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, 1999
[ ] 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)
2 Fenwick Road, Suite 100, Fort Monroe, VA 23651
(Address of Principal Executive Offices)(Zip Code)
(757) 224-5234
(Issuer's Telephone Number)
Securities 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 [ ]
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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 definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSBor any amendment to this Form 10-KSB. |X|
State issuer's revenues for its most recent fiscal year: $7,889,203.
The aggregate market value of the Registrant's voting Common Stock held
by non-affiliates of the registrant was approximately $1,013,518 (computed using
the closing bid price per share of Common Stock on April 1, 2000, based on the
assumption that directors and officers and more than 5% stockholders are
affiliates).
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
There were 5,975,851 shares of the registrant's Common Stock, par value
$.001 per share outstanding on April 1, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. Description of Business..................................................................... 2
2. Description of Property..................................................................... 4
3. Legal Proceedings........................................................................... 4
4. Submission of Matters to a Vote of Security Holders......................................... 5
5. Market for Common Equity and Related Stockholder Matters.................................... 6
6. Management's Discussion and Analysis or Plan of Operation................................... 6
7. Financial Statements........................................................................ F1-F15
8. Changes in and Disagreements with Accountants on Accounting
And Financial Disclosure.................................................................... 9
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with section 16(a) of the Exchange Act (Items 401
And 405)................................................................................... 10
10. Executive Compensation..................................................................... 11
11. Security Ownership of Certain Beneficial Owners and Management............................. 11
12. Certain Relationships and related Transactions............................................. 11
13. Exhibits and reports on Form 8-K........................................................... 12
14. Signatures of Officers..................................................................... 14
</TABLE>
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PART I
Item 1. Description of Business
Forward-Looking Statements
Certain matters discussed in this Annual Report on Form 10-KSB 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.
Generally
Pelican Properties, International Corp. (the "Company") was
incorporated under the laws of the State of Florida on June 1, 1990 under the
name Optimum Computing Inc. Its subsidiaries, Ohio Key I, Inc. and Ohio Key II,
Inc., were incorporated under the laws of the State of Florida on December 19,
1996.
On August 31, 1995, the Company entered into a Share Exchange Agreement
with the limited partners of the Sunshine Key Associates limited partnership, a
Florida Limited Partnership (the "Partnership") whereby a 99% interest in the
Partnership was transferred to the Company in exchange for 3,100,000 shares, or
83.6%, of the Company's common stock. 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
with the Subsidiaries were assigned the assets and assumed the liabilities of
the Partnership including the Sunshine Key RV Resort and Marina, a resort
property located in Ohio Key, Florida ("Property").
Until June 4, 1998, the Company, through the Subsidiaries, engaged in
the ownership and management of the Property. On June 4, 1998, the Company's
Subsidiaries sold (the "Sale") the Property for a sale price of $15,750,000
cash. 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 and Partnership. 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.
On October 15, 1998, the Company, through its Subsidiaries purchased
the McLure House Hotel and Conference Center (now Ramada Plaza City Center)
located in Wheeling, West Virginia for $3,200,000 paid in cash. The cash was
drawn from the proceeds held in the Company's Rule 1031 Exchange Account.
On November 25, 1998, the Company, through its 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.
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On November 30, 1998, the Company, through its Subsidiaries, purchased
the Chamberlin 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Description of Property" for further discussion of these
acquisitions.
As of this date all assets and liabilities of the Ramada Plaza City
Center, Chamberlin Hotel and the Palmer Inn have been transferred by Ohio Key I,
Inc. and Ohio Key II, Inc. to McLure House Hotel & Conference Center, LLC, Old
Point Comfort Hotel, LLC and Palmer Inn, Princeton LLC, respectively.
Business Strategy
The acquisition of the three hotels was a significant beginning for the
Company and management is presently reviewing other potential acquisitions with
the intent to build the asset base of the Company. The Company intends to
increase the growth of the existing properties through (1) their introduction
into other markets via Internet travel reservation companies (2) expansion and
renovation of its existing facilities, and (3) new innovative marketing efforts.
The Company has centralized accounting procedures to its Corporate office (which
produces monthly financial statements), has published standardized accounting
procedures for all hotel locations and maintains such standards by periodic
internal audits, has established a combined effort of sales and marketing
through a Corporate Sales department, and has centralized purchasing for capital
and commonly used items by all hotels. The Company has developed a consistent
standard at each hotel in relation to the customer service with periodic
training by the Corporate Sales department, as well as monitoring of guest
satisfaction through customer surveys and comment cards.
Management believes an increased marketing program will create both
short-term and long-term benefits at each hotel. A significant primary customer
base of the hotels continues to be the business traveler. Consequently, the
Company's sales force has concentrated its marketing efforts towards the
corporate environment. In addition, the Company's sales force has marketed
meeting and banquet services to groups and individuals for seminars, business
meetings, holiday parties and weddings. This has been accomplished by new
collateral materials at each hotel, as well as active sales calls and sales
campaigns in each area among targeted groups. The Company anticipates a
significant amount of media exposure through television and newspaper coverage
during the Operation Sail 2000 event in June 2000. Operation Sail 2000, a
nationally sponsored event planned by the United States, will be the largest
gathering of sail training and naval vessels in history. It is in celebration of
the millennium and will begin in May 2000 gathering in Puerto Rico and end in
New London, Maine in July 2000, with a stop in the Hampton Roads area in June
2000. The Chamberlin Hotel has been designated as the media host hotel in
Hampton Roads for this event.
The Company also intends to expand through the acquisition of
additional hotel properties. Management will concentrate on evaluating
full-service, high quality, independently franchised hotels throughout the
United States. The Company believes there are full-service, high quality,
independent franchised hotel properties on the hotel market that 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 that will provide internal growth and increased profitability.
Management believes that market conditions remain favorable for the acquisition
of full-service, high quality, independent franchised hotels and expects to
continue analyzing potential acquisition properties. The Company intends to fund
the acquisition of hotel properties through the public or private sale of its
securities or by obtaining financing from institutional or other financing
firms.
The Company has (as of March 2000) created a new division, Purchasing
Concepts, Inc., for the purpose of handling turnkey design, purchasing and
installation for both in-house and outside hospitality related projects. The
President of Purchasing and Design for the new division, Ms. Sheri Rountree, has
extensive experience in the hospitality industry with projects ranging from
renovation to new construction and expects to be very busy in the coming months
as the Company adds its own projects to her schedule. The Company plans
extensive renovations to the Chamberlin Hotel, as well as commencing the
up-coming construction of 22 new guest suites to the Palmer Inn.
Competition
The hotel industry is highly competitive and the Company's hotels are
subject to competition from other hotels. Many of the Company's competitors may
have substantially greater marketing and financial resources than the Company's.
Each of the Company's hotels competes for guests primarily with other similar
hotels in its immediate vicinity and secondarily with other hotels in its
geographic market. Management believes that brand recognition, location, the
quality of the hotel and services provided, and price are the principal
competitive factors affecting the Company's hotels.
Seasonality
The hotel industry is seasonal in nature. Generally, the Company's
hotel revenue will be greater in the second and third quarters of a calendar
year. The Ramada Plaza City Center also generates greater revenues in the fourth
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quarter of the calendar year due to an annual local area festival. This
seasonality can be expected to cause quarterly fluctuations in revenues and
profitability of the Company. Quarterly earnings also may be adversely affected
by events beyond the Company's control, such as extreme weather conditions,
economic factors, increasing fuel prices, and other considerations affecting
travel.
