<PAGE> 1
=====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-25515
PACIFIC CART SERVICES LTD.
(Exact name of registrant as specified in its charter)
NEVADA APPLIED FOR
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2501 Lansdowne Avenue
Saskatoon, Saskatchewan, Canada S7J 1H3
(Address of principal executive offices)
Registrant's telephone number including area code: (306) 343-5799
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common shares, $0.001 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 [ ] No [ x ], not subject to filing until May 10, 1999.
The number of common shares without par value outstanding on March 31,
1999 was 10,033,000 shares.
======================================================================
<PAGE> 2
PART 1. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements For The Period
Ended March 31, 1999.
MOEN AND COMPANY
CHARTERED ACCOUNTANTS
PO Box 10129
1400 IBM Tower Tel: (604) 662-8899
701 West Georgia Street Fax: (604) 662-8809
Vancouver, BC V7Y 1C6
INDEPENDENT AUDITORS' REPORT
To the Directors of
Pacific Cart Services Ltd.
(A Nevada Corporation)
(A Development Stage Company)
We have audited the accompanying Balance Sheet of Pacific Cart
Services Ltd. (A Development Stage Company) as at March 31, 1999, and
the related Statement of Income, Retained Earnings (Deficit), Cash
Flows and Shareholders' Equity for the three month period then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
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 an
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 financial statements referred to above present
fairly, in all material respects, the financial position of Pacific
Cart Services Ltd. (A Development Stage Company) as of March 31, 1999
and the results of its operations and Cash Flows for the three month
period then ended in conformity with generally accepted accounting
principles.
/s/ Moen and Company
Vancouver, British Columbia, Canada
May 28, 1999 Chartered Accountants
F-1
<PAGE> 3
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Balance Sheet
March 31,1999
(In U.S. Dollars)
<TABLE>
ASSETS
<S> <C>
Current Assets
Cash $ 110,842
Fixed Assets
Equipment at cost less
accumulated depreciation 15,237
----------
$ 126,079
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Note payable to shareholder, James Oste,
unsecured, non-interest bearing and
not subject to demand before
March 15, 2000 20,000
Due to related parties (note 4(c)) 6,511
----------
26,511
----------
Shareholders' Equity
Capital Stock (note 3)
Authorized:
100,000,000 common shares at
$0.001 par value
Issued and fully paid
10,033,000 common shares at
par value 10,033
Additional paid-in capital 476,617
Deferred compensation (273,167)
----------
213,483
Deficit, accumulated during the
development stage (113,915)
----------
99,568
----------
$ 126,079
==========
</TABLE>
Approved on Behalf of the Board
/s/ James Oste Director
/s/ David Glass Director
/s/ Robert J. Kinloch Director
See Accompanying Notes and independent Auditors' Report
F-2
<PAGE> 4
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Income
For the Three Month Period Ended March 31, 1999
(In U.S. Dollars)
<TABLE>
<CAPTION>
Three Months 27-Aug-98
Ended to
31-Mar-99 31-Dec-98
<S> <C> <C>
Administration Expenses
Accounting fee $ -- $ 2,050
Amortization of deferred
compensation (note 8) 14,333 15,000
Consulting services 13,500 --
Depreciation 275 --
Legal expenses 19,568 20,152
Management fees 11,500 --
Office expenses 1,607 733
Transfer agent fees 900 1,000
Travel expenses 5,449 7,848
--------- ---------
Total administration expenses 67,132 46,783
--------- ---------
Net Loss for the Period $ (67,132) $ (46,783)
========= =========
Net Loss Per Common Share
Basic $ (0.01) $ (0.01)
Diluted $ (0.01) $ (0.01)
Average Number of Common Shares Outstanding
Basic 9,449,667 5,092,851
Diluted 9,449,667 5,092,851
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Retained Earnings (Deficit)
For the Three Month Period Ended March 31, 1999
(In U.S. Dollars)
Three Months 27-Aug-98
Ended to
31-Mar-99 31-Dec-98
