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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-KSB/A
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1994
Commission File Number: 0-19471
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)
Registrant's telephone number, including area code: (206) 546-9660
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.001 par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
Gross revenue for the fiscal year ended December 31, 1994 was $1,163,120.
As of December 31, 1994, the aggregate number of shares of Common Stock held by
non-affiliates was 771,476 shares. For purposes of this disclosure, shares of
Common Stock held by persons who hold more than 10% of the outstanding shares of
Common Stock and shares held by officers and directors of the registrant have
been excluded because these persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily conclusive for other
purposes. Since there was no established market for the registrant's Common
Stock, the registrant cannot estimate the market value for such shares. See Item
5.
As of December 31, 1994, the aggregate number of shares outstanding of the
registrant's Common Stock was 1,263,142.
Documents incorporated by reference: None.
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TABLE OF CONTENTS
<TABLE>
PART I
<S> <C> <C>
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote Security Holders 7
PART II
Item 5. Market of the Registrant's Common Equity and Related
Stockholder Matters 8
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 7. Financial Statements 9
Item 8. Changes in and disagreements with Accountants on
Accounting and Financial Matters 9
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
Compliance with Section 16(a) of the Exchange Act 10
Item 10. Executive Compensation 11
Item 11. Security Ownership of Certain Beneficial Owners and
Management 12
Item 12. Certain Relationships and Related Transactions 14
Item 13. Exhibits and Reports on Form 8-K 15
</TABLE>
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PART I
ITEM 1. BUSINESS
General
PAN Environmental Corporation, a Delaware corporation (the "Company"),
up until December 31, 1994, supervised the operations of businesses engaged in
the reclamation, remediation, and recycling of industrial waste materials and
by-products. The Company provided its operating companies with accounting,
planning, budgeting and other administrative services. The Company also provided
technical environmental management support to each of its operating companies.
The Company had acted as a holding company, with all daily operations
and revenue generation occurring at the operating subsidiary level. The Company
employed two persons and had offices in Seattle, Washington.
Recent Developments
The Company undertook a comprehensive program of business restructuring
and debt reduction due to the failure of equity financing efforts undertaken in
1994. The Company completed the divestiture of all of its subsidiaries in
January 1995.
Advantage Parking Lot Service, Inc. ("Advantage"), a subsidiary engaged
in the manufacture and sale of asphalt-based slurry sealants since 1986, was
sold to its principal officer, Ronald Williams, effective January 2, 1995. Mr.
Williams was the founder and principal shareholder of Advantage prior to its
March 1993 acquisition by the Company. The terms of the agreement with Williams
included a write-off by the Company of $166,000 advanced to Advantage by the
Company and a return to the Company's treasury of 183,722 shares of the Company
held by Williams. Advantage operated a slurry sealer manufacturing plant in
Fontana, California and recently completed a major plant expansion subject to a
large amount of encumbering debt. When the Company lost its financing with
Credit Lyonnais in 1994, it could not finance nor bond any of Advantage's
projects and therefore the subsidiary became a burden to the Company. Advantage
ceased operations immediately upon being reacquired by Ronald Williams.
MRR Construction Services, Inc. ("MRR") performed environmental
construction management and construction activities, as well as soil remediation
activities, throughout Southern California, throughout 1993. When the Company
lost its financing with Credit Lyonnais in 1994, it could not finance nor bond
any of MRR's projects and therefore the subsidiary became a burden to the
Company. MRR has been sold to Roaul Wheeler, in exchange for forgiveness of a
$50,000 advance owed to MRR by the Company. During 1994, MRR became embroiled in
significant litigation on a project in Cerritos, California. As a result of this
litigation,
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and a lack of working capital, the company suspended its operations in the third
quarter of 1994, and had not resumed operation prior to its divestiture by the
Company.
