U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
[ ] Transition Report Under Section 13 or 15(d) of
the Exchange Act
For the transition period from ____________ to ____________.
Commission file number 0-23075
PELICAN PROPERTIES, INTERNATIONAL CORP.
---------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 65-0616879
------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2 Fenwick Road
Fort Monroe, Virginia 23651
---------------------------
(Address of Principal Executive Office)
(757) 224-5324
--------------
(Issuer's Telephone Number, Including Area Code)
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's common stock, par value $.001
per share as of July 31, 1999 was 5,975,851.
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP.
and SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM. 1 Financial Statements
Condensed consolidated Balance Sheets
June 30, 1999 and December 31, 1998
Condensed Consolidated Statements of Operations--
Three Months Ended June 30, 1999 and June 30, 1998
Six Months Ended June 30, 1999 and June 30, 1998
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and June 30, 1998
Condensed Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30 December 31
ASSETS 1999 1998
-------------------- --------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 333,318 $ 121,623
Investments 25,532 1,082,488
Accounts receivable 247,829 290,798
Other receivable - 224,047
Inventories 59,550 72,551
Other current assets 21,122 35,690
-------------------- --------------------
Total current assets 687,351 1,827,197
PROPERTY AND EQUIPMENT, NET 16,268,888 16,059,223
NOTE RECEIVABLE 500,000 500,000
OTHER ASSETS 259,406 80,651
-------------------- --------------------
TOTAL ASSETS $ 17,715,645 $ 18,467,071
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable & accrued expenses $ 883,647 $ 473,128
Other current liabilities 121,773 101,464
Current maturities of long-term debt 3,168,073 1,035,423
Income taxes payable 123,092 161,684
-------------------- --------------------
Total current liabilities 4,296,585 1,771,699
-------------------- --------------------
LONG-TERM LIABILITIES
Deferred income taxes 2,537,392 2,692,732
Long-term debt, less current maturities 6,400,000 9,336,205
-------------------- --------------------
Total long-term liabilities 8,937,392 12,028,937
-------------------- --------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock (6%), par value $.001; 1,000,000 shares
authorized of series A
convertible cumulative 6%
none issued or outstanding - -
Common stock, par value $.001; 100,000,000 shares
authorized 5,094,185 shares issued and outstanding
December 31, 1998, 5,975,851 shares issued and
outstanding June 30, 1999. 5,976 5,094
Additional Paid-in Capital 3,414,373 3,278,588
Retained earnings (accumulated deficit) 1,061,319 1,382,753
-------------------- --------------------
Total stockholders' equity (deficit) 4,481,668 4,666,435
-------------------- --------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 17,715,645 $ 18,467,071
==================== ====================
</TABLE>
PAGE 2
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<TABLE>
<CAPTION>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
----------------------------- -----------------------------
Three Months Ended Six Months Ended
----------------------------- -----------------------------
Jun 30 Jun 30 Jun 30 Jun 30
1999 1998 1999 1998
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
REVENUES 2,094,882 - 3,454,757 -
COST OF REVENUES 758,476 - 1,368,297 -
----------------------------- -----------------------------
GROSS PROFIT 1,336,406 - 2,086,460 -
----------------------------- -----------------------------
EXPENSES:
General & administrative 853,705 91,674 1,471,407 142,565
Operating 301,058 - 626,649 -
Selling 270,424 270,424
Interest expense 114,941 51,768 341,335 51,768
Depreciation & amortization 218,831 194 424,987 194
----------------------------- -----------------------------
Total expenses 1,758,959 143,636 3,134,802 194,527
----------------------------- -----------------------------
Loss from continuing operations
before other income (expenses) (422,553) (143,636) (1,048,342) (194,527)
OTHER INCOME (EXPENSES) 9,746 587 32,976 (45,532)
----------------------------- -----------------------------
Loss from continuing operations
before income taxes (412,807) (143,049) (1,015,366) (240,059)
Provision for income taxes (tax benefit) (155,340) (53,858) (382,082) (90,382)
----------------------------- -----------------------------
Loss from continuing operations (257,467) (89,191) (633,284) (149,677)
Gain on sale of discontinued operations
(net of income taxes) - 5,477,012 - 5,477,012
Income (loss) from discontinued
operations (net of income taxes) - (134,401) - 80,629
----------------------------- -----------------------------
Income (loss) before extraordinary gain (257,467) 5,253,420 (633,284) 5,407,964
Extraordinary gain (net of income taxes) - 361,570 311,850 361,570
----------------------------- -----------------------------
