<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending September 30, 2000.
[ ] 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 [ x ] No [ x ].
The number of common shares without par value outstanding on September
30, 2000 was 17,676,250 shares.
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<PAGE> 2
MOEN AND COMPANY CHARTERED ACCOUNTANTS
PO Box 10129
1400 IBM Tower
701 West Georgia Street
Vancouver, BC V7Y 1C6
INDEPENDENT ACCOUNTANTS' REPORT
To the Directors and Shareholders of
Pacific Cart Services Ltd. (A Nevada Corporation)
(A Development Stage Company)
We have reviewed the accompanying Balance Sheets of Pacific Cart
Services Ltd (A Development Stage Company) as at September 30, 2000 and
September 30, 1999, and the Statements of Income, Retained Earnings
(Deficit), Cash Flows and Shareholders' Equity for the nine month
periods then ended. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements for them
to be in conformity with generally accepted accounting principles.
Moen and Company
Chartered Accountants
Vancouver, British Columbia, Canada
November 1, 2000
F-1
<PAGE>
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Balance Sheet
September 30, 2000
(In U.S. Dollars)
(Unaudited)
(With Comparative Figures at September 30, 1999)
ASSETS
Current Assets 2000 1999
Cash $ 28,864 $ 25,843
Loans receivable (Note 10) 108,301 --
Advances for expenses 7,060 4,637
----------- ------------
144,225 30,480
Long-Term Investment
Deposit on purchase of assets
from Mr. Tube Steak Canada Inc. 598,500 --
Fixed Assets (Note 2(e))
Equipment at cost less accumulated
depreciation 15,998 21,470
----------- ------------
$ 758,723 $ 51,950
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 10,333 $ --
Management fees payable (Note 3(e)) 162,482 --
Notes payable (Note 12) 196,392 20,000
Due to Mr. Tube Steak Canada Inc. 2,005 --
----------- ------------
371,212 20,000
----------- ------------
Shareholders' Equity
Capital Stock (Note 14)
Authorized:
100,000,000 common shares at $0.001 par value
Issued and fully paid
17,676,250 common shares at par value
(1999 - 13,033,000 common shares) 17,876 13,033
Additional paid-in capital 1,794,525 593,617
Deferred compensation (481,169) (361,501)
----------- ------------
1,331,232 245,149
Deficit, accumulated during the
development stage (943,721) (213,199)
----------- ------------
387,511 31,950
----------- ------------
$ 758,723 $ 51,950
=========== ============
See Accompanying Notes and Independent Accountants' Report
F-2
<PAGE> 4
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Income
(In U.S. Dollars)
(Unaudited)
Cumulative From
Date of Inception Nine Months Ended Three Months Ended
on August 27, 1998 September 30, September 30,
to Sep 30, 2000 2000 1999 2000 1999
Revenue
Interest income 4,637 4,637 -- 4,637 --
---------- ---------- ---------- ---------- -----------
Administration Expenses
Accounting fees $ 11,090 $ 5,690 $ 2,250 $ 1,005 $ 1,500
Acquisition
administration fees 5,000 -- 5,000 -- 5,000
Amortization of deferred
compensation (Note 7) 115,331 42,999 42,999 14,333 14,333
Consulting services -
net 427,544 399,064 13,500 (197,814) --
Depreciation 8,664 4,104 3,192 1,368 1,286
Interest expenses 6,868 6,868 -- 6,868 --
Investor relations 11,491 1,491 10,000 -- 10,000
Legal expenses 62,218 17,191 24,728 10,717 5,160
Management fees 234,000 187,500 34,500 62,500 11,500
Merchandise design 1,650 -- 1,650 --
Office expenses 11,356 4,797 4,391 36 1,018
Transfer agent fees 4,780 2,084 1,479 1,281 365
Travel expenses 48,366 10,103 22,727 -- 8,831
---------- ---------- ---------- ---------- -----------
Total administration
expenses 948,358 681,891 166,416 (99,706) 58,993
---------- ---------- ---------- ---------- -----------
Net Profit (Loss) for
the Period $ (943,721) $ (677,254) $ (166,416) 104,343 (58,993)
========== ========== ========== ========== ===========
Net Profit (Loss) Per Common Share
Basic $ (0.05) $ (0.01) 0.02 (0.01)
Diluted $ (0.05) $ (0.01) 0.02 (0.01)
Average Number of Common Shares Outstanding
Basic 14,669,583 12,180,777 14,262,916 10,838,558
