<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 June 30, 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 June 30,
1999 was 13,033,000 shares.
======================================================================
<PAGE> 2
MOEN AND COMPANY
CHARTERED ACCOUNTANTS
PO Box 10129
1400 IBM Tower Telephone: (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 June 30, 1999, and the related
Statement of Income, Retained Earnings (Deficit), Cash Flows and
Shareholders' Equity for the six 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 June 30, 1999
and the results of its operations and Cash Flows for the six month
period then ended in conformity with generally accepted accounting
principles.
Moen and Company
Chartered Accountants
Vancouver, British Columbia, Canada
August 10, 1999
1
<PAGE> 3
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Balance Sheet
June 30, 1999
(In U.S. Dollars)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash $ 42,487
Loan receivable (note 10(b)) 26,000
Short term investment 15,000
---------
83,487
---------
Fixed Assets
Equipment at cost less
accumulated depreciation 20,606
---------
$ 104,093
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Account payable $ 65
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)) 7,418
---------
27,483
---------
Shareholders' Equity
Capital Stock (note 3)
Authorized:
100,000,000 common shares at $0.001 par value
Issued and fully paid
13,033,000 common shares at par value 13,033
Additional paid-in capital 593,617
Deferred compensation (375,834)
---------
230,816
Deficit, accumulated during the
development stage (154,206)
---------
76,610
---------
$ 104,093
=========
</TABLE>
Approved on Behalf of the Board
James Oste, Director
David Glass, Director
Robert J. Kinloch, Director
See Accompanying Notes and Independent Auditors' Report
2
<PAGE> 4
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Income
For the Six Month Period Ended June 30, 1999
(In U.S. Dollars)
<TABLE>
<CAPTION>
Six Months 27-Aug-98
Ended to
30-Jun-99 31-Dec-98
<S> <C> <C>
Administration Expenses
Accounting fees $ 750 $ 2,050
Amortization of deferred
compensation (note 8) 28,666 15,000
Consulting services1 3,500
Depreciation 1,906
Legal expenses 19,568 20,152
Management fees 23,000
Merchandise design 1,650
Office expenses 3,373 733
Transfer agent fees 1,114 1,000
Travel expenses 13,896 7,848
--------- ---------
Total administration expenses 107,423 46,783
--------- ---------
Net Loss for the Period $(107,423) $ (46,783)
========= =========
Net Loss Per Common Share
Basic $ (0.01) $ (0.01)
Diluted $ (0.01) $ (0.01)
Average Number of Common Shares
Outstanding Basic 9,741,337 5,092,851
Diluted 9,741,337 5,092,851
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Retained Earnings (Deficit)
For the Six Month Period Ended June 30, 1999
(In U.S. Dollars)
Six Months 27-Aug-98
Ended to
30-Jun-99 31-Dec-98
Balance, beginning of period $ (46,783) $
Net Loss for the Period (107,423) (46,783)
--------- ---------
Retained Earnings (Deficit),
end of period $(154,206) $ (46,783)
========= =========
</TABLE>
See Accompanying Notes and Independent Auditors' Report
3
<PAGE> 5
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Cash Flows
For the Six Month Period Ended June 30, 1999
(In U.S. Dollars)
<TABLE>
<CAPTION>
Six Months 27-Aug-98
Ended to
30-Jun-99 31-Dec-98
<S> <C> <C>
Cash Provided by (Used for)
Operating Activities
Loss for the period $ (107,423) $ (46,783)
Shares issued for consulting services 10,000
Changes in non-cash working capital items
Accounts payable (685) 750
Depreciation 1,906
Deferred compensation expenses 28,666 15,000
---------- ---------
(67,536) (31,033)
---------- ---------
Investing Activities
Loan receivable (26,000)
Short term investment (15,000)
Purchase of equipment (22,512)
---------- ---------
(63,512)
---------- ---------
Financing Activities
Capital stock subscribed for cash 63,000 114,150
Note payable to shareholder -- 20,000
Due to related parties 4,982 2,436
---------- ---------
67,982 136,586
---------- ---------
Increase (Decrease) in Cash
During the Period (63,066) 105,553
Cash, Beginning of the Period 105,553
---------- ---------
Cash, End of the Period $ 42,487 $ 105,553
========== =========
