U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
PELICAN PROPERTIES, INTERNATIONAL CORP.
(Name of Small Business Issuer in its Charter)
Florida 65-0616879
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
12520 S.W. 195 TERRACE, MIAMI, FLORIDA 33177
--------------------------------------------
(Address of Principal Executive Offices)(Zip Code)
(305) 251-4060
--------------
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
-------------------- ----------------------------------
-------------------- ----------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value .001 par share
(Title of Class)
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
- ------- -----------------------
Generally
Pelican Properties, International Corp. (the "Company") was incorporated
under the laws of the state of Florida on June 1, 1990 under the name Optimum
Computing Inc. Its subsidiaries, Ohio Key I, Inc. and Ohio Key II, Inc. were
incorporated under the laws of the state of Florida on December 19, 1996.
On August 31, 1995, the Company entered into a Share Exchange Agreement
with the limited partners of the Sunshine Key Associates Limited Partnership, a
Florida Limited Partnership (the "Partnership") whereby a 99% interest in the
Partnership was transferred to the Company in exchange for 3,010,000 shares, or
69.7% of the Company's common stock. On December 31, 1996, the Subsidiaries
entered into an agreement with the Partnership in which the Subsidiaries were
assigned and assumed the assets and liabilities of the Partnership including the
Sunshine Key RV Resort and Marina, a resort property located in Ohio Key,
Florida ("Property").
Following the acquisition of a 99% interest in the Partnership in
August 1995 and a subsequent default of the Partnership obligations to
NationsBank in December 1995, the Partnership on January 11, 1996 filed a
petition for reorganization under Chapter 11 and a Plan of Reorganization was
filed March 5, 1996. On October 29, 1996, a Modified Third Amended Plan of
Reorganization ("Plan") was confirmed by the Bankruptcy Court.
On December 31, 1996, the Partnership entered into agreements with Ohio
Key I, Inc. and Ohio Key II, Inc., both wholly-owned subsidiaries of the Company
(the "Subsidiaries") pursuant to which the Subsidiaries were assigned and
assumed the assets and liabilities of the Partnership.
Until May 29, 1998, the Company through the Subsidiaries engaged in the
ownership and management of the Property. On May 29, 1998 the Company's
Subsidiaries sold (the "Sale") the Property for a sale price of $15,750,000 paid
in cash. As a result of the Sale, the Company no longer owns directly or through
subsidiaries any operating assets. A portion of the proceeds from the Sale, or
$5,589,908, was used to pay all of the Company's long term debt (including all
debt associated with the Property). Proceeds were also used to redeem all of the
Company's outstanding preferred stock and satisfy all other loans associated
with the property and prior partnership. The Company has placed the remaining
proceeds of the Sale (the "Remaining Proceeds") in an IRS rule 1031 Exchange
account with the intention of taking advantage of tax deferral strategies if
reinvested in real estate properties within specified time frames and meeting
certain criteria. The Company fully intends to reinvest in properties that meet
its primary objective and attempt to take advantage of the 1031 Exchange account
benefits. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations"
Growth and Development; Business Strategy
- -----------------------------------------
The Company intends to pursue a strategy of growth and is seeking to
acquire recreational resort properties. Subject to the availability of financing
and recognizing that major portions of the "resort destination" market are
"family owned" operations which can benefit from the efficiencies of experienced
central management and the availability of financial resources to achieve full
potential, management is focused on those properties which will provide internal
growth and increased profitability. The Company intends to fund the acquisition
of resort properties with the proceeds held in the 1031 exchange account,
through the public or private sale of its securities or by obtaining financing
from institutional or other financing firms.
1
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The Company will target locations where nature and the environment are
the primary appeal of the location. The Company's objective is to target
properties in the recreational and leisure industry that will be situated
geographically so as to have at least one property in season at all times. The
Company will seek to upgrade the facilities at each location so as to be in a
position to attract recreational visitors. A prime requisite for a newly
acquired property would be one that preserves and takes advantage of all the
natural beauty of the area.
A second type of target property considered will be in areas that have
endured as a tourist destination because of specific natural surroundings, or
areas that are situated in close proximity to public transportation with unique
natural beauty. These properties will be either RV Parks, Hotels, and/or resort
accommodations. These locations may be within the continental United States or
abroad.
The third type of property to be targeted by the Company is under
utilized, over leveraged or capital deficit companies where current owners are
financially immobilized because of capital, liquidity, and tax requirements.
These types of investments will be structured so that long term value will be
restored in the target property through increased utilization accomplished
through marketing and capital improvements.
Competition
- -----------
The Company is seeking acquisitions in the highly competitive segment
of the hotel and resort industry. The Company competes directly or indirectly
with many companies, a number of which are larger, better capitalized and more
established. There can be no assurance that the Company will be able to compete
favorably in the future.
Employees
- ---------
The Company currently has one employee consisting of its Chief
Financial Officer. Management believes that its present employee is adequate to
support its current operations although the Company intends to hire additional
employees upon the acquisition of properties.
Legal Proceedings
- -----------------
The Company knows of no material litigation or claim pending,
threatened or contemplated to which the Company is or may become a party.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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Management's Discussion and Analysis or Plan of Operation contains
various "forward looking statements" within the meaning of the Securities Act of
1933 and the Securities And Exchange Act of 1934, which represents the Company's
expectations or beliefs concerning future events, including without limitation
the following; fluctuations in the economy; ability of the Company to obtain
financing on terms and conditions that are favorable; ability of the Company to
improve levels of profitability and sufficiency of cash provided by operations.
The Company cautions that these statements are further qualified by important
factors that could cause actual results to differ materially from those
contained in the forward looking statements, including without limitations,
general economic conditions, changes in the level of operating expense and the
present and future level of competition. Results actually achieved may differ
materially from expected results included in these statements.
The Company's primary objective is the management of held assets and
the acquisition and management of additional properties in the recreational and
leisure industry's resort destination segment. Until May 29, 1998, Pelican
Properties, International Corp., through its wholly owned subsidiaries, Ohio Key
I, Inc. and Ohio Key II, Inc., (hereinafter "Subsidiaries"), owned and operated
a resort known as the Sunshine Key RV Resort and Marina, (the "Property").
2
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On May 29, 1998 the Company's Subsidiaries sold the Property for a sale
price of $15,750,000 paid in cash. As a result of this sale, the Company no
longer owns directly or through subsidiaries any operating assets. The Buyer has
no material relationship with the Company or any of its affiliates, directors or
officers, or any associate of any such director or officer. The net proceeds of
the sale have been placed in an IRS code 1031 Exchange account with the
intention of taking advantage of tax deferral strategies if reinvested in real
estate properties within specified time frames and meeting certain criteria. The
Company fully intends to reinvest in properties that meet its primary objective
and will attempt to take advantage of the 1031 Exchange account benefits.
Six Months Ended June 30, 1997 compared to Six Months Ended June 30, 1998 for
Continuing Operations
- --------------------------------------------------------------------------------
General & Administrative expenses from continuing operations increased
$86,707 from $55,855 for the six-months ended June 30, 1997 as compared to
$142,562 for the six-months ended June 30, 1998. The increase primarily reflects
costs associated with professional fees for public reporting and related
expenses. These expenses were incurred to a lesser extent in the six-month
period ended June 30, 1997 but were recorded as other expense. The Company filed
its Form 10SB in September 1997 and audit and legal fees prior to this time were
treated as non-recurring expenses prior to becoming a reporting entity. The
interest expense of $51,768 relates to the redemption of the Company's Series A
Preferred Stock. Interest expense was calculated as the difference between the
product of the number of shares converted and the face value of the preferred
stock and the product of the stated redemption rate of 117.6% of the face value
and the number of shares. No accrued dividends were granted on the redemption of
the Series A Preferred Stock.
The net loss from continuing operations for the six-months ended June
30, 1998 increased $30,226 to $240,059 from $209,833 for the same time period in
1997. This increase is primarily due to the one-time interest expense incurred
in the second quarter of 1998.
Net income increased $5,739,567 from $29,967 for the six-months ended
June 30, 1997 to $5,769,534 for the six-months ended June 30, 1998. The increase
is due to the gain on the sale of discontinued operations and the extraordinary
gain. The $5,477,012 gain on the sale of the Subsidiaries' assets is net
$3,307,289 of income taxes based on the original resulting gain of $9,364,205.
The $361,570 extraordinary gain, that was from a forgiveness of debt due to the
early extinguishment of long-term debt, is net $218,973 of income taxes based on
the original gain of $580,543.
Liquidity and Capital Resources
The $7,859,440 recorded as Cash-Restricted primarily represents the net
proceeds deposited into the IRS code 1031 exchange account of $7,315,197. The
remaining difference includes the required $500,000 over funding of the payoff
for the $1,000,000 second mortgage held on the sold property and other escrowed
items that were not settled by the close of this quarter. The immediate
settlement of the second mortgage at closing was delayed by request of the
mortgage holder. Upon release these funds will be deposited in the 1031 exchange
account.
The $1,942,135 deferred income taxes represent the amount of tax that
is subject to indefinite deferral if certain conditions are met with the use of
funds held in the 1031 exchange account. The amount of $9,838 in current
maturities of long-term debt was for a remaining amount owed on the primary
mortgage of the subsidiary. This amount was unresolved as of the end of the
quarter, but has been settled as of the time of this filing. Therefore, as of
this filing, all long-term debt associated with the subsidiary and the property
have been satisfied.
3
<PAGE>
On May 29, 1998, the Company redeemed the outstanding certificates of
the holders of the Series A Preferred Stock. Two holders of the Series A
Preferred Stock, one being the chairman, received 117.6% of the multiple of the
face value of the shares and the number of shares held resulting in a payout of
$345,630. No accrued dividends were granted.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1997
- ---------------------------------------------------------------------
For the year ended December 31, 1997, revenues increased by $306,368 or
9.18%, from $3,342,310 in 1996 to $3,648,678 in 1997. The increase was primarily
attributable to an increase in the Company's site rental and associated
operations that increased $200,327 or 13.27%. The Company believes that this
increase was a result of increased marketing efforts and better management.
Costs of Revenues increased from $1,022,029 in 1996 to $1,081,893 in
1997 or 5.86%. Costs of Revenues were 30.58% of total revenue for 1996 and
29.65% of total revenue for 1997. The increase is attributable to an increase in
revenues and an increase in the cost and amount of fuel sold. The Gross Profit
increased from $2,320,281 in 1996 to $2,566,785 in 1997 resulting in an increase
of $246,504 or 10.62%. The gross profit margins for 1996 and 1997 were 69% and
70% respectively.
Total Operating and G/A expenses increased $224,211 or 12.50% from
$1,793,210 in 1996 to $2,017,421 in 1997. The increases are attributable mainly
to increases in utility costs, maintenance and repair and payroll that combined
represented approximately $205,000 of the increase. These increases were
primarily associated with the higher occupancy at Sunshine Key. The increase in
maintenance and repair and associated payroll expense were a direct result of
management's effort to upgrade and improve the property.
Interest expense increased $195,616 from $243,889 in 1996 to $439,505
in 1997. This increase represents the recalculation of the amortization schedule
on the primary mortgage recording imputed interest using a constant effective
interest rate. The 1997 increase also includes eleven monthly interest only
payments of $10,000 for the second mortgage beginning in February. Depreciation
and amortization expense was $212,168 in 1996 and $337,875 in 1997 representing
a $125,707 increase. This increase is due to the amortization of loan
origination costs incurred at December 31, 1996 of which $115,447 was expensed
in 1997.
Income from operations decreased $299,030 from $71,014 in 1996 to a
loss of $228,016 in 1997. Interest and Depreciation and Amortization represented
$321,323 of the net income decrease.
The Company posted other expenses of $202,126 in 1996 and $254,320 in
1997. The 1996 and a majority of the 1997 expenses are directly related to the
reclassification of "public offering" expenses originally booked in 1996 and
through the third quarter of 1997 as an "Other Asset". The remaining 1997
balance of approximately $67,000 is comprised of $45,000 for the write-off of
marina fuel tanks and underground electrical tracks replaced in 1997 and $22,000
for the write-off of the remaining minority interest balances.
The Company incurred an extraordinary gain as of December 31, 1996 from
forgiveness of debt in the total amount of $1,940,424. This amount is comprised
of a principal forgiveness reduction in the mortgage note of $616,854 and an
accrued interest forgiveness reduction of $1,323,570. This was the result of the
Company's effort to negotiate a settlement of the primary mortgage held on the
Property by WAMCO XXII, Ltd. (formerly held by NationsBank). The plan included a
refinancing in order to reduce the obligation to WAMCO to $4,700,000. As per the
agreement, the Company paid WAMCO a total amount of $1,000,000 towards
principal, of which $100,000 was paid directly by the Company in January 1997.
