U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_________ to___________
Commission file number 0-023075
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)
38801 OVERSEAS HIGHWAY, BIG PINE KEY, FLORIDA 33043
(Address of Principal Executive Offices)(Zip Code
(305) 872-2217
(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)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in the
<PAGE>
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. | |
State issuer's revenues for its most recent fiscal year: $3,648,678
The aggregate market value of the Registrant's voting Common Stock
held by non-affiliates of the registrant was approximately $3,086,753
(computed using the closing bid price price per share of Common Stock on April
2, 1998, based on the assumption that directors and officers and more than 5%
stockholders are affiliates).
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
There were 5,004,185 shares of the registrant's Common Stock, par value $.001
per share outstanding on April 2, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company, through its predecessor is engaged in the ownership and
management of a recreational property in Ohio Key, Florida. The Company's
primary objective is the management of its existing property and the
acquisition and management of additional properties, in the United States or
abroad, in the recreational and leisure industry's "resort destination"
segment. Through the acquisition of all of the limited partnership interest
and assets in Sunshine Key Associates Limited Partnership, a Florida limited
partnership (the "Partnership") (collectively with Pelican the "Company") the
Company presently owns and operates a resort known as the Sunshine Key RV
Resort and Marina located on 75 acres which encompasses all of Ohio Key,
Florida (the "Resort").
BACKGROUND
Pelican Properties International, Corp. was incorporated under the
laws of the state of Florida on June 1, 1990 under the name Optimum Computing
Inc. The Company was organized to acquire business opportunities through the
acquisition of assets or the capital stock of existing businesses.
The Resort, which was established in 1971, was acquired by the
Partnership in 1988. Financing for the acquisition was provided by NCNB,
predecessor to NationsBank of Florida, N.A. ("NationsBank"). In 1991 the
Partnership filed a petition for reorganization under Chapter 11 of the United
States Bankruptcy Code. The Resort was operated under the protection of the
Bankruptcy Court until November 1, 1991 when it was discharged.
Effective August 31, 1995, the Company entered into a Share Exchange
Agreement with the limited partners of the Partnership, whereby 99% interest
in the Partnership, which owned and operated the Resort until December 31,
1996 (as discussed below), was acquired by the Company in exchange for
3,010,000 shares of the Company's Common Stock, which amounted to
approximately 69.7% ownership of the Company.
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. The Partnership
was discharged on October 29, 1996.
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, excluding the
Partnership's interest in the proceeding again Monroe County Code Enforcement
Board. (See "Legal Proceedings.")
In connection therewith, the Subsidiaries and the Partnership entered
into a Loan Restructuring Agreement (the "Restructuring Agreement") and a
Restated Mortgage and Assumption Agreement (the "Agreement") with WAMCO XXII,
LTD. (the "Lender")(successor to NationsBank). The Restructured Loan in the
amount of Four Million Seven Hundred Thousand Dollars ($4,700,000) is evidenced
by the Restated Promissory Note and redocuments the indebtedness evidenced by
the Final Judgment to reflect the terms of the Stipulation, the Plan and
Confirmation Order. The restated mortgage and assumption agreement reflects the
terms of the "Restructuring Agreement". (See "Partnership's Outstanding
Indebtedness; Bankruptcy").
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On September 12, 1997, Pelican Properties International Corp. filed
the Form 10SB registration statement with the SEC that became effective on
November 12, 1997. The Company received thirty three comments from the SEC
regarding the Form 10SB registration statement. Although an amended Form 10SB
has not been submitted to the SEC, all non-financial statement related
comments and questions have been addressed and incorporated into this filing
and most financial comments were included in the accompanying financial
statements.
SUNSHINE KEY RESORT
The Company, through the Subsidiaries, owns and operates the Resort
located in the Florida Keys. The Resort offers the air, land and waterborne
visitor a home base near Key West, Florida. Located on Ohio Key at Mile Marker
39 on the Overseas Highway (U.S. Route 1) and at Marker 20 on the Intracoastal
Waterway, the Resort destination offers a complete on-site rest and relaxation
or vacation experience, while being close enough to Marathon and Key West for
airport access as well as day and evening excursions.
The Marina portion of the Resort can accommodate boats up to 100' and
has 172 boat slips, of which approximately 20% are occupied on full year
leases, 50% are occupied on a six-month lease basis, and 30% are available for
the transient visitors. There is boat storage for the regular visitors who do
not require regular access of a slip. A small marina store offers groceries,
bait and tackle and a dive shop that offers scuba/snorkel trips daily or
sunset cruises and kayaking. There is a boat ramp for those motorists who
bring their own boat, but those without a boat of their own can lease fishing
boats and tackle or charter a captain from the Resort.
The campground portion of the Resort has 405 sites, including five
double-wide sites. Catering to recreational vehicles ("RVs"), the facility has
40 consigned rental units for non-owners. While most visitors do their own
cooking, there is a small pool side restaurant at the Resort which offers
breakfast, lunch and an occasional dinner.
On the road entrance to the Resort, the facility has a Chevron
gasoline and convenience store for travelers on U.S. 1 as well as guests at
the Resort. Management offices, including the check-in guard gate, are
prominently located at the road entrance.
While most people associate the Florida Keys with the immediate
availability of the Gulf of Mexico on the North and the Atlantic Ocean on the
South, with its boating, fishing, scenic views and incomparable sunrises and
sunsets, the Resort offers the visitor a wide variety of on-site recreation
facilities and amenities as well. Water-based recreation is the primary
attraction which the Resort exploits to the full potential. In addition to the
salt water bathing at its private beach, the Resort has a large freshwater
swimming pool with ample tanning and pool-side lounging area. Snorkeling and
diving opportunities are available and from its Marina, the Resort offers sunset
cruises and kayaking. There are also tennis and basketball courts, as well as
shuffleboard courts. As a family resort, the Resort caters to every age group,
with adult recreation rooms, a Teen Recreation Hall, and a children's
playground. The Resort is equipped with a dog kennel for families traveling with
pets. Promoting the community aspects of this mini-village, the Resort has two
outdoor theaters which are used for various special events, for the regular
fishing contests and for the full activities program.
GROWTH AND DEVELOPMENT; BUSINESS STRATEGY
The Company intends to pursue a strategy of growth and is seeking to
expand its operations through acquisitions of additional resort type
properties. Subject to the availability of financing and recognizing that
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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 additional properties through the public or private sale of its
securities or by obtaining financing from institutional or other financing
firms.
As with the existing Resort, the Company will target locations where
nature and the environment are the primary appeal of the location. The
targeted properties in the recreational and leisure industry will be
geographically situated to have at least one property in season at all times.
The Company will seek to upgrade the facilities at each location to be in a
position to attract recreational visitors. A prime requisite for a newly
acquired property will be to incorporate 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, and they will be well positioned in a
rapidly expanding tourist destination.
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.
MARKETING
Substantial advertising and marketing efforts by the former majority
owners of the Partnership have provided "name recognition" and a strong
presence in the industry for the Resort as a year-round destination.
Currently, marketing is conducted through the efforts of the Company's
management. The Company has used various marketing methods, including direct
mailing, trade shows and RV association publications, in-person solicitation
and full color brochures and printed advertising. The Resort also enjoys
publicity from ESPN sports channel, as 2-3 fishing shows are broadcast each
year from the marina at Sunshine Key resort. The Resort also obtains guests
through recommendations and referrals from existing and former guests. In
addition, the Company has entered into a membership with a discount RV and
camping club to market the Resort in the off-season. The Partnership's
management devotes substantial time and effort to maintain continuing guest
relationships.
In that regard, management will seek to (i) maximize sales with an
extensive campaign to promote the Resorts to targeted groups, (ii) up-grade the
facilities to provide the most modern conferences and workshops, while
maintaining all the amenities for the level of comfort required by the guest,
(iii) add specialists to the Resort staff to support and sustain prolonged
growth under the marketing plan, and (iv) increase research efforts, through
consultants, to create additional follow-up programs as well as further
refinement of the Resort's competitive advantages.
SEASONALITY
The Company's business is considered seasonal with a large portion of
its revenues and profits being derived between December and April, and between
July and August. There can be no assurances that revenues received during
these periods will support the Company's operations for the rest of the year.
COMPETITION
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The Company is engaged in a highly competitive segment of the hotel
and RV resort industry. The Company competes directly or indirectly with many
companies, a number of which are larger, better capitalized and more
established. Although the Company believes it has a competitive advantage
because of its location and long time presence and existence, as well as a
constant focus on upgrading and maintaining the existing facilities in order
to enhance the available recreational opportunities, there can be no assurance
that the Company will be able to compete favorably in the future.