</TABLE>
See Accompanying Notes and Independent Auditors' Report
4
<PAGE> 6
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Shareholders' Equity
For the Six Month Period Ended June 30, 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 7(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
Deferred compensation
amortization
Net loss for the period
---------- -------- ---------
Balance, December 31, 1988 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
Jun. 15, 99 Shares subscribed
by stock option exercised $ 0.04 3,000,000 3,000 117,000
Deferred compensation
Deferred compensation amortized
Loss for the period
---------- -------- ---------
Balance, June 30, 1999 13,033,000 $ 13,033 $ 593,617
========== ======== =========
See Accompanying Notes and Independent Auditors' Report
5-a
<PAGE> 7
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Shareholders' Equity
For the Six Month Period Ended June 30, 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 7(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 (300,000) (300,000) (300,000)
Deferred compensation
amortization 15,000 15,000
Net loss for the period (46,783) (46,783)
---------- --------- --------- ---------
Balance, December 31, 1988 (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
Jun. 15, 99 Shares subscribed
by stock option exercised (117,000) 3,000 3,000
Deferred compensation (2,500) (2,500) (2,500)
Deferred compensation
amortized 28,666 28,666 28,666
Loss for the period (107,423) (107,423)
---------- --------- --------- ---------
Balance, June 30, 1999 $ (375,834) $ 230,816 $(154,206) $ 76,610
========== ========= ========= =========
</TABLE>
See Accompanying Notes and Independent Auditors' Report
5-b
<PAGE> 8
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
June 30, 1999
(in U.S. Dollars)
Note 1. BUSINESS OPERATIONS
a) 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.
b) 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.
c) 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.
f) Depreciation of Fixed Assets
Depreciation is recorded on a straight line basis over five years
which is the estimated useful life.
At cost $ 22,512
Less: accumulated depreciation 1,906
--------
$ 20,606
========
See Accompanying Notes and Independent Auditors' Report
6
<PAGE> 9
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
June 30, 1999
(in U.S. Dollars)
Note 3. CAPITAL STOCK
Cash consideration for common shares during the six months ended June
30, 1999 was $60,000 for the issuance of 1,500,000 common shares
subscribed by private placement and $3,000 for the subscription of
stock options exercised for 3,000,000 common shares These latter
3,000,000 common shares were not issued at June 30, 1999. 250,000
common 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 six month period ended June 30, 1999
total $23,000 representing $12,000 for James Oste and $11,000 for
Robert Kinloch.
c) Expenses paid by directors
Expenses incurred during the period 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 $22,512, for total costs of $44,140.
The balance unpaid as of June 30, 1999 is as follows:
James Oste, Chairman, President, Director $ 3,486
Robert Kinloch, Secretary, Director 3,932
-------
Balance unpaid at March 31, 1999 $ 7,418
=======
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 Auditors' Report.
7
<PAGE> 10
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
June 30, 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.
1) 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.
2) The effective date of the agreement is February 1, 1999 for
an initial period of five years.
3) Products purchased by PCS from MTS represented by equipment
and food and dry goods are payable on a sixty day basis.
4) MTS will provide product liability insurance in the amount
of $2,000,000 CDN.
5) 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.
6) 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.
7) If MTS intends to sell all or any part of its business PCS
shall have a first right of refusal.
8) The agreement is not assignable as security or otherwise by
either party without the prior consent of the other.
9) James Oste is President, Director and shareholder of Mister
Tube Steak Canada Inc.