4
<PAGE>
Liquidity and Capital Resources
The Company's working capital decreased from a deficit of $504,767 at
December 31, 1996 to a deficit of $2,235,899 at December 31, 1997. This increase
was primarily due to the December 1998 maturing of the $1,000,000 second
mortgage. Management was working with several lenders in an attempt to
consolidate the first and second mortgages. The deficit increase was also due to
the reduction of current assets associated with the use of approximately
$275,000 of loan proceeds from the closing of the second mortgage booked in
December 1996 as well as reductions in accounts receivables and inventory. Also
affecting the increase in current liabilities was the addition of accrued and
deferred interest of $217,348 associated with the re-amortization of the primary
mortgage based on the recording of imputed interest using a constant effective
interest rate method. The increase was also comprised of $241,153 described as
Loans Payable to Stockholders previously booked as a long-term liability.
At December 31, 1997 the Company had accounts receivable of $54,535 as
compared to $87,016 at December 31, 1996. This decrease is considered
inconsequential since this is comprised of community fees and storage charges
collected from long term customers and credit card charges in transit, all of
which had not been an area of concern in prior years. At December 31, 1997 the
Company had accounts payable and accrued expenses of $252,824 as compared to
$249,226 at December 31, 1996.
Cash outlays for capital expenditures of property and equipment totaled
$326,808 for the 1997 fiscal year compared to $144,319 for the 1996 fiscal year.
Major expenditures included outlays for the continuing replacement and upgrade
of the park's electrical system, the replacement of underground fuel tanks
located at the marina, ongoing renovation and improvements to the marina,
upgrades and expansion to the park's sewer system and other upgrades and
renovations to the park's facilities. At December 31, 1997 management estimates
that the replacement and upgrade to the park's electrical system is
approximately 60 percent complete and anticipates full completion and conversion
in 1998.
As of December 31, 1996, the Company was able to convert over $800,000
in debt owed the former and present general partners as well as one limited
partner to equity through the issuance of 534,029 shares of common stock at a
price of $1.50 per share. As of June 30, 1997, the Company further converted
approximately $300,000 in debt owed to pre-petition debt and the former general
partner to equity through the issuance of 195,907 shares of Series A Preferred
Stock.
In January 1997 the mortgage note payable to WAMCO XXII, Ltd. was
restructured and restated to December 31, 1996. The new agreement provides for
interest payments of $5,000 to be paid monthly through August 30, 1997.
Commencing on August 30, 1997, the Note will bear interest at the rate of 9% per
annum. Beginning on September 30, 1997, principal and interest payments will
begin on the outstanding principal balance of $4,700,000. The note will mature
on October 30, 1999 at which time the outstanding principal balance and all
accrued interest will become due and payable in full. At maturity, the Company
has a one-time option to extend the maturity of the restated note until October
30, 2002 if certain conditions are met. The Company also has provisions in the
agreement for an early payment discount equal to 8% of the outstanding principal
balance of the restated note if repaid before November 30, 1997 and a 5%
discount if the note is repaid in full after November 30, 1997 and before
November 30, 1998. The Company also entered into a promissory note for
$1,000,000 at 12% per annum. This note is payable in 23 consecutive monthly
installments of interest only commencing February 1997 and ending December 1998,
at which time the outstanding principal balance and accrued interest will become
due and payable in full. As part of the bankruptcy settlement, the Company also
restructured an existing note payable to the Small Business Administration. This
$326,401 note is now payable over ten years at a 4% per annum with the first 24
months principal and interest payments fixed at $2,000. Thereafter, the
outstanding principal balance will be amortized over a period of eight years at
4% per annum.
5
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Year 2000
The Commission has issued Staff Legal bulletin No. 5 (CF/IM) stating
that public operating companies should consider whether there will be any
anticipated costs, problems and uncertainties associated with the year 2000
issue, which affects many existing computer programs that use only two digits to
identify a year in the date field. The company anticipates that its business
operations will electronically interact with third parties very minimally, if at
all, and the issues raised by Staff Legal Bulletin No. 5 are not applicable in
any material way to the Company's business or operations. Additionally, the
Company intends that any computer systems that the Company may purchase or lease
that are incident to the Company's business will have already addressed the
"Year 2000" issue.
Outlook
As stated earlier, the net proceeds of the sale of the subsidiaries'
asset have been placed in an IRS rule 1031 Exchange account held by a third
party. The intention of the Company is to take advantage of tax deferral
strategies if the funds are used to acquire like-kind real estate properties
within specified time frames and meeting certain criteria. The Company fully
intends to reinvest in properties that meet its primary objective and will make
every effort to take advantage of the 1031 Exchange account benefits. There can
be no assurances that the Company will be able to fully take advantage of all
benefits of the Section 1031 exchange.
ITEM 3. DESCRIPTION OF PROPERTY.
------------------------
None. See Part I, Item 1, Description of Business.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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The following table sets forth certain information regarding the
Company's Common Stock beneficially owned on August 3, 1998 for (i) each
stockholder known by the Company to be the beneficial owner of five (5%) percent
or more of the Company's outstanding Common Stock, (ii) each of the Company's
executive officers and directors, and (iii) all executive officers and directors
as a group. In general, a person is deemed to be a "beneficial owner" of a
security if that person has or shares the power to vote or direct the voting of
such security, or the power to dispose or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities of
which the person has the right to acquire beneficial ownership within sixty (60)
days. At August 3, 1998, there were 5,094,185 shares of Common Stock
outstanding. The address for each of the persons set forth below is 12520 SW 195
Terrace, Miami, Florida 33177, except otherwise noted.
6
<PAGE>
No. of Shares
of Common Stock Percent
Name and Address Beneficially Owned of Class
- ---------------- ------------------ --------
C. John Knorr, Jr.(1) 1,018,817 24.9%
Jane Bergman (2) 280,000 5.5%
Donald E. Schupp 400 0.0%
Timothy M. Benjamin(3) 50,000 1.0%
Thomas L. Callahan(4) 688,145 13.5%
Linda Brauer(5) 350,698 6.8%
All executive officers and directors
as a group (four persons) 1,349,217 31.0%
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(1) Mr. Knorr's address is 104 Woodhall Drive, Richmond, VA 23229. Includes
107,256 shares of Common Stock held by Infinity Investment Group, Inc.,
the general partner of the Partnership, in which Mr. Knorr is the sole
shareholder. Does not include (i) 333,333 shares of Common Stock
issuable upon the exercise of options at a price of $.01 per share at
any time after January 1, 1998 until January 1, 2002 and (ii) 333,333
shares of Common Stock issuable upon the exercise of options at a price
of $.01 per share at any time after January 1, 1999 until January 1,
2003. 107256
(2) Ms. Bergman's address is 22 Larison Road, Chester, NJ 07930.
(3) Does not include up to 40,000 shares issuable upon the exercise of
options which vest upon certain conditions set forth in Mr. Benjamin's
employment agreement. See "Employment Agreements:"
(4) The address is 1001 Oystercove Drive, Grasonville, MD 21638.
(5) The address is 11308 Bedfordshire Avenue, Potomac, MD 20854.
- --
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
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The following table sets forth the names, positions with the Company
and ages of the executive officers and directors of the Company. Directors will
be elected at the Company's annual meeting of stockholders and serve for one
year or until their successors are elected and qualify. Officers are elected by
the Board of Directors and their terms of office are, except to the extent
governed by employment contract, at the discretion of the Board.
Name Age Position
---- --- --------
C. John Knorr, Jr. 51 Chairman of the Board
Jane Bergman 46 Director
Donald E. Schupp 52 Director
Timothy M. Benjamin 32 Chief Financial Officer
and Treasurer
Unless otherwise noted, the address of each of the directors and
officers of the Company is 12520 SW 195 Terrace, Miami, Florida 33177.
7
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Carl John Knorr, Jr. Since June 1, 1996 Mr. Knorr has served as the Company's
Chairman of the Board and from August 31, 1995 through May 31, 1996 as the
Company's President. Mr. Knorr is also president and sole shareholder of
Infinity Investment Group, Inc., the general partner and management company for
the Partnership since 1991.
Jane E. Bergman. From June 1, 1996 to May 31, 1998, Ms. Bergman served as
President of the Company and since February 20, 1997, as a Director of the
Company. From 1992 to 1996 Ms. Bergman has been self employed concentrating on
the management of her rental properties as well as managing and operating an
animal care business. In 1992, she retired from Bell Atlantic where she was
Director of Operations in various departments since 1983.
Donald E. Schupp. Since February 20, 1997 Mr. Schupp has served as a Director of
the Company. Mr. Schupp has served as President and Chief Operating Officer for
American Refining Group, which is in the oil refining business, headquartered in
Pittsburgh, Pennsylvania since 1983 and is a member of the Board of Directors of
the Company.
Timothy M. Benjamin. Since October 30, 1995, Mr. Benjamin has served as the
Company's Chief Financial Officer and since June 1, 1996 has served as the
Company's Chief Financial Officer and Treasurer. From 1989 to October 1995 Mr.
Benjamin was employed with the Federal Reserve Bank of Atlanta, Miami, Florida,
as Senior Business Development Coordinator, 1994 to October 1995, and Business
Development Coordinator, 1991 to 1994.
As additional properties are acquired, the Company anticipates
attracting additional, equally successful and qualified, directors, officers,
and facility managers.
COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES EXCHANGE ACT OF 1934
- ---------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the outstanding common stock, to file with the Securities and
Exchange Commission (the"SEC") initial reports of ownership on Form 3 and
reports of changes in ownership of Common Stock on Forms 4 or 5. Such persons
are required by SEC regulation to furnish the Company with copies of all such
reports they file.
Based solely on its review of the copies of such reports furnished to
the Company or written representations that no other reports were required. The
Company believes that all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with during the year ended December 31, 1997, except for Directors, C. John
Knorr, Jane Bergman, Donald Schupp and Chief Financial Officer, Timothy
Benjamin, who inadvertently filed a late Form 3 for reporting initial beneficial
ownership of securities. Chief Financial Officer, Timothy Benjamin inadvertently
filed a late Form 4 for reporting options exercised. Jane Bergman, President,
inadvertently filed a late Form 4 for reporting quarterly stock compensation.
ITEM 6. EXECUTIVE COMPENSATION.
-----------------------
No executive officer of the Company has had annual compensation in excess of
$100,000. The following table shows for the years ended December 31, 1996 and
1997 the cash and other compensation paid by the Company to its President and
Chairman.
8
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<TABLE>
<CAPTION>
Summary Compensation Table
Name and
Principal Other Annual All Other
Position Year Salary Bonus Compensation Compensation
- -------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Jane Bergman, 1996 $-0- $-0- $-0- $6,250(1)
President(2) 1997 $-0- $-0- $-0- $8,750(3)
1998 $-0- $-0- $-0- $28,700(4)
C. John Knorr(5),
Chairman of the Board 1995(6) $-0- $-0- $-0- $95,249(7)
and former President 1996(8) $-0- $-0- $-0- $106,506(9)
1997 $62,400 $-0- $-0- $-0-
1998 $42,000(10) $-0- $-0- $-0-
</TABLE>
(1) Represents the value determined by management of 100,000 shares of
Common Stock earned from the commencement of Ms. Bergman's employment
with the Company on June 1, 1996 through December 31, 1996 pursuant to
the employment agreement between the Company and Ms. Bergman.
(2) Ms. Bergman served as President of the Company from June 1, 1996 to May
29, 1998.
(3) Represents the value determined by management of 140,000 shares of
Common Stock earned in 1997 pursuant to the employment agreement
between the Company and Ms. Bergman.
(4) Represents the value determined by management of 40,000 shares of
Common Stock earned in 1998 pursuant to the employment agreement
between the Company and Ms. Bergman that as of May 31, 1998 had expired
and was not renewed.
(5) See Item 7, Certain Relationships and Related Transactions
(6) Mr. Knorr commenced employment with the Company as President on August
31, 1995.
(7) See Item 7, Certain Relationships and Related Transactions
(8) Mr. Knorr commenced employment with the Company as President on August
31, 1995.
(9) See Item 7, Certain Relationships and Related Transactions
(10) Represents salary through week ended August 28, 1998 based on a $62,400
annual salary.
