<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
- --------------------------------------------------------------------------------
For the Quarter Ended Commission File Number: 0-19471
June 30, 1996
PAN ENVIRONMENTAL CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 91-1632888
- -------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
19239 Aurora Avenue North
Shoreline, WA 98133-3930
------------------------
(Address of principal executive offices)
(Zip Code)
(206) 546-9660
--------------
(Registrant's telephone number, including area code)
14424 SE 78th Way, Renton, WA 98059 (206) 623-8544
--------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) has 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 [ ]
Number of common shares outstanding as of the close of the period covered by
this report: 2,848,163 shares of common stock.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENT
PAN ENVIRONMENTAL CORPORATION
CONDENSED BALANCE SHEET
(IN DOLLARS)
ASSETS
<TABLE>
<CAPTION>
As of As of
June 30 December 31
1996 1995
----------- -----------
<S> <C> <C>
OTHER ASSETS
Settlement agreement - principals 360,000 -0-
Escrowed shares for debt, Millard account 225,000 -0-
----------- -----------
Total other assets 585,000 -0-
----------- -----------
TOTAL ASSETS $ 585,000 $ -0-
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 449,751 $ 505,752
Accrued wages -0- 58,000
Taxes payable 13,104 10,092
Judgment payable 200,909 200,909
Accrued judgment interest 47,451 -0-
Loans from officer -0- 84,218
Notes payable -0- 17,800
----------- -----------
Total current liabilities 711,215 876,771
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
1,126,809 issued and outstanding
at December 31, 1995, and
2,848,163 issued and outstanding
at March 31, 1996 2,848 1,127
Additional paid-in capital 1,343,976 485,019
Accumulated deficit (1,473,039) (1,362,917)
Total stockholders' equity (126,215) (876,771)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 585,000 $ -0-
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
Page 2
<PAGE> 3
PAN ENVIRONMENTAL CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
-------------------------- ---------------------------
June 30 June 30 June 30 June 30
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales and Service Revenue $ -0- $ -0- -0- -0-
----------- ----------- ----------- -----------
Costs and Expenses
Materials, supplies and
operating expenses -0- 4,282 59,659 74,882
Interest and other debt
expense -0- -0- 47,451 (6,959)
Taxes other than income taxes -0- -0- 3,012 -0-
----------- ----------- ----------- -----------
Total Costs and Expenses $ -0- $ 4,282 $ 110,122 $ 67,923
----------- ----------- ----------- -----------
Other Expense $ -0- $ (244,517) $ -0- $ (769,989)
----------- ----------- ----------- -----------
Net Income (Loss) $ -0- $ (248,799) $ (110,122) $ (837,912)
=========== =========== =========== ===========
Net Income (Loss) per Common
Share (1) $ (0.00) $ (0.23) $ (0.04) $ (0.78)
=========== =========== =========== ===========
Dividends per Common Share $ -0- $ -0- $ -0- $ -0-
=========== =========== =========== ===========
Notes:
(1) Based on net income,
divided by average
number of common shares
outstanding of 2,848,163 1,076,809 2,848,163 1,076,809
</TABLE>
The accompanying notes are an integral part of these
financial statements.
Page 3
<PAGE> 4
PAN ENVIRONMENTAL CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the six months ended
-----------------------------
June 30 June 30
1996 1995
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ (110,122) $ (837,912)
Adjustment to reconcile to net cash
operating activities:
Depreciation and amortization -0- (499,093)
(Increase) decrease in working capital, net (63,538) (375,998)
----------- -----------
Net Cash From Operating Activities (173,660) (1,713,003)
Cash Flow From Investment Activities:
Acquisition of cash, notes, contracts and
other assets 585,000 17,797
Purchases of plant and equipment -0- 1,027,412
Divestiture of subsidiaries -0- 809,322
----------- -----------
Net Cash Flow From Investing Activities 585,000 1,854,531
Cash Flow From financing Activities:
(Payment of) proceeds from debt (102,018) (331,256)
Proceeds from issuance of common stock 1,721 (186)
Capital contributions from shareholders 858,957 -0-
Proceeds from judgment payable -0- 200,909
----------- -----------
Net Cash Used in Financing Activities 758,660 (130,533)
Net (decrease) increase in cash and
cash equivalents -0- 10,995
Cash and Cash Equivalents:
Beginning of period -0- (10,995)
----------- -----------
End of Period -0- $ -0-
----------- -----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
Page 4
<PAGE> 5
PAN ENVIRONMENTAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENT
SIX MONTHS PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1995
NOTE 1 - ORGANIZATION AND BASIS OF ACCOUNTING
The Company was organized as Jilly Bear & Company, Inc., under the laws
of the State of Delaware on February 13, 1986, for the primary purpose
of merchandising a line of plush soft sculpture teddy bears, penguins,
ducks and related motif items. The Company closed its retail store,
liquidated its remaining inventory and ceased operations in March, 1988.