Northwest Specialties, Inc. ("Northwest") had reclaimed timber and
commodity metals, primarily from obsolete railroad telecommunications and
signaling systems in the Midwest, Rocky Mountain and Eastern regions of the
United States, since 1993. Northwest operated on active and inactive railroad
right-of-ways, extracting utility poles, wire and other metal salvage. The
poles, other timber products, wire and other metals were then sorted, graded,
and processed for resale. Northwest completed approximately 65% of an 800 mile
project in North Dakota for Canadian Pacific Railroad and had several projects
under contract for large regional and short line railroads. Northwest had
significantly reduced the seasonality of its work during the past year by
expanding its reclamation activities into regions with less severe winter
weather conditions. Northwest employed nine persons. When the Company lost its
financing with Credit Lyonnais in 1994, it could not finance nor bond any of
Northwest's projects and therefore the subsidiary became a burden to the
Company. Northwest was sold back to Orland Howard in exchange for the
forgiveness by Northwest of a contingent liability to the Company to finance
operations of Northwest estimated to be approximately $300,000.
The Company undertook to acquire the stock of Glengarry Investment Fund
Company on September 30, 1994. The Company purported to enter into the
acquisition and issued 1,003,334 shares of Class A Series Preferred Stock on
that date. Subsequent to that date, as a result of investigations undertaken by
the Company, it came to light that the signatory signing on behalf of a 40%
shareholder of Glengarry was not authorized to sign on the shareholder's behalf.
In subsequent negotiations, that shareholder declined to agree to the exchange
of its share holdings in Glengarry for Class A Series Preferred shares of the
Company. As a result of subsequent negotiations, the agreement was amended and
ratified by the remaining shareholders of Glengarry. On March 3, 1995, the
Company thought it had completed the acquisition of a 60% interest in Glengarry
in exchange for 620,000 shares of its Class A Series Preferred stock; however,
Glengarry subsequently voided the acquisition in its entirety, and all Preferred
shares issued were cancelled. Glengarry is a real estate company, organized in
May 1993 to own and develop residential and commercial income properties and
vacant land. Glengarry will continue its real estate investment and development
activities on its own.
In August 1994, the shareholders of the company adopted the 1994 Stock
Option Plan, canceling and superseding all prior stock option plans. The Plan
permits the Compensation and Stock Option Committee to issue options for up to
3,500,000 shares of the common stock at various prices for purposes of
compensating for services rendered by officers, employees, directors and
consultants to the company and its subsidiaries. As of December 31, 1994, the
Company had issued 3,102,000 options, including 100,000 at $0.001 per share
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and 3,002,000 at $0.55 per share. The Plan generally provided for these options
to be exercisable for a period of ten years from the date of grant.
This Plan was cancelled in 1995. Thereafter the Board of Directors
authorized issuance of 720,000 Rule 144 restricted shares to be issued,
effective January 2, 1996, pursuant to a December 5, 1995 Settlement Agreement,
pro rata to the participants in the Stock Option Plan in exchange for the
principals of PAN 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, contracts,
agreements or any other relationship due from or with the Company.
Financing Plans
As a result of its divestitures, the Company has substantially reduced
its overall debt load and its operating expenses, a primary impediment to any
financing activities. The Company intends to focus its attention during the
coming year upon the acquisition of a company or companies which have sufficient
capital for their current operations, so as to improve its profitability and
business prospects before returning actively to the equity markets.
Government Regulation
The Company's operations were heavily dependent upon the effect of
various federal, state, and local regulations on its operations and those of its
customers. The Company had in the past benefited from the growth of regulation
in certain of its markets and businesses. However, there was no assurance that
such beneficial regulations would continue in place, nor that future changes in
such laws and regulations would not be seriously detrimental to the business or
business prospects of the Company, its operating subsidiaries or its customers.
The Company's operations were also subject to various state, federal,
and local provisions regulating the discharge of materials into the environment,
or otherwise relating to the protection of the environment. Compliance with such
provisions did not involve, and were not expected to involve, any material
expenditures.
Competition
There are inherent difficulties for any company entering any field with
limited resources and particularly for companies newly entering a particular
field or fields. The Company and its operating subsidiaries generally lacked the
resources of other established companies in the various areas in which it
competed. The Company was not well established or known in its field, and had
intense competition from
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other larger, more well established firms, with substantially greater resources,
backgrounds, experience, and records of successful operations, more employees
and more extensive facilities than the Company or its operating subsidiaries
would have had in the near future and, accordingly, some companies were in a
much better position to compete and to acquire other operations.