Employment Agreements
- ---------------------
On October 30, 1997, the Company entered into a one (1) year employment
agreement with Timothy M. Benjamin, the Company's Chief Financial Officer. The
agreement provides a base salary of $53,500 a year, medical benefits, insurance
and other fringe benefits, and stock options. The stock options are exercisable
for a period of five years from the date of vesting at an exercise price of the
greater of $1.00 per option or the average bid price per share of Common Stock
for the year 1998, determined by averaging the bid prices as of March 31, 1998,
June 30, 1998, September 30, 1998 and December 31, 1998 for any options vesting
on December 31, 1998. Subject to the provisions of the employment agreement, the
total of up to 40,000 option shares for 1998 shall vest provided that during
that year; (i) as of December 31, the Company shall have attained no less than a
20% increase in its Earnings Before Income Tax over the previous December 31
9
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year-end; and/or (ii) as of December 31, the weighted average earnings per share
of the Company's Common Stock shall have increased by no less than 20% over the
previous year's weighted average earnings per share, which shall be determined
by the sum of the average outstanding shares during the relevant year as of
March 31, June 30, September 30, and December 31, divided by four, and comparing
that number to the previous year's number, calculated in a like manner; and/or
(iii) as of December 31, the average bid price of the Common Stock shall have
increased by no less than 20% over the previous year's average bid price, which
shall be determined by the average bid price of the Common Stock for the five
consecutive business days commencing December 1. The Employment Agreement
provided for full time employment and contains a provision that the employee
will not compete or engage in a business competing with the current or
anticipated business of the Company for the term of the agreement and in the
event Mr. Benjamin is terminated for cause or voluntarily resigns, he shall be
subject to the non-competition clause for a period of one (1) year after
termination or resignation.
Option Grants in Last Fiscal Year
- ---------------------------------
The Company granted no options to purchase shares of Common Stock during the
fiscal year ended December 31, 1996. The following table sets forth information
with respect to the grant of options during the fiscal year ended December 31,
1997 to each person named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Shares) Date
- ---- ---------- ----------- ---------------
<S> <C> <C> <C> <C>
Jane Bergman, President -0- -0- -0- -0-
C. John Knorr, Jr.,
former President -0- -0- -0- -0-
Option Exercises and Holdings
- -----------------------------
</TABLE>
The following table sets forth information with respect to the exercise
of options to purchase shares of Common Stock during the fiscal year ended
December 31, 1997 to each person named in the Summary Compensation Table and the
unexercised options held as of the end of the 1997 fiscal year.
10
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
- ---------------------------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised in-the-Money
Acquired Options/SARs Options/SARs
on Value at FY-End (#) at FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Jane Bergman, 0 0 0 0
President
C. John Knorr, Jr. 0 0 0 0
former President
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Number Performance Estimated Future Payouts Under
of Shares, or Other Non-Stock Price-Based Plans
Units or Period Until ------------------------------
Other Rights Maturation Threshold Target Maximum
Name (#) or Payout ($ or #) ($ or #) ($ or #)
<S> <C> <C> <C> <C> <C>
Jane Bergman, 0 0 0 0 0
President
C. John Knorr, Jr. 0 0 0 0 0
former President
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
The Partnership and Infinity Investments Group, Inc., a Florida
corporation and general partner of the Partnership (the "Management Company")
which is owned and controlled by C. John Knorr, Chairman of the Board, entered
into an agreement under which the Management Company provided management
services to the Partnership (the "Management Agreement"). Under the terms of the
Management Agreement, the Management Company received an annual management fee
equal to three (3%) percent of front desk revenues (defined as all revenues
associated with the campground/recreational vehicle site rentals), plus two (2%)
percent of total gross revenues, payable monthly. For the year ended December
31, 1995, the Management Company received from the Partnership an aggregate of
$95,249 for services rendered. For the year ended December 31, 1996, the
Management Company received from the Partnership an aggregate of $106,506 for
services rendered. The Management Agreement terminated on December 31, 1996
pursuant to the disposition by the Partnership of all of the Partnership's
assets, and therefore, no fees were incurred during 1997.
As of the date hereof, there are stock options to purchase an aggregate
of 666,667 shares of Common Stock outstanding at a price of $.01 per share,
which were granted to Mr. Knorr on October 9, 1996 in consideration for Mr.
Knorr guaranteeing the payment of $1,000,000 pursuant to the Guarantee Agreement
between C. John Knorr, Jr. and WAMCO XXII, Ltd., dated August 6, 1996.
11
<PAGE>
Also, Infinity Investments privately owns three park model units
located at the Sunshine Key Resort. These rental units were managed through Ohio
Key I's rental management program and expenses paid on behalf of the units and
income earned by the units change the balances monthly. Prior to 1997, the
Management Company collected and distributed income derived from the rental of
privately owned park models on the rental management program at the Sunshine Key
Resort. This function was assumed by Ohio Key I, Inc. as of January 1, 1997. On
May 29, 1998 Infinity Investment Group sold its interests in the three park
model units and all balances owed by the Company were settled.
The Company owed Mr. Knorr directly and indirectly a sum of $102,272 as
of December 31, 1996 and was owed by Mr. Knorr directly and indirectly a sum of
$5,638 as of December 31, 1997 that is referred to as "Due to/from Affiliates"
in the financial statements. These sums are related to the above mentioned
accrued management fees and rental unit incomes that were due and payable were
converted to stock. Balances were adjusted quarterly. References to "Due from
Affiliates" are found in Note 5 of the 1997 financial statements and "Due to
Affiliates" on the 1997 consolidated statement of cash flows. As of this filing,
there are no balances owed to or from Mr. Knorr directly or indirectly other
than compensation for services as chairman in the sum of $62,400 annually.
On May 29, 1998 the Company redeemed an aggregate of 46,666 shares of
its Series A Preferred Stock for a redemption price of 117.6% of the stated face
value of $1.50 per share. As a result of the redemption, Mr. Knorr who owned
46,666 shares of the Series A preferred Stock, received $82,320.
ITEM 8. DESCRIPTION OF SECURITIES.
--------------------------
Common Stock
The Company is authorized to issue 100,000,000 shares of Common Stock,
par value $.001 per share, of which 5,094,185 shares were issued and outstanding
as of the date hereof. Holders of the shares are entitled to one vote per share
on each matter submitted to a vote at a meeting of shareholders. The shares of
Common Stock do not have cumulative voting rights or preemptive rights and there
are no redemption or conversion privileges attached thereto. Holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Company and to participate ratably in the distribution of any assets legally
available for distribution with respect to the Common Stock. The Company does
not expect to pay dividends for the foreseeable future.
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock,
par value $.001 per share. The Company has previously designated one series of
preferred stock consisting of 195,907 shares which were designated as Series A
Convertible Preferred Stock. As of May 29, 1998 all of the Series A Convertible
Preferred Stock was redeemed and no other Preferred Stock is issued and
outstanding.
The Board of Directors of the company has the authority, without
further action by shareholders, to issue the preferred stock in one or more
series, and to fix for any series the dividend rate, redemption price,
liquidation or dissolution preferences, conversion rights, voting rights and
other preferences and privileges.
Series A Preferred Stock
The Series A Preferred Stock had the following rights, preferences
and/or limitations:
12
<PAGE>
Dividend Rights. The holders of shares of Series A Preferred Stock were
entitled to receive a cumulative annual dividend of 6% of the stated value of
the Series A Preferred Stock of $1.50 per share ("Stated Value") on January 1 of
each year commencing January 1, 1998, or $.09 per share, payable in cash or
Common Stock of the Company (i.e., based on the equivalent fair market value of
Common Stock of the Company).
Conversion Rights. Holders of the Series A Preferred Stock had the
right to convert each share of Series A Preferred Stock into the Company's
Common Stock (calculated as to each conversion to the nearest share) at any time
at a conversion rate of one share of Series A Preferred Stock for one share of
Common Stock. In the event the Series A preferred Stock is not converted by
December 31, 1999, the Company had the right to cause the remaining outstanding
shares of Series A Preferred Stock to be converted into Common Stock of the
Company at the aforementioned conversion rate. In the event the Series A
Preferred Stock was not converted by either of the holders thereof or by the
Company, the Series A Preferred Stock would have continued to subsist as
established. No fractional share or scrip representing a fractional share would
have been issued upon conversion of the Series A Preferred Stock. In the event
of any reclassification, merger, consolidation or change of shares of the series
A Preferred Stock and/or the Common Stock of the Company, the Company would have
made adjustments to the conversion ratio which would have been as nearly
equivalent to that stated above as may be practical.
The conversion price was subject to adjustment in certain events,
including (i) the issuance of capital stock as a dividend or distribution on
Common Stock, (ii) subdivision, combinations, reverse stock splits and
reclassification of the Common Stock, and (iii) the fixing of a record date for
the distribution to all holders of Common Stock of evidence of indebtedness or
assets (other than cash dividends) of the Company or subscription rights or
warrants.
Redemption. The Company had the right, exercisable at any time upon ten
(10) trading days notice to the holders of the Series A Preferred Stock given at
any time to redeem, from funds legally available therefor at the time of such
redemption, all or any portion of the shares of Series A Preferred Stock which
had not previously been converted or redeemed, at a price equal to 117.6% of the
produce of (i) the number of shares of Preferred Stock then held by the holder
and (ii) the Stated Value, subject to adjustment pursuant to the terms hereof.
The entire redemption price was paid in cash. The holders of the Series A
Preferred Stock did not have the right to require the Company to redeem their
shares of Series A Preferred Stock.
Voting Rights. Except as provided by law, the Series A Preferred Stock
was not entitled to vote on matters submitted to a vote of the shareholders of
the Company. Unless the vote or consent of the holders of a greater number of
shares is required by law, the consent of the holders of at least a majority of
all of the Series A Preferred Stock at the time outstanding would have been
necessary to change, alter or revoke the rights and preferences conferred on the
Series A Preferred Stock by the Articles of Incorporation or to adopt any
amendment to the Articles of Incorporation materially adversely affecting the
rights of the holders of the Series A Preferred Stock.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, holders of the Series A Preferred Stock were entitled
to receive, after due payment or provision for payment for the debts and other
liabilities of the Company, a liquidating distribution before any distribution
may be made to holders of Common Stock of the Company. The holders of the Series
A Preferred Stock outstanding were entitled to receive an amount equal to $1.50
per share, plus declared dividends to the date of the final distribution,
whether or not such liquidation, dissolution or winding up is voluntary or
involuntary on the part of the Company.
13
<PAGE>
Class A Common Stock Purchase Warrants
- --------------------------------------
The Company currently has 200,000 Class A Common Stock Purchase
Warrants ("Class A Warrants") outstanding. The holders of each Class A Warrant
are entitled to purchase one share of Common Stock of the Company at an exercise
price of $5.00 per share. The Class A Warrants are exercisable any time after
issuance until March 19, 2000 and are subject to redemption by the Company, on
not less than thirty days written notice, at a price of $.005 per Class A
Warrant. Holders of the Class A Warrants will automatically forfeit their rights
to purchase the shares of Common Stock of the Company issuable upon exercise of
Class A Warrants unless the Class A Warrants are exercised before they are
redeemed. The Class A Warrants obtain provisions that protect the holders
against dilution by adjustment of the exercise price, in certain events,
including stock dividends, stock splits, mergers and for other unusual events.
The Company is not required to issue fractional shares and fractional shares
equal to or exceeding one-half of a share shall be rounded to the nearest whole
share, while fractional shares equaling less than one-half of a share shall be
disregarded. The holders of the Class A Warrants will not possess any rights as
shareholders of the Company unless and until the Warrants are exercised.
Class B Common Stock Purchase Warrants
- --------------------------------------
The Company currently has 200,000 Class B Common Stock Purchase
Warrants ("Class B Warrants") outstanding. The holders of each Class B Warrant
are entitled to purchase one share of Common Stock of the Company at an exercise
price of $5.00 per share. The Class B Warrants are exercisable any time after
issuance until March 19, 2001 and are subject to redemption by the Company, on
not less than thirty days written notice, at a price of $1.00 per Class B
Warrant. Holders of the Class B Warrants will automatically forfeit their rights
to purchase the shares of Common Stock of the Company issuable upon exercise of
Class B Warrants unless the Class B Warrants are exercised before they are
redeemed. The Class B Warrants obtain provisions that protect the holders
against dilution by adjustment of the exercise price in certain events,
including stock dividends, stock splits, mergers and for other unusual events.
The Company is not required to issue fractional shares and fractional shares
equal to or exceeding one-half of a share shall be rounded to the nearest whole
share, while fractional shares equaling less than one-half of a share shall be
disregarded. The holders of the Class B Warrants will not possess any rights as
shareholders of the Company unless and until the Warrants are exercised.
Shares Eligible For Future Sales
- --------------------------------
As of August 3, 1998, the Company has outstanding an aggregate of
5,094,185 shares of Common Stock. Of the total outstanding shares of Common
Stock, 972,063 shares of Common Stock are freely tradable without restriction or
further registration under the Act, 3,010,000 shares of Common Stock were
eligible for resale after August 31, 1997 under Rule 144 (of which 2,647,972
remain), and the remaining 1,474,195 shares of Common Stock will be eligible for
resale on various dates thereafter.
