PELICAN PROPERTIES INTERNATIONAL CORP
TICKER SYMBOL: PELP
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, 2000
[ ] 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.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
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Florida 65-0616879
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(State or Other Jurisdiction of Organization) (IRS Incorporation or
Employer Identification Number)
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2 Fenwick Road
Suite 100
Fort Monroe, Virginia 23651
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(Address of Principal Executive Office)
(757) 224-5234
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(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 August 14, 2000, 2000 was 5,975,851.
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
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PELICAN PROPERTIES INTERNATIONAL CORP.
and SUBSIDIARIES
Table of Contents
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PART I. FINANCIAL INFORMATION
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ITEM. 1 Financial Statements
Condensed Consolidated Balance Sheets Page 3
June 30, 2000 and December 31, 1999
Condensed Consolidated Statements of Operations-- Page 4
Three Months and Six Months Ended June 30, 2000 and June 30, 1999
Condensed Consolidated Statements of Cash Flows Page 5
Six Months Ended June 30, 2000 and June 30, 1999
Condensed Notes to Consolidated Financial Statements Page 6 - 7
ITEM 2 - Management Discussion and Analysis of Financial Condition
And Results of Operations Pages 8 - 9
PART II - OTHER INFORMATION
---------------------------
ITEM 1 - Legal Proceedings Page 10
ITEM 2 - Changes in Securities Page 11
ITEM 3 - Defaults upon Senior Securities Page 11
ITEM 4 - Submission of Matter to Vote of Security Holders Page 11
ITEM 5 - Other Information Page 11
ITEM 6 - Exhibits and Reports on Form 8-K Page 11
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2
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PELICAN PROPERTIES INTERNATIONAL CORP.
AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 December 31
2000 1999
ASSETS Unaudited
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CURRENT ASSETS
Cash $ 109,819 $ 69,037
Accounts receivable, net 111,218 87,290
Supplies 92,887 82,974
Prepaid expenses 49,657 25,380
Note receivable 500,000 500,000
Income tax refundable - 228,000
Other current assets - 1,734
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TOTAL CURRENT ASSETS 863,581 994,415
PROPERTY AND EQUIPMENT, net of accumulated 16,422,015 16,653,021
depreciation and amortization of $1,420,405 and $921,770
OTHER ASSETS
Deferred loan costs, net of accumulated amortization of $18,324 and $14,804 66,953 70,473
Deferred franchise costs, net of accumulated amortization of $529 and $106 18,471 18,894
Deposits and other 121,995 58,648
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207,419 148,015
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$ 17,493,015 $ 17,795,451
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,637,951 $ 1,638,750
Accounts payable and accrued liabilities 1,525,928 1,125,305
Obligation for renovations 150,000 150,000
Income taxes payable 77,000 150,000
Other current liabilities - 41,660
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TOTAL CURRENT LIABILITIES 3,390,879 3,105,715
OBLIGATION FOR RENOVATIONS 504,558 496,495
LONG-TERM DEBT, less current maturities 7,347,535 7,347,563
DEFERRED INCOME TAXES 3,285,000 3,512,000
STOCKHOLDER'S 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 5,975
Additional paid-in capital 3,393,216 3,393,216
Accumulated deficit (434,148) (65,513)
TOTAL STOCKHOLDERS' EQUITY 2,965,043 3,333,678
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,493,015 $ 17,795,451
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3
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PELICAN PROPERTIES INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30 JUNE 30
2000 1999 2000 1999
Unaudited Unaudited
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REVENUES
Rooms $ 1,616,514 $ 1,529,879 $ 2,610,822 $ 2,358,554
Food and beverage 450,857 488,769 679,930 669,558
Rental income 101,902 64,557 204,396 158,264
Other 123,686 21,423 227,278 301,357
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TOTAL REVENUES 2,292,959 2,104,628 3,722,426 3,487,733