NET INCOME (LOSS) (257,467) 5,614,990 (321,434) 5,769,534
============================= =============================
BASIC AND DILUTED EARNINGS (LOSS)
PER SHARE:
Continued operations (0.05) (0.02) (0.12) (0.03)
Sale of discontinued operations - 1.08 - 1.08
Discontinued operations - (0.03) - 0.02
Extraordinary gain - 0.07 0.06 0.07
----------------------------- -----------------------------
Net income (loss) (0.05) 1.11 (0.06) 1.14
============================= =============================
Weighted average number of shares
basic and diluted 5,700,302 5,080,852 5,398,918 5,052,170
============================= =============================
</TABLE>
PAGE 3
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<TABLE>
<CAPTION>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continuing operations (321,434) $ (149,677)
Adjustments to reconcile income from continuing operations
to net cash (used) provided by continuing operations:
Depreciation and amortization 424,987 194
Non-cash compensation - -
Extraordinary Item - Forgiveness of debt (500,000) -
Loss on disposal of asset - -
Changes in operating assets and liabilities:
Decrease(Increase) in Investments 1,056,956 -
Decrease(Increase) in accounts receivable 42,969 -
Decrease(Increase) in inventories 13,001 -
Decrease(Increase) in other receivable 224,047 -
Decrease (increase) in other assets (173,241) (17,492)
Increase (decrease) in accounts payable
and accrued expenses 410,519 39,038
Increase in deferred revenues - -
Increase in other current liabilities 20,309 (1,136)
Decrease in due to affiliate - -
Increase in deferred tax liabilities (155,340) -
Increase(Decrease) in income taxes payable (38,592) -
Decrease in pre-petition chapter 11 debt - -
------------------ ------------------
Net cash used by continuing operations 1,004,181 (129,073)
Net cash (used) provided by discontinued operations - (643,043)
------------------ ------------------
Net cash (used) provided by operating activities 1,004,181 (772,116)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures: discontinued operations - (3,873)
Capital expenditures: continued operations (625,598) -
Proceeds from sale of discontinued operations - 14,983,262
------------------ ------------------
Net cash (used) provided by investing activities (625,598) 14,979,389
------------------ ------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments on long-term debt: discontinued operations - (5,622,704)
Principal payments on long-term debt: continued operations (303,555) -
Repayment of loan - (241,153)
Cash redemption of preferred stock - (293,860)
Proceeds from issuance of common stock 136,667 500
------------------ ------------------
Net cash (used) provided by financing activities (166,888) (6,157,217)
------------------ ------------------
NET INCREASE IN CASH 211,695 8,050,056
CASH, BEGINNING OF PERIOD 121,623 63,335
------------------ ------------------
CASH, END OF PERIOD $ 333,318 $ 8,113,391
================== ==================
</TABLE>
PAGE 4
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PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The quarterly financial information included herein is
unaudited. However, in the opinion of management, all adjustments, consisting of
normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the three and six months ended June 30,
1999, are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. A description of the Company's accounting
policies and other financial information is included in its audited consolidated
financial statements for the year ended December 31, 1998.
The June 30, 1999 condensed consolidated financial statements include the
accounts of Pelican Properties, International Corp. and its wholly owned
subsidiaries Ohio Key I, Inc. and Ohio Key II, Inc.
NOTE 2 - EARNINGS (LOSS) PER SHARE
- ----------------------------------
The net income (loss) per share is computed by dividing the net income or (loss)
for the period by the weighted average number of shares outstanding (as adjusted
retroactively for the dilutive effect of prior years common stock options) for
the period plus the dilutive effect of outstanding common stock options,
warrants, and preferred shares considered common stock equivalents. Stock
options and other common stock equivalents are excluded from the 1999 and 1998
net income (loss) per share calculation as their effect would be antidilutive.
Basic and diluted earnings per share amounts are equal because the company has a
loss from continuing operations and consideration of the redeemable preferred
stock, options, warrants and their equivalents would result in anti-dilutive
effects to earnings per share.
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
- -------------------------------------------
Included in the Company's June 30, 1999 statement of operations is a non-cash
extraordinary gain in the amount of $311,850 net of $188,150 in taxes. This
resulted from an early extinguishment of debt as a result of refinancing
mortgage notes payable secured by the Chamberlain Hotel.