Under Rule 144, a person (or persons whose shares are aggregated) who
has beneficially owned restricted securities for at least one year, including
the holding period of any prior owner except an affiliate, would be generally
entitled to sell within any three month period a number of shares that does not
exceed the greater of (i) 1% of the number of then outstanding shares of the
Common Stock or (ii) the average weekly trading volume of the Common Stock in
the public market during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. Any person (or persons whose shares are aggregated) who is not deemed
to have been an affiliate of the Company at any time during the three months
preceding a sale, and who has beneficially owned shares for at least two years
(including any period of ownership of preceding nonaffiliated holders), would be
entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner-of-sale provisions, public information requirements or
notice requirements.
14
<PAGE>
Florida Anti-Takeover Statutes; Indemnification
- -----------------------------------------------
Florida has enacted legislation that may deter or frustrate a take-over
of a Florida corporation. The Florida Control Share Act generally provides that
shares of Common Stock acquired in excess of certain specified thresholds will
not possess any voting rights unless such voting rights are approved by a
majority of the corporation's disinterested shareholders. The Florida Affiliated
Transactions Act generally requires super majority approval by disinterested
directors or shareholders of certain specified transactions between a
corporation and holders of more than 10% of the outstanding voting shares of the
corporation (or their affiliates). The Florida law permits the Company's
Articles of Incorporation to require the Company to indemnify the Company's
directors, officers, employees and agents.
Options
- -------
As of the date hereof, there are stock options to purchase an aggregate
of 666,667 shares of Common Stock outstanding, which were granted to C. John
Knorr, Jr., Chairman of the Board of the Company, on October 9, 1996 in
consideration for Mr. Knorr guaranteeing the payment of $1,000,000 pursuant to
the Guarantee Agreement between C. John Knorr, Jr. and WAMCO XXII, Ltd., dated
August 6, 1996. Additionally, warrants or options to purchase shares of Common
Stock may be expected to be provided to key employees, members of management,
directors, and consultants to the Company in the future under the Company's
proposed Plan, other option programs and agreements.
Transfer Agent
- --------------
The transfer agent for the Company's Shares of Common Stock is Florida
Atlantic Stock Transfer, Tamarac, Florida.
15
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS.
- ----------------------------------------------------------------------------
As of August 3, 1998, there were approximately 280 stockholders of
record of the Company's Common Stock. The Company's Common Stock is currently
listed for trading on the over-the-counter bulletin board under the symbol
"PELP". The following table sets forth, for the period since October 20, 1995,
the high and low closing sales prices for the Common Stock as reported by the
OTC Bulletin Board.
Common Stock
------------
High Low
---- ---
1995
Fourth Quarter 8.06 6.63
(commencing October 20, 1995) 8.50 6.75
1996
First Quarter 8.50 0.50
Second Quarter 6.00 0.25
Third Quarter 2.50 0.06
Fourth Quarter 2.00 0.06
1997
First Quarter 1.88 0.12
Second Quarter 2.88 1.00
Third Quarter 2.00 0.50
Fourth Quarter 1.31 0.41
1998
First Quarter 1.50 0.50
Second Quarter 1.50 0.63
Third Quarter (through August 3, 1998) 1.44 1.00
The transfer agent for the Company's Common Stock is Florida Atlantic
Stock Transfer, Inc., 7130 Nob Hill Road, Tamarac, Florida 33321.
The Company has never paid cash dividends on its Common Stock. The
Company presently intends to retain future earnings, if any, to finance the
expansion of its business and does not anticipate that any cash dividends will
be paid in the foreseeable future. The future dividend policy will depend on the
Company's earnings, capital requirements, expansion plans, financial condition
and other relevant factors.
ITEM 2. LEGAL PROCEEDINGS.
-----------------
The Company is involved in a Code Enforcement case with Monroe County
arising out of the use of camping on the south side of the Company's formerly
owned property (Sunshine Key Resort), which resulted in an adverse ruling and a
lien against the Company's property. This case is on appeal before the Third
District Court of Appeal. The appeal has been perfected and all necessary
documents have been filed with the Third District Court of Appeals for over a
year and no ruling has yet been issued. If the Appeals Court upholds the Monroe
County Code Enforcement's lien, the maximum amount of that lien has already been
settled at $20,000 in 1997. Nevertheless, and despite this contingent liability,
the probability of success in this case is favorable as the factual and legal
issue brought up in appeal present a strong probability that the Appeal's Court
will vacate the lien and remand the matter to the Monroe County Code Enforcement
Special Master for resolution. That determination from the Appeals court would
eliminate this liability entirely. The Company has retained its interests in
this suit notwithstanding the sale of its Sunshine Key Resort asset.
16
<PAGE>
The Company was also a party to Sunshine Key vs. American Southern Home
Insurance. In September of 1995, litigation was commenced by Sunshine Key
Associates Limited Partnership against American Southern Home Insurance Company
("Southern"). Sunshine Key brought suit against Southern for the recovery of
damages, court costs and reasonable attorneys' fees based upon Southern's
failure to pay Sunshine Key for a loss which was covered by an insurance policy
issued by Southern for the benefit of Sunshine Key. The case was settled during
January 1997 for $45,000.
On or about February 1995, litigation was commenced by Sunshine Key
Associates Limited Partnership for damages and court costs against Nations One
Mortgage Services, Inc., f/d/a LifeCo. Mortgage Services, Inc. for failure to
close upon its mortgage loan commitment and its failure to return to Sunshine
Key commitment fees in the amount of $30,000. The defendants have responded to
the lawsuit and discovery has been completed. The case is presently awaiting a
court hearing date and there have not been any new developments in this matter.
The Company has retained its interests in this suit notwithstanding the sale of
its Sunshine Key Resort asset.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
----------------------------------------------
Reported and incorporated by reference to the Company's 8-K dated April
13, 1998.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
----------------------------------------
On June 11, 1990, the Company issued 1,000 shares of Common Stock to
the Company's incorporator, Rene Gomez, for consideration of $500 plus services
rendered. The issuance of such shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
On June 20, 1990, the Company issued an aggregate of 600,000 shares and
200,000 Class A Warrants to eight of the founders of the Company at a price of
$0.01 per share in consideration of an aggregate of $6,000 and 3,000,000 shares
to the ninth founder of the Company at a price of $0.01 per share for aggregate
consideration of $3,000. The Class A Warrants are exercisable until March 19,
2000 on a one for one basis to Common Stock at an exercise price of $5.00 per
share. The issuance of such shares and warrants was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
On August 13, 1990, the Company issued an aggregate of 200,000 Class B
Warrants to four of the founders of the Company for services rendered. The
Warrants are exercisable until March 19, 2000 on a one for one basis to common
stock at an exercise price of $5.00 per share. The issuance of such warrants was
exempt from the registration requirements of the Act pursuant to Section 4(2) of
the Act.
Between September 15, 1990 and November 23, 1990, the Company issued an
aggregate of 10,000 shares of Common Stock to one hundred and sixty eight
investors in a private offering of the Company's Common Stock. The Company
received gross proceeds of $10,000 from this private offering. The issuance of
such shares was exempt from the registration requirements of the Act pursuant to
Rule 504 and Section 3(b) of the Act.
On August 31, 1995, the Company issued an aggregate of 3,010,000 shares
of Common Stock to the 36 limited partners of Sunshine Key Associates Limited
Partnership pursuant to a Share Exchange Agreement. The issuance of such shares
was exempt from the registration requirements of the Act pursuant to Section
4(2) of the Act.
17
<PAGE>
On April 3, 1997, the Company issued 200,000 shares of Common Stock to
Jaime Gomez and Rod Martin in exchange for certain consulting services rendered
in connection with assisting the Company with (1) the merger of the Company and
Sunshine Key Associates Limited Partnership, (2) filing Standard & Poor's
application and Form 211 application for listing of the Company's Common Stock
on the OTC; and (3) maintaining current public information and shareholder
relations. The issuance of such shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
On May 7, 1997, the Company issued 6,667 shares of Common Stock to La
Regional Corporation. The issuance of such shares was pursuant to a capital
contribution of $10,000 by La Regional Corporation and was exempt from the
registration requirements of the Act pursuant to Section 4(2) of the Act.
On June 3, 1997, the Company issued an aggregate of 1,067,362 shares of
Common Stock in consideration for the satisfaction of certain outstanding loans,
as follows: 425,093 shares were issued to Carl J. Knorr, Jr. Of the total issued
to Mr. Knorr, 91,760 shares were the result of debt being transformed into
equity, and 333,333 shares were in consideration for a guarantee of a $1,000,000
commitment made by the Company. 101,203 shares were issued to Infinity
Investment Group, Inc. and were also the result of debt being transferred into
equity. 210,733 shares were issued to Thomas L. Callahan, and the issuance was
also the result of debt being transformed into equity. 130,333 shares were
issued to Workout Associates and were the result of debt being transferred to
equity. 200,000 shares were issued to Jane Bergman and were the result of
compensation for an Employment Contract.
On June 11, 1997, 20,166 shares were issued by the Company at a
purchase price of $1.50 per share to two investors. The issuance of such shares
was exempt from the Registration requirements of the Act pursuant to Section
4(2) of the Act.
On January 1, 1998 the Company issued 50,000 shares of common stock to
the law firm of Atlas, Pearlman, Trop and Borkson and an affiliate as payment of
legal fees. The issuance of such shares was exempt from the Registration
requirements of the Act pursuant to Section 4(2) of the Act.
On March 9, 1998, the Company issued an aggregate of 40,000 shares of
Common Stock of which 20,000 shares each were issued to Jane Bergman and were
the result of quarterly compensation for the quarter ended August 31, 1997 and
November 30, 1997 per her Employment Contract. The issuance of such shares was
exempt from the Registration requirements of the Act pursuant to Section 4(2) of
the Act.
On February 26, 1998, the Company granted to the Chief Financial
Officer ("CFO"), the option to purchase up to 50,000 shares of Common Stock at
an exercise price of $.01 per share that is vested and exercisable on March 1,
1998. On March 6, 1998, the CFO exercised the option and on March 9, 1998 was
issued 50,000 shares of Common Stock of the Company as restricted shares under
Rule 144 of the Securities Act of 1933. The issuance of such shares was exempt
from the Registration requirements of the Act pursuant to Section 4(2) of the
Act.
On June 16, 1998, the Company issued an aggregate of 40,000 shares of
Common Stock of which 20,000 shares each were issued to Jane Bergman and were
the result of quarterly compensation for the quarter ended February 28, 1998 and
May 31, 1998 per her Employment Contract. The issuance of such shares was exempt
from the Registration requirements of the Act pursuant to Section 4(2) of the
Act.
18
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
------------------------------------------
The Florida Business Corporation Act (the "Corporation Act") permits
the indemnification of directors, employees, officers and agents of Florida
corporations. The Company's Articles of Incorporation (the "Articles") and
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by the Corporation Act. Insofar as indemnification
for liabilities arising under the Act may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
PART F/S
The financial statements and supplementary data are included herein.
FINANCIAL STATEMENTS AND EXHIBITS
- ---------------------------------
The following are the audited and unaudited Financial Statements for
the Company, including the audited balance sheet, statements of operations,
changes in capital deficiency, and cash flows at December 31, 1996 and 1997, and
the unaudited balance sheet, statements of operations, changes in capital
deficiency, and cash flows for the quarter ended June 30, 1998.