On June 30, 1991, Nutec Transmission, Ltd., and Jilly Bear merged into a
resulting Texas corporation. Aster Development Enterprises, Ltd., was
organized as a private Texas corporation on August 6, 1992. Following
the rescission of the merger between Nutec and Jilly Bear on June 1,
1992, Aster Development became the successor of Jilly Bear and the
vehicle for the continued corporate existence in Delaware of the former
Jilly Bear. Aster Development had been inactive from June 1, 1992, until
March, 1993.
On March 4, 1993, the name of the Company was changed from Aster
Development Enterprises, Ltd., to PAN Environmental Corporation and the
Company acquired all of the outstanding common stock of Northwest
Specialities, Inc. ("Northwest"), a Minnesota corporation; Advantage
Parking Lot Service, Inc. ("Advantage"), a California corporation; and
MRR Construction Services, Inc. ("MRR"), a California corporation. The
Company issued a total of 2,650,000 shares of common stock for the
acquisition of these three corporations in a reorganization accounted
for as a reverse acquisition, whereby the shareholders of a privately
owned corporation or corporations obtained controlling ownership
interest in a previously inactive or dormant public "shell" corporation.
On October 11, 1993, the directors of the Company and its three
affiliated companies agreed to reduce by 50% the number of shares of
common stock which was originally issued for the acquisition. The net
result of the shares of common stock issued in the business combination
was 1,325,000 shares. The Company changed its fiscal year from January
31st to December 31st and reincorporated in the State of Delaware.
The Company was in the business of acquiring and supervising the
operations of businesses engaged in the reclamation, remediation and
recycling of industrial waste materials and by-products. The Company
provided its affiliated operating companies with financing and
management services including accounting, planning, budgeting, computer
information systems, human resources management, contract bonding and
liability insurance. The Company also provided technical environmental
management support to its operating companies. The Company's principal
offices are in Shoreline, Washington.
Page 5
<PAGE> 6
Advantage (incorporated in the State of California on February 19, 1986)
was engaged in the manufacturing and sale of asphalt-based slurry
sealants. Advantage applied the slurry sealants to asphalt surfaces,
primarily parking lots. Advantage also had a tank cleaning operation
which decontaminated portable commercial lubricant tanks. The
slurry-sealer manufacturing plant is located in Fontana, California.
Advantage had ten employees.
Northwest (incorporated in 1993) reclaimed timber (poles, ties, etc.)
and commodity metals, primarily from obsolete railroad
telecommunications and signaling systems. Northwest operated in the
Midwest and Rocky Mountain regions of the United States, and worked on
active and inactive railroad right-of-ways. The poles, other wood
products, and wiring were then sorted, graded and processed for resale.
MRR (incorporated in 1992, but inactive until 1993) performed
environmental construction management and related construction
activities, as well as soil remediation, in Southern California. MRR
employed a president and a project manager/superintendent. The majority
of the contract work was performed by subcontractors.
The Company divested itself of its three subsidiaries, Advantage,
Northwest, and MRR, effective January 2, 1995.
In November and December 1995, the Company attempted to acquire oil and
gas properties in a business combination agreement with Maximum
Resources, Inc. ("Maximum"), a Vancouver Stock Exchange company, and two
other companies, NP Energy Corporation ("NP"), a U. S. over the counter
electronic bulletin board (OTCBB) company, and Polaris Equities, Inc.
("Polaris"), a U. S. private company.
The form of business combination agreement would have taken the
following form: each of the above three oil and gas companies would set
up a U. S. subsidiary into which they would vend in selected oil and gas
properties. These three subsidiaries would then be acquired in a reverse
takeover transaction wherein the Company would issue 4,000,000 new
restricted Rule 144 common shares each to Maximum, NP and Polaris in
exchange for acquiring one hundred percent (100%) of the issued and
outstanding common shares of their three U. S. subsidiaries.
Since the Company did not have the necessary funds to do its accounting,
audits, 10- Q's, 10-K's and legal work, Maximum, NP and Polaris agreed
to advance the necessary funds to complete the work. In March and April
1996, Maximum, NP and Polaris defaulted on their obligations to advance
the necessary funds and the proposed business combination agreements
were never consummated.
Page 6
<PAGE> 7
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Earnings (loss) per share were calculated on the number of shares
outstanding at the end of the year.