NOTE 4 - YEAR 2000
- ------------------
The Securities and Exchange 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 minimally
and the issues raised by Staff Legal Bulletin No. 5 are not applicable in any
material way to the Company's business or operations. The Company presently
utilizes a hotel reservation software system that is not year 2000 compliant.
Management has already scheduled the upgrade of this system by the end of the
third quarter of 1999, which is necessary for other operational enhancements as
well as incorporating year 2000 compliance. The cost of this upgrade is
immaterial and is not expected to impact the Company's overall expenses.
Additionally, the Company intends to purchase or lease future computer systems
that will have already addressed the year 2000 issue.
PAGE 5
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
NOTE 5- EXTRAORDINARY GAIN - FORGIVENESS OF INDEBTEDNESS
- --------------------------------------------------------
EARLY PAY-OFF OF MORTGAGE INDEBTEDNESS
During February 1999, the Company was offered a $500,000 discount by a creditor
for the early payoff of certain indebtedness owed by the Company. As a result,
the Company refinanced the loans with a third party, satisfied the debt with the
creditor and recorded a net of tax gain in the amount of $311,850.
NOTE 6 - SUBSEQUENT EVENTS
- --------------------------
CURRENT DEBT MATURITY
The Company is currently in the process of refinancing debt approximately in the
amount of $4,900,000. Approximately $900,000 of the related Company debt was
originally scheduled to mature on June 29, 1999. The Company was successful in
obtaining an extension for said maturity until September 29, 1999. Failure to
refinance the debt could adversely impact the Company's financial position,
results of operations and cash flows.
NEW SUBSIDIARIES
The Company has four three wholly owned subsidiaries in the form of limited
liability companies. Substantially all assets and liabilities of the McLure
House Hotel were merged separately into the McLure House Hotel & Conference
Center, LLC one of new wholly owned subsidiaries. Another subsidiary, Ohio Key
LLC, holds a three quarter acre unimproved island in the Florida Keys, which was
not included in the Company's sale of the Sunshine Key RV Resort and Marina in
May 1998. None of the assets or liabilities of the Company's other two hotels
have been merged into the remaining limited liability companies. No pro- forma
information has been presented because the newly formed limited liability
companies were formed exclusively to succeed the business of Ohio Key I and II,
and thus, the merger has no material impact on the consolidated financial
statements of the Company.
CONTINGINCIES
On June 11, 1999, Ohio Key I, Inc. and Ohio Key II, Inc. (collectively, "Ohio
Key") filed suit against JCB Financial Corporation, James C. Barggren,
Chamberlin Hotel, LLC in the Circuit Court for the City of Hampton, State of
Virginia. In connection with the purchase of the Chamberlin Hotel from The
Chamberlin Hotel LLC, Ohio Key assumed two notes in the amount of $3,000,000.00
payable to The Chamberlin Hotel Company, an underlying mortgage holder, which
notes were secured by tow deeds of trust filed of record against The Chamberlin
Hotel. The two notes were paid in full on or about February 4, 1999 by Ohio Key
with an unsecured advance of $2,265,000.00 from Chamberlin Hotel, LLC, the
seller of the hotel. The deeds of trust have not been released and Chamberlin
Hotel, LLC has claimed an interest in the deeds of trust. Ohio Key has filed a
proceeding to have the deeds of trust judicially declared satisfied in full and
to obtain a judicial determination of what amounts of money, if any, are owed by
Ohio Key to Chamberlin Hotel, LLC, since Ohio Key believes that it may have
certain offsets against the funds advanced by Chamberlin Hotel, LLC. Ohio Key
intends to vigorously pursue its claims. The proceedings is currently in the
process of discovery. Ohio Key's potential liability is $2,265,000, currently
accounted for in the "Current maturities of long term debt" caption of the
Company's balance sheet at June 30, 1999.
PAGE 6
<PAGE>
PART II, OTHER INFORMATION
Item 2 Management's Discussion and Analysis or Plan of Operation
The following discussions should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
Certain matters discussed in this Quarterly Report on Form 10-QSB are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes",
"anticipates", "expects" or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which are described in close proximity to such
statements and which could cause actual results to differ materially from those
currently anticipated. Shareholders, potential investors and other readers are
urged to consider these factors in evaluating the forward-looking statements and
are cautioned not to place undue reliance on such forward-looking statements.
The forward-looking statements included herein are made as of the date of this
report, and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances
The Company's primary objective is the management of held assets and
the acquisition and management of additional hotel properties. Until June 4,
1998, the Company through Ohio Key I, Inc. and Ohio Key II, Inc.