Employees
The Company currently has 3 employees in its corporate management
consisting of its Chairman of the Board, Chief Operating Officer, and Legal
Counsel. The Company presently employs approximately 190 persons through its
subsidiaries. All three hotels are full service, but only one operates its own
food service. The number of employees at each hotel is subject to change based
on seasonal considerations. Management believes that it has an adequate number
of employees to support its current operations, although the Company intends to
hire additional employees upon the acquisition of other properties. Management
believes its relations with employees are satisfactory.
Item 2. Description of Property
The Company currently operates three full-service hotels with food
service and banquet facilities; one is under a franchise agreement with Best
Western, another is under a franchise agreement with Hospitality Franchise
Services and carries the name of Ramada Plaza, an upscale brand of the Ramada
chain. All hotels are concentrated in the Mid-Atlantic Region of the United
States. The Company maintains its principal place of business at the Chamberlin
Hotel in Hampton, Virginia.
The Ramada Plaza City Center, built in 1852, is located in downtown
Wheeling, West Virginia. In August 1998, AAA rated the hotel a Three Diamond
property. It has 170 guestrooms inclusive of 1 and 2 bedroom suites, a VIP
executive floor, 27 apartments, and a full service attached parking garage. The
hotel has approximately 7,500 square feet of banquet/conference space. The
ground floor has several storefront tenants who offer both street and lobby
access to their facilities. The world's original Hallmark gift shop is among
these tenants. The hotel is in the final phase of negotiations of a lease for
the restaurant facilities. In December 1999 the McLure House changed its name to
the Ramada Plaza City Center Hotel. Changes are continuing to satisfy franchise
requirements and brand recognition.
The Best Western Palmer Inn is located in Princeton, New Jersey. The
hotel is currently a AAA rated Three Diamond property. There are 106 guestrooms
inclusive of deluxe rooms, suites and efficiencies that are equipped for
extended stays. The hotel has five meeting/banquet rooms, a business center with
computer stations, fax and copier equipment, a pool, and an exercise room
complete with a sauna. There is a Charlie Brown franchised restaurant in the
hotel with lobby access for which there is a long-term lease arrangement between
the hotel and the restaurant.
The Chamberlin Hotel is located on the Chesapeake Bay in Hampton,
Virginia. The hotel is listed on the National Register of Historic Places. It
has 185 rooms, a banquet room and the second largest meeting space in the
market, indoor and outdoor pools, and a business center with computer stations,
fax and copier equipment. AAA does not currently rate the hotel.
Item 3. Legal Proceedings
In June, 1999, the Company's subsidiaries Ohio Key I, Inc. and Ohio Key
II, Inc. (collectively, "Ohio Key") filed suit against JCB Financial
Corporation, James C. Barggren, Chamberlin Hotel, L.L.C., and The Chamberlin
Hotel Company in the Circuit Court for the City of Hampton, State of Virginia.
When Ohio Key purchased The Chamberlin Hotel, Ohio Key assumed two notes in the
aggregate principal amount of $3,000,000 payable to The Chamberlin Hotel
Company, which were secured by two deeds of trust. Said notes were paid, in
full, on or about February 4, 1999. Despite such payment, The Chamberlin Hotel
Company assigned the two deeds of trust to JCB Financial Corporation. Subsequent
to such assignment, JCB Financial Corporation refused to satisfy said deeds of
trust in the public records. Ohio Key filed the subject litigation (i) to have
the two deeds of trust judicially determined to be satisfied and discharged, and
(ii) to obtain a determination as to what amounts of money, if any, are owed by
Ohio Key to James C. Barggren and his affiliates (collectively, "Barggren"). On
or about December, 1999, the Court appointed an auditor to prepare a report
("Report") regarding the indebtedness and claims by and between the litigants.
On February 8, 2000, the parties signed a Mediated Settlement Agreement which
settled and resolved all pending claims between the parties. Pursuant to such
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Mediated Settlement Agreement, Barggren agreed to release the existing deeds of
trust encumbering The Chamberlin Hotel; Ohio Key agreed (i) to immediately pay
Barggren the sum of $80,000, (ii) to execute and deliver to Barggren a deed of
trust note in the principal amount of $1,550,000 and, if the Report shows that
Barggren is indebted to Ohio Key, such indebtedness is to be offset and deducted
from the aforementioned principal sum, (iii) to execute and deliver a deed of
trust securing the aforementioned deed of trust note, and (iv) if the Report
shows that Ohio Key is indebted to Barggren, then Ohio Key is obligated to pay
such indebtedness to Barggren. Further, the parties agreed to jointly dismiss
this litigation. Ohio Key has paid to Barggren the aforementioned payment in the
amount of $80,000; however, as of this date, this litigation has not been
dismissed by the parties, and the deed of trust note and deed of trust have not
been executed nor delivered.
Item 4. Submission of Matter to a Vote of Security Holders
There were no matters submitted to a vote of stockholders during the
fourth quarter of 1999.
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PART II
Item 5. Market for Common Equity and Related Stockholders Matters
As of April 1, 2000, there were approximately 269 stockholders of
record of the Company's Common Stock. The Company's Common Stock is currently
listed for trading on the over-the-counter bulletin board under the symbol
"PELP". The following table sets forth, for the period since January 1, 1999,
the high and low closing sales prices for the Common Stock as reported by the
OTC Bulletin Board.
Common Stock
--------------
High Low
---- ---
1998
First Quarter .................................. 1.50 0.50
Second Quarter ................................. 1.50 0.63
Third Quarter .................................. 1.44 1.00
Fourth Quarter ................................. 1.25 0.50
1999
First Quarter .................................. 0.81 0.50
Second Quarter ................................. 0.43 0.43
Third Quarter .................................. 0.60 0.28
Fourth Quarter ................................. 0.49 0.07
The prices listed above for the Company's Common Stock reflect
inter-dealer quotations, without retail mark-ups, markdowns or commissions, and
do not necessarily represent actual transactions.
The transfer agent for the Company's Common Stock is Florida Atlantic
Stock Transfer, Inc., 7130 Nob Hill Road, Tamarac, Florida 33321.
The Company has never paid cash dividends on its Common Stock. The
Company presently intends to retain future earnings, if any, to finance the
expansion of its business and does not anticipate that any cash dividends will
be paid in the foreseeable future. The future dividend policy will depend on the
Company's earnings, capital requirements, expansion plans, financial condition
and other relevant factors.
Item 6. Management's Discussion and Analysis of Financial Condition and results
of Operations
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
report.
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 the Subsidiaries, engaged in the ownership and
management of the Property. On June 4, 1998, the Company's Subsidiaries, sold
the Property for a sale price of $15,750,000 cash. 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 and prior Partnership. 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 (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 are
met.
On October 15, 1998, the Company, through the Subsidiaries, purchased
the McLure House Hotel 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, 1998 the Company secured a note and mortgage on
the property for $2,4000,000. On April 28, 1999 the mortgage was re-financed
through the new legal entity of McLure House Hotel and Conference Center, LLC
for the amount of $2,400,000.
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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 Chamberlin 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 1031 Exchange Account.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1999
For the year ended December 31, 1999, revenues from continuing
operations were $7,889,203 as compared to $1,078,106 in 1998. Costs of revenues,
consisting of rooms, food and beverage, and other operating categories were
$5,838,576 as compared to $396,481 in 1998. The Gross Profit was $2,050,627 as
compared to $681,625 in 1998. The changes were attributable to hotel operations
through an entire twelve month fiscal period, as compared to only the last two
months in 1998.