EMPLOYEES
The Company currently has two employees consisting of its President
and Chief Financial Officer. Management believes that its present employees
are adequate to support its current operations although the Company intends to
hire additional employees upon the acquisition of additional properties. The
Company, in its subsidiary, currently has approximately 45 employees, most of
which are leased through the employment agency of Staff Leasing.
PARTNERSHIP'S INDEBTEDNESS AND BANKRUPTCY
To finance the cost of the acquisition of the Resort, in 1989 and
1990 the Partnership (prior to the acquisition by the Company) incurred
indebtedness (the "Loan") of approximately $7,100,000 with NationsBank
pursuant to a consolidated loan agreement ("Loan Agreement"). As a result of
certain actions of the former general partner of the Partnership, Capital
Equities Corp., the Loan was in default in 1991, at which time the Partnership
filed a petition for reorganization under Chapter 11 of the United States
Bankruptcy Code. From 1991 to 1994, the Partnership remained current on its
obligations to its creditors through revenues generated from the Resort. In
1994, NationsBank refused to fulfill its agreement to extend the maturity date
of the Loan, and the Partnership thereafter entered into a settlement
agreement ("Settlement Agreement") with NationsBank wherein the Partnership
was obligated to pay NationsBank the sum of $5,300,000 on or before November
15, 1995. Thereafter, on December 5, 1995, NationsBank and the Partnership
entered into a modification agreement ("Modification Agreement"). Following a
default by the Partnership on December 16, 1995, NationsBank gave notice of
acceleration of the Note and its intention to seek judgment against the
Partnership and foreclose on its security interest in the Resort. On January
11, 1996 the Partnership filed a petition for reorganization under Chapter 11
of the United States Bankruptcy Code seeking relief from its creditors. On
February 23, 1996, NationsBank filed a Motion to Dismiss, which was denied. On
March 5, 1996, the Partnership filed its Plan with the court,
which Plan was confirmed by the court and the Partnership was discharged on
October 29, 1996.
Pursuant to the Confirmation Order, Lender has the principal claim
and is secured by a first priority lien in and upon the real property owned by
the Subsidiaries and upon which it operates the Resort. Under the Plan, the
Subsidiaries made cash payments of approximately $1 million and the notes were
consolidated and restated in a single note in the principal amount of
$4,700,000 with the following payment terms:
(i) During the period commencing on December 29, 1996 and
ending on August 29, 1997, the restated note will bear $5,000 monthly interest
only payments commencing on May 29, 1996 to compensate the Lender for its
agreement to waive interest on the restated note during this period.
(ii) Commencing on August 30, 1997, the restated note will
bear interest at nine (9%) percent per annum. On September 29, 1997 through
and including September 29, 1999, the Subsidiaries will make equal amortizing
monthly payments of principal and interest on the restated note determined by
reference to standard amortization tables using an interest rate of nine (9%)
percent per annum, the principal balance of the restated note on October 30,
1996 and an amortization period of twenty five (25) years.
<PAGE>
Assuming the principal balance is $4,700,000, the monthly payment amount will be
$39,442.23. The restated note will mature on October 30, 1999, at which time the
outstanding principal balance and all accrued interest will be due and payable
in full.
(iii) If the restated note is repaid in full before November
30, 1997, the Subsidiaries will receive an early payment discount equal to
eight (8%) percent of the outstanding principal balance of the restated note
on the date of repayment. In order to receive the discount, the Subsidiaries
must repay all outstanding accrued interest and any other sums owed to the
Lender on the date of early payment.
(iv) If the restated note is repaid in full after November
30, 1997 and before November 30, 1998, the Subsidiaries will receive an early
payment discount equal to five (5%) percent of the outstanding principal
balance of the restated note on the date of repayment. In order to receive the
discount, the Subsidiaries must repay all outstanding accrued interest and any
other sums owed to the Lender on the date of early payment.
(v) No early payment discount will be available after
November 30, 1998.
The Subsidiaries will have a one-time option to extend the maturity
of the restated note until October 30, 2002 as long as they comply with the
following conditions:
(i) On or before October 29, 1999, the Subsidiaries must pay
the Lender an extension fee equal to one (1%) percent of the outstanding
principal balance of the restated note and reduce the principal balance of the
restated note by $500,000.
(ii) The Subsidiaries must provide the Lender with written
notice of its election to exercise the extension option by September 30, 1999.
If the Subsidiaries elect to exercise the extension option and meets
all conditions required by the Lender for the exercise thereof, the following
terms will apply during the extended term of the restated note:
(i) The Subsidiaries will execute a renewal of the restated
note (the "Renewal Note") which will bear an interest rate of 9.75% per annum
commencing on October 30, 1999.
(ii) November 29, 1999 through and including September 29,
2002, the Subsidiaries will make equal amortized monthly payments of principal
and interest on the Renewal Note determined by reference to standard
amortization tables using an interest rate of 9.75% per annum, the outstanding
principal balance of the restated note on October 30, 1999 and amortization
period of twenty (20) years period. The restated note will mature on October
30, 2002 at which time the outstanding principal balance plus accrued interest
will be due and payable in full.
As of the date hereof, the Subsidiaries have not repaid the note in
full, rather have made all monthly payments and are presently current on the
note.
The Company also entered into a promissory note with American Capital
and Equity Corp. located in Daytona Beach, Florida for $1,000,000 at 12% per
annum. This note is payable in 23 consecutive monthly installments of interest
only commencing on February 1997 and ending December 1998, at which time the
outstanding principal balance and accrued interest will become due and payable
in full.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Resort and the Company's operations are conducted on 75 acres in
the Florida Keys, which encompasses all of Ohio Key, Florida. The Company's
principal offices are located on the Resort at 38801 Overseas Highway, Big
Pine Key, Florida 33043.
ITEM 3. 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 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 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 the liability from this case entirely.
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.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
Prior to filing the Form 10SB with SEC, a majority of shareholders by
written consent dated June 29, 1997 authorized the creation of 1,000,000
shares of Preferred Stock at a par value of $.001 per share. Series of the
Preferred Stock may be created and issued from time to time, with such
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions providing for the creation and
issuance of such series of Preferred Stock as adopted by the Board of
Directors pursuant to the authority in this paragraph given.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
As of April 2, 1998 there were approximately 284 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 of October 20, 1995 to
December 31, 1997 the high and low closing sales prices for the Common Stock
as reported by the OTC Bulletin Board.
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Common Stock
------------
High Low
---- ---
1995
Fourth Quarter 8.0625 6.625
(commencing October 20, 1995) 8.50 6.75
1996
First Quarter 8.50 .50
Second Quarter 6 .25
Third Quarter 2.50 .06
Fourth Quarter 2 .06
1997
First Quarter 1.875 .12
Second Quarter 2.875 1
Third Quarter 2 .50
Fourth Quarter 1.31 .41
The transfer agent for the Company's Common Stock is Florida Atlantic
Stock Transfer, Inc., 5701 N. Pine Island 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 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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.
Pelican Properties, International Corp., through its wholly owned
subsidiary, Ohio Key I, Inc., owns and operates a resort known as the Sunshine
Key RV Resort and Marina. The resort encompasses all of Ohio Key, Florida
located in the Florida Keys. The company's primary objective is the management
of its existing property and the acquisition and management of additional
properties in the recreational and leisure industry's resort destination
segment. The references to operations generally refer to this subsidiary
unless otherwise noted. Prior to the December 31, 1996 acquisition by Ohio Key
I, Inc., the asset was owned by Sunshine Key Associates, Limited Partnership.
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.
<PAGE>
On September 12, 1997, Pelican Properties International Corp. filed the
Form 10SB registration statement. The Company received thirty three comments,
thirteen specifically relating to financial statements, from the SEC regarding
the Form 10SB registration statement. Although an amended Form 10SB has not been
submitted to the SEC, the accompanying audited condensed consolidated financial
statements include most of the SEC comments made to the company's Form 10SB. The
remaining comments are not directly related to issues incurred and disclosed in
1997. Management believes that those remaining comments that could affect the
Company's financial statements can be resolved to the satisfaction of the SEC
without changes to the financial statements. There can be no assurances that
these issues will be resolved to the satisfaction of the Company and changes to
the financial statements could occur that materially affect the information
stated. Prior year financials were also restated to incorporate the write off of
certain expenses that will be addressed in this filing. The following is a
summary of the relevant remaining comments not incorporated into this filing
that relate to the 1996 financials: a) An explanation is required as to the
basis for attributing 1996 compensation expense of $6,150 and $20,500 related to
the issuance of 100,000 and 333,333 common shares to Jane Bergman, President,
and Carl J. Knorr, Chairman. It is questioned as to the validity of attributing
a $.06 value to these shares with respect to the market value of the 1996 stock
prices; b) A request for consideration was given to the conversion of $801,045
of debt to 534,045 shares common stock at a $1.50 conversion rate on December 6,
1996 and the issuance of the above referenced 100,000 and 333,333 shares on
December 31, 1996.