("Subsidiaries") engaged in the ownership and management of Sunshine Key Resort
("Property"). On June 4, 1998 the Company's Subsidiaries, sold the Property for
a sale price of $15,750,000 cash (the "Sale"). A portion of the proceeds from
the Sale, or $5,589,908, was used to pay all of the Company's long term debt
(including all debt associated with the Property). Proceeds were also used to
redeem all of the Company's outstanding Series A preferred stock and satisfy all
other loans associated with the Property. After provisions for closing costs and
the resolution of certain issues with respect to the Property, the Company
placed the remaining proceeds of the Sale, $8,149,727.15 (the "Remaining
Proceeds"), in an IRS Rule 1031 Exchange Account with the intention of taking
advantage of tax deferral strategies if reinvested in real estate properties
within specified time frames and if certain criteria met.
On October 15, 1998, the Company, through the Subsidiaries, purchased
the McLure House Hotel and Conference Center located in Wheeling, West Virginia
for $3,200,000 paid in cash. The purchase funds were drawn from the proceeds
held in the Company's Rule 1031 Exchange Account. On October 16, 1999 the
Company secured a note and mortgage on the property for $2,400,000.
On November 25, 1998, the Company through the Subsidiaries purchased
the Palmer Inn Hotel located in Princeton, New Jersey for $7,500,000. $2,500,000
was paid in cash and the remaining balance was financed. The cash was drawn from
the proceeds held in the Company's Rule 1031 Exchange Account.
On November 30, 1998, the Company, through the Subsidiaries, purchased
the Chamberlain Hotel located in Hampton Roads, Virginia for $5,350,000.
$2,350,000 was paid in cash and the remaining balance was financed. The cash was
drawn from the proceeds held in the Company's Rule 1031 Exchange Account.
As of November 30, 1998 all requirements of the 1031 Exchange Account
had been satisfied and the Company does not anticipate any material tax
consequences due to the sale of the Property.
PAGE 7
<PAGE>
The Company is in the process of transferring substantially all assets
and liabilities of the individual hotels to three separate wholly owned new
subsidiaries of the Company. The newly formed limited liability companies are
being formed exclusively to succeed the business of Ohio Key I and II, and thus,
the mergers will have no material impact on the consolidated financial
statements of the Company. The limited liability company for the McLure, Palmer
and Chamberlain will be the McLure House Hotel and Conference Center, LLC,
Palmer Inn Princeton, LLC and Old Point Comfort Hotel, LLC. As of this filing
only the McLure House Hotel and Conference Center, LLC has been formed and
substantially all of the assets and liabilities of the McClure Howe Hotel have
been transferred to this subsidiary.
Six Months Ended June 30, 1999 compared to Six Months Ended June 30, 1998 for
Continuing Operations
For the period ended June 30, 1999, revenues of continuing operations
were $3,454,757 as compared to $0.00 in 1998. Cost of Revenues was $1,368,297 in
the period ended June 30, 1999 as compared to $0.00 in 1998. The Gross Profit in
the period June 30, 1999 was $2,086,460 as compared to $0.00 in 1998. All
changes in revenues, cost of revenues and gross profit were attributable to the
disposition of the Sunshine Key Resort in June 1998 and the acquisition of three
hotels in the fourth quarter of 1998. Since the Sunshine Key Resort was the
Company's only source of operations for 1998, the Company has treated the sale
as discontinued operations for all periods presented.
Total Operating and general and administrative expenses increased
$2,225,915 from $2,368,480 in the period ended June 30, 1999 from $142,565 in
1998. Interest expense was $341,335 in the period ended June 30, 1999 as
compared to $51,768 in 1998. The increase was attributable to the disposition of
Sunshine Key Resort in June 1998 and the acquisition of three hotels in the
fourth quarter of 1998. Since the Sunshine Key Resort was the Company's only
source of operations for 1998, the Company has treated the sale as discontinued
operations for all periods presented. Also, of the increase in the six months
ended June 30, 1999 the Company estimates that approximately $110,000 were
non-recurring expenses relating to a failed merger and the legal proceedings
outlined on Note 6 of the financials and Part II of this filing.
Income from continuing operations decreased $853,815 to a loss of
$1,048,342 in the period ended June 30, 1999 from a loss of $194,527 in 1998.
