<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
September 30, 1998
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: 7,268,163 shares of common stock.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENT
PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY
WHITFIELD HOLDINGS, LTD.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEET
(IN DOLLARS)
ASSETS
<TABLE>
<CAPTION>
As of As of
September 30 December 31
1998 1997
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash in Bank 349 -0-
Loan Receivable - Tropical (Note 9) 186,805 -0-
License Fees Receivable - Tropical (Note 10) 211,091 -0-
----------- ------------
Total Current Assets 398,245 -0-
FIXED ASSETS
Gaming System-Hardware (Note 1) 47,030 -0-
Gaming System-Software (Note 1) 432,970 -0-
----------- ------------
Total Fixed Assets 480,000 -0-
OTHER ASSETS
Settlement agreement - principals 360,000 360,000
Escrowed shares for debt, Millard account 225,000 225,000
Investment-Whitfield Holdings (Note 4) 3,200,000 -0-
Investment-Whitfield/Unearned (Note 4) (3,140,421) -0-
----------- ------------
Total other assets 644,579 585,000
----------- ------------
TOTAL ASSETS $ 1,522,824 $ 585,000
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
<PAGE> 3
PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY
WHITFIELD HOLDINGS, LTD.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEET
(IN DOLLARS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
As of As of
September 30 December 31
1998 1997
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Salaries Payable (Note 3) $ 32,500 $ -0-
Accounts payable (Note 3) 311,566 448,245
Conv. Notes Payable (Note 1,7) 391,250 -0-
Taxes payable 18,795 18,795
Judgment payable (Note 3) 200,909 200,909
Accrued judgment interest (Note 3) 94,902 94,902
----------- -----------
Total current liabilities 1,049,922 762,851
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
3,188,163 issued and outstanding
at December 31, 1997, and
7,268,163 issued and outstanding
at September 30, 1998 7,268 3,188
Additional paid-in capital (Note 8) 4,754,356 1,417,635
Common Stock-Unearned Escrow (Note 4) (3,140,421) -0-
Accumulated deficit (1,326,050) (1,598,674)
----------- -----------
Total stockholders' equity 472,902 (177,851)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,522,824 $ 585,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE> 4
PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY
WHITFIELD HOLDINGS, LTD.
CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
---------------------------- --------------------------------
Sept. 30 Sept. 30 Sept. 30 Sept. 30
1998 1997 1998 1997
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue (Note 10) $ 174,011 $ -0- $ 211,091 $ -0-
--------- --------- ----------- -----------
Costs and Expenses
Materials, supplies and
operating expenses (Note 11) 63,779 537 162,986 33,833
Interest and other debt expense -0- -0- -0- 47,451
Taxes other than income taxes -0- -0- -0- 10,918
--------- --------- ----------- -----------
Total Costs and Expenses $ 63,779 $ 537 $ 162,986 $ 92,202
--------- --------- ----------- -----------
Other Expense (Note 6) $ -0- $ -0- $ 5,000 $ -0-
--------- --------- ----------- -----------
Net Income (Loss) $ 110,232 $ (537) $ 43,105 $ (92,202)
========= ========= =========== ===========
Net Income (Loss) per Common
Share (1) $ 0.02 $ 0.00 $ 0.01 $ (0.03)
========= ========= =========== ===========
Dividends per Common Share $ -0- $ -0- $ -0- $ -0-
========= ========= =========== ===========
Notes:
(1) Based on net income,
divided by number common
shares outstanding of 7,268,163 3,028,163 7,268,163 3,028,163
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE> 5
PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY
WHITFIELD HOLDINGS, LTD.
CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the nine months ended
--------------------------------
September 30 September 30
1998 1997
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 43,105 $(92,202)
Adjustment to Retained Earnings 229,518 -0-
Adjustment to reconcile to net cash
operating activities:
(Increase) decrease in working capital, net (104,179) 58,202
--------- --------
Net Cash From Operating Activities 168,444 (34,000)
Cash Flow From Investment Activities:
Acquisition of cash, notes, contracts and
other assets 937,475 -0-
--------- --------
Net Cash Flow From Investing Activities 937,475 -0-
Cash Flow From financing Activities:
(Payment of) proceeds from debt 391,050 -0-
Proceeds from issuance of common stock 4,080 180
Capital contributions from shareholders 374,050 33,820
--------- --------
Net Cash Used in Financing Activities 769,380 34,000
Net (decrease) increase in cash and
cash equivalents 349 -0-
Cash and Cash Equivalents:
Beginning of period -0- -0-
--------- --------
End of Period 349 $ -0-
--------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5
<PAGE> 6
PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY, WHITFIELD HOLDINGS, LTD.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENT
NINE MONTHS PERIODS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
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 animals. 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 Specialties, Inc., a Minnesota
corporation; Advantage Parking Lot Service, Inc., a California corporation; and
MRR Construction Services, Inc., 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. October 11, 1993, the directors of PAN Environmental
Corporation 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. PAN Environmental Corporation changed its
fiscal year from January 31st to December 31st and reincorporated in the State
of Delaware.