---------------- --------------------- ----------------- ---------------------
COST AND EXPENSES
Rooms 368,569 476,164 677,737 685,178
Food and beverage 378,569 282,312 650,956 683,119
Other operating expenses 681,430 853,705 1,330,589 1,471,407
Corporate expenses 293,121 301,058 593,937 626,649
Sales and marketing expenses 130,265 270,424 270,072 270,424
Interest expense 198,520 114,941 400,788 341,335
Depreciation and amortization 244,824 218,831 466,257 424,987
---------------- --------------------- ----------------- ---------------------
TOTAL COSTS AND EXPENSES 2,295,297 2,517,435 4,390,336 4,503,099
---------------- --------------------- ----------------- ---------------------
LOSS BEFORE INCOME TAXES (2,339) (412,807) (667,910) (1,015,366)
INCOME TAX BENEFIT 0 (155,340) (223,000) (382,082)
---------------- --------------------- ----------------- ---------------------
LOSS BEFORE EXTRAORDINARY ITEM (2,339) (257,467) (444,910) (633,284)
EXTRAORDINARY ITEM, net of taxes 311,850
NET LOSS $ (2,339) $ (257,467) $ (444,910) $ (321,434)
================ ===================== ================= =====================
BASIC AND DILUTED LOSS
PER COMMON SHARE:
Loss before extraordinary item $0.00 -$0.05 -$0.07 -$0.12
---------------- --------------------- ----------------- ---------------------
Extraordinary item $0.00 $0.00 $0.00 -$0.06
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Net Loss $0.00 -$0.05 -$0.07 -$0.06
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PELICAN PROPERTIES INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Six Months Ended June 30, 2000 and June 30, 1999 Unaudited
June 30, 2000 June 30, 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (444,910) $ (321,434)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization 466,257 424,987
Extraordinary Gain on Forgiveness of Debt 0 (500,000)
Deferred Income Taxes (73,000) (155,340)
Changes in:
Accounts receivable (23,928) 1,056,956
Inventory (9,913) 42,969
Prepaid expenses (24,277) 13,001
Tax refund receivable 228,000
Other receivables 224,047
Other assets (57,670) (173,241)
Accounts payable and accrued expenses 400,622 410,519
Other current liabilities (42,459) 20,309
Income taxes payable (150,000) (38,592)
Other liabilities 8,063 -
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NET CASH PROVIDED BY OPERATING ACTIVITIES 276,785 1,004,181
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets (235,975) (625,598)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings (28) (303,555)
Proceeds from issuance of common stock 0 136,667
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NET CASH USED IN
FINANCING ACTIVITIES (28) (166,888)
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NET INCREASE IN CASH 40,782 211,695
CASH AT BEGINNING OF PERIOD 69,037 121,623
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CASH AT END OF PERIOD $ 109,819 $ 333,318
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PELICAN PROPERTIES INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2000
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The accompanying 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, considered
necessary for a fair presentation have been included. Operating results for the
six months ended June 30, 2000, are not necessarily indicative of the results
that may be expected for the year ending December 31, 2000. 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, 1999.
The accompanying condensed consolidated financial statements should be read in
conjuction with the 1999 financial statements which can be found in the
Company's annual report on form 10-KSB for 1999.
The June 30, 2000 condensed consolidated financial statements include the
accounts of Pelican Properties, International Corp. and its wholly owned
subsidiaries Ohio Key I, Inc., Ohio Key II, Inc., Old Point Comfort Hotel, LLC.,
Palmer Inn, Princeton, LLC., McLure House Hotel & Conference Center, LLC, and
Purchasing Concepts, Inc. (the "Company"). All inter-company and related party
transactions have been eliminated in consolidation.
NOTE 2 - LOSS PER SHARE
-----------------------
Basic and diluted loss 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 - CURRENT DEBT MATURITY
------------------------------
Current maturities of the Long Term debt include the obligation to the former
owner of the Chamberlin Hotel pursuant to a mediated settlement agreement dated
February 8, 2000, and revised on July 6, 2000 (See Part II, Item 1).