19
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibits Description of Document
- -------- -----------------------
3.1 Articles of Incorporation dated 5/30/90 (Incorporated by reference to
the exhibit of the same number filed with the Company's registration
statement on Form SB-2 as filed with the Securities and Exchange
Commission on September 12, 1997, File No. 000-23075)
3.2 Articles of Incorporation Amendment to the Articles of Incorporation
dated 6/29/95 (Incorporated by reference to the exhibit of the same
number filed with the Company's registration statement on Form SB-2 as
filed with the Securities and Exchange Commission on September 12,
1997, File No. 000-23075)
3.3 Articles of Incorporation Amendment to the Articles of Incorporation
dated 6/20/90 (Incorporated by reference to the exhibit of the same
number filed with the Company's registration statement on Form SB-2 as
filed with the Securities and Exchange Commission on September 12,
1997, File No. 000-23075)
3.4 Articles of Incorporation Amendment to the Articles of Incorporation
dated 8/15/95 (Incorporated by reference to the exhibit of the same
number filed with the Company's registration statement on Form SB-2 as
filed with the Securities and Exchange Commission on September 12,
1997, File No. 000-23075)
3.5 Ohio Key I Articles of Incorporation dated 12/16/96 (Incorporated by
reference to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No. 000-23075)
3.6 Ohio Key II Articles of Incorporation dated 12/16/96 (Incorporated by
reference to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No. 000-23075)
3.7 Bylaws (Incorporated by reference to the exhibit of the same number
filed with the Company's registration statement on Form SB-2 as filed
with the Securities and Exchange Commission on September 12, 1997, File
No. 000-23075)
3.8 Ohio Key I Bylaws (Incorporated by reference to the exhibit of the same
number filed with the Company's registration statement on Form SB-2 as
filed with the Securities and Exchange Commission on September 12,
1997, File No. 000-23075)
3.9 Ohio Key II Bylaws (Incorporated by reference to the exhibit of the
same number filed with the Company's registration statement on Form
SB-2 as filed with the Securities and Exchange Commission on September
12, 1997, File No. 000-23075)
3.10 Articles of Incorporation Amendment to the Articles of Incorporation
dated June 29, 1997 (Incorporated by reference to the exhibit of the
same number filed with the Company's Form 10-KSB as filed with the
Securities and Exchange Commission on April 14, 1998, File No.
000-23075)
4.1 Specimen Common Stock Certificate (Incorporated by reference to the
exhibit of the same number filed with the Company's registration
statement on Form SB-2 as filed with the Securities and Exchange
Commission on September 12, 1997, File No. 000-23075)
4.2 Specimen Class A Common Stock Purchase Warrant (Incorporated by
reference to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No. 000-23075)
4.3 Specimen Class B Common Stock Purchase Warrant (Incorporated by
reference to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No. 000-23075)
10.1 Share Exchange Agreement between the Company and all of the limited
partners of Sunshine Key Associates Limited Partnership effective
August 30, 1995 (Incorporated by reference to the exhibit of the same
number filed with the Company's registration statement on Form SB-2 as
filed with the Securities and Exchange Commission on September 12,
1997, File No. 000-23075)
20
<PAGE>
10.2 Loan Restructuring Agreement between Ohio Key I, Inc.; WAMCO XXII Ltd.
and Sunshine Key Associates Limited Partnership dated 1/31/96
(Incorporated by reference to the exhibit of the same number filed
with the Company's registration statement on Form SB-2 as filed with
the Securities and Exchange Commission on September 12, 1997, File No.
000-23075)
10.3 Promissory Note between WAMCO XXII, Ltd., Ohio Key I, Inc. and Ohio
Key II, Inc. dated 12/31/96 (Incorporated by reference to the exhibit
of the same number filed with the Company's registration statement on
Form SB-2 as filed with the Securities and Exchange Commission on
September 12, 1997, File No. 000-23075)
10.4 Restated Mortgage and Assumption Agreement (Incorporated by reference
to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No. 000-23075)
10.5 Assignment for Assumption of Leases between Ohio Key I, Inc and
Sunshine Key Associates Limited Partnership dated 1/24/97 (Incorporated
by reference to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No.
000-23075)
10.6 Agreement for Assumption of Liabilities between Ohio Key I, Inc. and
Sunshine Key Associates Limited Partnership dated 1/24/97 (Incorporated
by reference to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No.
000-23075)
10.7 Assignment and Assumption of Contracts between Ohio Key I, Inc. and
Sunshine Key Associates Limited Partnership dated 1/24/97 (Incorporated
by reference to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No.
000-23075)
10.8 Assignment between Ohio Key I, Inc. and Sunshine Key Associates Limited
Partnership dated 1/24/97 (Incorporated by reference to the exhibit of
the same number filed with the Company's registration statement on Form
SB-2 as filed with the Securities and Exchange Commission on September
12, 1997, File No. 000-23075)
10.9 Employment Agreement between the Company and Timothy Benjamin dated
10/31/96 (Incorporated by reference to the exhibit of the same number
filed with the Company's registration statement on Form SB-2 as filed
with the Securities and Exchange Commission on September 12, 1997, File
No. 000-23075)
10.10 Employment Agreement between the Company and Jane E. Bergman dated
6/1/97 (Incorporated by reference to the exhibit of the same number
filed with the Company's registration statement on Form SB-2 as filed
with the Securities and Exchange Commission on September 12, 1997, File
No. 000-23075)
10.11 Stock Option Agreement between the Company and Timothy Benjamin dated
10/01/96 (Incorporated by reference to the exhibit of the same number
filed with the Company's registration statement on Form SB-2 as filed
with the Securities and Exchange Commission on September 12, 1997, File
No. 000-23075)
10.12 Employment Agreement between the Company and Timothy Benjamin dated
10/31/97 (Incorporated by reference to the exhibit of the same number
filed with the Company's Form 10-KSB as filed with the Securities and
Exchange Commission on April 14, 1998, File No. 000-23075)
10.13 Stock Option Agreement between the Company and Timothy Benjamin dated
10/31/97 (Incorporated by reference to the exhibit of the same number
filed with the Company's Form 10-KSB as filed with the Securities and
Exchange Commission on April 14, 1998, File No. 000-23075)
10.14 Agreement of Purchase and Sale and Escrow Instructions (Incorporated by
reference to the exhibit of the same number filed with the Company's
Form 10-QSB/A as filed with the Securities and Exchange Commission on
June 5, 1998, File No. 000-23075)
21
<PAGE>
27.1 Financial Data Schedule. (1)
99.1 Order Confirming Debtor's Modified Third Amended Plan of
Reorganization, Case No. 96-10174-BKC-RAM in the United States
Bankruptcy Court, Southern District of Florida (Incorporated by
reference to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No. 000-23075)
99.2 Company's Modified Third Amended Plan of Reorganization (Incorporated
by reference to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No. 000-23075)
- ------------------
(1) Filed herewith
Reports on Form 8-K
The Company filed a report on Form 8-K, date of report December 5,
1997, which reported the Company's change in Accountants.
Financial Statements
Unaudited Consolidated Balance Sheet for the quarter ended June 30,
1998.
Unaudited Consolidated Statement of Operations for the quarter
ended June 30, 1998.
Unaudited Consolidated Statement of Cash Flows for the quarter ended
June 30, 1998.
Audited Consolidated Balance Sheet for the years ended December 31,
1997 and December 31, 1996.
Audited Consolidated Statement of Operations for the years ended
December 31, 1997 and December 31, 1996.
Audited Consolidated Statements of Stockholders Deficit for the years
ended December 31, 1997 and December 31, 1996.
Audited Consolidated Statement of Cash Flows for the years ended
December 31, 1997 and December 31, 1996.
22
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
PELICAN PROPERTIES
INTERNATIONAL, CORP.
Date: September 4, 1998 By: /s/ C. John Knorr
---------------------
C. John Knorr, Chairman
23
<PAGE>
<TABLE>
<CAPTION>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
Assets June 30, 1998 December 31,1997
(Proforma)
CURRENT ASSETS
<S> <C> <C>
Cash $ 253,951 $ 63,335
Cash, restricted 7,859,440 -
Other current assets 17,492 -
--------------- ------------------
Total current assets 8,130,883 63,335
PROPERTY, PLANT AND EQUIPMENT, net 17,784 14,105
OTHER ASSETS 4,003 4,003
---------------- ----------------
Total assets $ 8,152,670 $ 81,443
============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 39,039 $ -
Current portion of pre-petition debt - 32,260
Other current liabilities 88,820 89,956
Current maturities of long-term debt 9,838 -
Income taxes payable - discontinued operations 1,569,785 -
Net current liabilities of discontinued operations 605,648
Loan payable to stockholders - 241,153
--------------- ----------------
Total current liabilities 1,707,482 969,017
--------------- ----------------
LONG TERM LIABILITIES
Long term portion of pre-petition debt -
120,547
Deferred income taxes 1,942,135 -
Total long term liabilities 1,942,135 120,547
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock (6%), par value $.001; 1,000,000 shares
authorized and 195,907 issued as of December 31, 1997 - 196
Common stock, par value $.001; 100,000,000 shares
authorized; 4,954,185 shares issued as of December 31,
1997 and 5,094,185 shares issued as of June 30, 1998 5,094 4,954
Additional paid in capital 3,278,590 3,536,894
Retained earnings (accumulated deficit) 1,219,369 ( 4,550,165)
--------------- ---------------
Total stockholders' equity (deficit) 4,503,053 ( 1,008,121)
--------------- ---------------
Total liabilities and stockholders' equity $ 8,152,670 $ 81,443
============= ================
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
(Proforma) (Proforma)
<S> <C> <C> <C> <C>
REVENUES $ $ - $ - $ - -
COST OF REVENUES - - - -
--------------- -------------- --------------- -------------
GROSS PROFIT - - - -
--------------- -------------- --------------- -------------
EXPENSES
General and administrative 91,674 32,694 142,565 55,855
Interest 51,768 - 51,768 -
Depreciation and amortization 194 - 194 -
-------------- -------------- -------------- --------------
Total expenses 143,636 32,694 194,527 55,855
-------------- -------------- -------------- --------------
Loss from continuing operations
before other income (expenses) (143,636) (32,694) (194,527) (55,855)
OTHER INCOME (EXPENSE) 587 (66,209) (45,532) (153,978)
---------------- --------------- -------------- -------------
Loss from continuing operations
before income taxes (143,049) ( 98,903) (240,059) (209,833)
TAX BENEFIT (53,858) (37,237) (90,382) (79,002)
-------------- -------------- -------------- ------------
Loss from continuing operations (89,191) (61,666) (149,677) (130,831)
Gain on sale of discontinued
operations (net of income taxes) 5,477,012 - 5,477,012 -
Income (loss) from discontinued
operations (net of income taxes) (134,401) (118,282) 80,629 160,798
-------------- ------------- ---------- ------------
Income (loss) before extraordinary gain 5,253,420 (179,948) 5,407,964 29,967
Extraordinary Gain (net of income taxes) 361,570 - 361,570 -
NET INCOME (LOSS $ 5,614,990 $ (179,948) $ 5,769,534 $ 29,967
============ ============ =========== ============
Basic and diluted earnings (loss) per share:
Continuing operations $ (.02) $ (.01) $ (.03) (.03)
Sale of discontinued operations 1.08 - 1.08 -
Discontinued operations (.03) (.03) .02 .04
Extraordinary gain .07 - .07 -
-------- ---------- --------- ---------
Net income (loss) $ 1.10 $ (.04) $ 1.14 $ .01
======== ========= ======== =======
Weighted average number
of shares basic and diluted 5,080,852 4,832,976 5,052,170 4,700,203
========== ========== ========== ==========
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 1998 and June 30, 1997
(Unaudited)
1998 1997
(Proforma)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Loss from continuing operations: $ ( 149,677) $ (130,831)
Adjustments to reconcile income from continuing operations
to net cash (used) provided by continuing operations:
Depreciation and amortization 194 -
Changes in working capital of continuing operations:
Decrease (increase) in other assets (17,492) 95,542
Increase (decrease) in accounts payable
and accrued expenses 39,038 ( 57,135)
(Decrease) in other current liabilities (1,136) (79,002)
--------------- -------------
Net cash used by continuing operations (129,073) (171,426)
-------------- ------------
Net cash (used) provided by
discontinued operations (643,043) 392,848
------------- ------------
Net cash (used) provided by operating activities (772,116) 221,422
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (3,873) (100,878)
Proceeds from sale of discontinued operations 14,983,262 -
------------ -------------
Net cash (used) provided by investing activities 14,979,389 (100,878)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt of
discontinued operations (5,622,704) (130,000)
Repayment of shareholders' loans (241,153) -
Cash redemption of preferred stock (293,860) -
Proceeds from issuance of common stock 500 -
-------------- -------------
Net cash (used) provided by financing activities (6,157,217) (130,000)
------------- -------------
Net increase (decrease) in cash and cash equivalents 8,050,056 (9,456)
Cash and cash equivalents, beginning of period 63,335 105,342
--------------- -------------
Cash and cash equivalents, end of period $ 8,113,391 $ 95,886
============= =============
</TABLE>
26
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - BASIS OF PRESENTATION
- -------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The quarterly financial information included herein is
unaudited. However, in the opinion of management, all adjustments, consisting of
normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the six months ended June 30, 1998, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. A description of the Company's accounting policies and other
financial information is included in its audited consolidated financial
statements for the year ended December 31, 1997.
The June 30, 1998 condensed consolidated financial statements include the
accounts of Pelican Properties, International Corp. and its wholly owned
subsidiaries Ohio Key I, Inc. and Ohio Key II, Inc. and its 99% owned
subsidiary, Sunshine Key Associates Limited Partnership, an inactive Partnership
after December 31, 1996.