Balance, beginning of period $ (46,783) $ --
Net Loss for the Period (67,132) (46,783)
---------- ---------
Retained Earnings (Deficit),
December 15, 1998 $ (113,915) $ (46,783)
========== =========
</TABLE>
See Accompanying Notes and Independent Auditors' Report
F-3
<PAGE> 5
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Cash Flows
For the Three Month Period Ended March 31, 1999
(In U.S. Dollars)
<TABLE>
<CAPTION>
Three Months 27-Aug-98
Ended to
31-Mar-99 31-Dec-98
<S> <C> <C>
Cash Provided by (Used for)
Operating Activities
Loss for the period $ (67,132) $ (46,783)
Shares issued for consulting services 10,000
Changes in non-cash working capital items
Accounts payable (750) 750
Depreciation 275
Deferred compensation expenses 14,333 15,000
---------- ---------
(43,274) (31,033)
---------- ---------
Investing Activities
Purchase of equipment (15,512) --
---------- ---------
Financing Activities
Capital stock subscribed for cash 60,000 114,150
Note payable to shareholder 20,000
Due to related parties 4,075 2,436
---------- ---------
64,075 136,586
---------- ---------
Increase in Cash During the Period 5,289 105,553
Cash, Beginning of the Period 105,553 --
---------- ---------
Cash, End of the Period $ 110,842 $ 105,553
========== =========
</TABLE>
See Accompanying Notes and Independent Auditors' Report
F-4
<PAGE> 6
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Shareholders' Equity
For the Three Month Period Ended March 31,1999
(in U.S. Dollars)
<TABLE>
<CAPTION>
Price Number of Additional
Per Common par Paid-in
Share Shares value Capital
<S> <C> <C> <C> <C>
Oct 5, 98 Shares subscribed by
Director for cash
(note -)(b)) $0.05 5,000,000 $ 5,000 $ 245,000
Oct 5, 98 Shares subscribed
by Director for
finders fee
(note 7(a)) $0.05 2,000,000 2,000 98,000
Dec 7, 98 Share subscribed by
private placement
for cash $0.05 1,283,000 1,283 62,867
Deferred compensation
Net loss for the period
--------- -------- ---------
Balance, December 31, 1989 8,283,000 8,283 405,867
Feb 2, 99 Shares subscribed
by Director for
consulting services $0.05 250,000 250 12,250
Feb 3, 99 Shares subscribed by
private placement
for cash $0.04 1,500,000 1,500 58,500
Deferred compensation
Deferred compensation amortized
Loss for the period
---------- -------- ---------
Balance, March 31, 1999 10,033,000 $ 10,033 $ 476,617
========== ======== =========
See Accompanying Notes and Independent Auditors' Report
F-5a
<PAGE> 7
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Shareholders' Equity
For the Three Month Period Ended March 31, 1999
(in U.S. Dollars)
Total Retained Total
Deferred Capital Earnings Shareholders
Compensation Stock (Deficit) Equity
<S> <C> <C> <C> <C>
Oct 5, 98 Shares subscribed by
Director for cash
(note -j(b)) $ 250,000 $ 250,000
Oct 5, 98 Shares subscribed by
Director for finders'
fee (note 7(a)) 100,000 100,000
Dec 7, 98 Share subscribed by
private placement
for cash 64,150 64,150
Deferred compensation (285,000) (285,000) (285,000)
Net loss for the period (46,783) (46,783)
---------- --------- ---------- ---------
Balance, December 31, 1998 (285,000) 129,150 (46,783) 82,367
Feb 2, 99 Shares subscribed by
Director for consulting
services 12,500 12,500
Feb 3, 99 Shares subscribed by
private placement
for cash 60,000 60,000
Deferred compensation (2,500) (2,500) (2,500)
Deferred compensation
amortized 14,333 14,333 14,333
Loss for the period (67,132) (67,132)
---------- --------- ---------- --------
Balance, March 31, 1999 $ (273,167) $ 213,483 $ (113,915) $ 99,568
========== ========= ========== =========
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
F-5b
<PAGE> 8
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
(in U.S. Dollars)
Note 1. BUSINESS OPERATIONS
1. The Company was incorporated on August 27, 1998 under the Company
Act of the State of Nevada, U.S.A. to pursue opportunities in the
business of franchising fast food distributor systems.
2. The Company is considered to be a development stage enterprise as
its principal operations have not yet commenced and have not yet
produced revenue. The deficit has been accumulated in the
development stage.