ITEM 2. PROPERTIES
The Company's subsidiary, Northwest, divested effective January 2, 1995,
leased on a month to month basis, for $750 per month, approximately 5,000 square
feet of land from Orland Howard, a former shareholder of Northwest and a current
officer and director of the Company. Located on such property is office space of
approximately 1,000 square feet. The lease may be terminated or at any time by
Mr. Howard.
Advantage, divested effective January 2, 1995, owns 2.4 acres of land,
including 5,750 square feet of office and storage space, located at 14388 Santa
Ana Avenue, Fontana, California. The land, together with all improvements,
equipment, furniture and fixtures, accounts receivable and inventory, are
subject to encumbrances as collateral in connection with a $300,000 loan
executed in March 1989 and due in March 1999, from Frontier Bank in La Palma,
California under a Small Business Administration guaranty (the "Frontier Bank
Loan").
ITEM 3. LEGAL PROCEEDINGS
MRR, divested effective January 2, 1995, is one of several defendants in
two lawsuits brought by J/K Excavation and Grading and Industrial Asphalt in the
amounts of $90,221 and $153, 421 respectively, in Los Angeles County Superior
Court, Norwalk, California on August 15, 1994. The lawsuits allege non-payment
for services rendered as subcontractors to MRR on a project in Cerritos,
California. MRR's agreements with these subcontractors provide for payment
within ten days of receipt of payment from the general contractor on the
project. Payments to subcontractors on the project are secured by a payment
bond. Proper legal notices have been filed and MRR management expects that
payment will be received and the lawsuit resolved. MRR management believes the
outcome of these lawsuits will not have a material effect on MRR, its business
or financial condition.
In addition, Kenneth Williams and Robert Bickel, claiming to be
consultants to MRR, sued MRR and the Company for alleged consulting fees owed
for 1993 and 1994 and obtained default judgments of $121,809 and $122,709
respectively in 1995. The Company will seek to have such judgments vacated or
set aside.
The Company has been notified of a default judgment proceeding against
the company in the amount of $12,789 for non-payment of rent and legal fees and
expenses to its former landlord.
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The Company has also been notified of a legal action from a shareholder
regarding default of the Company's share re-purchase agreement for $161,250. The
Company plans to work out a settlement of this matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
On August 5, 1994, at a special meeting of shareholders, shareholders
holding a majority of the shares of the Company approved adoption of the 1994
Employee Benefit Stock Plan ("the Plan"). The Plan provides for issuance of
options to purchase up to 3,500,000 shares of common stock of the Company to
provide incentives to directors, officers, employees, advisors and consultants.
There were 820,000 shares voted in favor of the resolution to adopt the Plan.
There were no votes cast against the resolution, no votes withheld and no
abstentions.
On August 5, 1994, at a special meeting of shareholders, shareholders
holding a majority of the shares of the Company elected Dean Kalivas and James
O'Connor to the Board of Directors of the Company. There were 820,000 shares
voted in favor of the election of these Directors. There were no votes cast
against the resolution, no votes withheld and no abstentions. Jerry Cornwell,
Orland Howard, Roaul Wheeler, Ron Williams and John Young continued as Directors
of the Company. Dean Kalivas and James O'Connor subsequently declined to serve
as Directors.