Loss from continuing operations increased to $(978,266) as compared to
$(260,186) in 1998. Net Loss was $(1,448,266) for 1999 as compared to Net Income
of $5,932,918 in 1998. The increase in 1999 was attributable to 12 months of
hotel operations compared to only 2 months in 1998 coupled with material
non-recurring items as discussed below. Non-cash depreciation expense was
$858,428 in 1999 as compared to $81,361 in 1998.
Net Loss increased from $(1,448,266) in 1999 as compared to income of
$5,932,918 in 1998. The decrease in net income resulted from the loss from
continuing operations as discussed in the above paragraph in addition to the
additional deferral of income taxes in the amount of $1,023,000 as outlined in
"Other Factors to Consider" below. Also, in 1998 a net gain of $5,475,305 was
recognized on the sale of Discontinued Opeartions.
Liquidity and Capital Resources
The Company's working capital decreased from $55,498 as of December 31,
1998 to $(2,111,301) at December 31, 1999. This decrease was due to cash
obtained through hotel operations being used for capital improvements at the
Ramada Plaza City Center Hotel, the Chamberlin Hotel, the construction of the
Corporate Office located at the Chamberlin Hotel, the use of investment funds
for operational expenses, the accrual of current liabilities, and the maturity
of $1,638,750 of debt to current for the Chamberlin Hotel. This maturity is
anticipated to be refinanced by September 2000.
As of December 31, 1998 the Company held Accounts Receivables of
$290,798 as compared to $87,290 at December 31, 1999. This decrease is due to
the increased effort at the hotel level in collections, as well as the net use
of Bad Debt Allowance for uncollectable accounts in the 90 Day category. As of
December 31, 1998 the Company had Accounts Payable and Accrued Expenses of
$473,128 as compared to $1,125,305 at December 31, 1999. The changes were
attributable to hotel operations through an entire twelve month fiscal period,
as compared to only two months in 1998.
Capital Expenditures of Property and Equipment totaled $16,059,223 in
1998 as compared to $1,490,000 in 1999. This difference is due primarily to the
purchase of all three hotel locations in 1998. The McLure House Hotel, it's
subsequent conversion to a Ramada Plaza hotel, improvements at the Chamberlin
Hotel, as well as the construction of the new Corporate Offices located at the
Chamberlin Hotel in Hampton, Virginia account for the capital expenditures in
1999.
Long-term debt of $10,371,628 in 1998 decreased to $8,986,313 in
1999. The original debt of $1 million for the Palmer Inn was satisfied in
October 1999 and was replaced with a bridge loan of $940,000 due on April 1,
2000. This loan, as well as the current $4 million mortgage at the Palmer Inn,
is expected to be satisfied in the re-financing package scheduled for closing in
May, 2000.
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Additional Facts to Consider
Material change in Financial Statements Items from 1998 to 1999
In 1999, the Company made an election related to the filing of its 1998
income tax return allowing the reduction of the tax basis of the property
exchanged in 1998 rather than the recognition of taxable income currently. When
calculating the estimated tax basis of its assets and the tax provision at
December 31, 1998, the election was not taken into account. The election is
related to the forgiveness of indebitedness from the restructure of debt in 1996
and resulted in an additional deferral of income taxes in the amount of
$1,023,000. This change in estimated tax basis is reflected in the Company's
1999 income tax on Statement of Operations and as an increase in deferred tax
liability on the Balance Sheet.
Significant elements of expense not arising out of Continuing
Operations
During 1999, the Company experienced non-recurring quantifiable expense
items directly related to three events: the acquisition and re-position of the
three hotel properties, consulting fees related to continued capital raising ,
and the legal proceedings against the former owner of the Chamberlin Hotel. The
financial impact on the Company as a result of these events is in excess of
$375,000, of which $130,000 were non-cash expenses. These expenses are reflected
in the Company's Statement of Opeartions.
Year 2000
The Commission has issued Staff Legal bulletin No. 5 (CF/IM) stating
that public operating companies should consider whether there will be any
anticipated costs, problems and uncertainties associated with the year 2000
issue, which affects many existing computer programs that use only two digits to
identify a year in the date field. The Company anticipates that its business
operations will electronically interact with third parties 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
hotel reservation software systems that are year 2000 compliant. To date there
have been no problems associated with Y2K issues.
Outlook
Management anticipates an increase in revenues at all three
properties through the end of 2000. Management continues to believe that the
implementation of its central management operation will produce decreases in
management expenses incurred at all hotel operations. The Company believes that
this self-management approach will create savings in the overall management
costs as opposed to the use of management companies. Included in this approach
are accounting, sales and marketing, purchasing, and legal counsel.
Palmer Inn implemented a rate increase in mid 1999 that will allow it
to remain within the average rate of comparable hotels in its market. The Palmer
Inn will also begin construction of a 22 room suite wing that will be completed
by the end of 2000.
The McLure House Hotel will be finalizing its conversion to a Ramada
Plaza Hotel. Current emphasis is upon all common areas such as the lobby,
exterior and other public areas, corridors, meeting and ballroom space. The
restaurant lease is expected to be finalized in May, 2000. Overtures with the
City of Wheeling regarding the building of a Convention/Expo Center across the
street from the Ramada Plaza will continue throughout the year.
The Chamberlin Hotel is expected to begin renovations in the Spring,
2000. The initial construction will cover the public areas such as the lobby,
selected meeting space, restaurant and lounge, selected corridors, and one floor
of guestrooms. In mid June the hotel will host the media covering Op Sail 2000,
an event involving several hundred sailing vessels from around the world.
Visitor estimates will be between 1 and 2 million for this 4-day event.
The Company is investigating several Internet opportunities that it
believes has a synergystic relationship to the existing business. It is the hope
of management that inclusion of Internet diversification will have a positve
effect on the value of the Company's stock.
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Item 7. Financial Statements
The Company's financial statements are included in this report, at
pages F-1 through F-15.
Item 8. Changes In Disagreements With Accountants on Accounting and Financial
Disclosure
None
9
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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, position 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. The Board of Directors elects
officers 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. ............. 54 Chairman of the Board
Nathan A. Roesing .............. 32 Chief Operating Officer
Donald E. Schupp ............... 53 Director
Michael Halpern ................ 47 Director
Unless otherwise noted, the address of each of the directors and
officers of the Company is 2 Fenwick Road, Suite 100, Fort Monroe, Virginia
23651.
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.
Nathan A. Roesing. Since March 1999 Mr. Roesing has served as Chief
Operating Officer. Mr. Roesing has extensive hospitality experience, having
worked for Interstate Hotels, Servico Hotels, Brookshire Hotels, and Lane
Hospitality. Mr. Roesing also serves as President of Vintage Hotels Corporation,
which is the management company for Pelican Properties International's hotel
properties.
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.
Michael Halpern. Since June 22, 1999 Mr. Halpern has served as a
director of the Company. Mr. Halpern has worked as an attorney since 1977 in the
Key West, Florida area. He has also served as President and Chief Executive
Officer of Triad Planning and Management Corp., Ramlo Construction Corp., Ramlo
Development Corp., and Key West Saloon, Inc.
As additional properties are acquired, the Company anticipates
attracting additional, equally successful and qualified, directors, officers,
and facility managers.
The Company currently does not have any board-approved committees.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the outstanding common stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership on Form 3 and
reports of changes in ownership of Common Stock on Forms 4 or 5. Such persons
are required by SEC regulation to furnish the Company with copies of all such
reports they file.