3. The first fiscal year end of the Company was December 31, 1998.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Administration Costs
Administration costs are written off to operations during the
period.
b) Translation of Foreign Currency
The accounts of the Company are translated into U.S. dollars on the
following basis:
- current assets and liabilities at the rate of exchange in
effect at the balance sheet date
- administration expenses at the average rate in effect during
the period
- non-current assets and liabilities at rates prevailing when
the transaction occurred
c) Basis of Presentation
These financial statements are prepared in accordance with United
States Generally Accepted Accounting Principles (GAAP).
d) Net Loss Per Share
Net loss per common share is computed by dividing net loss by the
weighted average number of shares outstanding during the period.
d) Depreciation of Fixed Assets
Depreciation is recorded on a straight line basis over five years
which is the estimated useful life.
At cost $ 15,512
Less: accumulated depreciation 275
---------
$ 15,237
---------
See Accompanying Notes and Independent Auditor's Report.
<PAGE> 9
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
(in U.S. Dollars)
Note 3. CAPITAL STOCK
Cash consideration for shares during the three months ended March 31,
1999 was $60,000 for the issuance of 1,500,000 shares subscribed by
private placement. 250,000 shares were issued to a director for
consulting services of $10,000.
Note 4. RELATED PARTY TRANSACTIONS:
a) Share subscription by director
The Company authorized the issue of 250,000 shares to David Glass,
a Director of the company, for consulting services. There is
additional compensation of $2,500 based on a value of $0.05 per
share. The compensation is amortized over a five year period as
outlined in note 8.
b) Management fees
Management fees for the quarter ended March 31, 1999 total $11,500
representing $6,000 for James Oste and $5,500 for Robert Kinloch
c) Expenses paid by directors
Expenses incurred by directors on behalf of the Company are
comprised of office expenses of $177 travel costs of $4,951, legal
expenses of $3,000, consulting services of $13,500 and purchase of
equipment of $15,512, for total costs of $37,140. The balance
unpaid as of March 31, 1999 is as follows:
James Oste, Chairman,
President, Director $ 3,486
Robert Kinloch, Secretary, Director 3,025
----------
Balance unpaid at March 31, 1999 $ 6,511
==========
d) Agreement with Mister Tube Steak Canada Inc.
James Oste is President, Director and a shareholder of Mister Tube
Steak Canada Inc. as outlined in note 6 below.
e) Note payable - $20,000
The note payable of $20,000 is payable to James Oste. It is
unsecured and was initially not subject to demand before June 1,
1999; the latter date has been changed by letter dated March 15,
1999, to an earliest call date of March 15, 2000.
See Accompanying Notes and Independent Auditor's Report.
F-7
<PAGE> 10
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
(in U.S. Dollars)
Note 5. INCOME TAXES
The Company has a loss for income tax purposes that may be carried
forward to be applied against future taxable income. The benefit of a
potential reduction in future income taxes has not been recorded as an
asset it is reduced by a valuation allowance.
Note 6. AGREEMENT WITH MILTER TUBE STEAK CANADA INC.
a) Agreement with Mister Tube Steak Canada Inc.
i) By agreement dated January 10, 1999 and signed on January 26,
1999, between Mister Tube Steak Canada Inc. ("MTS") and
Pacific Cart Services Ltd. ("PCS"), MTS appointed PCS as its
exclusive distributor for its products in California and
Washington State.
ii) The effective date of the agreement is February 1, 1999 for an
initial period of five years.
iii) Products purchased by PCS from MTS represented by equipment
and food and dry goods are payable on a sixty day basis.
iv) MTS will provide product liability insurance in the amount of
$2,000,000 CDN.
v) The term of the agreement is for five years unless terminated
earlier on consent of both parties. The agreement shall
automatically renew for successive two-year periods,
commencing on the fifth anniversary, unless PCS provides 180
days prior written notice to MTS of its intent not to renew.
MTS shall have the right to cancel this agreement on the fifth
anniversary and second anniversary of any subsequent renewal
upon not less than 180 days prior written notice to PCS.
vi) The agreement provides for reimbursement to PCS for value of
business and goodwill created by PCS if the agreement is
terminated by MTS for other than a default or breach by PCS.
vii) If MTS intends to sell all or any part of its business PCS
shall have a first right of refusal.
viii) The agreement is not assignable as security or otherwise by
either party without the prior consent of the other.
ix) James Oste is President, Director and shareholder of Mister
Tube Steak Canada Inc.
See Accompanying Notes and Independent Auditor's Report.