Diluted 14,669,583 12,180,777 14,262,916 10,838,558
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Retained Earnings (Deficit)
(In U.S. Dollars)
(Unaudited)
Cumulative From
Date of Inception Nine Months Ended Three Months Ended
on August 27, 1998 September 30, September 30,
to Sep 30, 2000 2000 1999 2000 1999
Balance, beginning
of period $ -- $ (266,467) $ (46,783) $ (1,048,064) $ (154,206)
Net Profit (Loss) for
the Period (943,721) (677,254) (166,416) 104,343 (58,993)
----------- ---------- --------- ------------ ----------
Retained Earnings
(Deficit) $ (943,721) $ (943,721) $(213,199) $ (943,721) $ (213,199)
=========== ========== ========= ============ ==========
See Accompanying Notes and Independent Accountants' Report
<PAGE> 5
PACIFIC CART SERVICES LTD.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Cash Flows
(In U.S. Dollars)
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
Cash Provided by (Used for)
Operating Activities
Net Profit (Loss) for the period $ (677,254) $ (166,416) $ 104,343 $ (58,993)
Shares issued for consulting
services - net 410,000 10,000 (200,000) --
Shares issued on deposit on purchase of
assets of Mr. Tube Steak Canada Inc. 598,500 -- -- --
Changes in non-cash working capital items
Advances for expenses (222) (4,637) (1,025) (4,637)
Accounts payable 10,185 (750) 9,731 (65)
Unpaid management fees 162,482 -- 56,152 --
Loan receivable (108,301) -- (4,637) 26,000
Depreciation 4,104 3,192 1,368 1,286
Deferred compensation expenses (134,001) 42,999 (162,667) 14,333
----------- ---------- --------- --------
265,493 (115,612) (196,735) (22,076)
----------- ---------- --------- --------
Investing Activities
Short term investment -- -- -- 15,000
Deposit on purchase of assets
from Mr. Tube Steak Canada Inc. (598,500) -- -- --
Purchase of equipment -- (24,662) -- (2,150)
----------- ---------- --------- --------
(598,500) (24,662) -- 12,850
----------- ---------- --------- --------
Financing Activities
Capital stock subscribed for cash 180,000 63,000 180,000 --
Notes payable 135,852 -- 28,338 --
Due to Mr. Tube Steak Canada Inc. 2,005 -- 2,005 --
Due to related parties -- (2,436) -- (7,418)
----------- ---------- --------- --------
317,857 60,564 210,343 (7,418)
----------- ---------- --------- --------
Increase (Decrease) in Cash During
the Period (15,150) (79,710) 13,608 (16,644)
Cash, Beginning of the Period 44,014 105,553 15,256 42,487
----------- ---------- --------- --------
Cash, End of the Period $ 28,864 $ 25,843 $ 28,864 $ 25,843
=========== ========== ========= ========
See Accompanying Notes and Independent Accountants' Report
F-4
<PAGE> 6
PACIFIC CART SERVICES LTD
(A Nevada Corporation)
(A Development Stage Company)
Statement of Shareholders' Equity
For the Period From Date of Inception on August 27, 1998 to September 30, 2000
(in U.S. Dollars)
(Unaudited)
Price Number of Additional
Per Common Par Paid-in
Share Shares Value Capital
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, 98Share 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, 99Shares subscribed by private
placement for cash $ 0.04 1,500,000 1,500 58,500
Jun. 15, 99Shares subscribed by stock option
exercised - shares to be issued
$ 0.04 *3,000,000 3,000 117,000
Deferred compensation (2,500)
Dec 3, 99Shares subscribed by private
placement for cash $ 0.65 25,250 25 17,226
Deferred compensation amortization
Net loss for year ended
December 31, 1999
------ ---------- -------- ----------
Balance, December 31,1999 13,058,250 13,058 610,843
Net loss for six months ended
June 30, 2000 ------ ---------- -------- ----------
Deferred compensation amortization
13,058,250 13,058 610,843
Deferred compensation amortization
January 2000 shares for assets of
Mr. Tube Steak Canada Inc. $ 0.75 798,000 798 597,702
March 8, 2000 shares issued for
consulting fees $ 0.50 1,220,000 1,220 608,780
Cancellation of shares issued for
consulting fees (400,000) (200) (199,800)
Net loss for three months ended
September 30, 2000
Sep 30, 00Shares subscribed by stock option
exercised - shares to be issued $ 0.06 *3,000,000 3,000 177,000