Results of Operations
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 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 effort of management 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.
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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". This reclassification
is a result of an SEC comment relating to the Company's Form 10SB filing. The
remaining 1997 balance of approximately $67,000 is comprised of $45,000 for
the write-off 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 a
long-standing dispute with 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.
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
is primarily due to the December 1998 maturing of the $1,000,000 second
mortgage. Management is presently working with several lenders in an attempt to
consolidate the first and second mortgages. Management believes that they will
secure financing acceptable to the company and does consider this note as a
going concern. 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. Management does not
believe the holders of these loans, which are all current stockholders of the
company, will demand payment and therefore does not consider them a going
concern.
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 have 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 project of
the 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 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.
<PAGE>
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.
Outlook
Management believes that the resort destination industry and more
specifically the recreation vehicle (RV) industry are expected to grow
substantially because of: (i) a shift in recreation vehicle ownership patterns
toward the enormous baby boom population; (ii) expectations of the baby boom
population to increase 34% between 1995 and 2005 and the over 65 population
increasing an estimated 24% to 40 million by 2010; (iii) in 1996, over 466,000
new RV's were shipped with a total value of $10 billion, constituting the
highest annual dollar value to date; and (iv) according to the University of
Michigan Survey Research Group, RV ownership rates are highest in the 50-65
age group and are expected to grow by 40% over the next ten years. =
The Company will seek to take advantage of the growing resort
destination industry through its strategy of expanding through acquisitions.
The Company intends to further take advantage of this growing industry by
targeting locations where nature and the environment are the primary appeal of
the location. This will take advantage of the above stated industry outlook as
well as the growing eco-tourism sector. The Company will emphasize, as initial
targets, acquisitions that complement its existing operation with alternate
seasonality. This will provide the Company with a consistent cash flow from
operations and ensure that an operation is in season at all times throughout
the year.
Ohio Key I, Inc. Subsidiary
Management anticipates increases in revenue for 1998. Several factors
will influence this increase. A rate increase was implemented in October of 1997
that represented the first increase in two years. Also, since the majority of
the peak-season falls within the first quarter, which represents approximately
40% of the yearly revenues, management feels there is a tremendous potential for
increased sales in the off-peak season. A more focused marketing effort targeted
to improve operations in the off-peak season has recently been implemented. The
many capital improvements undertaken in the last several years along with
present projects is believed to improve the overall appeal of the park and thus
increase sales. One project in particular, the complete electrical upgrade of
the park, will have several major positive effects on operations. It will
increase power efficiency resulting in anticipated power cost savings of
approximately $75,000 a year and a reduction in responsibility for the primary
electrical system that the local electric utility company will assume
<PAGE>
at the completion of the project. This improvement will also allow the
Company to meter and bill individual sites occupied by longer term residents
thus increasing revenues as well as eliminating the existing brownouts that
occur periodically.
Significant efforts have been made in 1997 to expand the number and
quality of amenities offered at the resort. The Company entered into agreements
with two separate entities that have significantly upgraded our recreational
water amenities. The first was the rental use boats owned and maintained by an
outside source. This replaced the two existing boats with modern boats and
eliminated the costly maintenance operation. The second was the opening of a
state of the art scuba diving facility on the property offering retail
merchandise, instruction and a wide variety of aquatic recreation. The business
is owned and operated by an outside individual with an industry wide reputation
and existing client base. The rental boats and dive facilities are anticipated
to increase the overall appeal of the park, as well as increase revenues through
our profit sharing and space leasing arrangements. As part of the profit sharing
arrangements, the Company receives 25% of the base rental boat rate of each
rental. The Company also receives 5% of the dive shop sales revenue that
increases to 12% over the next several years. The Company also receives a
monthly payment from the dive shop owners that represents the lease of the dive
shop space location on the Resort property.
Management does not anticipate any significant fluctuations in
Operating and General & Administrative expenses for 1998. The Company expects
interest expense to decrease in 1998 due to management's expectation of a
refinancing of the first and second mortgages at a more favorable effective
interest rate. The alternative debt financing will also enable the Company to
take advantage of the discounted payoff amount of $4,465,000 by November 1998
of the $4,700,000 note held by Allied Capital Corp. (formerly held by WAMCO
XXII, Ltd.) This would result in a principal reduction of $234,000 or 5%.
Management is confident that financing will be available to take advantage of
this reduction.
In 1997, the Company won an appeal of a previous Circuit Court ruling
that prohibited certain recreational park model vehicles from the park. As a
result of the favorable appeal ruling the Company plans to more forward with a
subsequent damage claim with the county. The Company also has a pending claim
with the local electric utility company regarding the non payment of prior
year's billing credits, the refund of prior year's late fees, and associated
accrued interest that amounts to approximately $65,000. Management feels
strongly that this claim can be settled in 1998, but does feel that legal
steps may be needed to collect.
The Company will continue to reinvest in ongoing capital improvements
to the property in 1998. The electrical upgrade project is due for completion
in 1998. Other capital improvement projects intended to significantly upgrade
the park's appeal and reputation include but are not limited to; the complete
modernization of the marina floating docks, repaving of the park's roads, an
additional pool (inclusive of a new restaurant and game room) facility and the
renovation of the roadside gas station and grocery store facility. Management
intends to begin working on these projects in 1998, but there can be no
assurances that the Company will have sufficient cash flows to start these
projects in 1998.
ITEM 7. FINANCIAL STATEMENTS
The financial statements required to be filed hereunder are included
under Item 13 of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
<PAGE>
Reported by reference in the Company's 8-K dated April 13, 1998.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
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 45 President and Director
Donald E. Schupp 51 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 38801 Overseas Highway, Big Pine Key, Florida
33043.
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. Since June 1, 1996, Ms. Bergman has 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 a 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. From 1989 to October 1995 Mr. Benjamin was
employed with the Federal Reserve Bank of Atlanta,
<PAGE>
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 directores 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 wre
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.
ITEM 10. EXECUTIVE COMPENSATION
No executive officer of the Company has had annual compensation in excess of
$100,000. The following table shows for the year ended December 31, 1997, the
cash and other compensation paid by the Company to its President and Chief
Financial Officer.
Summary Compensation Table
Name and
Principal Fiscal Other Annual All Other
Position Year Salary Bonus Compensation Compensation
- -------- ---- ------ ----- ------------ -------------
Jane Bergman, 1997 $-0- $-0- $-0- $8,750(1)
President =========
C. John Knorr (2) 1998 -0- -0- -0- 0
(1) Represents the value determined by management of 140,000 shares of Common
Stock earned in 1997 pursuant to the employment agreements between the
Company and Ms. Bergman.
(2) Commenced employment on August 31, 1995 as President and resigned as
President on June 1, 1996.
Employment Agreements
On June 1, 1997 the Company entered into a one (1) year employment
agreement with Jane Bergman, the Company's President, which agreement may
automatically be renewed for up to one (1) year, upon the mutual consent of
the parties thereto. The agreement provides for an initial base salary of up
to an aggregate of 80,000 shares of the Company's Common Stock per year,
medical benefits, insurance and other fringe benefits. The shares of Common
Stock to be issued to Ms. Bergman shall be issued as follows: Twenty Thousand
(20,000) shares to be issued on the last day
<PAGE>
of the completion of the first quarter following the signing of the agreement,
Twenty Thousand (20,000) shares to be issued at the completion of the second
quarter following the signing of the agreement, Twenty Thousand (20,000) shares
to be issued on the last day of the completion of the third quarter following
the signing of the agreement, and Twenty Thousand (20,000) to be issued on the
last day of the completion of the final quarter following the signing of the
agreement. The employment agreement provides for full time employment and
contains a provision that the employee will not compete or engage in a business
competitive with the current or anticipated business of the Company for the term
of the agreement and in the event Ms. Bergman is terminated for cause or
voluntarily resigns, she shall be subject to the non-competition clause for a
period of one (1) year after termination or resignation.