See Accompanying Notes and Independent Auditors' Report
8
<PAGE> 11
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
June 30, 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:
a) James Oste to be employed as President, Chief Executive Officer
and Director of the Company, commencing at $24,000 per year.
b) Robert Kinloch, to be employed as Executive Vice-President, Chief
Operating Officer, and Director of the Company commencing at
$22,000 per year.
c) 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
See Accompanying Notes and Independent Auditors' Report
9
<PAGE> 12
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
June 30, 1999
(in U.S. Dollars)
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:
Compensation
Expense
--------------
Total Deferred Dec 31 June 30
Compensation Portion 1998 1999
------------ -------- ----- -----
a) 2,00,000 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 $ 85,500 $ 5,000 $ 9,500
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 $200,000 200,000 171,000 10,000 19,000
c) 250,000 common shares
issued for consulting
services to David Glass
at a price of $0.50 per
share 2,500 2,334 -- 166
d) 3,000,000 common
shares exercised on
stock options 117,000 117,000 -- -
--------- --------- -------- --------
$ 419,500 $ 375,834 $ 15,000 $ 28,666
========= ========= ======== ========
Note 9 PENSION AND EMPLOYMENT LIABILITIES
The Company does not have any liabilities as at June 30, 1999 for
pension, post-employment benefits or postretirement benefits. The
Company does not have a pension plan.
See Accompanying Notes and Independent Auditors' Report
10
<PAGE> 13
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Financial Statements
June 30, 1999
(in U.S. Dollars)
Note 10 SUBSEQUENT EVENTS
a) Investor Relations Agreement
By agreement dated August 8, 1999 the Company engaged Daniel La
Pointe of White Rock, Canada, as an investor relations consultant
for a period of one month beginning August 11, 1999 and ending
September 10, 1999, for the amount of $10,000.
b) Loan Receivable
The loan of $26,000 receivable from James Oste, President and a
Director, was repaid to the Company on August 9, 1999.
See Accompanying Notes and Independent Auditors' Report
11
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-QSB contains certain forward-
looking statements (within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934)
regarding the Company and its business, financial condition, results of
operations and prospects. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" and similar
expressions or variations of such words are intended to identify forward-
looking statements in this Report. Additionally, statements concerning
future matters such as the development of new services, technology
enhancements, purchase of equipment, credit arrangements, possible
changes in legislation and other statements regarding matters that are
not historical are forward-looking statements.
Although forward-looking statements in this Report reflect the good
faith judgment of the Company's management, such statements can only be
based on facts and factors currently known by the Company. Consequently,
forward-looking statements are inherently subject to risks and
uncertainties, and actual results and outcomes may differ materially from
results and outcomes discussed in the forward-looking statements. Factors
that could cause or contribute to such differences in results and
outcomes include without limitation those discussed below as well as
those discussed elsewhere in this Report. Readers are urged to carefully
review and consider the various disclosures made by the Company in this
Report, which attempt to advise interested parties of the risks and
factors that may affect the Company's business, financial condition,
results of operations and prospects.
The Company continues to work on plans to commence operations in
California and Washington. Discussions are ongoing with key suppliers to
that market. Any commencement of operations will not occur before the
fourth quarter of 1999. The Company anticipates that a market research
study to further refine the business model may be required. Discussions
have taken place with professionals in that field and it is hoped that
process can begin it is hoped that such process can begin in the third
quarter.
The Company has been made aware of other opportunities in the
consumer products field since its Form 10-SB became effective by
operation of law. While informal due diligence is taking place on
several fronts no contractual developments are imminent however the
Company remains open to all situations in its area of expertise.
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 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.
<PAGE> 15
The Company has purchased several street carts in anticipation of
future operations
Results of Operations (August 27,1998) through June 30, 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.
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 23rd day of August, 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 finanical information extracted from the
Statement of Financial Condition at June 30, 1999 (Audited) and the Statement
of Income for the six months June 30, 1999 (Audited) and is unqualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 42,487
<SECURITIES> 15,000
<RECEIVABLES> 26,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 83,487
<PP&E> 22,512
<DEPRECIATION> (1,906)
<TOTAL-ASSETS> 104,093
<CURRENT-LIABILITIES> 27,483
<BONDS> 0
0
0
<COMMON> 230,816
<OTHER-SE> (154,206)
<TOTAL-LIABILITY-AND-EQUITY> 104,093
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (107,423)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (107,423)
<INCOME-TAX> 0
<INCOME-CONTINUING> (107,423)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107,423)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