NOTE 3 - OTHER EXPENSE
The Company incurred other expenses as a result of recording losses due
to the divestiture of its three subsidiary companies in the amount of
$324,563. The Company also defaulted in a share repurchase agreement
with a stockholder of the Company, resulting in a default judgment in
the amount of $200,909. The judgment bears interest at the rate of 25%
per annum on $161,250 (principal portion) and 18% per annum on $39,659
(interest, attorney fee and costs portion). In addition, Kenneth
Williams and Robert Bickel sued MRR, a former subsidiary of the Company,
and the Company for alleged consulting fees owed for 1993 and 1994 and
obtained default judgments against the Company in the amounts of
$121,809 and $122,709 respectively.
NOTE 4 - ISSUANCE/SALES OF STOCK
The Company issued 116,000 shares of restricted Rule 144 common stock in
settlement of a promissory note for $58,000 payable to Jerry Cornwell
for past services rendered.
The Company issued 31,318 shares for $ 15,659 of services rendered by a
consultant of the Company, Valhalla Financial Group, L.L.C.
The Company issued 168,436 shares of restricted Rule 144 common stock to
settle out an $84,218 promissory note payable to Jerry Cornwell for a
cash loan.
The Company issued 155,600 shares of restricted Rule 144 common stock to
settle out a $77,800 debt to Bristol Ltd. for a $17,800 cash loan and
$60,000 for past services rendered.
The Company issued 450,000 shares of restricted Rule 144 common stock in
escrow to Douglas Millard, Escrow Agent, for the purpose of paying off
or settling $225,000 of accrued trade debt, accrued taxes payable and
accrued interest.
The Company issued 800,000 shares of restricted Rule 144 common stock
to: 80,000 shares to a consultant of the Company, Valhalla Financial
Group, L.L.C. for
The accompanying notes are an integral part of these financial statements.
Page 7
<PAGE> 8
services rendered incident to the Settlement Agreement, and 720,000
shares to former or current PAN principals or affiliates pursuant to a
December 5, 1995 Settlement Agreement wherein the shares will be issued
pro rata to the participants in the Stock Option Plan in exchange for
giving up all right, title and interest in any accrued salary, accrued
employee benefits, whether separate or under an employee benefit plan,
accrued commissions or fees, reimbursements, stock options, agreement or
any other relationship due from or with the Company.
All such shares issued during the first quarter of 1996 were issued for
a stated value of $0.50 per share.
NOTE 5 - GOING CONCERN
Because of a deficiency in working capital and significant operating
losses, there is doubt about the ability of the Company to continue in
existence unless additional working capital is obtained. The Company
currently has plans to raise sufficient working capital through equity
financing and through the acquisition of companies having sufficient
assets and cash flow to enable the Company to be self-sufficient and
profitable.
Page 8
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Attached hereto and incorporated herein by this reference are unaudited
financial statements for the quarter ending June 30, 1996.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FINANCIAL CONDITION AND RESULTS OF OPERATION
The results of operations for the quarter ending June 30, 1996 reflect an
operating loss of $110,122 as compared to a loss of $589,113 for the quarter
ending June 30, 1995. Included in the $110,122 loss were the $59,659 in losses
recorded due to expenses for services rendered incident to attempts to acquire
oil and gas properties in late 1995 and early 1996 and $47,451 in accrued
interest on the $200,909 default judgment obtained against the Company for a
default in a share repurchase agreement with a shareholder of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was in a deficit position with current liabilities
of $711,215 and no current assets due to the divestiture of its three
subsidiaries in 1995. The Company is working out settlement agreements to
satisfy this debt.
Additional equity capital is essential to the Company's ability to maintain
ongoing operations. Therefore, the Company has plans to raise additional working
capital through equity financing and debt restructuring and through the
acquisition of companies having sufficient assets and cash flow to enable the
Company to be self-sufficient and profitable.
Page 9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
A lawsuit was filed against the Company by its legal counsel which resulted in a
default judgment against the Company of $38,279.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON 8-K
(a) EXHIBITS:
Exhibit 27 Financial Data Schedule.
(b) REPORTS:
None.
Page 10
<PAGE> 11
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 hereunto duly authorized.
PAN Environmental Corporation
-----------------------------------------
(Registrant)
Dated: December 31, 1997
/s/ Jerry Cornwell
- ------------------------------------
Jerry Cornwell
President & CEO
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATIN EXTRACTED FROM JUNE 1996 -
FORM 10 QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH JUNE 1996 -
FORM 10 QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 585,000
<CURRENT-LIABILITIES> 711,215
<BONDS> 0
0
0
<COMMON> 2,848
<OTHER-SE> 1,343,976
<TOTAL-LIABILITY-AND-EQUITY> 585,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