PAN Environmental Corporation (PAN) 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. PAN 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. PAN's
principal offices are in Shoreline, Washington.
Advantage Parking Lot Service, Inc. (incorporated in the State of California on
February
Page 6
<PAGE> 7
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 Specialties, Inc. (incorporated in 1993) reclaimed timber (poles,
ties, etc.) and commodity metals, primarily from obsolete railroad
telecommunications and signaling systems. The Company 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 Construction Services, Inc. (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
its president and a project manager-superintendent. The majority of the contract
work was performed by subcontractors. Daily administrative support work was
provided by personnel at Advantage Parking Lot Service, Inc.
PAN divested itself of its three subsidiaries, Advantage Parking Lot Service,
Inc., Northwest Specialties, Inc. and MRR Construction Services, Inc., effective
January 2, 1995.
The Company raised $40,000 in December 1996 in a small private placement from
shareholders of the Company and proceeded to complete its accounting, audits,
10-Q's and 10-K's for December 31, 1994 through December 31, 1997, thus bringing
the Company into SEC compliance on February 22, 1998.
On February 20, 1998 the Company reached an agreement in principle to acquire
Winner's Way, Inc., an offshore race and sports book, subject to review and
approval of the financial statements of Winner's Way, Inc. by the Board of
Directors of the Company. After careful consideration, the company's Directors
decided that such acquisition would not be in the Company's best interests.
On May 22, 1998 the Company acquired Whitfield Holdings, Ltd., an Antiguan
corporation, in the business of purchasing and licensing-back gaming systems
from legally licensed offshore race and sports books. Whitfield's initial
licensee is Tropical International Sports, Inc., an Antiguan corporation,
legally licensed as an Antiguan race and sports book.
On June 30, 1998 the Company acquired and licensed-back the gaming system from
Way Communications Race and Sports Book and moved it to Antigua on July 17, 1998
to be operated by Tropical International Sports, Inc. The purchase price was
$380,000, the terms for which were $160,000 down and a non-interest bearing note
for the balance
Page 7
<PAGE> 8
payable at $10,000 per month. The Company deducted this purchase price from its
loans receivable to Tropical International Sports, Inc. subject to proof of
payment. In the event these amounts are not paid, the loans receivable account
from Tropical will be increased accordingly. (See Note 9.)
Note 2. Summary of Significant Accounting Policies
Earnings (loss) per share were calculated on the number of shares outstanding at
the end of the year. The interim financial statements include all adjustments,
which in the opinion of management, are necessary in order to make the financial
statements not misleading.
Note 3. Accounts Payable, Judgments Payable and Wages Payable
The Company incurred other expenses in 1995 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 1995 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 in 1995 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. In a settlement agreement
Williams and Bickel received 80,000 shares and an adjustment to retained
earnings was made in the amount of $229,518, the net settlement amount. The
Company accrued $32,500 of wages payable of the three months ended September 30,
1998 to the Company's officers, $50,000 of services payable incident to the
Whitfield acquisition, $36,000 of investor relations fees payable, and $10,500
of accounting and administration fees payable, all of which were settled for
stock pursuant to the S-8 Registration Statement filed October 2, 1998. (See
Note 10.)
Note 4. Issuance/Sales of Stock
The Company issued 30,000 additional shares of restricted Rule 144 common stock
at $0.50 per share for $15,000 of services rendered incident to the Williams and
Bickel settlement for a total of 80,000 shares instead of 50,000 shares to
consummate the settlement.
The Company issued 3,200,000 shares of restricted Rule 144 common stock into
escrow for the acquisition of Whitfield Holdings, Ltd. on a performance basis.
The shares are released out of escrow on a quarterly basis based on revenues
received by Whitfield. When Whitfield receives $1,992,000 in annual revenues,
all 3,200,000 shares will be
Page 8
<PAGE> 9
released. The Company released 59,579 shares out of escrow in good faith for the
revenues accrued for nine days operations for the first quarter ended May 31,
1998; however, this amount still has not been paid. No further stock will be
released from escrow until the $37,089.63 has been paid for the first quarter
and until $174,001.36 has been paid for the second quarter.