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; (1) 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
year-end; and/or (2) 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 years 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 years number, calculated in a like manner; and/or (3) as
of December 31, the average bid price of the Common Stock shall have increased
by no less than 20% over the previous years 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 competition 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, 1997. 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
Name Granted(#) Fiscal Year ($/Shares) Date Expiration
---- ---------- ----------- ---------- ---- ----------
<S> <C> <C> <C> <C> <C>
Jane Bergman, President -0- -0- -0- -0-
</TABLE>
<PAGE>
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
- --------------------------------------------------------------------------------
Jane Bergman, 0 0 0 0
President
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts Under
Number Performance Non-Stock Price-Based Plans
of Shares, or Other -----------------------------
Units or Period Until
Other Rights Maturation Threshold Target Maximum
Name (#) or Payout ($ or #) ($ or #) ($ or #)
- --------------------------------------------------------------------------------
Jane Bergman, 0 0 0 0 0
President
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
Company's Common Stock beneficially owned on February 2, 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 April 2, 1998, there were 5,004,185 shares of Common Stock outstanding.
The address of each of the persons set forth below is 38801 Overseas Highway,
Big Pine Key, Florida 33043, except as otherwise noted.
<PAGE>
No. of Shares
of Common Stock
Name and Address Beneficially Owned
- ---------------- ------------------
C. John Knorr, Jr.(1) 911,561
Jane Bergman (2) 260,000
Donald E. Schupp -0-
Timothy M. Benjamin(3) 50,000
Thomas L. Callahan(4) 688,145
Linda Brauer(5) 350,698
All executive officers and directors
as a group (four persons) 1,221,561
- ------------------------------
(1) Includes 101,203 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.
(2) Does not include 20,000 shares of Common Stock issuable pursuant to the
Employment Agreement entered into between the Company and Ms. Bergman
which shares are issuable quarterly during the remaining quarter of
employment at a rate of 20,000 shares on the last day of May 31, 1998.
(3) Excludes 40,000 shares issuable pursuant to options which vest upon
certain conditions. See "Employment Agreements:"
(4) The address is 144 De Coursey Cove Lane, Queenstown, MD 21658.
(5) The address is 11308 Bedfordshire Avenue, Potomac, MD 20854.
ITEM 12. 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, plus two (2%) percent of
total gross revenues, payable monthly. 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
<PAGE>
Partnership of all of the Partnership's assets, and therefore, no fees were
incurred during 1997. Also, Infinity Investments privately owns three park model
units located at the Sunshine Key Resort. These rental units are managed through
Ohio Key I's rental management program and balances to and from all units change
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.
As of the date hereof, there are stock options to purchase an
aggregate of 666,666 shares of Common Stock outstanding, 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.
Mr. Knorr is presently compensated by the subsidiary, Ohio Key I, Inc.
and Ohio Key II, Inc. the sum of $62,000 annually for services as its sole
officer and director. 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 financials. These sums are related to the above
mentioned accrued management fees and rental unit incomes that are offset by
conversions to stock. Balances are adjusted quarterly and do not include his
annual salary compensation referenced above. References to "Due From Affiliates"
are found in Note 5 of the 1997 financials and "Due to Affiliates" the 1997
consolidated statement of cash flows.
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
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. (1)
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)
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)
<PAGE>
10.3 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
10/31/97. (1)
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
10/01/97. (1)
23.1 Consent of Morrison, Brown, Argiz & Co. (1)
23.2 Consent of Garcia, Espinosa, Miyares & Co. (1)
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.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Pelican Properties International, Inc.
(Registrant)
By: /S/ JANE BERGMAN
----------------------
Jane Bergman
President and Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/S/ C. JOHN KNORR Chairman of the Board April 14, 1998
- -----------------
C. John Knorr
/S/ JANE BERGMAN President and Director
- ---------------- (Principal Executive Officer) April 14, 1998
Jane Bergman
/S/ DONALD E. SCHUPP Director
- --------------------
Donald E. Schupp April 14, 1998
/S/ TIMOTHY M. BENJAMIN Chief Financial Officer and
- ----------------------- Treasurer (Principal Financial
Timothy M. Benjamin Officer) April 14, 1998
<PAGE>
FINANCIAL STATEMENTS
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
CONSOLIDATED BALANCE SHEET.............................................1
CONSOLIDATED STATEMENTS OF OPERATIONS..................................2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT.......................3
CONSOLIDATED STATEMENTS OF CASH FLOWS..................................4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS........................5 - 19
<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)
<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>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
CURRENT ASSETS
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
===============
The accompanying notes are an integral part of these consolidated
financial statements.
-1-
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
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 Accumulated
Shares Amount Shares Amount Capital Deficit Total
------- ------ -------- -------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances - January 1, 1996 ..... 3,606,094 $ 3,606 -- $ -- $ 2,300,781 $ (5,846,629) $ (3,542,242)
Conversion of 1996 pre-petition
debt to equity................ 534,029 534 -- -- 800,511 -- 801,045
Issue of stock compensation .... 100,000 100 -- -- 6,150 -- 6,250
Issue of stock compensation .... 333,333 333 -- -- 20,500 -- 20,833
Issue of common stock options -
loan origination .............. -- -- -- -- 41,667 -- 41,667
Net income ..................... -- -- -- -- -- 1,778,800 1,778,800
----------- --------- ------- ------- ----------- ----------- -----------
Balances - December 31, 1996 ... 4,573,456 4,573 -- -- 3,169,609 (4,067,829) (893,647)
----------- --------- ------- ------- ----------- ----------- -----------
Issue of stock compensation .... 50,000 50 -- -- 3,075 -- 3,125
Issue of stock compensation .... 50,000 50 -- -- 3,075 -- 3,125
Issue of common stock .......... 200,000 200 -- -- 24,800 -- 25,000
Issue of preferred stock ....... -- -- 195,907 196 293,666 -- 293,862
Issue of common stock to repay loan 20,156 20 -- -- 30,230 -- 30,250
Issue of common stock to shareholder 13,906 14 -- -- (14) -- 0
Issue of common stock to repay loan 6,667 7 -- -- 9,993 -- 10,000
Issue of stock compensation .... 20,000 20 -- -- 1,230 -- 1,250
Issue of stock compensation .... 20,000 20 -- -- 1,230 -- 1,250
Net loss ....................... -- -- -- -- -- (482,336) (482,336)
--------- --------- -------- ------ ---------- ----------- -----------
Balances - December 31, 1997 ... 4,954,185 $ 4,954 195,907 $196 $ 3,536,894 $ (4,550,165) $ (1,008,121)
========= ========= ======== ====== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
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 in weather 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:
Estimated Useful
Life
----------------
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
==============
-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
Other assets at December 31, 1997 consisted of the
following:
Security deposits $ 12,405
Due from affiliate 5,638
Loan origination costs (net of amortization
of $115,446) 105,827
------------
$ 123,870
------------
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
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)
<TABLE>
<CAPTION>
<S> <C> <C>
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
================
The fair value of the Company's long-term debt is estimated
to approximate carrying value.
The aggregate maturities of long-term debt subsequent to
December 31, 1997 are as follows:
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
Accounts payable and accrued expenses at December 31, 1997
consisted of the following:
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
===============
NOTE 8 - OTHER CURRENT LIABILITIES
Other current liabilities at December 31, 1997 consisted of
the following:
Reservation deposits $ 399,549
Accrued and deferred interest 217,348
Miscellaneous 3,148
---------------
$ 620,045
===============
NOTE 9 - INCOME TAXES
The components for income taxes for the years ended December
31, 1997 and 1996 are as follows:
1997 1996
--------------- -------------
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 $ - $ -
=============== ================
-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, 1997 AND 1996
NOTE 11 - REVENUES
Revenues consisted of the following:
1997 1996
------- -------
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
============ ===========
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 PROPERTIES, 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 a key executive 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:
Total Exercisable Option
Option Option Price
Shares Shares Range
------- ----------- ------
Options outstanding
at January 1, and
December 31, 1997 746,666 - $.01 - $2.50
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)
During the fourth quarter of 1997, the Company recorded various
significant adjustments, as follows (approximate amount of):
<TABLE>
<CAPTION>
<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-
EXHIBIT 3.10
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
PELICAN PROPERTIES, INTERNATIONAL CORP.
Pursuant to Section 607.1006 of the Business Corporation Act of the State of
Florida, the undersigned President of Pelican Properties, International Corp.
(the "Company") a corporation organized and existing under and by virtue of the
Business Corporation Act of the State of Florida, bearing Document No. L77616,
does hereby certify:
That pursuant to the Written Consent of the Directors and Majority Shareholders
of said Corporation dated June 29, 1997 and the Unanimous Written Consent of the
Board of Directors of said Corporation dated June 24, 1997, the Shareholders and
Directors approved an amendment to the Corporation's Articles of Incorporation
as follows:
Article IV of the Certificate of Incorporation of this Corporation is amended
and restated to read in its entirety as follows:
ARTICLE IV
CAPITAL STOCK
1. The maximum number of shares that this Corporation shall be
authorized to issue and have outstanding at any one time shall
be One Hundred and One Million (101,000,000) shares which are
to be divided into two classes as follows:
100,000,000 shares of common stock with a par value of $.001
per share and 1,000,000 shares of Preferred Stock at a par
value of $.001 per share. Series of the Preferred Stock may be
created and issued from time to time, with such designations,
preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting
rights, qualifications, limitations or restrictions thereof as
shall be stated and expressed in the resolution or resolutions
providing for the creation and issuance of such series of
Preferred Stock as adopted by the Board of Directors pursuant
to the authority in this paragraph given.