On September 28, 1994, at a special meeting of shareholders,
shareholders holding a majority of the shares of the Company approved amendment
of the Company's Articles of Incorporation, revising the number of shares of
common stock authorized to 40,000,000 and authorizing up to 10,000,000 shares of
$3.00 par value preferred stock in such series as the Board of Directors shall
designate. There were 820,000 shares voted in favor of the resolution
authorizing amendment of the Articles of Incorporation. There were no votes cast
against the resolution, no votes withheld and no abstentions.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
There is no established trading market for shares of the company's
Common Stock. Although the Company's Common Stock is quoted on the OTC Bulletin
Board from time to time, such quotations are limited, sporadic and often
volatile. The following table sets forth the high and low bid prices and
aggregate monthly trading volume for the Company's Common Stock during 1994. The
information set forth below reflects principal transactions and does not include
any agency activity. The Company's Common Stock underwent a one-for-three
reverse stock split effective June 8, 1994, whereby three shares prior to June
8, 1994 became one share of Common Stock after that date. The share volumes and
high and low bid prices prior to June 8, 1994 have been adjusted to reflect the
effects of the one-for three reverse stock split. At December 31, 1994 the
Company had approximately 325 holders of record.
<TABLE>
<CAPTION>
Share
Month Year Volume High Low
- ----- ---- ------ ----- -----
<S> <C> <C> <C> <C>
January 1994 88,376 9.750 0.188
February 1994 53,757 10.125 6.000
March 1994 124,713 9.750 6.000
April 1994 74,883 9.375 6.375
May 1994 94,709 8.250 3.750
June 1994 70,122 11.250 1.500
July 1994 130,262 3.531 0.594
August 1994 92,746 1.000 0.594
September 1994 28,963 1.000 0.375
October 1994 530 0.375 0.313
November 1994 79,463 0.500 0.125
December 1994 72,993 0.563 0.250
January 1995 44,438 0.313 0.188
</TABLE>
Dividends
No dividends on Common Stock of the company have been paid and no such
payment is anticipated in the foreseeable future.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The consolidated results of operations for the year ending December 31,
1994 reflect an operating loss of $574,811 as compared to a loss of $415,604 for
the year ending December 31, 1993. The Company sustained substantial operating
losses in each of the Company's three operating subsidiaries, as well as normal
corporate overhead and expenses related to the company's ongoing efforts to
secured equity financing. Credit Lyonnais Laing in London, UK notified the
Company on July 15, 1994, that it was withdrawing its prior commitment to
finance the Company based on adverse changes in market conditions. The Company
is in discussions with alternate financing sources, though there can be no
assurance of the outcome of these discussions and alternate equity financing for
the Company is not assured. The Company began evaluating ways to reduce its
expenses and operating losses during the year. This evaluation resulted in the
Company divesting itself of its three operating subsidiaries effective January
2, 1995. Thereafter, the Company intends to broaden its search for equity
capital and a merger with another entity with greater financial resources than
the Company and with the potential for earnings sufficient to support a
successful public company.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached hereto and incorporated herein by this reference are
consolidated audited financial statements for the year ending December 31, 1994.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Terrence J. Dunne, CPA, Suite 900 Washington Trust Building, West 717
Sprague, Spokane, Washington 99204 retained in 1993 as auditor of this
corporation chose not to continue as the Company's auditor for 1994 and
succeeding years. The former accountant's report for the fiscal year ended
December 31, 1993 contained a qualification in which the auditor expressed
uncertainty about the Company's ability to continue as a going concern.
Registrant has no disagreements and has never had any disagreements with
Mr. Dunne or any other auditor about how to treat any aspect of any audit or
financial statement.
William L. Butcher, CPA, P. O. Box 1035, Lynnwood, Washington 98046-
1035, has been retained recently as auditor for the corporation for 1994 and
succeeding years.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors, Executive Officers, Promoters and Control Persons
The directors and executive officers of the Company were as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Dennis Brewer (1) 40 Chief Operating Officer
Jerry Cornwell 57 President, Chief Executive Officer and Director
Orland L. Howard (2) 59 Director
Ronald E. Williams (3) 52 Treasurer and Director
Roaul L. Wheeler 67 Secretary and Director
John Young (4) 50 Director
</TABLE>
(1) Mr. Brewer was elected to the Board of Directors on February 24, 1995
and resigned June 19, 1995.
(2) Mr. Howard resigned from the Board of Directors on October 1, 1995.
(3) Mr. Williams resigned as Director and Treasurer effective February 28,
1995.
(4) Mr. Young resigned from the Board of Directors on October 1, 1995.