The Company issued 800,000 shares of restricted Rule 144 common stock for
services rendered incident to the acquisition of Whitfield Holdings, Ltd.
The Company issued 50,000 shares of restricted Rule 144 common stock for $25,000
at $0.50 per share in a New York private placement.
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.
Note 6. Other Expense
The Company advance $5,000 to an Internet services company in the first quarter
of 1998 pursuant to a proposed letter of intent to acquire, but the letter of
intent was never consummated. The Company wrote off the $5,000, being unable to
recover the advance.
Note 7. Convertible Notes
The Company filed and is conducting a 506 Reg D offering in the State of New
York. The offering consists of convertible notes, of which $391,250 had been
received and convertible notes issued as of September 30, 1998. The notes are
all due December 31, 1999 and subject to a call by the Noteholder for prepayment
at any time subsequent to September 30, 1998; $85,000 of the notes are
convertible into restricted Rule 144 common stock of the Company at $0.50 per
share, and $306,250 of the notes are convertible into restricted Rule 144 common
shares of the Company at $0.75 per share.
Note 8. Paid-In Capital
The Company received $177,750 from a former Whitfield shareholder and current
PAN escrow shareholder which the Company allocated as additional paid-in
capital.
Page 9
<PAGE> 10
Note 9. Loans Receivable - Tropical
The Company through its wholly owned subsidiary, Whitfield Holdings, Ltd., made
loans to Whitfield's race and sports book licensee, Tropical International
Sports, Inc., of $566,805 from which it deducted $380,000 for the acquisition of
the gaming system from Way Communications, Inc. subject to the actual proof of
payment from Tropical. Tropical took over operation of the Way Communications
race and sports book as of July 17, 1998. As of September 30, 1998 the
outstanding balance was $186,805 after the above mentioned deduction of
$380,000.
Note 10. License Fees Receivable - Tropical
The Company is owed license fees receivable of $211,090.99 composed of
$37,089.63 for nine days operations in May 1998 which ended the first quarter of
operations and $174,001.36 for the three months operations in June, July and
August 1998 which ended the second quarter of operations. These amounts have
been accrued on the Company's books and have not been paid as of September 30,
1998.
Note 11. Subsequent Events
On October 2, 1998 the Company filed an S-8 Registrations Statement with the SEC
issuing a total of 490,250 shares including 1) 50,000 shares to Forte'
Communications, Inc. for $50,000 of public relations; 2) 6,250 shares to Kaufman
& Associates, Inc. for $6,250 of finders fees incident to the Forte'
transaction; 3) 50,000 shares to TCKTS, L.L.C. dba Bristol Media, Ltd. for
$50,000 of services rendered incident to the Whitfield acquisition; 4) 96,000
shares to TCKTS, L.L.C. dba Bristol Media, Ltd. for 24 months of investor
relations services at the rate of $4,000 per months which commenced January 1,
1998; 5) 120,000 shares to Jerry Cornwell, 100,000 shares to Clifford M.
Johnston and 40,000 shares to Judy Morton Johnston for 24 months of wages and
salaries commencing July 1, 1998 at the rate of $60,000 per year to Jerry
Cornwell, President, $50,000 per year to Clifford M. Johnston, Vice President,
and $20,000 per year to Judy Morton Johnston, Assistant Secretary/Assistant
Treasurer; and 6) 28,000 shares to Quality Tax Service, Inc. for two years of
quarterly administration and accounting services at the rate of $3,500 per
quarter commencing January 1, 1998. The shares were issued to prevent cash flow
drain to the Company until the Company has sufficient capital for pay for needed
services.
Page 10
<PAGE> 11
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Attached hereto and incorporated herein by this reference are unaudited
consolidated financial statements for the quarter ending September 30, 1998.
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 September 30, 1998 reflect an
operating profit of $110,232 as compared to a loss of $537 for the quarter
ending September 30, 1997. Included in the $110,232 profit were $174,011 of
revenues; and expenses of $8,970 in professional fees; $19,480 in investor
relations fees and expenses; $2,020 in SEC electronic filing expense; $807 in
travel expenses; $32,500 in wages and salaries; and $2 in office expense. The
$174,011 of revenues were accrued only. This amount has not been paid to the
Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was in a deficit position with current liabilities
of $1,049,922 and current assets of $398,245 due to the divestiture of its three
subsidiaries in 1995 (the Company is working out settlement agreements to
satisfy this debt); due to the issuance of $391,250 of convertible notes; and
due to the $220,000 credit to Tropical on the Company's loan receivable from
Tropical account for paying, over time, for the Way Communications race and
sports book.