Based solely on its review of the copies of such reports furnished to
the Company or written representations that no other reports were required, the
Company believes that all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with during the year ended December 31, 1999.
10
<PAGE>
Item 10. Executive Compensation
Only one executive officer of the Company has had annual compensation
in excess of $100,000. The following table shows for the years ended December
31, 1998 and 1999 the cash and other compensation paid by the Company to its
Chairman and Chief Operating Officer.
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation Compensation
- ------------------ ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
C. John Knorr, Chairman of the Board 1998 $ 62,400 $ 8,750 $-0- $-0-
1999 $ 73,500 $-0- $-0- $-0-
Nathan A. Roesing, Chief Operating Officer 1999 $112,452 $26,600 $-0- $-0-
</TABLE>
Option Grants in Last Fiscal Year
There were no option grants made in fiscal year 1999.
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 April 1, 2000 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. On April 1, 2000, there were 5,975,581 shares of Common Stock outstanding.
The address for each of the persons set forth below is 2 Fenwick Road, Suite
100, Fort Monroe, VA 23651, except as otherwise noted.
<TABLE>
<CAPTION>
No. of Shares
of Common Stock Percent
Name and address Beneficially Owned of Class
- ---------------- ------------------ --------
<S> <C> <C>
C. John Knorr, Jr. (1) 1,701,265 28.5%
Thomas L. Callahan (2) 675,434 11.3%
Linda Brauer (3) 350,698 5.9%
Clara Road Investments, Inc. (4) 666,666 11.2%
All executive officers and directors as a group 1,701,265 28.5%
</TABLE>
- ----------------
(1) Mr. Knorr's address is 104 Woodhall Drive, Richmond, VA 23229.
(2) Mr. Callahan's address is 1001 Oystercove Drive, Grasonville, MD 21638
(3) Ms. Braurer's address is 11308 Bedfordshire Avenue, Potomac, MD 20854
(4) Clara Road Investments' address is 2670 Clara Road, Whitehaven,
MD 21856
Item 12. Certain Relationships and Related Transactions
Infinity Investments Group, Inc., a Florida corporation which is owned
and controlled by Mr. Knorr, Chairman of the Board, privately owned three park
model units located at the Sunshine Key Resort. Those rental units were managed
through Ohio Key I Inc.'s rental management program and expenses were paid on
their behalf; these units earned income through May 1998. On June 4, 1998
Infinity Investment Group sold its interests in the three park model units and
all balances owed by the Company were settled.
11
<PAGE>
PART IV
Item 13. Exhibits, List and Reports on Form 8-K
Exhibit
Number Description
- ------ -----------
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 date 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 the exhibit of the same number filed with the
Company's registration statement on Form SB-2 as filed with
the Securities and Exchange Commission on September 12, 1997,
File No. 000-23075)
3.7 -Bylaws (Incorporated by reference to the exhibit of the same
number filed with the Company's registration statement on Form
SB-2 as filed with the Securities and Exchange Commission on
September 12, 1997, File No. 000-23075)
3.8 -Ohio Key I Bylaws (Incorporated by reference to the exhibit
of the same number filed with the Company's registration
statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No. 000-23075)
3.9 - Ohio Key II Bylaws (Incorporated by reference to the exhibit
of the same number filed with the Company's registration
statement on Form SB-2 as filed with the Securities and
Exchange Commission on September 12, 1997, File No. 000-23075)
3.10 - Articles of Incorporation Amendment to the Articles of
Incorporation dated June 29,1997 (Incorporated by reference to
the exhibit of the same number filed with Securities and
Exchange Commission on November 14, 1997, File No. 000-23075)
4.1 - Specimen Common Stock Certificate (Incorporated by reference
to the exhibit of the same number filed with the Company's
registration statement on Form SB-2 as filed with the
Securities and Exchange Commission on September 12, 1997, File
No. 000-23075)
4.2 - Specimen Class A Common Stock Purchase Warrant (Incorporated
by reference to the exhibit of the same number filed with the
Company's registration statement on Form SB-2 as filed with
the Securities and Exchange Commission on September 12, 1997,
File No. 000-23075)
4.3
12
<PAGE>
-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 file 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 file with the Securities and Exchange Commission
on September 12, 1997, File No. 000-23075)
10.3 -Promissory Note between WAMCO XXII, Ltd., Ohio Key I,
Inc. and Ohio Key II, Inc. dated 12/31/96 (Incorporated by
reference to the exhibit of the same number filed with the
Company's registration statement on Form SB-2 as file 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 file 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 file 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 Associated 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 file 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 Associated 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 file 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
Associated 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 file with the
Securities and Exchange Commission on September 12, 1997, File
No. 000-23075)
10.9 - Purchase agreement between Ohio Key I, Inc., Ohio Key II,
Inc. and WesBanco for the purchase of the Ramada Plaza City
Centre dated September 23,1998 (Incorporated by reference to
the Company's 8-K as filed with the Securities and Exchange
Commission on October 22, 1998
10.10 - Agreement of Sale between Ohio Key I, Inc., Ohio Key II,
Inc. and Keydocrom, Inc. for the purchase of the Palmer Inn
date November 11, 1998 ( Incorporated by reference to the
Company's 8-K/A as filed with the Securities and Exchange
Commission on December 14, 1998)
10.11 - Sale and Purchase of Assets Agreement between Ohio Key I,
Inc., Ohio Key II, Inc. and Chamberlin Hotel LLC dated
November 30, 1998 (Incorporated by reference to the Company's
8-K/A as filed with the Securities and Exchange Commission on
December 14, 1998)
10.12 - Ramada Plaza City Centre $2,400,000 Term Note. (1)
10.13 - Palmer Inn $4,000,000 Mortgage Note. (1)
10.14 - Palmer Inn Note and Mortgage Modification and Assumption
Agreement for 10.14 $1,000,000 First Mortgage.(1)
10.15 - Palmer Inn Promissory Note of $940,000.(1)
21.1 - Subsidiaries.
23.1 - Independent Auditor's Consent(2)
27.1 - Financial Date Schedule. (2)
(footnotes on next page)
13
<PAGE>
(footnotes for previous page)
(1) Incorporated by reference to the Company's report on Form 10-KSB as filed
with the Securities and Exchange Commission on April 15, 1999.
(2) Filed herewith.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K, date of report February 4, 2000,
which reported a change in the Company's certifying accountants.
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, Corp
(Registrant)
By: /s/ C. John Knorr, Jr.
--------------------------
C. John Knorr, Jr.
Chairman
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, Jr. Chairman of the Board
- ---------------------- ---------------------
C. John Knorr, Jr. (Principal Executive Officer)
/s/ Nathan A. Roesing Chief Operating Officer
- --------------------- -----------------------
Nathan A. Roesing
14
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
<PAGE>
<PAGE>
C O N T E N T S
--------
Page
Number
-------
Reports of Independent Certified Public Accountants
Moore Stephens Lovelace, P.A. F-1
Morrison, Brown, Argiz & Company F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet as of
December 31, 1999 F-3
Consolidated Statements of Operations for the
Years Ended December 31, 1999 and 1998 F-4
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1999 and 1998 F-5
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1999 and 1998 F-6
Notes to Consolidated Financial Statements F-7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors
Pelican Properties, International Corp.
and Subsidiaries
Fort Monroe, Virginia
We have audited the accompanying consolidated balance sheet of Pelican
Properties, International Corp. and Subsidiaries (the "Company") as of December
31, 1999, and the related consolidated statements of operations, changes in
stockholders' equity, 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 as of December 31, 1999, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Moore Stephens Lovelace, P.A.