Net income decreased $6,090,968 to a loss of $321,434 in the period ended June
30, 1999 from $5,769,534 in 1998. The decreases were attributable to the
disposition of the Sunshine Key Resort in June 1998 and the acquisition of three
hotels in the fourth quarter of 1998. Since the Sunshine Key Resort was the
Company's only source of operations for 1998, the Company has treated the sale
as discontinued operations for all periods presented. Also, of the decrease in
the six months ended June 30, 1999 the Company estimates that approximately
$110,000 were non-recurring expenses relating to a failed merger and the legal
proceedings outlined on Note 6 of the financials and Part II of this filing.
Liquidity and Capital Resources
The Company's working capital decreased $3,609,234 to a deficit of
$4,296,585 at June 30, 1999 from $55,498 at December 31, 1998. This decrease was
due primarily to the booking of the $2.27 million unsecured obligation on the
Chamberlain Hotel. The unsecured obligation allowed the Company to take
advantage of a discount on the previous mortgage. Management is in the process
of seeking a refinancing of this unsecured obligation and anticipates securing a
conventional loan on the property before the end of the fiscal year. Also
included in the working capital deficit is the $1,000,000 first mortgage on the
Palmer Inn that was originally due on June 29, 1999, but was extended to
September 30, 1999. Although the mortgage is current, management has been
actively negotiating the refinance of the first and second mortgages and expects
to secure financing before the September 30 deadline. The Company has received a
commitment for the refinancing of the existing debt of the Palmer Inn plus
additional funds for capital improvements at the Palmer Inn. The Company also
has obtained, as a backup, a conduit loan commitment from another major hotel
lender. If for any reason the refinancing of the Palmer Inn does not occur,
and/or the Company is unable to refinance the Chamberlin Hotel, the Company's
business and operations would be materially adversely affected. There can be no
assurance that any other financing will be available to the Company on
acceptable terms, or at all. Further, there can be no assurance that existing
stockholders will provide any portion of the Company's financing requirements.
Additional equity financing may involve substantial dilution to the interest of
the Company's existing stockholders.
PAGE 8
<PAGE>
At June 30, 1999 the Company had accounts receivable of $247,829 as
compared to $290,798 at December 31, 1998. At June 30, 1999 the Company had
accounts payable and accrued expenses of $883,647 as compared to $473,128 at
December 31, 1998.
Cash outlays for capital expenditures of property and equipment totaled
$625,598 the period ended June 30, 1999 as compared to $56,319 for the 1998
fiscal year for continued operations. The 1998 expenditures relate to the
acquired hotels and the increase emphasizes management's intent to upgrade its
existing facilities.
As stated in the working capital section above, the Company satisfied
the $3,000,000 loan payable related to the November 1998 purchase of the
Chamberlain Hotel. The mortgage was satisfied for $2,500,000 and the company
recorded a net of tax gain in the amount of $311,850.
ADDITIONAL FACTS TO CONSIDER
Year 2000
The Securities and Exchange 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
minimally and the issues raised by Staff Legal Bulletin No. 5 are not applicable
in any material way to the Company's business or operations. The Company
presently utilizes a hotel reservation software system that is not year 2000
compliant. Management has already scheduled the upgrade of this system by the
end of the third quarter of 1999, which is necessary for other operational
enhancements as well as incorporating year 2000 compliance. The cost of this
upgrade is immaterial and is not expected to impact the Company's overall
expenses. Additionally, the Company intends to purchase or lease future computer
systems that will have already addressed the year 2000 issue.
Outlook
The McLure House Hotel will be in the final year of a four-year capital
improvement plan in fiscal 1999. The Company has completed the upgrades to the
last floor of guestrooms and corridors and will be commencing the renovation to
the lounge area this fall. Management plans on funding these projects through
operations. The Company is also presently negotiating an agreement with a
national company to franchise the McLure House Hotel. Although there can be no
assurances that such an agreement will be finalized.
The Company is presently in the process of reviewing tentative plans
for the addition of 24 suites to the Palmer Inn. As of the date of this filing,
the Company has received a commitment for the refinancing of the existing debt
plus the funds necessary for the construction of the new suites. As a backup the
Company has obtained a conduit loan commitment from another major hotel lender.
Management is currently developing a capital improvement plan for the
Chamberlain Hotel. It will initially focus on improvements to guestrooms and
public areas, which has commenced. The Company anticipates completing the
rehabilitation of the outdoor swimming pool by the end of the fiscal year.
Management plans on funding these projects through operations.