The Company is dependent upon revenues from Tropical which, as of September 30,
1998, had not been paid. The continuation of required payments not being paid
will have an adverse effect on the Company's liquidity as well as an adverse
effect on operations.
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.
Y2K ISSUE
Management does not believe the Company's business will be effected by any Y2K
issues.
Page 11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
Effective May 23, 1998 the Company issued 3,200,000 shares of restricted Rule
144 common stock to the eleven shareholders of Whitfield Holdings, Ltd. into
escrow in exchange for 10,000 shares of $10 par value common stock of Whitfield
Holdings, Ltd. (100%). The shares were issued pursuant to an exemption under
Section 4(2) of the Act as a non-public offering.
Effective May 23,1998 the Company issued 800,000 shares of restricted Rule 144
common stock to several consultants for consulting services rendered incident to
the acquisition of Whitfield Holdings, Ltd. The shares were issued pursuant to
an exemption under Section 4(2) of the Act as a non-public offering.
In May 1998 the Company issued 50,000 shares of its restricted Rule 144 common
stock to a private investor for $25,000 pursuant to a private placement in New
York State. The shares were issued pursuant to Rule 506 under Regulation D and
pursuant to an exemption under section 4(2) of the Act as a non-public offering.
The Company issued $391,250 of convertible notes between May 1998 and July 1998
to several private investors, $85,000 of which are convertible into restricted
Rule 144 common stock at $0.50 per share and $306,250 of which are convertible
into restricted Rule 144 common stock at $0.75 per shares. Therefore, if the
notes are converted into common stock the Company would issue 170,000 shares of
restricted Rule 144 common stock at $0.50 per share and 408,333 shares of
restricted Rule 144 common stock at $0.75 per share. The notes were issued
pursuant to Rule 506 under Regulation D and pursuant to an exemption under
Section 4(2) of the Act as a non-public offering.
In addition, the Company received a capital contribution of $177,750 in August
1998 from a former Whitfield shareholder and current PAN escrow shareholder
which the Company allocated as additional paid-in capital rather than as a note
payable. The money was accepted under a previous exemption on May 23, 1998 under
Section 4(2) of the Act as a non-public offering.
The $391,250 and $177,750 were used as working capital by Whitfield, the
Company's wholly owned subsidiary, to acquire additional race and sports book
gaming systems and
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<PAGE> 13
to loan working capital to Tropical International Sports, Inc., Whitfield's race
and sports book licensee.
No underwriting discounts or commissions were paid on any of the above issuances
of stock or notes.
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:
27 Financial Data Schedule
(b) REPORTS:
None.
Page 13
<PAGE> 14
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: October 15, 1998
/s/ JERRY CORNWELL
- ---------------------------------
Jerry Cornwell
President & CEO
Page 14
<PAGE> 15
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD ENDED SEPTEMBER 30, 1998 AND
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Unaudited Consolidated Statement of Financial Position
at September 30, 1998, December 31, 1997, and December
31, 1996 1-2
Unaudited Consolidated Statement of Operations for the
Interim Period Ended September 30, 1998 and for the Years
Ended December 31, 1997 and December 31, 1996 3
Unaudited Consolidated Statement of Cash Flows for the
Interim Period Ended September 30, 1998 and for the Years
Ended December 31, 1997 and December 31, 1996 4
Unaudited Consolidated Statement of Changes in Stockholders'
Equity for the Interim Period Ended September 30, 1998 and
for the Years Ended December 31, 1997 and December 31, 1996 5-6
Notes to Unaudited Consolidated Financial Statements 7-11
</TABLE>
<PAGE> 17
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
SEPTEMBER 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
9/30/98 12/31/97 12/31/96
----------- ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash in Bank 349 -0- -0-
Loan Receivable - Tropical
(Note 9) 186,805 -0- -0-
License Fee Receiv. - Tropical
(Note 10) 211,091 -0- -0-
----------- ------------ ------------
Total Current Assets 398,245 -0- -0-