2. The Board of Directors of the Corporation desires, pursuant to
its authority as aforesaid, to determine and fix the rights,
preferences, privileges and restrictions relating to a class
of said Preferred Stock to be
Roxanne K. Beilly, Esq., FL Bar #851450
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Phone No: (954) 763-1200
<PAGE>
A. Designation and Number of Shares. The Preferred Stock shall
be designated "Series A Convertible Cumulative Preferred Stock" of a
par value of f$.001 per share, and the number of shares constituting
the Series A Preferred Stock shall be 195,907 shares.
B. Dividend Rights. The holders of shares of Series A
Preferred shall be 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
Corporation (i.e., based on the equivalent fair market value of Common
Stock of the Corporation).
C. Conversion Rights. Holders of the Series A Preferred Stock
will have the right to convert each share of Series A Preferred Stock
into the Corporation's Common Stock (calculated as to each conversion
to the nearest share) 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
Corporation shall have the right to cause the remaining outstanding
shares of Series A Preferred Stock to be converted into Common Stock of
the Corporation at the aforementioned conversion rate. In the event the
Series A Preferred Stock is not converted by either of the holders
thereof or by the Corporation, the Series A Preferred Stock will
continue to subsist as established. No fractional share or scrip
representing a fractional share will be 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 Corporation, the Corporation shall make
adjustments to the conversion ratio which shall be as nearly equivalent
to that stated above as may be practical.
The conversion price will be 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 Corporation or subscription rights or warrants.
Adjustment in the conversion price may be postponed until the
cumulative effect of any adjustments amount to 1% or more of the
conversion price. The Corporation agrees to use its best efforts at all
times to reserve or hold available a sufficient number of shares of
Common
<PAGE>
Stock to cover the number of shares issuable on conversion of the
Series A Preferred Stock.
The holder shall effect conversions by surrendering the
certificate or certificates representing the shares of Series A
Preferred Stock to be converted to the legal counsel for the Company,
with a copy thereof to the Company, together with the form of
conversion notice attached to the certificate. Each conversion notice
shall specify the number of shares of Preferred Stock to be converted
and the date on which such conversion is to be effected, which date may
not be prior to the date the holder delivers such conversion notice by
facsimile (the "Conversion Date"). If no Conversion Date is specified
in a conversion notice, the Conversion Date shall be the date that the
conversion notice is delivered. Each conversion notice, once given,
shall be irrevocable. If the holder is converting less than all shares
of Series A Preferred Stock represented by the certificate or
certificates tendered by the holder with the conversion notice, or if a
conversion hereunder cannot be effected in full for any reason, the
Company shall convert up to the number of shares of Series A Preferred
Stock which can be so converted and shall promptly deliver to such
holder a certificate for such number of shares as have not been
converted.
Shares of Series A Preferred Stock converted into Common Stock
shall be canceled and shall have the status of authorized but unissued
shares of undesignated Preferred Stock.
D. Redemption. The Company shall have 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 have not
previously been converted or redeemed, at a price equal to 117.6% of
the product 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 shall be paid in cash.
The holders of the Series A Preferred Stock do not have the right to
require the Corporation to redeem their shares of Series A Preferred
Stock.
E. Voting Rights. Except as provided by law, the Series A
Preferred Stock shall not be entitled to vote on matters submitted to a
vote of the shareholders of the Corporation. 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 shall be necessary to change,
alter or revoke the rights and preferences conferred on the Series A
Preferred Stock by the
<PAGE>
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.
F. Liquidation Rights. In the event of any liquidation,
dissolution or winding up of the Corporation, holders of the Series A
Preferred Stock shall be entitled to receive, after due payment or
provision for payment for the debts and other liabilities of the
Corporation, a liquidating distribution before any distribution may be
made to holders of Common Stock of the Corporation. The holders of the
Series A Preferred Stock outstanding shall be 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 Corporation.
G. Miscellaneous. The Series A Preferred Stock has no
preemptive rights. The Corporation reserves the right to issue up to an
additional 804,093 shares of Preferred Stock, representing the balance
of the authorized Preferred Stock, with designations and preferences as
the Board of Directors shall determine. The Series A Preferred Stock
and the Common Stock into which such Series A Preferred Stock is
convertible, when issued will be legally issued, fully paid and
non-assessable.
Any and all notices of other communications or deliveries to
be provided by the holders of the Series A Preferred Stock hereunder,
including, without limitation, any conversion notice, shall be in
writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service or sent by certified or registered
mail, postage prepaid, addressed to the attention of the Chief
Executive Officer of the Company at the facsimile telephone number or
address of the principal place of business of the Company. Any and all
notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service or
sent by certified or registered mail, postage prepaid, addressed to
each holder of Series A Preferred Stock at the facsimile telephone
number or address of such holder appearing on the books of the Company,
or if no such facsimile telephone number or address appears, at the
principal place of business of the holder. Any notice or other
communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (Eastern
Time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone
number specified in this Section later
<PAGE>
than 4:30 p.m. (Eastern Time) on any date and earlier than 11:59 p.m.
(Eastern Time) on such date, (iii) four days after deposit in the
United States mails, (iv) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or
(v) upon actual receipt by the party to whom such notice is required to
be given.
The foregoing amendment was adopted by all of the Directors and a majority of
the Shareholders of the corporation pursuant to a Written Consent on June 24,
1997 and June 29, 1997, respectively, pursuant to section 607.0821 and Section
607.0704, respectively, of the florida Business Corporation Act. Therefore, the
number cast for the amendment to the Corporation's Articles of Incorporation was
sufficient for approval.
IN WITNESS WHEREOF, the undersigned, being the President of this Corporation,
has executed these Articles of Amendment as of September 9, 1997.
PELICAN PROPERTIES, INTERNATIONAL CORP.
By: /s/ Jane Bergman
---------------------------------
Jane Bergman, President
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 31st day of October, 1997 (the "Effective Date"), between Pelican
Properties, International Corp., a Florida corporation whose address is 38801
Overseas Highway, Big Pine Key, FL 33043 (the "Company"), and Timothy Benjamin
(the "Employee").
WHEREAS, the parties hereto entered into an Employment Agreement
dated October 31, 1995 (the "1995 Agreement"), which provided for, and the
parties hereby consummate, the option to renew for two (2) additional one (1)
year periods upon the mutual agreement between the parties;
WHEREAS, the parties hereby agree to renew the 1995 Agreement upon
the terms and conditions provided for herein;
WHEREAS, the Company is presently, through its subsidiary, the owner
and operator of a recreational vehicle and camping resort in Monroe County,
Florida and intends to acquire additional existing businesses, whether in the
form of asset purchases, stock purchases, mergers, consolidations, joint
ventures, strategic alliances or otherwise (the "Business"); and
WHEREAS, the Company intends to establish a valuable reputation and
goodwill in its business, with expertise in all aspects of the Business; and
WHEREAS, the Employee is desirous of being employed by the Company,
and the Company has agreed to hire the Employee upon certain terms and
conditions, one of which is the execution of this Agreement by Employee; and
WHEREAS, the Employee, by virtue of the Employee's employment with
the Company for the past year has become familiar with and possessed with the
manner, methods, trade secrets and other confidential information pertaining
to the Company's Business, including the Company's client base;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Company and the Employee do hereby agree as follows:
1. Engagement. The Company hereby employs the Employee as the
Chief Financial Officer, Treasurer and Secretary of the Company, and the
Employee hereby accepts such employment, upon the terms and conditions
hereinafter set forth.
2. Authority and Power During Employment Period. The duties of
the Employee shall be subject to the direction of the Board of Directors of the
Company, and the Employee shall perform all duties as may be mutually agreed
upon between the Employee and the Company. The Employee shall devote full
attention and render exclusive, full time services to the Company, and shall be
employed solely by the Company according to the terms of this Agreement.
3. Term. Unless terminated sooner pursuant to Section 15 of this
Agreement, the Term of employment will commence on the Effective Date and
continue for a period of one year thereafter. This Agreement may be
automatically renewed for up to one (1) year upon mutual agreement between the
parties
<PAGE>
(the "Renewal Term"), unless terminated pursuant to Section 15 of this
Agreement. The term of the provisions of Sections 5 and 6 shall be as
specifically set forth in this Agreement.