As more fully discussed in Note 2, the Company's net liabilities have been
segregated from continuing operations in the accompanying condensed consolidated
balance sheets, and its operating results are segregated and reported as
discontinued operations in the accompanying condensed consolidated statements of
operations and cash flows. The Company's 1997 condensed consolidated financial
statements are shown proforma for comparison purposes.
The June 30, 1997 condensed consolidated financial statements have been adjusted
retroactively to reflect significant 1997 fourth quarter adjustments.
Note 2 - SALE OF DISCONTINUED OPERATIONS
- ----------------------------------------
On May 29, 1998, the Company, through its wholly owned subsidiaries Ohio Key I,
and Ohio Key II, sold its only revenue producing asset known as Sunshine Key RV
Resort and Marina, which resulted in a gain of $ 8,784,302, which is net of $
3,307,290 in taxes. The proceeds were used to pay outstanding indebtedness of
$5,589,908 existing at date of sale. The sale is intended to qualify as a
like-kind exchange as promulgated by Internal Revenue Code Section 1031. In
order to ensure this type of income tax treatment, certain qualifying criteria
must be met, including, but without limitation, the proceeds are to be held by a
third party and such proceeds must be used to acquire like-kind property or
properties. It is the intention of management to continue the Company's primary
business and to reinvest such proceeds in resort type real estate.
As an additional result of the sale of discontinued operations, the company
benefited from a forgiveness of debt due to early extinguishment. This is
reflected on the Company's financial statements as an extraordinary gain of $
361,570, which is net of $ 218,973 in taxes.
27
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 3 - DISCONTINUED OPERATIONS
As more fully discussed in Note 2, the Company sold its principal revenue
producing asset, and accordingly, the results of operations of Ohio Key I, and
Ohio Key II, are being accounted for as discontinued operations. Also, the
condensed consolidated balance sheet as of June 30, 1997 has been reclassified
and shown proforma to reflect the Company's net liabilities of discontinued
operations.
Net current liabilities of discontinued operations at December 31, 1997 are
summarized as follows:
Accounts receivable $ 54,535
Inventories 52,992
Other current assets 27,303
Property and equipment, net 6,171,103
Other assets 105,826
Accounts payable & accrued expenses (251,690)
Deferred revenues (222,764)
Other current liabilities (313,875)
Accrued interest (217,348)
Current maturities of long-term debt (65,018)
Long-term debt (5,946,712)
Total $ (605,648)
===========
Note 3 - DISCONTINUED OPERATIONS (continued)
Information relating to the discontinued operations for the six months ended
June 30, 1998 and 1997 are summarized as follows:
1998 1997
-------- -------
Revenues $ 1,853,644 $ 2,311,196
Costs of revenues (439,490) (668,823)
Operating expenses (622,120) (732,278)
General & administrative expenses (296,868) (296,135)
Interest expense (195,177) (93,578)
Depreciation and amortization (142,681) (161,001)
Income taxes (76,679) (198,583)
----------- -----------
Income from discontinuing operations $ 80,629 $ 160,798
=========== ===========
28
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4 - STOCK BASED COMPENSATION
- ---------------------------------
On January 1, 1998 the Company issued 50,000 shares of common stock as payment
of legal fees resulting in a $50 increase to "Common Stock" and a $6,200
increase to "Additional paid in capital."
On February 28, 1998 the Company issued 20,000 shares of common stock as
compensation resulting in a $20 increase to "Common stock" and a $2,480 increase
to "Additional paid in capital" . On May 29, 1998 the Company issued 20,000
shares on common stock as compensation resulting in a $20 increase to "Common
Stock" and a $26,230 increase to "Additional paid in capital".
On February 26, 1998 the Company granted to the Chief Financial Officer ("CFO")
, the option to purchase up to 50,000 shares of Common Stock at an exercise
price of $.01 per share that is vested and exercisable on March 1, 1998. On
March 6, 1998, the CFO exercised the option and was issued 50,000 shares of
Common Stock of the company as restricted shares under Rule 144 of the
Securities Act of 1933.
Note 5 - NET INCOME (LOSS) PER SHARE
- ------------------------------------
The net income (loss) per share is computed by dividing the net income or (loss)
for the period by the weighted average number of shares outstanding (as adjusted
retroactively for the dilutive effect of prior years common stock options) for
the period plus the dilutive effect of outstanding common stock options,
warrants, and preferred shares considered common stock equivalents.
Note 6 - PREFERRED STOCK
- ------------------------
On June 30, 1997, the Company issued 195,907 shares of Series A Preferred Stock
in exchange for payment of $293,862 of debt, $223,862 of which was included in
Pre-petition debt and $70,000 was owed to a related party. On May 29, 1998, the
Company redeemed 195,907 shares of Series A Preferred Stock or all of its
Preferred Stock for $ 293,862 in cash.
Note 7 - SUPPLEMENTAL CASH FLOW INFORMATION
- -------------------------------------------
During 1998, the company issued shares of common stock as payment for legal
expenses and as compensation of officers totaling $ 6,250 and $ 28,750
respectively.
Included in the Company's June 30, 1998 statement of operations is a non-cash
extraordinary gain in the amount of $ 361,570 net of $ 218,973 in taxes. This
resulted from an early extinguishment of debt as a result of the sale of
discontinued operations.
29
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Pelican Properties, International Corp. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Pelican
Properties, International Corp. and Subsidiaries (the "Company") as of December
31, 1997, and the related consolidated statements of operations, stockholders'
deficit and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pelican Properties,
International Corp. and Subsidiaries at December 31, 1997, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in NOTE 3 to the
consolidated financial statements, the Company has experienced losses resulting
in a deficit equity position. At December 31, 1997, the Company's current
liabilities exceeded its current assets by approximately $2,200,000. Future
working capital requirements are dependent on the Company's ability to restore
and maintain profitable operations, to restructure its financing arrangements or
obtain alternative financing as required. Management's plans in regard to these
matters are also described in NOTE 3. As described in NOTES 6, 12 and 16, the
Company emerged from bankruptcy in December, 1996 under a plan of
reorganization. It is not possible to predict the outcome of future operations
or whether the necessary alternative financing can be arranged, if needed. The
Company's ability to achieve the foregoing elements of its business plan, which
may be necessary to permit the realization of assets and satisfaction of
liabilities in the ordinary course of business, is uncertain. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
MORRISON, BROWN, ARGIZ AND COMPANY
Certified Public Accountants
Miami, Florida
February 27, 1998 (except Note 17, as
to which the date is March 6, 1998)
30
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Pelican Properties, International Corp. and Subsidiaries
We have audited the accompanying consolidated statements of operations,
stockholders' deficit and cash flows of Pelican Properties, International Corp.
and Subsidiaries (the "Company") for the year ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of the operations and the cash
flows of Pelican Properties, International Corp. and Subsidiaries for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.
GARCIA, ESPINOSA, MIYARES & CO.
Certified Public Accountants
Coral Gables, Florida
April 9, 1997
<PAGE>
<TABLE>
<CAPTION>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 63,335
Accounts receivable 54,535
Inventories 52,992
Other current assets 27,303
---------------
TOTAL CURRENT ASSETS 198,165
PROPERTY AND EQUIPMENT, net 6,171,103
OTHER ASSETS 123,870
---------------
TOTAL ASSETS $ 6,493,138
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 252,824
Deferred revenues 222,764
Current portion of pre-petition debt 32,260
Other current liabilities 620,045
Current maturities of long-term debt 1,065,018
Loans payable to stockholders 241,153
---------------
TOTAL CURRENT LIABILITIES 2,434,064
---------------
LONG TERM LIABILITIES
Long-term debt, less current maturities 4,946,649
Long-term portion of pre-petition debt 120,546
---------------
TOTAL LONG TERM LIABILITIES 5,067,195
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred Stock, par value $.001; 1,000,000 shares
authorized and 195,907 shares Series A convertible
cumulative 6%, issued and outstanding 196
Common stock, par value $.001; 100,000,000 shares
authorized; 4,954,185 shares issued and outstanding 4,954
Additional paid in capital 3,536,894
Accumulated deficit (4,550,165)
---------------
TOTAL STOCKHOLDERS' DEFICIT (1,008,121)
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 6,493,138
===============
</TABLE>
1
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
REVENUES $ 3,648,678 $ 3,342,310
COST OF REVENUES 1,081,893 1,022,029
--------------- ---------------
GROSS PROFIT 2,566,785 2,320,281
--------------- ---------------
EXPENSES
Operating 1,308,852 1,272,766
General and administrative 708,569 520,444
Interest 439,505 243,889
Depreciation and amortization 337,875 212,168
--------------- ---------------
TOTAL EXPENSES 2,794,801 2,249,267
--------------- ---------------
INCOME (LOSS) FROM OPERATIONS (228,016) 71,014
OTHER EXPENSES, net (254,320) (202,126)
--------------- ---------------
LOSS BEFORE MINORITY INTEREST
AND EXTRAORDINARY GAIN (482,336) (131,112)
MINORITY INTEREST IN LOSS FROM SUBSIDIARY - (2,181)
--------------- ---------------
LOSS BEFORE EXTRAORDINARY GAIN (482,336) (133,293)
EXTRAORDINARY GAIN (Net of minority interest of $28,331) - 1,912,093
--------------- ---------------
NET INCOME (LOSS) $ (482,336) $ 1,778,800
=============== ===============
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
FROM CONTINUING OPERATIONS $ (.10) $ (.03)
============== ==============
BASIC AND DILUTED EARNINGS PER SHARE FROM
EXTRAORDINARY ITEMS $ - $ .51
=============== ===============
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ (.10) $ .48
============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
------------ --------------- Paid-in
Shares Amount Shares Amount Capital
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances - January 1, 1996 3,606,094 $ 3,606 - $ - $ 2,300,781
Conversion of 1996 pre-petition debt to equity 534,029 534 - - 800,511
Issue of stock compensation 100,000 100 - - 6,150
Issue of stock compensation 333,333 333 - - 20,500
Issue of common stock options -
loan origination - - - - 41,667
Net income - - - - -
------------- ------------- ------------- ------------- -------------
Balances - December 31, 1996 4,573,456 4,573 - - 3,169,609
------------- ------------- ------------- ------------- -------------
Issue of stock compensation 50,000 50 - - 3,075
Issue of stock compensation 50,000 50 - - 3,075
Issue of common stock 200,000 200 - - 24,800
Issue of preferred stock - - 195,907 196 293,666
Issue of common stock to repay loan 20,156 20 - - 30,230
Issue of common stock to shareholder 13,906 14 - - (14)
Issue of common stock to repay loan 6,667 7 - - 9,993
Issue of stock compensation 20,000 20 - - 1,230
Issue of stock compensation 20,000 20 - - 1,230
Net loss - - - - -
------------- ------------- ------------- ------------- -------------
Balances - December 31, 1997 4,954,185 $ 4,954 195,907 $ 196 $ 3,536,894
============= ============= ============= ============= =============
(restubbed table)
Accumulated
Deficit Total
----------------------------
<S> <C> <C>
Balances - January 1, 1996 $ (5,846,629) $ (3,542,242)
Conversion of 1996 pre-petition debt to equit - 801,045
Issue of stock compensation - 6,250
Issue of stock compensation - 20,833
Issue of common stock options -
loan origination - 41,667
Net income 1,778,800 1,778,800
------------- --------------
Balances - December 31, 1996 (4,067,829) (893,647)
------------- --------------
Issue of stock compensation - 3,125
Issue of stock compensation - 3,125
Issue of common stock - 25,000
Issue of preferred stock - 293,862
Issue of common stock to repay loan - 30,250
Issue of common stock to shareholder - 0
Issue of common stock to repay loan - 10,000
Issue of stock compensation - 1,250
Issue of stock compensation - 1,250
Net loss (482,336) (482,336)
------------ --------------
Balances - December 31, 1997 $ (4,550,165) $ (1,008,121)
============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (482,336) $ 1,778,800
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 337,875 212,168
Extraordinary gain - forgiveness of debt - (1,940,424)
Non-cash compensation 8,750 6,250
Impaired assets written-off and disposed of 49,880 -
Change in operating assets and liabilities:
Accounts receivable 32,481 (9,753)
Inventories 3,333 (9,481)
Other current assets 252,397 (2,473)
Other assets 8,384 274,338
Accounts payable and accrued expenses 3,598 (271,036)
Deferred revenues 6,419 3,108
Other current liabilities 307,335 (6,018)
Due to affiliate (102,272) 102,272
Pre-Petition debt - 442,979
--------------- ---------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 425,844 580,730
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (326,808) (144,319)
--------------- ---------------
NET CASH USED BY INVESTING ACTIVITIES (326,808) (144,319)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (358,962) (300,000)
Payment of pre-petition debt 59,309 -
Proceeds from other loans 277,228 70,252
--------------- ---------------
NET CASH USED BY FINANCING ACTIVITIES (141,043) (229,748)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (42,007) 206,663
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 105,342 (101,321)
--------------- ---------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 63,335 $ 105,342
=============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - BUSINESS AND ORGANIZATION
Pelican Properties, International Corp. ("Pelican") through
its subsidiary, Ohio Key I, Inc. and Ohio Key II, Inc.