Certified Public Accountants
Orlando, Florida
March 17, 2000
F-1
<PAGE>
[Letterhead]
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors and Stockholders
Pelican Properties, International Corp. and Subsidiaries
We have audited the consolidated statements of operations, stockholders'
(deficit) and cash flows of Pelican Properties, International Corp. and
Subsidiaries (the "Company") for the year ended December 31, 1998. 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, 1998. In conformity with generally accepted accounting
principles.
/s/ MORRISON, BROWN, ARZIG & COMPANY
MORRISON, BROWN, ARZIG & COMPANY
Certified Public Accountants
Miami, Florida
April 2, 1999
F-2
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT ASSETS
Cash $ 69,037
Accounts receivable, net of allowance for doubtful accounts of $157,976
87,290
Supplies
82,974
Prepaid expenses 25,380
Note receivable 500,000
Income taxes refundable 228,000
Other current assets
1,734
-----------
TOTAL CURRENT ASSETS
994,415
PROPERTY AND EQUIPMENT, net of accumulated depreciation
and amortization of $921,770 16,653,021
OTHER ASSETS
Deferred loan costs, net of accumulated amortization of $14,804
70,473
Deferred franchise costs, net of accumulated amortization of $106 18,894
Deposits and other
58,648
-----------
148,015
----------
$17,795,451
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,638,750
Accounts payable and accrued liabilities 1,125,305
Obligation for renovations 150,000
Income taxes payable 150,000
Other current liabilities
41,660
-----------
TOTAL CURRENT LIABILITIES 3,105,716
OBLIGATION FOR RENOVATIONS
496,495
LONG-TERM DEBT, less current maturities 7,347,563
DEFERRED INCOME TAXES 3,512,000
-
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock, 1,000,000 shares authorized; none issued or outstanding
-
Common Stock, par value $.001; 100,000,000 shares authorized;
5,975,851 shares issued and outstanding
5,975
Additional paid-in capital 3,393,216
Accumulated deficit
(65,513)
-----------
TOTAL STOCKHOLDERS' EQUITY 3,333,678
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $17,795,451
===========
</TABLE>
F-2
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ----------
<S> <C> <C>
REVENUES
Rooms $ 5,324,616 $ 708,642
Food and beverage 1,621,447 70,399
Rental Income 529,075 98,945
Interest income 53,252 163,431
Other 360,813 36,689
------------ ----------
TOTAL REVENUES 7,889,203 1,078,106
COSTS AND EXPENSES
Rooms 1,425,422 126,407
Food and beverage 1,395,898 131,826
Other operating expenses 3,017,256 138,248
Corporate expenses 971,272 678,006
Sales and marketing expenses 584,667 36,016
Interest expense 614,526 146,428
Depreciation and amortization 858,428 81,361
------------ ----------
TOTAL COSTS AND EXPENSES 8,867,469 1,338,292
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (978,266) (260,186)
INCOME TAX (PROVISION) BENEFIT (775,000) 97,570
------------ ----------
LOSS FROM CONTINUING OPERATIONS (1,753,266) (162,616)
DISCONTINUED OPERATIONS
Income from discontinued operations, net of $15,967 in taxes - 39,686
Gain on sale, net of $3,311,834 in taxes - 5,475,305
------------ ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (1,753,266) 5,352,375
EXTRAORDINARY ITEM, net of $195,000 and $-0- in taxes, for
December 31, 1999 and 1998, respectively 305,000 580,543
------------ ----------
NET INCOME (LOSS) $ (1,448,266) $5,932,918
============ ==========
BASIC AND DILUTED EARNINGS (LOSS)
PER COMMON SHARE:
Continuing operations $ (0.31) $ (0.03)
------------ ----------
Discontinued operations $ - $ 1.09
------------ ----------
Extraordinary items $ 0.05 $ 0.11
------------ ----------
Net income (loss) $ (0.25) $ 1.17
============ ==========
</TABLE>
F-3
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For The Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Preferred
Common Stock Stock Additional Retained
------------ ---------------------------- Paid-In Earning
Shares Amount Shares Amount Capital (Deficit) Total
------ ------ ------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCES - DECEMBER 31, 1997 4,954,185 $ 4,954 195,907 $ 196 $3,536,894 (4,550,165) (1,008,121)
ISSUANCE OF STOCK COMPENSATION 50,000 50 - - 6,200 - 6,250
ISSUANCE OF STOCK COMPENSATION 20,000 20 - - 2,480 - 2,500
ISSUANCE OF STOCK COMPENSATION 20,000 20 - - 26,230 - 26,250
REPURCHSE OF PREFERRED STOCK - - (195,907) (196) - (293,862)
ISSUANCE OF COMMON STOCK 50,000 50 - - 450 - 500
NET INCOME - - - - - 5,932,918 5,932,918
BALANCES - DECEMBER 31, 1998
5,094,185 5,094 - - 3,278,588 1,382,753 4,666,435
--------- -------- -------- ------ ---------- ----------- ----------
ISSUANCE OF COMMON STOCK FOR SERVICES 215,000 215 - - 108,628 - 108,843
ISSUANCE OF COMMON STOCK UPON
EXERCISE OF OPTIONS 666,666 666 - - 6,000 - 6,666
NET LOSS - - - - - (1,448,266) (1,448,266)
--------- -------- -------- ------ ---------- ----------- ----------
BALANCES - DECEMBER 31, 1999 5,975,851 $ 5,975 - $ - $3,393,216 $ (65,513) $ 3,333,678
========= ======== ======== ====== ========== =========== ===========
</TABLE>
F-4
<PAGE>
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,448,266) $ 5,932,918
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 843,913 79,640
Amortization 14,514 1,721
Extraordinary gain on forgiveness of debt (500,000) (580,543)
Loss on disposal of fixed assets from discontinued operations - 28,593
Gain on sale of discontinued operations - (8,787,139)
Stock issued for compensation and services 108,843 35,000
Provision for bad debts 154,976 -
Deferred income taxes 819,268 2,692,732
Change in:
Accounts receivable 48,532 (236,263)
Inventories (10,423) (19,559)
Prepaid expenses 10,310 (8,38)
Income taxes refundable (228,000) -
Other assets (31,213) 43,219
Accounts payable and accrued expenses 652,177 204,269
Income taxes payable (11,684) 161,684
Other liabilities (59,804) (741,345)
------------ -----------
Net cash provided by (used in) continuing operations 363,143 (1,277,706)
Net cash provided by discontinued operations - 84,246
------------ -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 363,143 (1,193,460)
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in investments 1,082,488 (1,082,488)
Issuance of note receivable - (500,000)
(Increase) decrease in other receivable 224,047 (224,047)
Acquisition of fixed assets (1,490,110) (16,169,838)
Proceeds from the sale of fixed assets
- 14,958,903
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (183,575) (3,017,470)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings (1,194,335) (4,459,496)
Changes in pre-petition debt - (136,771)
Proceeds from borrowings 955,515 9,400,000
Repayments of stockholders loans - (241,153)
Repurchase of preferred stock - (293,862)
Proceeds from issuance of common stock 6,666 500
------------ -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (232,154) 4,269,218
------------ -----------
NET (INCREASE) DECREASE IN CASH (52,586) 58,288
CASH AT BEGINNING OF YEAR 121,623 63,335
------------ -----------
CASH AT END OF YEAR $ 69,037 $ 121,623
============ ===========
</TABLE>
F-5
<PAGE>
23
PELICAN PROPERTIES, INTERNATIONAL CORP.