FIXED ASSETS
Gaming System-Hardware (Note 1) 47,030 -0- -0-
Gaming System-Software (Note 1) 432,970 -0- -0-
----------- ------------ ------------
Total Fixed Assets 480,000 -0- -0-
OTHER ASSETS
Settlement Agreement-principals 360,000 360,000 360,000
Escrowed shares for debt,
Millard account 225,000 225,000 225,000
Investment-Whitfield Holdings
(Note 4) 3,200,000 -0- -0-
Investment-Whitfield/Unearned
(Note 4) (3,140,421) -0- -0-
----------- ------------ ------------
Total Other Assets 644,579 585,000 585,000
----------- ------------ ------------
TOTAL ASSETS $ 1,522,824 $ 585,000 $ 585,000
=========== ============ ============
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-2-
<PAGE> 18
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
SEPTEMBER 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/98 12/31/97 12/31/96
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT LIABILITIES
Salaries Payable (Note 3) $ 32,500 $ -0- $ -0-
Accounts Payable (Note 3) 311,566 448,245 451,633
Conv. Notes Payable (Note 1,7) 391,250 -0- -0-
Taxes payable 18,795 18,795 18,795
Judgment payable (Note 3) 200,909 200,909 200,909
Accrued judgment interest
(Note 3) 94,902 94,902 47,451
----------- ----------- -----------
Total Current Liabilities 1,049,922 762,851 718,788
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value;
50,000,000 shares authorized;
2,848,163 shares
issued and outstanding at
December 31, 1996; 3,188,163
shares at December
31, 1997; and 7,268,163 shares at
September 30, 1998 7,268 3,188 2,848
Additional paid-in capital
(Note 8) 4,932,105 1,417,635 1,343,976
Common Stock-Unearned Escrow
(Note 4) (3,140,421) -0- -0-
Accumulated Deficit (1,326,050) (1,598,674) (1,480,612)
----------- ----------- -----------
Total Stockholders' Equity 472,902 (177,851) (133,788)
----------- ----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 1,522,824 $ 585,000 $ 585,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-3-
<PAGE> 19
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE INTERIM PERIOD ENDED
JUNE 30, 1998 and YEARS ENDED DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Interim
Period Ended Year Ended Year Ended
9/30/98 12/31/97 12/31/96
------------ ---------- ----------
<S> <C> <C> <C>
REVENUE (Note 10) $ 211,091 $-0- $-0-
COST OF SALES -0- -0- -0-
--------- --------- ---------
GROSS PROFIT (LOSS) 211,091 -0- -0-
--------- --------- ---------
OPERATING EXPENSES
Professional fees (Note 11) 72,216 58,690 61,541
Investor relations expense
(Note 11) 7,680 -0- -0-
Investor relations fees
(Note 11) 30,000 -0- -0-
SEC electronic filing expense 12,112 -0- -0-
Interest -0- 47,451 47,451
Travel 6,409 -0- -0-
Taxes and licenses -0- 10,918 8,703
Telephone 600 -0- -0-
Office expense 455 3,238 -0-
Bank charges 226 -0- -0-
Wages and salaries (Note 11) 32,500 -0- -0-
Postage and delivery 788 154 -0-
--------- --------- ---------
Total Operating Expenses $ 162,986 $ 120,451 $ 117,695
--------- --------- ---------
(LOSS) FROM OPERATIONS 48,105 (120,451) (117,695)
--------- --------- ---------
OTHER EXPENSE (Note 6) (5,000) -0- -0-
OTHER INCOME -0- 2,389 -0-
PROVISION FOR INCOME TAX -0- -0- -0-
NET INCOME (LOSS) $ 43,105 $(118,062) $(117,695)
========= ========= =========
NET INCOME (LOSS) PER SHARE $ .006 $ (.037) $ (.041)
========= ========= =========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-4-
<PAGE> 20
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE INTERIM PERIOD ENDING
SEPTEMBER 30, 1998 and YEARS ENDED DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Interim
Period Ended Year Ended Year Ended
9/30/98 12/31/97 12/31/96
------------ ---------- ----------
<S> <C> <C> <C>
Cash Flows From
Operating Activities:
Net Profit (Loss) $ 43,105 $(118,062) $(117,695)
--------- --------- ---------
Adjustments to Reconcile
Net Loss to Net Cash
Provided by Operating Activities
Net Cash Provided by
Operating Expenses:
Increase (Decrease) In:
Accounts payable (136,679) (3,388) (54,119)
Taxes payable, accrued
wages, accrued interest 32,500 47,451 (1,846)
Adjustment to retained earnings 229,518 -0- -0-
--------- --------- ---------
Net Cash Provided by
Operating Activities: 125,339 (73,999) (173,660)
--------- --------- ---------
Cash Flows From
Investing Activities:
Increase in current assets 397,896 -0- -0-
Increase in fixed assets 480,000 -0- -0-
Increase in other assets 59,579 -0- 585,000
--------- --------- ---------
Net Cash Used In
Investing Activities: 937,475 -0- 585,000
--------- --------- ---------