4. Compensation and Benefits.
a. Base Salary. For all services rendered by the Employee
pursuant to the terms of this Agreement and in consideration of the execution
of this Agreement by the Employee, the Company shall initially pay the
Employee the sum of Fifty Thousand Dollars ($53,500) per year, payable
bi-weekly. The base salary of the Employee for any Renewal Term shall be
determined by the Board of Directors but at no time during any Renewal Term of
the Employee's employment with the Company shall the base salary be less than
Fifty Thousand Dollars ($53,500) per year.
b. Employee Benefits. The Employee shall be entitled to
participate in all benefit programs of the Company currently existing or
hereafter made available to other salaried executive officers, including, but
not limited to, pension, profit sharing and any other retirement plans, group
life insurance, hospitalization, surgical, dental and major medical coverage,
sick leave, salary continuation, vacation and holidays, long-term disability,
and other fringe benefits. The Company shall use its best efforts to enter
into a medical benefits plan for the Company's employees within six (6) months
from the Effective Date. The Company agrees to assume ninety percent (90%) of
the obligations the Employee may have with regard to his life insurance policy
and the medical benefits plan maintained by his former employer on behalf of
the Employee and his family for a period of one (1) year commencing on the
Effective Date or until such time the Company shall adopt and implement its
own medical benefits plan and group life insurance plan at which time the
Employee and his family shall be covered by such plans.
c. Business Expense Reimbursement. During the Term or any
Renewal Term of employment, the Employee shall be entitled to receive proper
reimbursement for all reasonable, out-of-pocket expenses incurred by the
Employee (in accordance with the policies and procedures established by the
Company for its executive officers) in performing services hereunder, provided
the Employee properly accounts therefor and provided further that any expense
in excess of $100 or in the aggregate of $500 must be approved in advance by
the Board of Directors.
d. Stock Options. The Employee shall be entitled to receive
Stock Options as described more fully in the Stock Option Agreement attached
hereto as Exhibit "A" and incorporated herein.
5. Covenant Not to Compete. The Employee acknowledges and
recognizes the highly competitive nature of the Company's business and the
goodwill, continued patronage, and specifically the names and addresses of the
Company's Clients (as hereinafter defined) constitute a substantial asset of the
Company having been acquired through considerable time, money and effort.
Accordingly, in consideration of continued employment and compensation by the
Company, the Employee agrees to the following:
a. That during the Restricted Period (as defined herein) and
within the Restricted Area (as defined herein), the Employee will not,
individually or in conjunction with others, directly or indirectly, engage in
any Business Activities (as hereinafter defined) other than on behalf of the
Company and as agreed by the Company and the Employee, whether as an officer,
director, proprietor, employer, partner, independent contractor, investor,
stockholder (other than as a holder of less than 1% of the outstanding capital
stock of a publicly traded corporation), consultant, advisor, agent or
otherwise. Except that during the term of Employee's employment with the
Company, the foregoing limitations as to Restricted Area shall not be
applicable.
b. That during the Restricted Period and within the
Restricted Area (as defined herein), the Employee will not, indirectly or
directly, compete with the Company by soliciting, inducing or influencing any
of the Company's Clients which have a business relationship with the Company
at any time during the
<PAGE>
Restricted Period to discontinue or reduce the extent of such relationship with
the Company. Except that during the term of Employee's employment with the
Company, the foregoing limitations as to Restricted Area shall not be
applicable.
c. During the term of the Employee's employment with the
Company and for any time thereafter, the Employee will not (a) directly or
indirectly recruit, solicit or otherwise influence any employee or agent of
the Company to discontinue such employment or agency relationship with the
Company, or (b) employ or seek to employ, or cause or permit any business
which competes directly or indirectly with the Business Activities of Company
(the "Competitive Business") to employ or seek to employ for any Competitive
Business any person who is then (or was at any time within six (6) months
prior to the date Employee or the Competitive Business employs or seeks to
employ such person) employed by the Company.
d. During the term of the Employee's employment with the
Company and for any time thereafter, the Employee will not interfere with,
disrupt or attempt to disrupt any past, present or prospective relationship,
contractual or otherwise, between the Company and any Company's client,
employee, agent, vendor, supplier or customer.
6. Non-Disclosure of Confidential Information.
a. The Employee acknowledges that the Company's trade
secrets, private or secret processes, methods and ideas, as they exist from
time to time, customer lists and information concerning the Company's
products, services, business records and plans, inventions, product design
information, price structure, discounts, costs, computer programs and
listings, source code and/or subject code, copyright, trademark, proprietary
information, formulae, protocols, forms, procedures, training methods,
development, technical information, marketing activities and procedures,
method for operating of the Company's Business, credit and financial data
concerning the Company and the Company's Clients and Client Lists, which
Client Lists shall not only mean one or more of the names and addresses of the
Clients of the Company but it shall also encompass any and all information
whatsoever regarding them, including their needs, and marketing and
advertising practices and plans and information which is embodied in written
or otherwise recorded form, but it shall also include information which is
mental, not physical (collectively, the "Confidential Information") as
valuable, special and unique assets of the Company, access to and knowledge of
which are essential to the performance of the Employee hereunder. In light of
the highly competitive nature of the industry in which the Company's business
is conducted, the Employee agrees that all Confidential Information,
heretofore or in the future obtained by the Employee as a result of the
Employee's association with the Company, shall be considered confidential.
b. Excluded from the Confidential Information, and therefore
not subject to the provisions of this Agreement, shall be any information
which:
(5) At the time of disclosure, is in the public
domain as evidenced by printed publications;
(6) After the disclosure, enters the public
domain by way of printed publication through no fault of
the Employee or those in privity with it;
(7) Employee can show by written documentation
was in its possession at the time of disclosure and which
was not acquired directly or indirectly from the Company;
or
(8) Employee can show by written documentation
was acquired, after disclosure, from a third party who did
not receive it from the Company, and who had the right to
disclose the information without any obligation to hold
such information confidential.
<PAGE>
c. The Employee acknowledges that, as between the
Company and the Employee, the Confidential Information and any and all rights
and privileges provided under the trademark, copyright, trade secret and other
laws of the United States, the individual states thereof, and jurisdictions
foreign thereto, and the goodwill associated therewith, are and at all times
will be the property of the Company.
d. Employee agrees that it shall:
(1) Hold in confidence and not disclose or make
available to any third party any such Confidential Information unless so
authorized in writing by the Company;
(2) Exercise all reasonable efforts to prevent
third parties from gaining access to the Confidential Information;
(3) Not use, directly or indirectly, the Confidential
Information in any respect of its business, except as necessary to evaluate the
information;
(4) Restrict the disclosure or availability of the
Confidential Information to those of Employee's employees who have read and
understand this Agreement and who have a need to know the information in order
to achieve the purposes of this Agreement;
(5) Not copy or modify any Confidential Information
without prior written consent of the Company.
(6) Take such other protective measures as may
be reasonably necessary to preserve the confidentiality of the Confidential
Information; and
(7) Relinquish and require all of its employees to
relinquish all rights it and its employees may have in any matter, such as
drawings, documents, models, samples, photographs, patterns, templates, molds,
tools or prototypes, which may contain, embody or make use of the Confidential
Information; promptly deliver to the Company any such matter as the Company may
direct at any time; and not retain any copies or other reproductions thereof.
e. Employee further agrees:
(1) That it shall promptly disclose in writing
to the Company all ideas, inventions, improvements and
discoveries which may be conceived, made or acquired by
Employee or its employees as the direct or indirect result
of the disclosure by the Company of the Confidential
Information to Employee;
(2) That all such ideas, inventions,
improvements and discoveries conceived, made or acquired
by Employee, alone or with the assistance of others,
relating to the Confidential Information, shall be the
property of the Company and shall be treated as
Confidential Information in accordance with the provisions
hereof and that Employee shall not acquire any
intellectual property rights under this Agreement except
the limited right to use set forth in this Agreement.
(3) That Employee and its employees shall assist
in the preparation and execution of all applications,
assignments and other documents which the Company may deem
necessary to obtain patents, copyrights and the like in
the United States and in jurisdictions foreign thereto,
and to otherwise protect the Company.
f. Upon written request of the Company, Employee shall return
to the Company all written materials containing the Confidential Information.
Employee shall also deliver to the Company written
<PAGE>
statements signed by the Employee certifying all materials have been returned
within five (5) days of receipt of the request.
7. Company's Clients. The "Company's Clients" shall be deemed
to be any persons, partnerships, corporations, professional associations or
other organizations for whom the Company has performed Business Activities.