------ ---------- -------- ----------
Balance, September 30, 2000 17,676,250 17,876 1,794,525
====== ========== ======== ==========
* subsequently issued
See Accompanying Notes and Independent Accountants' Report
F-5a
<PAGE> 7
PACIFIC CART SERVICES LTD
(A Nevada Corporation)
(A Development Stage Company)
Statement of Shareholders' Equity
For the Period From Date of Inception on August 27, 1998 to September 30, 2000
(in U.S. Dollars)
(Unaudited)
Total Retained Total
Deferred Capital Earnings Shareholders'
Compensation Stock (Deficit) Equity
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 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, 99Shares subscribed by Director
for consulting services 12,500 12,500
Feb. 3, 99Shares subscribed by private
placement for cash 60,000 60,000
Jun. 15, 99Shares subscribed by stock option
exercised - shares to be issued (117,000) 3,000 3,000
Deferred compensation (2,500) (2,500) (2,500)
Dec 3, 99Shares subscribed by private
placement for cash 17,251 17,251
Deferred compensation
amortization 57,332 57,332 57,332
Net loss for year ended
December 31, 1999 (219,684) (219,684)
-------- ---------- ---------- ---------
Balance, December 31, 1999 (347,168) 276,733 (266,467) 10,266
Net loss for six months ended
June 30, 2000 (781,597) (781,597)
Deferred compensation amortization 28,666 28,666 28,666
-------- ---------- ---------- ----------
(318,502) 305,399 (1,048,064) (742,665)
Deferred compensation
amortization 14,333 14,333 14,333
January 2000 shares for assets of
Mr. Tube Steak Canada Inc. 598,500 598,500
March 8, 2000 shares issued
for consulting fees 610,000 610,000
Cancellation of shares issued for
consulting fees (200,000) (200,000)
Net loss for three months ended
September 30, 2000 104,343 104,343
Sep 30, 00Shares subscribed by stock option
exercised - shares to be issued (177,000) 3,000 3,000
-------- ---------- --------- ----------
Balance, September 30, 2000 (481,169) 1,331,232 (943,721) 387,511
======== ========== ========= ==========
* subsequently issued
See Accompanying Notes and Independent Accountants' Report
<PAGE> 8
PACIFIC CART SERVICES, LTD.
(A NEVADA STATE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(in U.S. Dollars)
Note 1. BUSINESS OPERATIONS
a) The Company date of incorporation and inception was 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.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Administration Costs
Administration costs are written off to operations when
incurred.
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 (including
shares subscribed but unissued) during the period.
F-5
<PAGE> 9
PACIFIC CART SERVICES, LTD.
(A NEVADA STATE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(in U.S. Dollars)
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Con't.)
e) Fixed Assets / Depreciation
The company depreciates its equipment at 20% per annum on a
straight-line basis.
September 30,
2000 1999
Cost $ 24,662 $ 24,622
Accumulated Depreciation 8,664 3,192
--------- ---------
$ 15,998 $ 21,470
========= =========
f) Consolidation
The Company has a Canadian wholly-owned subsidiary, Gretna
Capital Corporation ("GRETNA"), which is inactive and has no
assets. The intention is to utilize Gretna for closing of the
acquisition of the business of Mister Tube Steak Canada Inc.
When Gretna is activated the Company will prepare and disclose
consolidated financial statements.
Note 3. RELATED PARTY TRANSACTIONS:
a) Management fees
Management fees of $187,500 have been incurred by the Company in
2000 (1999 - $34,500).
b) Expenses paid by directors
Expenses incurred by directors on behalf of the Company
comprised of travel and related costs of $10,103.
c) Agreement with Mister Tube Steak Canada Inc. (see Note 5) James
Oste is President, Director and a shareholder of Mister Tube
Steak Canada Inc.
d) Note payable to shareholder, James Oste and related company (see
Note 10(e)). There is a note payable of $33,553 to James Oste
with a due date of March 15, 2001 and a note for $35,880 payable
to Karenco Foods which is owned by James Oste and his wife.