PAGE 9
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On June 11, 1999, the company's subsidiaries Ohio Key I, Inc. and Ohio
Key II, Inc., as plaintiffs, filed a lawsuit against JCB Financial Corporation,
James C. Barggren and Chamberlin Hotel, L.L.C., The Chamberlin Hotel Company; in
the Circuit Court for the City of Hampton, State of Virginia.
On June 11, 1999, Ohio Key I, Inc. and Ohio Key II, Inc. (collectively,
"Ohio Key") filed suit against JCB Financial Corporation, James C. Barggren and
Chamberlin Hotel, LLC in the Circuit Court for the City of Hampton, State of
Virginia. In connection with the purchase of the Chamberlin Hotel from The
Chamberlin Hotel LLC, Ohio Key assumed two notes in the amount of $3,000,000.00
payable to The Chamberlin Hotel Company, an underlying mortgage holder, which
notes were secured by tow deeds of trust filed of record against The Chamberlin
Hotel. The two notes were paid in full on or about February 4, 1999 by Ohio Key
with an unsecured advance of $2,265,000.00 from Chamberlin Hotel, LLC, the
seller of the hotel. The deeds of trust have not been released and Chamberlin
Hotel, LLC has claimed an interest in the deeds of trust. Ohio Key has filed a
proceeding to have the deeds of trust judicially declared satisfied in full and
to obtain a judicial determination of what amounts of money, if any, are owed by
Ohio Key to Chamberlin Hotel, LLC, since Ohio Key believes that it may have
certain offsets against the funds advanced by Chamberlin Hotel, LLC. Ohio Key
intends to vigorously pursue its claims. The proceedings is currently in the
process of discovery. Ohio Key's potential liability is $2,265,000, less any
offsets and/or credits.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matter to a Vote of Security Holders
(a) On June 22, 1999, the Company held its annual meeting of
shareholders ("Annual Meeting").
(b) At the Annual Meeting, the shareholders elected Mr. C. John
Knorr, Jr., Donald E. Schupp, and Michael Halpern as directors to
hold office until the 2001 Annual Meeting or until their
successors are duly elected and qualified.
(c) The matters voted on at the Annual Meeting and the number of
votes cast for, against or withheld, as well as the number of
abstentions and broker non-votes as to each such matter are as
follows:
Election of the Board of Directors:
Carl John Knorr, Jr. Votes for: 3,064,435
Votes against: 0
Votes Abstentions/Withheld: 0
Broker Non-Votes 0
Mr. Donald E. Schupp Votes for: 3,044,435
Votes against: 0
Votes Abstentions/Withheld: 20,000
Broker Non-Votes 0
Mr. Michael Halpern Votes for: 3,044,435
Votes against: 0
Votes Abstentions/Withheld: 20,000
Broker Non-Votes 0
Item 5. Other Information
Not applicable
PAGE 10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Financial Data Schedule (for SEC use only)
Exhibit 27
Reports on Form 8-K
No reports on Form 8-K were filed in the second quarter of
1999.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act
of 1934, Pelican Properties, International, Corp. has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PELICAN PROPERTIES, INTERNATIONAL, CORP.
DATE: August 23, 1999 By: /S/ C. John Knorr
------------------------------
C. John Knorr, Chairman
DATE: August 23, 1999 By: /S/ Timothy M. Benjamin
------------------------------
Timothy M. Benjamin, CFO/Treasurer
PAGE 11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 333,318
<SECURITIES> 25,532
<RECEIVABLES> 247,829
<ALLOWANCES> 0
<INVENTORY> 59,550
<CURRENT-ASSETS> 687,351
<PP&E> 16,268,888
<DEPRECIATION> 424,987
<TOTAL-ASSETS> 17,715,645
<CURRENT-LIABILITIES> 3,405,007
<BONDS> 0
0
0
<COMMON> 5,976
<OTHER-SE> 4,326,328
<TOTAL-LIABILITY-AND-EQUITY> 17,560,305
<SALES> 3,454,757
<TOTAL-REVENUES> 3,454,757
<CGS> 1,368,297
<TOTAL-COSTS> 3,134,802
<OTHER-EXPENSES> 32,976
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 341,335
<INCOME-PRETAX> (1,015,366)
<INCOME-TAX> (382,082)
<INCOME-CONTINUING> (633,284)
<DISCONTINUED> 0
<EXTRAORDINARY> 311,850
<CHANGES> 0
<NET-INCOME> (321,434)
<EPS-BASIC> (.12)
<EPS-DILUTED> (.12)
</TABLE>