Cash Flows From
Financing Activities:
Proceeds from sale of common stock 4,080 340 1,721
Capital contribution from shareholders 374,050 73,659 858,957
Loans from officers -0- -0- (84,218)
(Payment of) proceeds from debt 391,250 -0- (17,800)
--------- --------- ---------
Net Cash Received From
Financing Activities: 769,380 73,999 (758,060)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH -0- -0-
Cash Beginning of Periods -0- -0- -0-
Cash End of Periods 349 -0- -0-
========= ========= =========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-5-
<PAGE> 21
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE INTERIM PERIOD ENDED
SEPTEMBER 30, 1998 and YEARS ENDED DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
----------------------------- Paid In Accumulated
Shares Amount Capital Deficit Totals
--------- ------ --------- ----------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 1,126,809 1,127 485,019 (1,362,917) (876,771)
Common stock issued at $0.50
per share for services 116,000 116 57,884 -0- 58,000
Common stock issued at $0.50
per share for services 31,318 31 15,629 -0- 15,660
Common stock issued at $0.50
per share in settlement of
promissory note representing
a cash loan 168,436 168 84,050 -0- 84,218
Common stock issued at $0.50
per share for: settlement of
$17,800 promissory note
representing a cash loan,
and $60,000 for services 155,600 156 77,644 -0- 77,800
Common stock issued at $0.50
per share into escrow for
settling the Company's debt 450,000 450 224,550 -0- 225,000
Common stock issued at $0.50
per share for: 80,000 shares
for services, 720,000 shares
for settlement with Company
principals and affiliates 800,000 800 339,200 -0- 400,000
Net (loss) for the period
ended December 31, 1996 -0- -0- -0- (117,695) (117,695)
--------- ----- --------- ---------- --------
BALANCE, DECEMBER 31, 1996 2,848,163 2,848 1,343,976 (1,480,612) (133,788)
Common stock issued at $0.50
per share to C. M. Johnston
for consulting services re:
Williams and Bickel 50,000 50 24,950 -0- 25,000
Common stock issued to
Bristol Media, Ltd. re:
Douthwaite settlement 130,000 130 8,870 -0- 9,000
Common stock issued to
Stephen M. Roake IRA for
payment of accounting, audit
and transfer agent fees 60,000 60 14,940 -0- 15,000
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-6-
<PAGE> 22
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE INTERIM PERIOD ENDED
SEPTEMBER 30, 1998 and YEARS ENDED DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
---------------------------- Paid In Accumulated
Shares Amount Capital Deficit Totals
--------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Common stock issued to
Bristol Media, Ltd. for
payment of accounts payable,
audit and legal 100,000 100 24,900 -0- 25,000
Net (loss) for the period
ended December 31, 1997 -0- -0- -0- (118,062) (118,062)
--------- --------- --------- ---------- ---------
BALANCE, DECEMBER 31, 1997 3,188,163 3,188 1,417,635 (1,598,674) (177,851)
Common stock issued at $0.50
per share to consummate
settlement re: Williams
and Bickel 30,000 30 14,970 -0- 15,000
Adjustment to retained
earnings -0- -0- -0- 229,518 229,518
Common stock issued at $1.00
per share into escrow
(earned portion only) for
acquisition of Whitfield
Holdings, Ltd. 3,200,000 3,200 156,380 -0- 159,580
Common stock issued for
services rendered incident
to the acquisition of
Whitfield Holdings, Ltd. 800,000 800 -0- -0- 800
Common stock issued at $0.50
per share in New York
private placement 50,000 50 24,950 -0- 25,000
Contribution of paid-in
capital from former Whitfield
shareholder and PAN escrow
shareholder (Note 8) -0- -0- 177,750 -0- 177,750
Net income (loss) for the
period ended
September 30, 1998 -0- -0- -0- 43,105 43,105
--------- --------- --------- ---------- ---------
BALANCE, SEPTEMBER 30, 1998 7,268,163 7,268 1,791,685 1,326,051 472,902
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-7-
<PAGE> 23
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
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 Specialties, Inc., a Minnesota
corporation; Advantage Parking Lot Service, Inc., a California corporation; and
MRR Construction Services, Inc., 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. October 11, 1993, the directors of PAN Environmental
Corporation 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. PAN Environmental Corporation changed its
fiscal year from January 31st to December 31st and reincorporated in the State
of Delaware.