("Subsidiaries") (collectively the "Company"), owns and
operates a recreational vehicle and camping resort in the
Florida Keys as its primary business. The Subsidiaries also
own and operate a convenience store, gas station, bait and
tackle shop, and marina on its premises. In August, 1995, an
agreement was consummated whereby the majority of the Limited
Partners of Sunshine Key Associates, Ltd., Partnership
("Partnership") exchanged limited partnership interests for
shares of the common stock in Pelican Properties,
International Corp. Pelican did not acquire any part of the
general partnership interest in the Partnership. As of
December 31, 1997 and 1996, the Subsidiary and Partnership
interest represented the majority of Pelican's assets and
liabilities. Furthermore, as a result of the bankruptcy plan
and related debt restructuring, substantially all assets and
liabilities of the Partnership were merged into Ohio Key I,
Inc. and Ohio Key II, Inc. on January 1, 1997. Pelican is in
the business of acquiring suitable business ventures primarily
in the travel and leisure industry.
The Company is economically dependent upon the recreational
and tourism trade and changes inweather conditions in the
Florida Keys. The operations are seasonal, with peaks during
the first and fourth quarters of the year.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the financial
statements of Pelican Properties, International Corp. and its
98.54% limited partnership interests in Sunshine Key
Associates, Ltd. Partnership for the year ended December 31,
1996. For the year ended December 31, 1997, the consolidated
financial statements include the financial statements of
Pelican and its wholly owned subsidiaries, Ohio Key I, Inc.
and Ohio Key II, Inc. All material intercompany transactions
and balances have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires that
management make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could
differ from those estimates.
5
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as financial instruments
with maturities of three months or less. As a result, the
recorded amounts approximate their fair value. The Company
maintains its cash and cash equivalents with high quality
financial institutions. At times, such balances may be in
excess of the federally insured limit of $100,000.
ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1997 and 1996 consisted of
community fees, credit card charges, and storage fees. The
fair value of accounts receivable approximates the recorded
amounts. No allowance for uncollectible accounts was
considered necessary at December 31, 1997.
INVENTORIES
Inventories consisting of groceries, gift shop items, bait and
tackle, gas, oil, and other supplies are valued at the lower
of cost or market. Cost is determined using the first in,
first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the respective assets. Expenditures for major
improvements and additions are capitalized and depreciated
while replacements, maintenance and repairs which do not
improve or extend the lives of the respective assets are
expensed as incurred.
INCOME TAXES
Deferred income taxes are provided in amounts sufficient to
give effect to temporary differences between financial and tax
reporting, in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes".
6
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES (CONTINUED)
Management does not believe that any part of the extraordinary
gain for the year ended December 31, 1996, resulting in its
entirety from the forgiveness of debt incurred by the
Partnership under its Chapter 11 Plan of Reorganization, will be
taxable to the Company under the bankruptcy exception, as
provided in Code Section 108 of the Internal Revenue Code. The
entire gain has been treated as a permanent difference for the
1996 income tax expense calculation. In the event that the
Internal Revenue Service would deem that all, or part of the
extraordinary gain is taxable, the Company may incur an
additional, material tax liability. The financial statements do
not include any adjustments that may result from this
uncertainty.
REVENUE RECOGNITION
The Company records site rentals on the accrual basis of
accounting ratably over the term of guest stays, as earned. The
Company requires a non-refundable deposit prior to the actual
stay, which is recorded as reservation deposits within other
current liabilities in the accompanying consolidated balance
sheet.
Deferred revenues arise from annual community fees charged in
advance to park model owners. The Company recognizes community
fees over the term of the year, as earned.
EARNINGS PER SHARE
At December 31, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share".
This statement establishes standards for computing and
presenting earnings per share ("EPS"). It replaces the
presentation of primary EPS with a presentation of basic EPS.
This statement requires restatement of all prior-period EPS data
presented.
The net income (loss) per share is computed by dividing the net
income or loss for the period by the weighted average number of
shares outstanding (as adjusted retroactively for the dilutive
effect of prior year common stock options) for the period plus
the dilutive effect of outstanding common stock options and
warrants considered to be common stock equivalents. Stock
options and other common stock equivalents are excluded from the
1996 net loss per share calculation as their effect would be
antidilutive. The difference between primary and fully diluted
earnings per share is not material.
7
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE (CONTINUED)
Basic and diluted earnings per share amounts are equal because
the Company has a loss from continuing operations and
outstanding options, warrants and their equivalents are
non-exercisable as of December 31, 1997. Additionally,
consideration of the redeemable preferred stock would result in
anti-dilutive effects to earnings per share.
The weighted average number of shares used to compute EPS were
4,743,819 and 3,737,441 for 1997 and 1996, respectively.
NOTE 3 - GOING CONCERN
As shown in the accompanying consolidated financial
statements, the Company has incurred losses and has deficits
in working capital and net worth. Additionally, the Company
has a $1 million debt maturing in December, 1998 (NOTE 6).
These factors raise substantial doubt about the Company's
ability to continue as a going concern.
Management is working to refinance the debt due in December,
1998 and is evaluating methods to reduce costs and improve
results of operations. There can be no assurance that the
Company will be successful in its efforts to refinance the
debt or restore and maintain profitable operations. The
consolidated financial statements do not include any
adjustments, other than the current classification of the
long-term debt due in December, 1998 that might result from
the outcome of this uncertainty.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 consisted of the
following:
<TABLE>
<CAPTION>
Estimated Useful
Life
----------------
<S> <C> <C>
Land - $ 3,814,761
Buildings and improvements 15-31 years 3,465,392
Machinery and equipment 5-7 years 985,827
Furniture and fixtures 7 years 181,126
Vehicles and trailers 5-7 years 223,268
Pools, courts, etc. 7 years 133,134
Computer software 5 years 10,365
---------------
8,813,873
Less accumulated depreciation 2,642,770
---------------
$ 6,171,103
===============
</TABLE>
8
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4 - PROPERTY AND EQUIPMENT (CONTINUED)
Depreciation was $222,428 and $212,168 for the years ended
December 31, 1997 and 1996, respectively. Property and
equipment are located primarily in Monroe County, Florida.
The Company's land includes a certain amount of acreage
designated as an Area of Critical County Concern (a bird
sanctuary).
NOTE 5 - OTHER ASSETS
<TABLE>
<CAPTION>
Other assets at December 31, 1997 consisted of the following:
<S> <C>
Security deposits $ 12,405
Due from affiliate 5,638
Loan origination costs (net of amortization of $115,446) 105,827
---------------
$ 123,870
===============
</TABLE>
Beginning in 1997 loan origination costs are being amortized
over 23 months. Amortization expense was $115,446 for the year
ended December, 1997.
NOTE 6 - LONG-TERM DEBT
<TABLE>
<S> <C>
Mortgage note payable:
The Note was restructured and restated in January, 1997,
retroactive to December 31, 1996. The new agreement provides
for interest payments of $5,000 to be paid monthly through
August 30, 1997. Commencing on August 30, 1997, the Note bears
interest at 9% per annum (effective rate of 6.7% per annum).
Beginning on September 30, 1997, the Company began making
payments of principal and interest in the amount of $39,442.
The Note matures on October 30, 1999 at which time the
outstanding principal balance and all accrued interest will
become due. Under certain conditions the Company may have an
option to extend the maturity until October 30, 2002. The Note
is secured by a mortgage which is collateralized by
substantially all property and equipment. $ 4,684,236
9
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 6 - LONG-TERM DEBT (CONTINUED)
Promissory note payable:
Note payable at 12% per annum. Principal payable in 23
consecutive monthly installments of interest only commencing
February, 1997 and ending December, 1998, at which time the
outstanding principal balance and all accrued interest will
become due. The Note is secured by a second mortgage and by
substantially all property and equipment and is guaranteed by
a stockholder. $1,000,000
Notes payable to Small Business Administration:
Two notes payable to the Small Business Administration were
reorganized as a result of the Modified Third Amended Plan of
Reorganization. The notes are payable over ten years and
accrue interest at the rate of 4% per annum. For the first 24
months, commencing January, 1997, the monthly payments will be
$2,000. Thereafter, the outstanding principal balance and all
accrued interest shall be amortized over an eight year period.
The notes are secured by a mortgage on substantially all
property and equipment. 327,431
---------------
6,011,667
Less current maturities 1,065,018
---------------
Long-term debt $ 4,946,649
===============
</TABLE>
The fair value of the Company's long-term debt is estimated to
approximate carrying value.
<TABLE>
<CAPTION>
The aggregate maturities of long-term debt subsequent to December 31, 1997 are
as follows:
<S> <C> <C>
1998 $ 1,065,018
1999 4,699,710
2000 72,590
2001 36,718
2002 38,214
Thereafter 99,417
---------------
$ 6,011,667
===============
</TABLE>
10
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 6 - LONG-TERM DEBT (CONTINUED)
On January 11, 1996, the Partnership filed a voluntary petition
under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Southern District of
Florida. The case was filed in response to the foreclosure
action initiated by Nationsbank, N.A. with respect to the real
property owned by the Partnership. In May, 1996, the claims of
Nationsbank were acquired by WAMCO XXII, Limited ("WAMCO").
Following various contested matters before the Bankruptcy Court,
the Partnership was ultimately able to negotiate a settlement of
the bankruptcy case with WAMCO. The agreement was reflected in
the Modified Third Amended Plan of Reorganization ("Plan")
proposed by the Partnership. The Plan called for an effective
date of December 20, 1996. In January, 1997, the Company
undertook the transactions necessary to make the Plan effective,
including a refinancing of the property in order to reduce the
obligation to WAMCO to $4.7 million. As per the agreement, the
Company paid WAMCO a total amount of $1 million toward
principal, of which $100,000 was paid directly by the Company in
January, 1997. The discounted obligation was evidenced by a
Restated Note and Mortgage which were executed in January, 1997,
retroactive to December 31, 1996.
In exchange for the foregoing concessions, the Company agreed to
grant WAMCO continuing relief from the Automatic Stay to
Complete Foreclosure in the event of a default by the Company or
the Obligor under the terms of the agreement or the occurrence
of a bankruptcy filing by or against the Obligor and full relief
from the Automatic Stay to foreclose the mortgage securing the
restructured debt in the event of any future bankruptcy filing
by or against the Obligor.
Aside from the treatment of the mortgage claims, the Plan also
proposed to re-amortize the indebtedness evidenced by the second
mortgage on the property and that the assets and liabilities of
the Partnership be transferred to wholly owned subsidiaries of
Pelican Properties, International Corp. Under the Plan, the
Company will pay unsecured creditors in full, in cash, over a
period of 48 months.
Pursuant to Section 1141 of the Bankruptcy Code, the entry of
the Confirmation Order discharges the Company of any and all
liabilities listed on the Schedules, except as otherwise
provided in the Plan. As of October 29, 1996, the Company
emerged from the bankruptcy proceeding and is now operating as
the Reorganized Debtor. It is management's opinion that they
have complied, to date, with all transactions pursuant to the
Plan.
Interest expense on all indebtedness was $439,505 and $243,889
for the years ended December 31, 1997 and 1996, respectively.
11
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
Accounts payable and accrued expenses at December 31, 1997
consisted of the following:
<S> <C>
Accounts payable $ 112,651
Sales taxes 22,714
Payroll taxes 1,134
Staff leasing expense 10,067
Personal property taxes 5,716
Real estates taxes 100,542
---------------
$ 252,824
===============
</TABLE>
NOTE 8 - OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
Other current liabilities at December 31, 1997 consisted of the
following:
<S> <C>
Reservation deposits $ 399,549
Accrued and deferred interest 217,348
Miscellaneous 3,148
---------------
$ 620,045
===============
</TABLE>
NOTE 9 - INCOME TAXES
The components for income taxes for the years ended December 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
--------------- -------------
<S> <C> <C>
Current
Federal $ (121,765) $ (14,160)
State (19,697) (2,291)
--------------- ---------------
(141,462) (16,451)
--------------- ---------------
Deferred
Federal 121,765 14,160
State 19,697 2,291
--------------- ---------------
141,462 16,451
--------------- ---------------
Total income taxes $ - $ -
=============== ===============
</TABLE>
12
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 9 - INCOME TAXES (CONTINUED)
The provision (benefits) for deferred income taxes consists of
the following:
1997 1996
------------ ----------
Increase in valuation allowance $ 141,462 $ 16,451
Net deferred tax assets and liabilities at December 31, 1997 are
as follows:
Deferred tax assets:
Loss carryforward benefit $ 257,602
Less valuation allowance (257,602)
----------------
Net deferred tax asset $ -
================
The valuation allowance for deferred tax assets was $257,602 at
December 31, 1997. In assessing the realizability of deferred
tax assets, management considers whether it is more likely than
not that some portion or all of the deferred tax assets will not
be realized. Management considers, among other things, the
scheduled deferred tax liabilities, projected future taxable
income, and other planning strategies.