F-6
<PAGE> 10
PACIFIC CART SERVICES, LTD.
(A NEVADA STATE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(in U.S. Dollars)
Note 3. RELATED PARTY TRANSACTIONS:(Con't.)
e) Effective January 1, 2000 remuneration is $150,000 per year for
Robert Kinloch and $100,000 per year for James Oste. Management
fees unpaid of $162,482 at September 30, 2000 are payable to the
following persons:
Robert Kinloch $ 88,982
James Oste 73,500
----------------
$ 162,482
================
Note 4 INCOME TAXES
The Company has losses that total $931,721 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 at September 30, 2000 as it is
reduced by a valuation allowance.
Note 5 AGREEMENTS WITH MISTER TUBE STEAK CANADA INC.
a) 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.
The effective date of the agreement is February 1, 1999 for an
initial period of five years for the United States, and with
respect to all other countries five years from February 1, 1999
or such date as may be agreed to by the parties with respect to
any additional country. Products purchased by PCS from MTS
represented by equipment and food and dry goods are payable on a
sixty day basis.
MTS will provide product liability insurance in the amount of
$2,000,000 CDN.
F-7
<PAGE> 11
PACIFIC CART SERVICES, LTD.
(A NEVADA STATE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(in U.S. Dollars)
Note 5. AGREEMENT WITH MISTER TUBE STEAK CANADA INC. (Con't.)
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.
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.
If MTS intends to sell all or any part of its business PCS shall
have a first right of refusal.
The agreement is not assignable as security or otherwise by
either party without the prior consent of the other.
James Oste is President, Director and shareholder of Mister Tube
Steak Canada Inc.
b) Pursuant to a letter of intent and to the AGM of Mister Tube
Steak Canada Inc. (MTS) the company has drawn up a formal
agreement of Purchase and Sale between it's inactive wholly
owned subsidiary Gretna Capital Corporation ("GRETNA") and MTS.
In January 2000 the company issued 798,000 shares at a price of
$0.75 per share for consideration of $598,500 with the shares to
be held in trust by Bryan and Co. pending closing of this
transaction. If the transaction is completed then Gretna will
be activated.
F-8
<PAGE> 12
PACIFIC CART SERVICES, LTD.
(A NEVADA STATE COMPANY)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(in U.S. Dollars)
Note 6 EMPLOYMENT AGREEMENT
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, and
increased by resolution to $100,000 per year effective January
1, 2000.
ii) Robert Kinloch, to be employed as Executive Vice-President,
Chief Operating Officer, and Director of the Company commencing
at $22,000 per year and increased by resolution to $150,000 per
year effective January 1, 2000.
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 7 COMPENSATION/DEFERRED COMPENSATION
Shares have been issued that give rise to compensation
expense. This compensation except for (d) is amortized
over a five year period, with three months thereof expensed
as of March 31, 2000. Details of compensation expense and
deferred compensation are as follows:
F-9
<PAGE> 13
PACIFIC CART SERVICES, LTD.
(A NEVADA STATE CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2000
(in U.S. Dollars)
Compensation
Expense
Deferred Nine Months
Total Portion Ended Sept 30
Compensation 9/30/00 2000 1999
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 $ 62,500 $ 13,500 $ 13,500
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 $200,000 200,000 123,500 28,500 28,500
c) 250,000 common shares issued for
consulting services to David Glass
at a price of $0.05 per share 2,500 1,169 999 999
d) 3,000,000 common shares exercised
on stock options (Note 13) 117,000 117,000 -- --
e) 3,000,000 common shares exercised
on stock options at a cash price of
$0.001 per share giving rise to
compensation of $0.059 per share or
$177,000 177,000 177,000 -- --
----------- --------- ---------- -----------
$ 596,500 $ 481,169 $ 42,999 $ 42,999
=========== ========= ========== ===========
Note 8 PENSION AND EMPLOYMENT LIABILITIES
The Company does not have any liabilities as at September 30, 2000
for pension, post-employment benefits or postretirement benefits.
The Company does not have a pension plan.
F-10
<PAGE> 14
PACIFIC CART SERVICES, LTD.