AND SUBSIDIARIES
notes to CONSOLIDATED financial STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 1 - BACKGROUND AND BASIS OF PRESENTATION
Through June 3, 1998, Pelican Properties, International Corp. and
its subsidiaries (the "Company") owned and operated Sunshine Key
RV Resort and Marina ("Sunshine Key") located in the Florida Keys.
On June 4, 1998, the Company sold its interest in Sunshine Key.
Accordingly, the operations of Sunshine Key are reflected as
discontinued operations in the accompanying consolidated statement
of operations for the year ended December 31, 1998. On October 15,
1998, the Company acquired the McLure House Hotel and Conference
Center in Wheeling, West Virginia ("McLure House"). On November
25, 1998, the Company acquired Palmer Inn in Princeton, New Jersey
("Palmer Inn"). On November 30, 1998, the Company acquired the
Chamberlin Hotel in Hampton, Virginia ("Chamberlin Hotel").
The accompanying consolidated financial statements include the
accounts of Pelican Properties International, Corp., and its
wholly owned subsidiaries, which operated Sunshine Key and
continue to operate McLure House, Chamberlin Hotel and Palmer Inn.
The operations of the three hotels are included from the date of
their respective acquisitions. All significant intercompany
transactions and accounts have been eliminated in the
consolidation. For federal income tax purposes, the sale of
Sunshine Key and the acquisition of the three hotels was treated
as a tax-free exchange under Section 1031 of the Internal Revenue
Code.
Operations
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As of December 31, 1999, current liabilities exceeded
current assets by approximately $2,111,000. Management's plans
with regard to this situation include seeking to refinance the
current maturities of the Company's borrowings on a long-term
basis and improving the occupancy at its hotels (See Note 6).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue is recorded on the accrual basis in the period in which
occupancy rights are provided to guests and tenants. Advance
deposits are recorded as deferred revenue until occupancy occurs.
F-6
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Supplies
Supplies consists primarily of food, beverage and housekeeping
inventories. Supplies are stated at the lower of cost, determined
using the first-in, first-out method, or market value.
Property and Equipment
Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the estimated useful
lives of the respective assets. Leasehold improvements are
amortized over the estimated useful lives of the improvements, or
the term of the lease, if shorter. The estimated useful lives for
property and equipment are as follows:
Years
-------------
Buildings and building improvements 15 - 31
Furniture, fixtures and equipment 5 - 7
Computer equipment 5
Other Assets
Other assets consists primarily of deferred financing costs and
deposits. Deferred financing costs are amortized over the terms of
the related borrowings. Other assets are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the sum of the expected
future cash flows is less than the carrying amount of the asset, a
loss is recognized.
Environmental Liabilities
Accruals for environmental matters, if any, are recorded in
operating expenses when it is probable that a liability has been
incurred and the amount of the liability can be reasonably
estimated. Accrued liabilities are exclusive of claims against
third parties and are not discounted.
In general, costs related to environmental remediation are charged
to expense. Environmental costs are capitalized if the costs
increase the value of property and/or mitigate or prevent
contamination from future operations. The Company has not recorded
an accrual for environmental liabilities at December 31, 1999.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included
in its financial statements or tax returns. Deferred income tax
liabilities and assets are determined based on the difference
between the financial statement and tax bases of liabilities and
assets using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income
available to common stockholders for the period by the weighted
average number of common shares outstanding for the period.
Diluted earnings (loss) per share reflects the potential dilution
that could occur if securities or other contracts to issue common
stock were exercised or converted. Common share equivalents were
not considered in the diluted earnings per share calculation for
1999 or 1998 because their effect would have been anti-dilutive.
As a result, both basic and diluted earnings (loss) per share for
1999 and 1998 were calculated based on 5,699,849 and 5,074,980
weighted average common shares outstanding during each year,
respectively.
Credit Risk and Concentrations
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash,
accounts receivable and note receivable.
The Company maintains its cash primarily in bank deposit accounts,
which, at times, may exceed federally insured limits. The Company
has not experienced any losses in such accounts and management
believes that it is not exposed to any significant credit risk
with respect to cash.
The Company is economically dependent upon the travel and tourism
trade and changes in weather conditions in the cities where the
hotels are located. Owning and operating only three hotel
properties is a source of business concentration risk.
Fair Value of Financial Instruments
F-7
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The carrying values of cash, accounts receivable, note receivable,
accounts payable, accrued expenses and borrowings approximate
their fair values.
Comprehensive Income
The Company has adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" effective for
the year ended December 31, 1998. There were no items of other
comprehensive income for the years ended December 31, 1999 and
1998, respectively.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and revenues
and expenses during the period reported. Actual results could
differ from those estimates.
Reclassifications
Certain amounts in the 1998 consolidated financial statements have
been reclassified to conform to the 1999 presentation. These
reclassifications have no effect on net income (loss).
note 3 - SIGNIFICANT DISPOSITION AND ACQUISITIONS
Sale of Sunshine Key
On June 4, 1998, the Company sold Sunshine Key for approximately
$15,750,000, resulting in a gain of approximately $5,475,000, net
of taxes of approximately $3,312,000. The operations of Sunshine
Key have been presented separately as discontinued operations in
the 1998 statement of operations. Results of operations for
Sunshine Key for 1998 through the date of its sale included
approximately $1,862,000 of revenues and $1,822,000 of expenses,
resulting in approximately $40,000 of net income from discontinued
operations, net of taxes of approximately $16,000.
In connection with the sale of Sunshine Key, the Company satisfied
certain debt obligations. As a result of the debt satisfaction,
the Company recognized an extraordinary gain of $580,543.
Acquisition of McLure House
On October 15, 1998, the Company acquired the assets of McLure
House, including land, buildings, furniture, fixtures and
equipment used in its operations for $3,200,000. In connection
with the acquisition, the Company obtained financing in the amount
of $2,400,000.
Acquisition of Palmer Inn
On November 25, 1998, the Company acquired the assets of the
Palmer Inn, including land, buildings, furniture, fixtures and
equipment used in its operations for $7,500,000. In connection
with the acquisition, the Company assumed debt in the aggregate
amount of $5,000,000.
Acquisition of Chamberlin Hotel
On November 30, 1998, the Company acquired the assets of the
Chamberlin Hotel, including the building, furniture, fixtures and
equipment used in its operations for $5,350,000. In connection
with the acquisition, the Company assumed responsibility for a
40-year lease for the land on which the hotel is located (see Note
9). Also in connection with the acquisition, the Company assumed
notes payable in the aggregate amount of $3,000,000. The holder of
the notes payable offered a $500,000 reduction in the principal
amount of the notes if payment of the notes in full would occur
within 60 days of the closing and such payment were guaranteed. In
January 1999, $2,500,000 was paid in full satisfaction of the
notes approximately as follows: $2,276,500 by the previous owner
of the Chamberlin Hotel and $223,500 by the Company. The
$2,276,500 amount paid by the previous owner on the Company's
behalf was not evidenced by a written agreement and had no formal
terms for repayment. The $500,000 discount for the early
repayment, net of the related income tax effect of $195,000, was
accounted for as an extraordinary gain in the accompanying
consolidated statement of operations for the year ended December
31, 1999.