PAN Environmental Corporation (PAN) 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. PAN 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. PAN's
principal offices are in Shoreline, Washington.
Advantage Parking Lot Service, Inc. (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 Specialties, Inc. (incorporated in 1993) reclaimed timber (poles,
ties, etc.) and commodity metals, primarily from obsolete railroad
telecommunications and signaling systems. The Company 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.
-8-
<PAGE> 24
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1. Organization and Basis of Accounting - continued
MRR Construction Services, Inc. (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
its president and a project manager-superintendent. The majority of the contract
work was performed by subcontractors. Daily administrative support work was
provided by personnel at Advantage Parking Lot Service, Inc.
PAN divested itself of its three subsidiaries, Advantage Parking Lot Service,
Inc., Northwest Specialties, Inc. and MRR Construction Services, Inc., 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., a
Vancouver Stock Exchange company, and two other companies, NP Energy
Corporation, a U. S. over the counter electronic bulletin board (OTC:BB)
company, and Polaris Equities, Inc., 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.
The Company raised $40,000 in December 1996 in a small private placement from
shareholders of the Company and proceeded to complete its accounting, audits,
10-Q's and 10-K's for December 31, 1994 through December 31, 1997, thus bringing
the Company into SEC compliance on February 22, 1998.
The Company in January 1998 sought to enter into a letter of intent to acquire
an Internet services company, but the letter of intent was never consummated.
On February 20, 1998 the Company reached an agreement in principle to acquire
Winner's Way, Inc., an offshore race and sports book, subject to review and
approval of the financial statements of Winner's Way, Inc. by the Board of
Directors of the Company. After careful consideration, the company's Directors
decided that such acquisition would not be in the Company's best interests.
On May 22, 1998 the Company acquired Whitfield Holdings, Ltd., an Antiguan
corporation, in the business of purchasing and licensing-back gaming systems
from legally licensed offshore race and sports books. Whitfield's initial
licensee is Tropical International Sports, Inc., an Antiguan corporation,
legally licensed as an Antiguan race and sports book.
-9-
<PAGE> 25
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1. Organization and Basis of Accounting - continued
On June 30, 1998 the Company acquired and licensed-back the gaming system from
Way Communications Race and Sports Book and moved it to Antigua on July 17, 1998
to be operated by Tropical International Sports, Inc. The purchase price was
$380,000, the terms for which were $160,000 down and a non-interest bearing note
for the balance payable at $10,000 per month. The Company deducted this purchase
price from its loans receivable to Tropical International Sports, Inc. subject
to proof of payment. In the event these amounts are not paid, the loans
receivable account from Tropical will be increased accordingly. (See Note 9.)
Note 2. Summary of Significant Accounting Policies
Earnings (loss) per share were calculated on the number of shares outstanding at
the end of the year. The interim financial statements include all adjustments
which, in the opinion of management, are necessary in order to make the
financial statements not misleading.
Note 3. Accounts Payable, Judgments Payable and Wages Payable
The Company incurred other expenses in 1995 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 1995 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 in 1995 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. In a settlement agreement
Williams and Bickel received 80,000 shares and an adjustment to retained
earnings was made in the amount of $229,518, the net settlement amount. The
Company accrued $32,500 of wages payable of the three months ended September 30,
1998 to the Company's officers, $50,000 of services payable incident to the
Whitfield acquisition, $36,000 of investor relations fees payable, and $10,500
of accounting and administration fees payable, all of which were settled for
stock pursuant to the S-8 Registration Statement filed October 2, 1998.
(See Note 10.)
Note 4. Issuance/Sales of Stock
The Company issued 30,000 additional shares of restricted Rule 144 common stock
at $0.50 per share for $15,000 of services rendered incident to the Williams and
Bickel settlement for a total of 80,000 shares instead of 50,000 shares to
consummate the settlement.
The Company issued 3,200,000 shares of restricted Rule 144 common stock into
escrow for the acquisition of Whitfield Holdings, Ltd. on a performance basis.
The shares are released out of escrow on a quarterly basis based on revenues
received by Whitfield. When Whitfield receives $1,992,000 in annual revenues,
all 3,200,000 shares will be released. The Company released 59,579 shares out of
escrow in good
-10-
<PAGE> 26
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 4. Issuance/Sales of Stock - continued
faith for the revenues accrued for nine days operations for the first quarter
ended May 31, 1998; however, this amount still has not been paid. No further
stock will be released from escrow until the $37,089.63 has been paid for the
first quarter and until $174,001.36 has been paid for the second quarter.