NOTE 4- SUBSEQUENT EVENTS AND CONTINGENCIES
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REFINANCE OF MORTGAGE NOTE
The mortgage note for Palmer Inn was refinanced on July 21, 2000. A new mortgage
note ("Note"), payable to a financial institution, requires monthly payments of
principal, interest and taxes beginning August 20, 2000. The Note charges
interest at a rate of 9.75%, amortized over 25 years, with any unpaid principal
and interest payable in full on July 21, 2005. The Note is collateralized by the
property and equipment of Palmer Inn and guaranteed by the Company's chairman.
6
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NOTE 5 - OPERATIONS
-------------------
The accompanying condensed consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As shown in the
accompanying condensed consolidated financial statements, the Company reported a
net loss of $444,910 for the six months ended June 30, 2000, and had a working
capital deficiency and accumulated deficit of approximately $2,500,000 and
$430,000, respectively. The continuation as a going concern is dependent upon
management's ability to refinance current maturities of the Company's borrowings
on a long-term basis, including the mediated settlement agreement between the
Company and the former owner of The Chamberlin hotel due September 15, 2000 (see
Part II - Other Information, Item 1. Legal Proceedings), to generate additional
revenues from the 22-room addition to the Palmer Inn scheduled to begin early
2001, and to increase bookings from sales and marketing initiatives. No
assurance can be given that the Company will be able to obtain additional equity
or debt financing to meet its maturing obligations, or that the terms of such
financing or equity infusion would be on terms favorable to the Company. If the
Company is unable to obtain favorable financing terms, it may have an adverse
impact on the Company.
7
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Item 1 Management's Discussion and Analysis or Plan of Operation
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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. This objective was
realized in 1999 with the sale of Sunshine Key and the purchase of three hotels
in the mid-Atlantic region. The Company took advantage of tax deferral
strategies through a 1031 Exchange Account. Details of such transactions have
been disclosed in prior 10-QSB reports filed in 1999, and the 10-KSB for 1999.
Six Months Ended June 30, 2000 compared to Six Months Ended June 30, 1999 for
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Operations
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For the six month period ended June 30, 2000, total revenues were $3,722,426 as
compared to $3,487,733 in 1999. Cost of Revenues was $1,328,693 in the six month
period ended June 30, 2000 as compared to $1,368,297 in 1999. The Gross Profit
in the six month period ended June 30, 2000 was $2,393,733 as compared to
$2,119,436 in 1999.
Total Operating expenses decreased to $1,330,589 in the six month period ended
June 30, 2000 from $1,471,407 in 1999. Corporate Office expenses decreased in
the six month period ended June 30, 2000 to $593,937 from $626,649 in 1999.
Sales and Marketing expenses decreased in the six month period ended June 30,
2000 to $270,072 from $270,424 in 1999. Interest expense increased in the six
month period ended June 30, 2000 to $400,788 from $341,335 in 1999. Depreciation
and amortization expense increased for the six month period ended June 30, 2000
to $466,257 from $424,987 in 1999. The increase in interest is to be
attributable to the restructuring of the Chamberlin hotel's debt as part of the
legal agreement reached in February (see discussion under Part II, Item 1, Legal
Proceedings). Increases in depreciation are attributable to increases in capital
equipment during 2000.
Loss before Income Taxes was $667,910 in the six month period ended June 30,
2000 as compared to $1,015,366 in 1999. Net Loss was $444,910 in the six month
period ended June 30, 2000 as compared to $321,434 in 1999. The decrease in Net
Loss results primarily from increased revenues and decreased expenses for the
second quarter of 2000.
8
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Liquidity and Capital Resources
-------------------------------
The Company's working capital deficiency increased from December 31, 1999 by
$415,998. This increase is due to the financing of several capital improvement
projects through operations.