During March through May 1999, the Company pursued permanent
financing for the Chamberlin Hotel but was unable to obtain the
financing primarily because the lessor of the land lease would not
approve the lease assignment pending the completion of, or the
commitment to complete, certain renovations. In June 1999, the
Company filed suit against the previous owner seeking, among other
things, a judicial determination of the previous owner's
obligation for the completion of the renovations.
F-8
<PAGE>
Note 3 - SIGNIFICANT DISPOSITION AND ACQUISITIONS (Continued)
Acquisition of Chamberlin Hotel (Continued)
In February 2000, the Company and the previous owner entered into
a stipulated settlement agreement which provided, among other
things, that the previous owner would accept a payment of
$1,630,000 as payment in full for the $2,276,500 that had been
advanced on behalf of the Company. The resulting difference of
approximately $646,500 represented the estimated cost of the
renovations necessary to effect the assignment of the land lease.
The Company has recorded its estimated obligation to complete the
renovations as a liability in its December 31, 1999 consolidated
balance sheet. The Company is currently negotiating with the land
lessor to obtain approval for the assignment of the lease to the
Company. Upon the approval of the lease assumption, the Company
intends to obtain permanent financing for the Chamberlin Hotel and
to pay the amounts due to the previous owner from the proceeds of
such financing. The stipulated settlement agreement provides that
the Company deliver to the previous owner a promissory note for
such amounts bearing interest at a rate of 8% and maturing June
15, 2000. The note is to be collateralized by the assets of the
Chamberlin Hotel.
The acquisitions of the McLure House, Chamberlin Hotel and Palmer
Inn were accounted for as purchases. Accordingly, the respective
purchase prices were allocated to the acquired assets based on
their respective fair values and the results of operations of the
hotels have been included in the consolidated financial statements
from the dates of their respective acquisitions.
note 4 - NOTE RECEIVABLE
In November 1998, in connection with the Company's purchase of the
Palmer Inn, the Company loaned $500,000 to the seller and obtained
a promissory note receivable in exchange. The note receivable
earned interest at an annual rate of 7.5% through June 1999. After
that date, the note earns interest at an annual rate of 8%.
Interest is payable in monthly installments. The principal balance
is due on the earlier of May 25, 2000, or the date the $4,000,000
second mortgage on the Palmer Inn is repaid (See Note 6).
note 5 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31,
1999:
Land $ 1,084,587
Buildings and building improvements 13,909,726
Furniture, fixtures and equipment 1,841,857
Computer equipment 59,635
Renovations in progress 678,986
---------------
17,574,791
Less accumulated depreciation (921,770)
---------------
Property and equipment, net $ 16,653,021
===============
F-9
<PAGE>
Note 6 - BORROWING ARRANGEMENTS
<TABLE>
<CAPTION>
<S> <C>
The Company's borrowing arrangements at December 31, 1999,
consists of the following:
Promissory note payable to a financial institution, payable in monthly
payments of interest only at a variable rate approximating prime plus 1%
with a balloon payment of the entire principal balance originally due
April 1, 2000. The Company has obtained an extension of the maturity date
through June 30, 2000. Collateralized by the property and equipment of the
Palmer Inn and guaranteed by the Company's chairman. $ 940,000
Mortgage note payable to a corporation, payable in monthly
installments of interest only at 7.5% from November 1998 to May
1999, and at 8.00% from May 1999 to May 2000. The principal
balance of the note and any accrued interest is due May 25, 2000.
The note is collateralized by substantially all property and
equipment at the Palmer Inn.
4,000,000
Mortgage note payable to a financial institution, payable in monthly
payments of interest only at 7.5% per annum through October 2000, after
which the principal balance will be amortized based on a 25-year
amortization schedule with the remaining principal balance due on
October 16, 2003. Collateralized by the property and equipment of the
McLure House. 2,400,000
Obligation due to the former owner of Chamberlin Hotel pursuant to
a Mediated Settlement Agreement dated February 8, 2000, by which
an amount of $1,630,000 is due the former owner to satisfy all
obligations resulting from the transfer of ownership of the
Chamberlin Hotel to the Company. The interest only note at a rate
of 8.00% is payable monthly with principal and any accrued
interest due June 15, 2000. The obligation is collateralized by
the assets of the Chamberlin Hotel.
1,630,000
Other borrowing arrangements with financial institutions at rates
ranging from 7.50% to 9.65%, payable in monthly installments of
principal and interest, maturing in 2003 and 2004, collateralized
by various equipment.
16,313
--------------
8,986,313
Less current maturities (1,638,750)
--------------
Total long-term debt $ 7,347,563
===============
</TABLE>
The Company has obtained a commitment from a financial institution
to refinance the $4,000,000 mortgage note due in May 2000 and the
$940,000 promissory note due in April 2000 on a long-term basis.
The commitment letter from the financial institution provides for,
among other things, funding of $6,200,000 to repay the maturing
obligations and to fund the construction of a twenty-two room
addition to the Palmer Inn. Accordingly, the $4,000,000 mortgage
note due in May 2000 and the $940,000 promissory note due in April
2000 have been classified as long term in the accompanying
consolidated balance sheet. The closing of the refinancing is
subject to, among other things, the delivery of certain
information to the financial institution and the attainment of
certain financial ratios by the Company.
Cash paid for interest amounted to approximately $590,000 and
$307,000 in 1999 and 1998, respectively.
F-10
<PAGE>
note 6 - BORROWING ARRANGEMENTS (Continued)
Assuming the closing of the refinancing described in the previous
paragraph occurs, the aggregate maturities of the Company's
borrowing arrangements subsequent to December 31, 1999, will be
approximately as follows:
Year Ending
December 31, Amount
----------------------- ---------------
2000 $ 1,639,000
2001 $ 38,000
2002 $ 40,000
2003 $ 2,326,000
2004 $ 3,000
Thereafter $ 4,940,000
note 7 - INCOME TAXES
The components of the Company's provision for income taxes for the
years ended December 31, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
1999 1998
------------- --------------
<S> <C> <C>
Current
Federal $ 100,000 $ 138,052
State 50,000 23,632
------------- --------------
Total current 150,000 161,684
Deferred
Federal 746,000 2,620,048
State 74,000 448,499
------------- --------------
Total deferred 820,000 3,068,547
------------- --------------
Total provision for income taxes $ 970,000 $ 3,230,231
============= ==============
</TABLE>
The provision for income taxes is reflected in the consolidated
statement of operations as net components included in discontinued
operations, extraordinary items and income tax (provision)
benefit.
Significant components of the Company's deferred tax liabilities
and assets at December 31, 1999, are approximately as follows:
Deferred Tax Liability
----------------------
Deferred gain from like-kind exchange $ (3,574,000)
Deferred Tax Asset
------------------
Bad debt allowance 62,000
-------------
Net deferred taxes $ (3,512,000)
=============
Reconciliations of the significant differences between tax at the
federal statutory income tax rate and the effective income tax on
pre-tax income (loss), are as follows:
1999 1998
------- -------
Statutory federal rate (34)% 34%
Change in estimated tax basis of assets 214 -
Tax exempt portion of gain - (2)
Tax benefit of net operating loss carryforward 20 -
State tax effect, net of federal benefit 3 3
------- -------
Effective income tax 203% 35%
F-11
<PAGE>
Note 7 - INCOME TAXES (Continued)
In 1999, the Company made an election related to the filing of its
1998 income tax return allowing the Company to reduce the tax
basis of the property exchanged in 1998 rather than having to
recognize taxable income currently. When calculating the estimated
tax basis of its assets and the tax provision at December 31,
1998, the election was not taken into account. The election is
related to the forgiveness of indebtedness from the restructure of
debt in 1996 and resulted in an additional deferral of income
taxes in the amount of $1,023,000. This change in estimated tax
basis is reflected in the Company's 1999 income tax provision.