(A NEVADA STATE CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2000
(in U.S. Dollars)
Note 9 FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, loan receivable,
advances for expenses, accounts payable, management fees payable and
notes payable. It is management's opinion that the Company is not
exposed to significant interest, currency or credit risks arising
from these financial instruments. The fair value of these financial
statements approximates their carrying values.
Note 10 UNITED KENO HILL MINES LTD.
In February 2000, the company entered into a formal agreement with
United Keno Hill Mines Ltd. (UKH) to provide that company with
$150,000 CDN, over a six-week period ended March 30, 2000. $117,500
CDN ($81,055 US) had been advanced by March 31, 2000 and $32,500 CDN
(22,599 US) for a total of $103,664 US. The agreement provides for
conversion of the loan to UKH stock at $0.09 per share; Secondly,
that PCS has the right to provide additional financing up to
$4,000,000 CDN, such financing, if provided, in whole or in part,
would also be convertible into UKH treasury stock at $0.09 per share
and if fully exercised would 44,444,000 shares of UKH or
approximately 50% of the outstanding stock of that company.
By September 30, 2000, the Company has accrued interest of $4,637.42
CDN on the loan of $150,000 CDN to United Keno Hill Mines Ltd.
Note 11 CONSULTING AGREEMENT - ALAN BERKUN
The company entered into a consulting agreement with Alan Berkun of
New York City for the provision of services relating to Mergers and
Acquisitions. Pursuant to this agreement, the company issued
1,220,000 treasury shares at a price of $0.50 per share. The company
filed form S-8 for the stock and issued a letter of authorization to
its transfer agent to issue the shares. The amount of $610,000 is
charged as consulting fees less a recovery of $25,000 for net costs
of $585,000, less 400,000 shares returned to the Company at $0.50
per share, or $200,000, so that costs relating to this agreement
total $385,000 for the nine month period ended September 30, 2000.
F-11
<PAGE> 15
PACIFIC CART SERVICES, LTD.
(A NEVADA STATE CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2000
(in U.S. Dollars)
Note 12 NOTES PAYABLE
The company has the following promissory notes payable as at
September 30, 2000 with interest at 9% per annum.
Due Date
Mallard Construction $ 43,488 Payable on demand
Mark Mcmunn 14,000 June 10, 2000
Terry Yates 14,000 June 10, 2000
Myles Haverluk 14,000 June 10, 2000
Mr. Tube Steak
Canada Inc. 24,633 June 19, 2000
Karenco Foods 35,880 March 15,2001
James Oste 33,553 March 15,2001
Rodney D Mancini 9,970 July 31, 2000
--------
189,524
Accrued Interest 6,868
--------
196,392
========
Interest of $6,868.28 is accrued on the notes payable and interest
will be paid on the revised due dates. The note holders have agreed
to extend the due dates and the extensions are yet to be formalized.
(see Note 15(b))
Note 13 BRIDGE FINANCING
Basic International Development Corporation of New York represents
that it acts as the American agent for a European based pension fund.
Having secured the Keno agreement, Note 10 above, PCS management
entered into a joint venture agreement with Basic International
Development Corporation (Basic), whereby Basic would provide take-out
financing guarantees if PCS could provide bridge financing to United
Keno for working capital and preproduction costs. At the end of the
second quarter PCS was still negotiating with interested parties to
secure the necessary bridge loan.
F-12
<PAGE> 16
PACIFIC CART SERVICES, LTD.
(A NEVADA STATE CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2000
(in U.S. Dollars)
Note 14 CAPITAL STOCK
a) Reconciliation to shares issued and outstanding as provided by
transfer agent for the company, American Securities Transfer &
Trust Inc., which changed name to Computershare Trust Co. is as
follows:
Shares issued and outstanding per
transfer agent 11,676,250 common shares
Subscribed by stock option exercised
on June 15, 1999, but shares not yet
issued 3,000,000 common shares
Subscribed by stock option exercised
on September 30, 2000, but shares not
yet issued 3,000,000 common shares
----------
Total shares subscribed and paid up as at
September 30, 2000 17,676,250 common shares
==========
b) On July 14, 2000, 400,000 shares were returned to the treasury
from Alan Berkun that were initially issued to him at a price of
$0.50 per share as part of the consideration issued to him
relating to a consulting agreement, and the amount of $200,000
has been credited to Consulting Service Expenses in the current
quarter ended September 30, 2000.