8. Restrictive Period. The "Restrictive Period" shall be deemed
to be during the Employee's employment with the Company and for a period of
twelve (12) months following termination of the Employee's employ, regardless of
the reason for termination.
9. Restricted Area. The Restricted Area shall be deemed to mean
within Monroe County, Florida and any other county in any other state which the
Company shall conduct its Business.
10. Business Activities. "Business Activities" shall be deemed to
include any activities which are included in the Company's Business now or
during the effective period of this Agreement.
11. Covenants as Essential Elements of this Agreement; Survival of
Covenants.
a. It is understood by and between the parties hereto that
the foregoing covenants by Employee contained in Sections 5 or 6 of this
Agreement shall be construed to be agreements independent of any other element
of the Employee's employment with the Company. The existence of any other
claim or cause of action, whether predicated on any other provision in this
Agreement, or otherwise, as a result of the relationship between the parties
shall not constitute a defense to the enforcement of the covenants in this
Agreement against the Employee.
b. The covenants by Employee contained in Sections 5 and 6
shall survive the expiration of this Agreement if the Employee continues to work
for the Company, in any manner, without renewing this Agreement. The Employee
further agrees that the covenants set forth in Section 5 and 6 of this Agreement
shall continue to be in effect following the expiration or termination of the
Employee's employment with the Company.
12. Remedies.
a. The Employee acknowledges and agrees that the Company's
remedy at law for a breach or threatened breach of any of the provisions of
Sections 5 or 6 herein would be inadequate and the breach shall be per se
deemed as causing irreparable harm to the Company. In recognition of this
fact, in the event of a breach by the Employee of any of the provisions of
Sections 5 or 6, the Employee agrees that, in addition to any remedy at law
available to the Company, including, but not limited to monetary damages, the
Company, without posting any bond, shall be entitled to obtain, and the
Employee agrees not to oppose the Company's request for equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available
to the Company.
b. The Employee acknowledges that the granting of a
temporary injunction, temporary restraining order or permanent injunction
merely prohibiting the use of Confidential Information would not be an
adequate remedy upon breach or threatened breach of Sections 5 or 6 and
consequently agrees, upon proof of any such breach, to the granting of
injunctive relief prohibiting any form of competition with the Company.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach.
c. In the event that the Employee shall be in violation
of the aforementioned restrictive covenants as set forth in Sections 5 and 6,
then the time limitation during which breach or breaches should occur, and in
the event the Company should be required to seek relief from such breach in any
court or other
<PAGE>
tribunal, then the covenant shall be extended for a period of time equal to the
pendency of such proceedings, including appeal.
13. Attorneys' Fees. The Employee agrees that in the event that
the Company is required to engage an attorney to enforce the terms of the
covenants in Sections 5 or 6 of this Agreement, the Employee shall pay all costs
and expenses of that attorney or firm, whether or not a complaint or suit is
filed with any court of competent jurisdiction.
14. Effect on Prior Agreements. This Agreement supersedes any and
all prior or written agreement in their entirety between the Company and the
Employee, which shall be void and of no further force and effect after the date
of this Agreement.
15. Termination.
a. Termination Without Cause by Either Party. The
Company and the Employee may terminate this Agreement without cause upon giving
thirty (30) days' prior written notice. During such thirty (30) day period, the
Employee shall continue to perform the Employee's duties pursuant to this
Agreement, and the Company shall continue to compensate the Employee in
accordance with this Agreement.
b. Mutual Agreement. The Company and the Employee may
terminate this Agreement by mutual agreement of the parties hereto at any time.
c. Immediate Termination. This Agreement may be
terminated immediately by the Company upon the occurrence of any of the
following events:
(1) The death of the Employee;
(2) The Employee has a guardian of the person or
estate appointed by a court of competent jurisdiction;
(3) The Employee is disabled so as to be unable
to perform duties required under this Agreement for a
period of ninety (90) consecutive days or ninety (90) days
in any one-hundred eighty (180) day period; or
(4) The willful engagement in misconduct that is
materially injurious to the Company, monetarily or
otherwise; or
(5) For "Cause," as defined below.
d. "Cause" means (i) committing or participating in an
injurious act of fraud, gross neglect, misrepresentation, embezzlement or
dishonesty against the Company; (ii) committing or participating in any other
injurious act or omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Company, monetarily or otherwise; (iii)
engaging in a criminal enterprise involving moral turpitude; (iv) conviction
of a felony under the laws of the United States or any state thereof; (v) if
applicable, loss of any state or federal license required for the Employee to
perform the Employee's material duties or responsibilities for the Company; or
(vi) any assignment of this Agreement in violation of Section 20 of this
Agreement.
Notwithstanding anything else contained in this
Agreement, this Agreement will not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Employee a notice of
termination stating that the Employee committed one of the types of conduct
set forth in the definition of Cause contained in this Agreement and
specifying the particulars thereof.
<PAGE>
e. Termination After Failure to Cure Breach. If the
Employee commits a material breach of any provisions of this Agreement, the
Company may terminate the Agreement at any time, if after providing written
notice to the Employee of the alleged breach or failure, the breach or failure
remains uncured for a period of ten (10) days after receipt of such notice.
16. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested; by
overnight delivery; by courier; or by confirmed telecopy, in the case of the
Employee to the Employee's last place of business or residence as shown on the
records of the Company, or in the case of the Company to its principal office
as set forth in the introductory paragraph, or such other place as it may
designate.
17. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions hereunder shall
not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any provision hereof be taken or held to be a
waiver of any other preceding or succeeding breach of any term or provision of
this Agreement. No extension of time for the performance of any obligation or
act shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
18. Complete Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the contents hereof and supersedes
all prior agreements and understandings between the parties with respect to such
matters, whether written or oral. Neither this Agreement nor any term or
provision hereof may be changed, waived, discharged or amended in any manner
other than by an instrument in writing, signed by the party against which the
enforcement of the change, waiver, discharge or amendment is sought.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
20. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and assigns. This
Agreement shall not be assignable by the Employee but shall be assignable by the
Company in connection with the sale, transfer or other disposition of its
business or to any of the Company's affiliates controlled by or under common
control with the Company.
21. Governing Law. This Agreement shall become valid when executed and
accepted by Company. The parties agree that it shall be deemed made and entered
into in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida. Anything in this Agreement to
the contrary notwithstanding, the Employee shall conduct the Employee's business
in a lawful manner and faithfully comply with applicable laws or regulations of
the state, city or other political subdivision in which the Employee is located.
22. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
23. Survival. Any termination of this Agreement shall not, however,
affect the ongoing provisions of this Agreement which shall survive such
termination in accordance with their terms.
24. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. If any court
determines that any provision of
<PAGE>
Section 5 or 6 hereof is unenforceable because of the duration or scope of such
provision, such court shall have the power to reduce the scope or duration of
such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.
25. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
26. Venue. Company and Employee acknowledge and agree that the U.S.
District for the Southern District of Florida, or if such court lacks
jurisdiction, the 11th Judicial Circuit (or its successor) in and for Dade
County, Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly, under
or in connection with this Agreement and the parties further agree that, in the
event of litigation arising out of or in connection with this Agreement in these
courts, they will not contest or challenge the jurisdiction or venue of these
courts.
27. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, UNDERSTAND ITS TERMS
AND CONDITIONS, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL
OF THEIR OWN CHOICE AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS.
IN WITNESS WHEREOF, the Effective Date shall be the date the Agreement has
been accepted by the Company at its principal offices in Dade County, Florida.
THE COMPANY
Pelican Properties, International Corp.
By: /S/ JANE BERGMAN
---------------------
Name: Jane Bergman
Its: President
THE EMPLOYEE:
/S/ TIMOTHY BENJAMIN
--------------------------------
Timothy Benjamin
D R A F T
04/14/98
EXHIBIT 10.11
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is dated as of October 31, 1997, (the
"Grant Date"), between Pelican Properties, International Corp., a Florida
corporation whose principal place of business is 38801 Overseas Highway, Big
Pine Key, FL 33043 (the "Company") and Timothy Benjamin (the "Optionee").
In consideration for services rendered to the Company as a Chief
Financial Officer, Treasurer and Secretary, the Company hereby grants to
Optionee the option to acquire common stock, par value $.001 per share, of the
Company (the "Common Stock"), upon the following terms and conditions.
1. Grant of Option. Subject to the provisions of this Agreement
and the Employment Agreement entered into between the Company and the Optionee
of even date, the Company hereby grants to Optionee the right and option (the
"Option") to purchase up to Forty Thousand (40,000) shares of Common Stock (the
"Option Shares") at the Exercise Price (the "Exercise Price") described in
Section 2 of this Agreement and specifically subject to the "Vesting of the
Option" described in Section 3 of this Agreement.