F-8
<PAGE> 11
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
(in U.S. Dollars)
Note 7. EMPLOYMENT AGREEMENTS
Employment agreements dated March 15, 1999 were entered into by the
Company for a five year period from January 1, 1999 to December 31, 2003,
as follows:
i) James Oste to be employed as President, Chief Executive
Officer and Director of the Company, commencing at $24,000 per
year.
ii) Robert Kinloch, to be employed as Executive Vice-President,
Chief Operating Officer, and Director of the Company
commencing at $22,000 per year.
iii) for both of the above agreements, subsequent year compensation
is to be negotiated prior to commencement of a new year.
Additional compensation is as follows:
- reimbursement of all out-of-pocket expenses payable or
incurred by the employee in connection with his duties
under the agreement
- all reasonable travelling expenses incurred by the
employee in the course of his duties
- six weeks paid vacation
- club membership not to exceed $1,000
- stock option package to be negotiated during the first
year of employment
Note 8. COMPENSATION/DEFERRED COMPENSATION
Shares have been issued that give rise to compensation expense. This
compensation is amortized over a five year period. Details of
compensation expense and deferred compensation are as follows:
See Accompanying Notes and Independent Auditor's Report.
F-9
<PAGE> 12
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
(in U.S. Dollars)
<TABLE>
<CAPTION>
Compensation
Expense
Total Deferred Dec. 31, March 31,
Compensation Portion 1998 1999
<S> <C> <C> <C> <C>
a) 2,000,000 common shares
issued as a finder's fee
to Robert Kinloch, a
director and officer of
the Company at a price
of $0.05 per share $ 100,000 $ 90,250 $ 5,000 $ 4,750
b) 5,000,000 common shares
subscribed by James
Oste, a director and
officer of the Company
at a cash price of $0.01
per share for a total of
$50,000 giving rise to
compensation at $0.04
per share, or $ 200,000 200,000 180,500 10,000 9,500
c) 250,000 common shares
issued for consulting
services to David Glass
at a price of $0.50 per
share 2,500 2,417 --- 83
--------- ---------- -------- --------
$ 302,500 $ 273,167 $ 15,000 $ 14,333
--------- ---------- -------- --------
</TABLE>
Note 9. PENSION AND EMPLOYMENT LIABILITIES
The Company does not have any liabilities as at March 31, 1999 for
pension, post-employment benefits or postretirement benefits. The
Company does not have a pension plan.
See Accompanying Notes and Independent Auditors' Report
F-10
<PAGE> 13
Item 2. Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
The Company has inadequate cash to maintain operations during the
next twelve months. In order to meet its cash requirements the Company
will have to raise additional capital through the sale of securities or
loans. As of the date hereof, the Company has not made sales of
additional securities and there is no assurance that it will be able to
raise additional capital through the sale of securities in the future.
Further, the Company has not initiated any negotiations for loans to the
Company and there is no assurance that the Company will be able to raise
additional capital in the future through loans. In the event that the
Company is unable to raise additional capital, it may have to suspend or
cease operations.
The Company does not intend to conduct any product research or
development. The Company intends to rely entirely upon MTS for product
research and development.
The Company does not intend to purchase a plant or significant
equipment.
The Company will hire employees on an as needed basis, however, the
Company does not expect any significant changes in the number of
employees.
The Company expects to commence operations and earn revenues in the
third quarter of 1999. There is no assurance, however, that the Company
will commence operations or earn said revenues.
Results of Operations - (August 27, 1998) through March 31, 1999.
The Company is considered to be in the development stage as defined
in Statement of Financial Accounting Standards No. 7. There have been
no operations since incorporation.
Liquidity and Capital Resources.
The Company issued 10,033,000 shares of its Common Stock to
officers, directors and others. The Company has no operating history and
no material assets. The Company has $110,842 in cash as of March 31,
1999.
<PAGE> 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
EXHIBIT INDEX
Exhibit
No. Description.
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Dated this 2nd day of June, 1999.
PACIFIC CART SERVICES LTD.
By: /s/ David G. Glass
David G. Glass, Chief Financial officer
Treasurer and member of the Board of
Directors
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Condition at March 31, 1999 (Unaudited) and the
Statement of Income for the period from inception on August 27, 1998
(Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 110,842
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 110,842
<PP&E> 15,237
<DEPRECIATION> 0
<TOTAL-ASSETS> 126,079
<CURRENT-LIABILITIES> 26,511
<BONDS> 0
0
0
<COMMON> 213,483
<OTHER-SE> (113,915)
<TOTAL-LIABILITY-AND-EQUITY> 126,079
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (67,132)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (67,132)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,132)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