In accordance with the governing instruments of the Company, the Board
of Directors has fixed its number at seven members. Officers are appointed by
and serve at the pleasure of the Board of Directors. There are no family
relationships between any director or officer of the Company, nor are there any
arrangements or understandings between any director or officer and any other
person pursuant to which such director or officer was elected to serve.
Dennis Brewer has been the Chief Operating Officer of the Company since
January 1994. On February 24, 1995, he was elected to the Board of Directors,
and as President and Chief Executive Officer effective March 15, 1995. Mr.
Brewer resigned from all positions on June 19, 1995. He was a consultant to the
Company from October 1993 to January 1994. From 1989 to 1993, Mr. Brewer was
President of an environmental services firm active in Washington state. Prior to
that time, Mr. Brewer was President of a development stage computer hardware and
software firm for three years, and was a manager and consultant for Deloitte
Haskins and Sells for seven years.
Jerry Cornwell was President and Chief Executive Officer of the Company
from January 1993 until March 15, 1995. Mr. Cornwell reassumed his position as
President and Chief Executive Officer on June 19, 1995. For the prior ten years,
he was principal of Corn-Mill Enterprises, a business investment advisory firm.
Mr.
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Cornwell was previously President and Chief Executive Officer of J. A. Cornwell,
Inc., a land reclamation and irrigation development firm, from 1975 to 1983.
Orland L. Howard served as a Director of the Company and as President of
Northwest since March 1993. Previously, Mr. Howard was owner of Northwest
Specialties, a sole proprietorship. Mr. Howard resigned from the Company's Board
of Directors on October 1, 1995.
Ronald E. Williams served as a Director and Treasurer from March 1993
through February 1995. Mr. Williams has more than thirty years experience in
sales and manufacturing of asphalt sealing products. Mr. Williams resigned from
the Company's Board of Directors on February 28, 1995.
Roaul L. Wheeler has served as Director and Secretary of the Company and
as President of its MRR subsidiary since March 1994. Mr. Wheeler also assumed
the duties of Treasurer in February 1995 upon the resignation of Ronald E.
Williams. Previously, Mr. Wheeler served as Vice President of Phoenix
Construction Services, Inc., a privately held construction management firm
operating in Southern California. Prior to that, Mr. Wheeler was an asphalt
sealing and paving contractor for more than twenty years.
John Young has served as a Director of the Company since March 1993.
Mr. Young is President of Royalstar Resources, Inc., a mining exploration and
development company with principal offices in Vancouver, British Columbia. Mr.
Young resigned from the Company's Board of Directors on October 1, 1995.
Compliance with Section 16(a) of the Exchange Act
Based solely on review of the copies of the forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the fiscal year ended December 31, 1997, all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with; except that Stephen M. Roake IRA
failed to file 1 monthly report covering 1 transaction on Form 4, but did report
the transactions on his 1997 year end report on Form 5; and that John Young
failed to file 1 monthly report covering 1 transaction on Form 4, but did report
the transactions on his 1997 year end report on Form 5.
ITEM 10. EXECUTIVE COMPENSATION
No executive officer's salary and bonus exceeded $10,000 during any of
the company's last three fiscal years.
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Stock Options
The Chief Executive Officer was granted options for 540,909 shares at
$0.55 per share during the year ended December 31, 1994. The incoming President
and Chief Executive Officer (formerly Chief Operating Officer) was granted
options for 340,909 shares exercisable at $0.55 per share during the year ended
December 31, 1994. Four corporate directors received options to acquire a total
of 734,731 shares at $0.55 per share during the year ended December 31, 1994. Of
those, 219,060 were canceled as a result of the agreement divesting Advantage.
In addition, the Company has granted options on 150,000 shares at $0.55 per
share to former employees. All of the above stock options expire in August 2004.
All such stock options were cancelled in 1995 pursuant to the December 5, 1995
Settlement Agreement.
Thereafter the Board of Directors authorized issuance of 720,000 Rule
144 restricted shares to be issued, effective January 2, 1996 pursuant to a
December 5, 1995 Settlement Agreement, pro rata to the participants in the Stock
Option Plan in exchange for the principals of PAN 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, contracts, agreements or any other relationship due from or with
the Company.