Note 15 SUBSEQUENT EVENTS
The Company is negotiating with note holders that have agreed to
extend the due dates.
Investment Banking Advisory Services Agreement
By agreement dated September 29, 2000, the Company engaged CPM Group
as investment banking advisors, for the period from September 29,
2000, to October 20, 2000, for 10,000 shares of the Company (not
issued as at September 30, 2000) and 5% of the gross dollar proceeds
to be raised in investments that CPM Group may bring to the Company.
No costs have been recorded applicable to this agreement to September
30, 2000.
F-13
<PAGE> 17
PACIFIC CART SERVICES, LTD.
(A NEVADA STATE CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2000
(in U.S. Dollars)
Note 16 STOCK OPTION PLANS
The Company has the following stock option plans:
a) Qualified Plan
The plan is for 8,000,000 shares.
The outstanding option granted to September 30, 2000 are as
follows:
Final
Number Exercise Exercise
Optionee of Share Price Date
Robert Kinloch 3,000,000 $ 0.07 December 31, 2003
James Oste 500,000 $ 0.07 December 31, 2003
---------
3,500,000
=========
b) Non-Qualified Plan
The plan is for 4,000,000 shares.
There are no outstanding options granted for this plan as at
September 30, 2000.
F-14
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.
GENERAL
Marginal Revenue was recorded in the company for the 9 month
period ended September 30, 2000.
The focus of the last two quarters has been on our investment in
United Keno Hill Mines Ltd. (UKH). Management of Pacific Cart Services
Ltd. (PCS) was instrumental in allowing UKH to seek protection from its
creditors in February 2000 by providing debtor in possession financing.
The $103,000.00 convertible loan offered to UKH vested PCS with the
option to purchase up to 50% of the common equity of United Keno, which
is listed on the Toronto Stock Exchange. That option may have expired
on August 18th 2000.
United Keno Hill Mines Ltd. owns a 60 square mile mining camp,
containing 65 known deposits, which have produced 215 million ounces of
silver since 1914. At current prices mineable reserves would be
projected to generate US$67,000,000 in Net Smelter Return based on a
33-month production schedule.
At present, a management group from UKH has filed a plan of
arrangement with the Ontario Superior Court offering $6,500,000.00 to
the various classes of creditors in full and final settlement of its
outstanding debts. Should this plan be implemented, PCS would be in a
position to convert its loan in whole or in part or accept the return
of its loan with accrued interest. While we have sought an equity
interest for some time in UKH, the potential dilution caused by the
convertible debt instrument set out in the plan of arrangement may
force a re-examination of that desire.
As this is the third attempt by certain Keno managers to provide
organizational financing and given the tenuous asset class upon which
the financing depends, PCS has formed several alliances in the event
their gambit fails. While we cannot be certain that UKH will not end
up in bankruptcy, we intend to play a significant role should the
opportunity present it self for increased investment.
Notwithstanding near term weakness, management believes that silver
remains one of the best performing metals on a fundamental price basis
with a compelling long term supply/demand profile and with good
intermediate prospects should the U.S. dollar weaken as expected.
Once the scope of our investment in UKH is quantified, which
should occur in the 4th quarter, PCS will set out its broader strategy
of conglomerating investments in four or five areas set up to create a
counter point between cash flow and high yield investments, like United
Keno. This new initiative will probably engender a corporate name
change to reflect the company's new vision. We hope and anticipate
that present investments will provide the base for this plan.
<PAGE> 19
Liquidity and Capital Resources
The company has been able to raise funds through debt instruments,
which have provided a source of working capital. We would prefer to
balance this debt with an equity offering or private placement but that
largely depends on the success of existing investments. Monetizing the
company's convertible loan or commencement of revenue generation
through the closure of existing contracts is a potential source of
funding in the near term.
Management will continue with its efforts to attract stable
affordable capital to the corporation. Discussions are ongoing with
interested parties but market conditions remain uncertain leading to a
difficult financing environment for development stage companies. At
present we are confident we have sufficient resources till the end of
the fiscal year. Thereafter we must raise new capital or contemplate
the curtailment of cessation of operations.
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 15th day of November, 2000.
PACIFIC CART SERVICES LTD.
By: /s/ Robert Kinloch
Robert Kinloch, Secretary and member of
the Board of Directors