At June 30, 2000 the Company had net accounts receivable of $111,218 as compared
to $247,829 at June 30, 1999. This change is attributable to increase collection
efforts at the hotel level and an adjustment for Bad Debt allowance at year-end
of 1999. At June 30, 2000 the Company had accounts payable and accrued expenses
of $1,525,928 as compared to $1,005,420 at June 30, 1999.
ADDITIONAL FACTS TO CONSIDER
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Outlook
-------
Management continues to anticipate an increase in revenue at all three
properties through the end of 2000 (as evidenced in the first and second
quarters). Management feels that the implementation of its central management
operation has produced decreases in management expenses incurred at all hotel
operations, as evidenced in the financial statements. The Company continues to
believe that this self-management approach will create savings in the overall
management costs as opposed to the use of management companies.
Palmer Inn remains within the average rate of comparable hotels in its current
market. The Palmer Inn is expected to begin construction of a 22-room suite wing
by January 2001.
The McLure House Hotel has completed the first phase of its conversion to a
Ramada Plaza Hotel. The second phase will involve 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 within the third quarter.
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 has completed minor renovations. This renovation has
covered public areas such as the lobby, selected meeting space, and some items
in the restaurant and lounge. Results from the OpSail 2000 event were very
favorable, enabling the hotel to have increases in room occupancy and revenues
for the month of June, 2000.
The Company is continuing its investigation into several Internet opportunities
that it believes has a synergistic relationship to the existing business. It is
the hope of management that inclusion of Internet diversification will have a
positive effect on the value of the Company's stock.
9
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PART II - OTHER INFORMATION
---------------------------
Item 1. 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 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 paid to Barggren the aforementioned payment in the
amount of $80,000. Thereafter, a dispute arose between the parties concerning
the interpretation of certain provisions of the Mediated Settlement Agreement.
On July 6, 2000, the Court entered a Consent Order confirming the Mediated
Settlement Agreement and such Consent Order further provides, among other
things, that (I) Ohio Key execute a standard form of deed of trust and
promissory note in the amount of $1,550,000, with interest at the rate of ten
percent (10%) payable $20,000 per month, principal and interest on or before the
fifth day of the month beginning August 5, 2000 until September 15, 2000 when
all accrued interest and principal shall be due and payable in full, (ii) in the
event Ohio Key fails to pay such promissory note in full by September 15, 2000,
the principal balance shall be the sum of $1,627,500 less any principal
theretofore paid, (iii) Barggren shall cause to be released within forty-eight
(48) hours the recordation of the aforementioned new deed of trust and
promissory note, the two deeds of trust which secured the two notes in the
aggregate principal amount of $3,000,000 payable to The Chamberlin Hotel
Company, (iv) at such time as Ohio Key pays off the note for $1,550,000 the
closing agent shall retain in escrow the sum of $100,000 from the funds due
Barggren under such note to be applied to any indebtedness within thirty (30)
days of the report or, if Barggren disputes such indebtedness, Barggren shall
pay the amount due, if any, within thirty (30) days of arbitration decision,
(vi) if the report shows that Ohio Key owes any sums to Barggren, Ohio Key shall
pay such indebtedness within thirty (30) days of the Report or, if Ohio Key
disputes such indebtedness, Ohio Key shall pay the amount due, if any, within
thirty (30) days of an arbitration decision, and (vii) Ohio Key is responsible
for completing all improvements of the Chamberlin Hotel required by the Army
Corps of Engineers to effectuate the Army's consent to the assignment of the
land lease from the Chamberlin Hotel, LLC to Ohio Key. The Report was delivered
to the parties on or about July 28, 2000 and such Report shows that Barggren
owes Ohio Key the sum $265,678.88.
10
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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
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Financial Data Schedule (for SEC use only)
Reports on Form 8-K
Change of Auditor's filed on February 4, 2000. Anticipated Filing date for
10-KSB filed on April 19, 2000.
11
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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 15, 2000 By: /s/ C. John Knorr
-------------------------------------
C. John Knorr, Chairman
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