The combined state and federal effective tax rate for 1997 and
1996 was 37.65%.
NOTE 10 - RELATED PARTY TRANSACTIONS
Infinity Investments Group, Inc. ("Infinity") is a Florida
corporation and the general partner of the Partnership. As per
terms of a management agreement dated January 2, 1990 between
Infinity and the Partnership, Infinity is to provide
management services to the Partnership in exchange for a
management fee equaling 3% of front desk revenues, plus 2% of
total gross revenues, payable monthly. Management fees
incurred for the years ended December 31, 1996 was $106,506.
The agreement was terminated as part of the bankruptcy Plan,
and therefore, no fees were incurred during 1997.
13
<PAGE>
PELICAN PROPERTIES INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31
NOTE 11 - REVENUES
<TABLE>
<CAPTION>
Revenues consisted of the following:
1997 1996
--------------- ---------------
<S> <C> <C>
Site rentals $ 1,597,635 $ 1,466,699
Merchandise sales 1,560,007 1,444,373
Other (community fees and rental management) 491,036 431,238
--------------- ---------------
$ 3,648,678 $ 3,342,310
=============== ===============
</TABLE>
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company is involved in an appeal of an adverse decision by
the Monroe County Building Department to deny the right to use
free standing concrete blocks to stabilize recreational
vehicles. There is no threatened fine or penalty. However, the
impact of this ruling could negatively effect the Company's
ability to accommodate recreational vehicles that do not have
alternative stabilization devices.
The Company is involved in a Code Enforcement case with Monroe
County arising out of the use of camping on the south side of
the Company's property, which resulted in an adverse ruling and
a lien against the Company's property. This case is on appeal
before the Third District Court of Appeal. The appeal has been
perfected and all necessary documents have been filed with the
Third District Court of Appeals for over a year and no ruling
has yet been issued. If the Appeals Court upholds the Monroe
County Code Enforcement's lien, the maximum amount of that lien
was settled and paid during 1997 at $20,000. Despite this
contingent liability, the probability of success in this case is
favorable.
The Company is involved in various legal actions arising in the
ordinary course of business. Management does not believe that
the outcome of such legal actions will have a material adverse
effect on the Company's financial position or results of
operations.
Legal fees incurred were approximately $114,000 and $163,000 for
the years ended December 31, 1997 and 1996, respectively.
As previously stated in NOTE 6 to the financial statements, as a
result of the bankruptcy plan and related debt restructuring at
January 1, 1997, the Company is currently paying the mortgage
holders under the terms of all of the various restructured and
new notes payable. Foreclosure by any of the mortgage holders
upon default of any of the terms and conditions of the
agreements (see NOTE 6), may at that time, terminate the
Company's ability to satisfy its remaining obligations and pose
substantial doubt about its ability to continue as a going
concern. The consolidated financial statements do not include
any adjustments that might result from the outcome of these
uncertainties.
14
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 12 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
ENVIRONMENTAL MATTERS
During 1997, based on the timeframes outlined in a Florida
Department of Environmental Regulation ("FDER") mandated tank
replacement program, the partially underground petroleum storage
tanks located in the marina area needed to be replaced. During
the removal of the old tanks some limited contaminated soil was
identified. The Company engaged certain professional
environmental consultants to assist with rectification of the
problem. The appropriate initial remedial action was taken and
subsequent to the placements of the new tanks, below surface
monitoring began. As of February, 1998 the readings of any
contaminants are all below acceptable specified levels and have
been submitted for a "No Further Action" status and the issuance
of a "Site Rehabilitation Completion Order".
The Company also has underground petroleum storage tanks in its
gas station area on a monitoring only plan. Although no
assessment has been recently pursued by the FDER, the Company
has plans to analyze and submit the new readings in May, 1998
for a "No Further Action" status for this area also.
The Company engaged certain professional environmental
consultants to assist with the assessment, analysis, monitoring
and resolution of the problems indicated above. The problems are
believed to have been rectified and the Company is awaiting an
evaluation and determination from FDER regarding a "No Further
Action" status and the issuance of a Site Rehabilitation
Completion Order. Although the Company may incur future costs
for environmental compliance, the Company does not believe that
these matters will have a material adverse effect on the
consolidated financial statements of the Company.
OPERATING LEASE
The Company rented office facilities in Miami, Florida on a
month to month basis during 1996. The rent expense was $3,000
for the year ended December 31, 1996.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with two of its officers.
The agreements provide for payment of certain base salaries,
benefits and stock options.
15
<PAGE>
PELICAN INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 and 1996
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information:
1997 1996
----------------- ---------
Interest paid $ 218,411 $ 179,750
Taxes paid - -
Supplemental schedule of non-cash financing activities:
During 1997, the Company issued 195,907 shares of preferred
stock in satisfaction of loans and debt totaling $293,862 (see
NOTE 15).
During 1997, the Company issued 26,823 shares of common stock in
satisfaction of loans totaling $40,250.
During 1997, the Company issued 200,000 shares of common stock
to consultants in exchange for certain consulting services
rendered in connection with assisting the Company with (1) the
merger of the Company and Sunshine Key Associates Limited
Partnership, (2) filing Standard & Poor's application and Form
211 application for listing of the Company's common stock on the
OTC, and (3) maintaining current public information and
shareholder relations. The shares were valued at an aggregate
amount of $25,000.
During 1996, the Company had non-cash transactions relating to
the $1 million loan from American Capital and Equity Corporation
as follows: a receivable of $277,228 included in other current
assets, a principal reduction of the note payable to WAMCO of
$600,000, and loan origination costs of $122,772. As
compensation for guaranteeing the loan, both stock and options
were issued resulting in a $333 increase to common stock and a
$62,167 increase to additional paid-in capital.
During 1996, the Partnership had non-cash transactions relating
to conversion of debt to partners' capital in the amount of
$801,045.
Additionally, during 1996, $1,940,424 of non-cash income from
the extraordinary gain on forgiveness of debt was reduced from
net income in arriving at net cash flow from operating
activities.
NOTE 14 - STOCKHOLDERS' DEFICIT
During 1996 and 1997, the Company issued 100,000 and 140,000
shares of common stock, respectively, to the President as
compensation.
In December, 1996, the Company issued 534,029 shares of common
stock in conversion of $801,045 of Chapter 11 Pre-petition debt
to equity.
16
<PAGE>
PELICAN PROPERTIES INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 14 - STOCKHOLDERS' DEFICIT (CONTINUED)
During December, 1996, the Company issued 333,333 shares of
common stock to the Chairman of the Board as consideration for
personally guaranteeing a loan (NOTE 6). Additionally, 666,667
options to purchase common stock were granted at an exercise
price of $.01. 50% of the total options are exercisable on
January 1, 1998, and the remaining 50% are exercisable on
January 1, 1999.
STOCK OPTIONS AND PURCHASE WARRANTS
The Company has various stock options outstanding to certain
officers.
The following table presents information on stock options:
<TABLE>
<CAPTION>
Total Exercisable Option
Option Option Price
Shares Shares Range
------ ------ -----
<S> <C> <C> <C>
Options outstanding at January 1,
and December 31, 1997 746,666 - $.01 - $2.50
</TABLE>
Class A Common Stock Purchase Warrants:
The Company has 200,000 Class A Common Stock Purchase Warrants
("Class A Warrants") outstanding. The holders of each Class A
Warrant are entitled to purchase one share of Common Stock of
the Company at an exercise price of $5.00 per share. The Class A
Warrants are exercisable any time after issuance until March 19,
2000 and are subject to redemption by the Company, on not less
than thirty days written notice, at a price of $.005 per Class A
Warrant.
Class B Common Stock Purchase Warrants:
The Company has 200,000 Class B Common Stock Purchase Warrants
("Class B Warrants") outstanding. The holders of each Class B
Warrant are entitled to purchase one share of Common Stock of
the Company at an exercise price of $5.00 per share. The Class B
Warrants are exercisable any time after issuance until March 19,
2001 and are subject to redemption by the Company, on not less
than thirty days written notice, at a price of $1.00 per Class B
Warrant.
Holders of both Class A and B Warrants will automatically
forfeit their rights to purchase the shares of Common Stock of
the Company unless the Class A and B Warrants are exercised
before they are redeemed. The Class A and B Warrants contain
provisions that protect the holders against dilution by
adjustment of the exercise price in certain events, including
stock dividends, stock splits, mergers and for other unusual
events.
17
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 15 - CONVERTIBLE PREFERRED STOCK
During 1997, the Company amended its articles of incorporation
to authorize 1,000,000 shares of Preferred Stock of which
195,907 shares were designated "Series A Convertible Cumulative
Preferred Stock", with a par value of $.001 per share. The
holders are entitled to receive a cumulative annual dividend of
6% of the stated value ($1.50 per share) on January 1 of each
year commencing January 1, 1998, payable in cash or common stock
of the Company.
Holders of the Series A preferred stock have the right to
convert each share of preferred stock into the Company's common
stock at any time, at a conversion ratio of one share of Series
A preferred stock for one share of common stock. In the event
the Series A preferred stock is not converted by December 31,
1999, the Company shall have the right to convert the then
outstanding shares of Series A preferred stock to common stock
of the Company. In the event the Series A preferred stock is not
converted by either of the holders thereof or by the Company,
the Series A preferred stock will continue to subsist as
established. The conversion price is subject to adjustments
under certain events. The Company has the right to redeem the
Series A preferred stock at any time, at a pre-determined price.
During 1997, the Company issued 195,907 shares of Series A
preferred stock in satisfaction of certain loans and debt
amounting to $293,862. The preferred shares issued included
46,666 shares to the Chairman of the Board of the Company, who
cancelled a loan in the amount of $70,000.
NOTE 16 - EXTRAORDINARY GAIN - FORGIVENESS OF INDEBTEDNESS
The Partnership was able to negotiate a settlement of the
bankruptcy case with WAMCO (See NOTE 6). The Plan included a
refinancing in order to reduce the obligation to WAMCO to $4.7
million. As per the agreement, the Partnership paid WAMCO a
total amount of $1 million toward principal, of which $100,000
was paid in January, 1997. As a result of the discounted
obligation, the Partnership incurred an extraordinary gain from
forgiveness of debt in the amount of $1,940,424. This amount is
comprised of a principal reduction in the mortgage note of
$616,854 and an accrued interest reduction of $1,323,570.
NOTE 17 - SUBSEQUENT EVENTS
On February 26, 1998, the Company granted to the Chief Financial
Officer ("CFO"), the option to purchase up to 50,000 shares of
Common Stock at an exercise price of $.01 per share that is
vested and exercisable on March 1, 1998. On March 6, 1998, the
CFO exercised the option and was issued 50,000 shares of Common
Stock of the Company as restricted shares under Rule 144 of the
Securities Act of 1933.
18
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 18 - SIGNIFICANT FOURTH QUARTER ADJUSTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
During the fourth quarter of 1997, the Company recorded various
significant adjustments, as follows (approximate amount of):
<S> <C>
Effective interest on debt-expense $ 140,000
Offering expenses incurred and written off during 1997 113,000
Impairment loss on leasehold improvements 35,000
Depreciation expense adjustment 65,000
Accrued real estate taxes 28,000
---------------
$ 381,000
===============
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 253,951
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,130,883
<PP&E> 17,978
<DEPRECIATION> 194
<TOTAL-ASSETS> 8,152,670
<CURRENT-LIABILITIES> 1,707,482
<BONDS> 0
0
0
<COMMON> 5,094
<OTHER-SE> 4,497,959
<TOTAL-LIABILITY-AND-EQUITY> 8,152,670
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 188,291
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,768
<INCOME-PRETAX> (240,059)
<INCOME-TAX> (90,382)
<INCOME-CONTINUING> (149,677)
<DISCONTINUED> 5,557,641
<EXTRAORDINARY> 361,570
<CHANGES> 0
<NET-INCOME> 5,769,534
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.14
</TABLE>