The Company issued 800,000 shares of restricted Rule 144 common stock for
services rendered incident to the acquisition of Whitfield Holdings, Ltd.
The Company issued 50,000 shares of restricted Rule 144 common stock for $25,000
at $0.50 per share in a New York private placement.
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.
Note 6. Other Expense
The Company advance $5,000 to an Internet services company in the first quarter
of 1998 pursuant to a proposed letter of intent to acquire, but the letter of
intent was never consummated. The Company wrote off the $5,000, being unable to
recover the advance.
Note 7. Convertible Notes
The Company filed and is conducting a 506 Reg D offering in the State of New
York. The offering consists of convertible notes, of which $391,250 had been
received and convertible notes issued as of September 30, 1998. The notes are
all due December 31, 1999 and subject to a call by the Noteholder for prepayment
at any time subsequent to September 30, 1998; $85,000 of the notes are
convertible into restricted Rule 144 common stock of the Company at $0.50 per
share, and $306,250 of the notes are convertible into restricted Rule 144 common
shares of the Company at $0.75 per share.
Note 8. Paid-In Capital
The Company received $177,750 from a former Whitfield shareholder and current
PAN escrow shareholder which the Company allocated as additional paid-in
capital.
Note 9. Loans Receivable - Tropical
The Company through its wholly owned subsidiary, Whitfield Holdings, Ltd., made
loans to Whitfield's race and sports book licensee, Tropical International
Sports, Inc., of $566,805 from which it deducted $380,000 for the acquisition of
the gaming
-11-
<PAGE> 27
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 9. Loans Receivable - Tropical - continued
system from Way Communications, Inc. subject to the actual proof of payment from
Tropical. Tropical took over operation of the Way Communications race and sports
book as of July 17, 1998. As of September 30, 1998 the outstanding balance was
$186,805 after the above mentioned deduction of $380,000.
Note 10. License Fees Receivable - Tropical
The Company is owed license fees receivable of $211,090.99 composed of
$37,089.63 for nine days operations in May 1998 which ended the first quarter of
operations and $174,001.36 for the three months operations in June, July and
August 1998 which ended the second quarter of operations. These amounts have
been accrued on the Company's books and have not been paid as of September 30,
1998.
Note 11. Subsequent Events
On October 2, 1998 the Company filed an S-8 Registrations Statement with the SEC
issuing a total of 490,250 shares including 1) 50,000 shares to Forte!
Communications, Inc. for $50,000 of public relations; 2) 6,250 shares to Kaufman
& Associates, Inc. for $6,250 of finders fees incident to the Forte!
transaction; 3) 50,000 shares to TCKTS, L.L.C. dba Bristol Media, Ltd. for
$50,000 of services rendered incident to the Whitfield acquisition; 4) 96,000
shares to TCKTS, L.L.C. dba Bristol Media, Ltd. for 24 months of investor
relations services at the rate of $4,000 per months which commenced January 1,
1998; 5) 120,000 shares to Jerry Cornwell, 100,000 shares to Clifford M.
Johnston and 40,000 shares to Judy Morton Johnston for 24 months of wages and
salaries commencing July 1, 1998 at the rate of $60,000 per year to Jerry
Cornwell, President, $50,000 per year to Clifford M. Johnston, Vice President,
and $20,000 per year to Judy Morton Johnston, Assistant Secretary/Assistant
Treasurer; and 6) 28,000 shares to Quality Tax Service, Inc. for two years of
quarterly administration and accounting services at the rate of $3,500 per
quarter commencing January 1, 1998. The shares were issued to prevent cash flow
drain to the Company until the Company has sufficient capital for pay for needed
services.
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PAN
ENVIRONMENTAL CORPORATION AND SUBSIDIARY - INTERIM UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FORM 10 QSB FOR 3RD QUARTER, 1998 ENDED SEPTEMBER 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 349
<SECURITIES> 0
<RECEIVABLES> 397,896
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 398,245
<PP&E> 480,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,522,824
<CURRENT-LIABILITIES> 1,049,922
<BONDS> 0
0
0
<COMMON> 7,268
<OTHER-SE> 1,613,935
<TOTAL-LIABILITY-AND-EQUITY> 1,522,824
<SALES> 174,011
<TOTAL-REVENUES> 174,011
<CGS> 0
<TOTAL-COSTS> 63,779
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 110,232
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,232
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