2. Exercise Price. Subject to the provisions of Section 3 of
this Agreement, the Exercise Price of the Option Shares shall be determined as
follows:
a. For any Option vesting on December 31, 1998 ("Year
Three"), the exercise price shall be the greater of (i) $1.00 per Option Share
or (ii) the average bid price per share of Common Stock for Year Three,
determined by averaging the bid prices as of March 31, 1998, June 30, 1998,
September 30, 1998, and December 31, 1998.
The Company shall pay all original issue or transfer taxes
on the exercise of the Option.
3. Vesting of Option. Subject to the provisions of this
Agreement
a. A total of up to 40,000 Option Shares shall vest
subject to the Company meeting two of the three criteria set forth below
commencing December 31, 1997, and continuing through December 31, 1998:
(1) As of December 31, the Company shall have
attained no less than a 20% increase in its Earnings Before Income Tax (EBIT)
over the previous December 31 year end; and/or
(2) 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 earning 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
4, and comparing that number to the previously year's number, calculated in a
like manner; and/or
<PAGE>
(3) 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 which shall be determined by average bid
price of the Common Stock for the five (5) consecutive business days commencing
December 1.
b. To the extent that
(1) only one of the criteria described in
Section 3(a) is attained during a given year, 20,000 Option Shares shall vest
for that year; and
(2) an increase of more than 10% but less than
20% of the criteria is met during a given year, the number of Option Shares
shall vest based upon a pro-rata percentage, which would range between 20,000 to
39,999 Option Shares for that year.
c. Subject to the provisions hereof, the Option Shares
shall vest as of December 31 as applicable,
4. Exercisability of Option. Subject to the provisions of this
Agreement, the Option shall be exercisable by Optionee in whole or in part, at
any time and from time to time, upon the Vesting Date and ending on December 31,
2003.
5. Non-Assignability of Option. The Option shall not be given,
granted, sold, exchanged, transferred, pledged, encumbered, assignee or
otherwise disposed of by Optionee, other than by will or the laws of descent and
distribution, and, during the lifetime of Optionee, shall not be exercisable by
any other person, but only by the Optionee.
6. Method of Exercise of Option. Optionee shall notify the
Company by written notice, in the form of the Notice of Exercise attached hereto
(Attachment A), delivered to the Company's principal office, attention: Chief
Executive Officer, accompanied by Optionee's cashier's check payable to the
order of the Company for the full exercise price of the Option Shares
purchased. As soon as practicable after the receipt of such Notice of Exercise,
the Company shall, at its principal office, tender to Optionee a certificate or
certificates issues in Optionee's name evidencing the Option Shares purchased by
Optionee hereunder.
7. Termination of Option. To the extent not exercised, the Option
shall terminate the earlier of:
(a) December 31, 2003; or
(b) In the event Optionee ceases to be the Chief
Financial Officer of the Company at any time prior to expiration of the Option,
for any reason other than for Cause, as that term is defined in the Employment
Agreement between the Company and the Optionee of even date herewith, the
unexercised portion of the Option may be exercised by Optionee (or by a person
who acquired the right to exercise the Option by bequest or inheritance or by
reason of the death of Optionee) for a period of thirty (30) days from the date
of such cessation; or
(c) In the event of Optionee's termination for Cause at
any time prior to the expiration of the Option, the unexercised portion of the
Option shall immediately terminate.
8. Shares of Common Stock as Investment. By accepting the Option,
Optionee agrees that the Option and any and all Option Shares purchased upon the
exercise thereof, unless registered at the time of purchase under the Securities
Act of 1933, as amended (the "Securities Act"), shall be acquired for investment
and not for distribution, and upon the issuance of any or all of the Option
Shares subject to the Option, Optionee shall deliver to the Company a
representation in writing that such Option Shares are being acquired in good
faith for investment and not with a view to resale or distribution. The Company
may place an appropriate restrictive legend on the certificate or certificates
evidencing such Option Shares.
9. Adjustment of Shares.
<PAGE>
(a) If any time prior to the expiration or exercise in full
of the Option, there shall be any increase or decrease in the number of issued
and outstanding shares of the Common Stock through the declaration of a stock
dividend or through any recapitalization resulting in a stock split-up,
combination or exchange of the Common Stock, then and in such event,
appropriate adjustment shall be made in the number of Shares, and the exercise
price per Option Share thereof, that remain unexercised under the Option, so
that the same percentage of the Company's issued and outstanding shares of
Common Stock shall remain subject to purchase at the same aggregate exercise
price.
(b) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with a direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
exercise price of the Shares that remain unexercised under the Option.
(c) Without limiting the generality of the foregoing, the
existence of unexercised Shares under the Option shall not affect in any manner
the right or power of the Company to make, authorize or consummate (i) any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger or consolidation of
the Company; (iii) any issue by the Company of debt securities, or preferred to
preference stock that would rank above the Shares issuable upon exercise of the
Option; (iv) the dissolution or liquidation of the Company; (v) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
10. Corporate Events. In the event of a proposed liquidation of the
Company, a proposed sale of all or substantially all of its assets or its
Common Stock, a proposed merger or consolidation, or a proposed separation or
reorganization, the Board of Directors may declare that the Option shall
terminate as of a date to be fixed by the Board of Directors; provided that
not less than thirty (30) days written notice of the date so fixed shall be
given to the Optionee, and the Optionee shall have the right, during the
thirty (30) days preceding such termination, to exercise the Option as to all
or any part of the Option Shares covered thereby, including Option Shares as
to which such Option shall not otherwise be exercisable. However, nothing set
forth herein shall (i) extend the term set for purchasing the Option Shares or
(ii) give Optionee any rights or privileges as a shareholder of the Company
(respecting the Option Shares underlying the Option which is the subject of
this Agreement) prior to the Optionee's exercise of any of the Option Shares.
11. Binding Effect. Except as otherwise expressly provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto, their heirs, legal representatives, successors and permitted assigns.
12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without giving
effect to the conflict of laws principles thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
PELICAN PROPERTIES,
INTERNATIONAL CORP.
By: /S/ JANE BERGMAN
----------------------------
Jane Bergman, President
OPTIONEE
/S/ TIMOTHY BENJAMIN
--------------------------------
TIMOTHY BENJAMIN
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise the within
Option to the extent of purchasing ____________ shares of Common Stock of
Pelican Properties, International Corp., a Florida corporation, and hereby
makes payments of $_________ in payment therefor.
--------------------------------
Signature
--------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
Name: _______________________________________________________________
(Please type or print in block letters.)
Address: _____________________________________________________________
_______________________________________________________________________
Social Security Number: ______________________________________________
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Annual Report on
Form-10KSB under the Securities and Exchange Act of 1934 of Pelican
Properties, International Corp. for the year ended December 31, 1997 of our
report dated February 27, 1998 insofar as such report relates to the financial
statements and schedules of Pelican Properties, International Corp. for the
year ended December 31, 1997.
/s/ MORRISON, BROWN, ARGIZ & CO.
- --------------------------------
MORRISON, BROWN, ARGIZ & CO.
Miami, Florida
April 14, 1998
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Annual Report on
Form-10KSB under the Securities and Exchange Act of 1934 of Pelican
Properties, International Corp. for the year ended December 31, 1997 of our
report dated April 9, 1997 insofar as such report relates to the financial
statements and schedules of Pelican Properties, International Corp. for the
year ended December 31, 1997.
/s/ GARCIA, ESPINOSA, MIYARES & CO.
- -----------------------------------
GARCIA, ESPINOSA, MIYARES & CO.
Miami, Florida
April 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 63,335
<SECURITIES> 0
<RECEIVABLES> 54,535
<ALLOWANCES> 0
<INVENTORY> 52,992
<CURRENT-ASSETS> 198,165
<PP&E> 8,813,873
<DEPRECIATION> (2,642,770)
<TOTAL-ASSETS> 6,493,138
<CURRENT-LIABILITIES> 2,434,064
<BONDS> 0
0
196
<COMMON> 4,959
<OTHER-SE> (1,013,276)
<TOTAL-LIABILITY-AND-EQUITY> 6,493,138
<SALES> 3,648,678
<TOTAL-REVENUES> 3,648,678
<CGS> 1,081,893
<TOTAL-COSTS> 1,081,893
<OTHER-EXPENSES> 2,271,741
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 439,505
<INCOME-PRETAX> (482,336)
<INCOME-TAX> 0
<INCOME-CONTINUING> (482,336)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (482,336)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