In 1998, the Company paid $228,000 in cash for income taxes. No
cash was paid for income taxes in 1999.
note 8 - Stockholders' Equity
Common Stock Purchase Warrants
During 1999 and 1998, the Company had 200,000 Class A Common Stock
Purchase Warrants ("Class A Warrants") outstanding. The holders of
each Class A Warrant were entitled to purchase one share of the
Company's common stock at an exercise price of $5.00 per share.
The Class A Warrant expired unexercised on March 19, 2000.
During 1999 and 1998, the Company also had 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 the Company's common stock at an exercise price of $5.00 per
share. The Class B Warrants are exercisable through March 19, 2001
and are subject to redemption by the Company at a price of $1.00
per Class B Warrant.
Preferred Stock
The Company has authorized the issuance of up to 1,000,000 shares
of Preferred Stock in one or more series with rights, preferences,
privileges and restrictions, including voting and conversion
rights, as determined by the Company's Board of Directors (the
Board).
During 1997, in connection with the satisfaction of certain loans
and debt amounting to $293,862, the Company issued 195,907 shares
of the Company's authorized preferred shares. The issued preferred
shares included 46,666 shares issued to the Chairman of the Board
of the Company, who cancelled a loan in the amount of $70,000. The
issued preferred shares were designated "Series A Convertible
Preferred Stock," with a par value of $0.01 per share. The holders
were 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 had the right to
convert each share of their Series A 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.
During 1998, the Company, at a cost of $293,862, redeemed all
Series A preferred shares.
Common Stock Options
During 1999 and 1998, the Company had various stock options
outstanding to certain officers. The following table summarizes
the aggregate stock options activity for the years ended December
31, 1999 and 1998:
Shares Under
Option
------------
Outstanding at December 31, 1997 746,666
Grants 50,000
Exercises (50,000)
Cancellations (40,000)
-----------
Outstanding at December 31, 1998 706,666
Grants -
Exercises (666,666)
Cancellations -
-----------
Outstanding at December 31, 1999 40,000
===========
The 50,000 options that were granted and exercised in 1998 were
exercised at $0.01 per share. The 666,666 options that were
exercised in 1999 were exercised at a price of $0.01 per share.
The 40,000 options that remain outstanding as of December 31,
1999, are exercisable at a price of $1.00 per share.
F-12
<PAGE>
Note 8 - Stockholders' Equity (Continued)
Financial Accounting Standards Board pronouncement FAS No.
123, "Accounting for Stock-Based Compensation," (FAS 123) requires
that the Company calculate the value of stock options at the date
of grant using an option pricing model. The Company has elected
the "pro-forma, disclosure only" option permitted under FAS 123,
instead of recording a charge to operations. If the 50,000 options
granted in 1998 had been valued using the Black-Shoals model based
on a 7.5% risk-free rate of return; an expected option life of one
year; an expected stock price volatility of 106% and a grant date
value of $1.50; the earnings per share would have been $0.01 per
share less than that reported in the 1998 consolidated statement
of operations.
Issuance of Common Stock for Services
During 1999, the Company issued 215,000 shares of its common stock
to a consultant in payment for services. The shares were valued at
$108,843.
During 1998, the Company issued 50,000 shares of common stock as
payment in connection with legal services provided. The shares
were valued at an aggregate amount of $6,250.
During 1998, the Company issued 20,000 shares common stock as
compensation to a key executive. The shares were valued at an
aggregate amount of $2,500.
During 1998, the Company issued 20,000 shares of common stock as
compensation to a key executive. The shares were valued at an
aggregate amount of $26,250.
Note 9 - commitments and contingencies
Franchise Agreement
The Palmer Inn operates under a franchise agreement with a
national hotel franchise system. The agreement provides for, among
other things, an annual membership fee, as determined by the
franchiser's board of directors. The agreement also requires the
Company to pay a royalty fee and reservation fee based on room
bookings, net of cancellations. The terms of the franchise
agreement expire in November 2000, and renews automatically each
year at the discretion of the franchiser. The Company may
terminate the franchise agreement at any time without penalty.
The McLure House also operates under a franchise agreement with a
national hotel franchise system. Deferred costs related to the
acquisition of the franchise agreement of $19,000 have been
recorded as an other asset in the December 31, 1999 consolidated
balance sheet, net of accumulated amortization of $106. The
franchise agreement provides for, among other things, a monthly
royalty and service fee ranging from 6.5% of monthly gross room
revenues in the first year to 8.5% by year five of the franchise
agreement. The term of the franchise agreement is 15 years.
Lease as Lessee
The Company leases the land upon which the Chamberlin Hotel is
located through an operating lease contract. The lease provides
for minimum lease payments of $6,000 per year through the lease's
expiration date in 2037. Total rent expense approximated $6,000
and $500 for the years ended December 31, 1999 and 1998,
respectively. The Company has not yet obtained the landlord's
approval of the assumption of the lease (See Note 3).
F-13
<PAGE>
Note 9 - commitments and contingencies (Continued)
Lease as Lessor
The Company leases certain food and beverage and retail concession
space to unrelated businesses. The Company receives rents for the
leased space on a monthly basis. The scheduled future minimum
rents to be received under these leases are approximately as
follows:
Year Ending
December 31, Amount
------------------------ ---------------
2000 $ 213,000
2001 $ 101,000
2002 $ 102,000
2003 $ 82,000
2004 $ 80,000
Thereafter $ 320,000
Legal Proceedings
The Company is engaged in various legal and regulatory
proceedings. Management believes that the range of potential loss
resulting from these proceedings will fall within the Company's
available insurance coverage and that the outcomes of such
proceedings will not be material to the Company's consolidated
financial position. Additionally, the Company is subject to
extensive federal, state and local laws and regulations. The
Company believes that it is in compliance with all applicable laws
and regulations and is not aware of any pending or threatened
investigations involving allegations of potential wrongdoing.
While no such regulatory inquiries have been made, compliance with
such laws and regulations can be subject to future governmental
review and interpretation, as well as significant regulatory
action, including fines and penalties.
Employment Agreement
The Company had an employment agreement with one of its officers
that expired on October 31, 1999. The agreement provided for a
base salary, benefits and stock options.
F-14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 69037
<SECURITIES> 0
<RECEIVABLES> 87290
<ALLOWANCES> 0
<INVENTORY> 82974
<CURRENT-ASSETS> 755114
<PP&E> 16653021
<DEPRECIATION> (921770)
<TOTAL-ASSETS> 17795451
<CURRENT-LIABILITIES> 3602211
<BONDS> 0
0
0
<COMMON> 5975
<OTHER-SE> 3327703
<TOTAL-LIABILITY-AND-EQUITY> 17795451
<SALES> 7835951
<TOTAL-REVENUES> 7889203
<CGS> 7394515
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 858428
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 614526
<INCOME-PRETAX> (978266)
<INCOME-TAX> 0
<INCOME-CONTINUING> (775000)
<DISCONTINUED> 0
<EXTRAORDINARY> 305000
<CHANGES> 0
<NET-INCOME> (1448266)
<EPS-BASIC> (0.31)
<EPS-DILUTED> (0.25)
</TABLE>