Executive Compensation Agreement
The Company had no obligations under any executive compensation
agreements as of December 31, 1994.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 31, 1995, the beneficial
ownership of Common Stock of all directors of the Company, all directors and
officers of the Company as a group, and each person who is known to the Company
to own beneficially more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
(1) Stock
Amount / (1) Options Balance of
Name and Address Nature of Percent Cancelled Security
of Beneficial Owner Ownership of Class 1995 Ownership
- ------------------- --------- -------- --------- ----------
<S> <C> <C> <C> <C>
Dennis Brewer 340,909 7.8% 340,909 -0-
11729 NE 149th St (2)
Kirkland, WA 98034
</TABLE>
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<TABLE>
<CAPTION>
(1) Stock
Amount / (1) Options Balance of
Name and Address Nature of Percent Cancelled Security
of Beneficial Owner Ownership of Class 1995 Ownership
- ------------------- --------- -------- --------- ----------
<S> <C> <C> <C> <C>
Jerry Cornwell 540,909 12.39% 540,909 -0-
14424 SE 78th Way (3)
Newcastle, WA 98059
Orland L. Howard 365,110 8.36% 220,055 145,055
P. O. Box 206A (4)
Rochert, MN 56578
Roaul L. Wheeler 258,505 6.5% 145,616 112,889
P. O. Box 1423 (5)
Chino, CA 91708
Stephen M. Roake IRA 166,666 -0- 166,666
10650 Riviera Place NW
Seattle, WA 98125
John Young 200,000 150,000 50,000
1108 West 39th Ave (6)
Vancouver, BC
Canada V6M 1S8
Kartar Resources, Ltd. 300,000 6.9% 300,000 -0-
Anchor House (7)
6 Crofton Road
Loaghaire County
Dublin, Ireland
HJS Financial Services, Inc. 427,909 9.8% 427,909 -0-
33481 Spinnaker (8)
Dana Point, CA 92629
Bristol Investments, Ltd. 483,334 11.1% 483,334 -0-
c/o Goldsmith & Hartshorne
1660-650 West Georgia St
Vancouver, BC
Canada V6B 4N7
All officers and directors
as a group (10) 1,655,433 39.1% 1,397,489 257,944
</TABLE>
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(1) Pursuant to the applicable rules of the Securities Exchange Commission,
shares which were not outstanding as of January 31, 1995, but which were
subject to issuance upon exercise of options by such director or by all
officers and directors as a group, within sixty days of January 31,
1995, were deemed to be outstanding for purposes of computing the
percentage ownership of such director or of all officers and directors
as a group.
(2) Includes stock options which are exercisable to acquire 340,909 shares.
(3) Includes stock options which are exercisable to acquire 540,909 shares.
(4) Includes stock options which are exercisable to acquire 220,505 shares.
(5) Includes stock options which are exercisable to acquire 145,616 shares.
(6) Includes stock options which are exercisable to acquire 150,000 shares.
(7) Includes stock options which are exercisable to acquire 300,000 shares.
(8) Includes stock options which are exercisable to acquire 427,909 shares.
(9) Includes stock options which are exercisable to acquire 483,334 shares.
(10) Includes all shares outstanding and those which are not outstanding as
of January 31, 1995, but which are subject to issuance upon exercise of
stock options. See Footnotes (2) through (6).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective January 2, 1995, Advantage was divested to a Director of the
Company, pursuant to a divestiture agreement between the Company and Mr. Ronald
Williams. The agreement provided for, among other things, the exchange of all
Mr. Williams' interest in common shares of the company totaling 183,722 shares.
Effective January 2, 1995, MRR was divested to a Director of the
Company, pursuant to an agreement between the Company and Mr. Roaul Wheeler. The
agreement provided for, among other things, the exchange of all the Company's
interest in common shares of MRR in exchange for forgiveness of a debt to MRR by
the Company in the amount of $50,000.
Effective January 2, 1995 Northwest was divested to a Director of the
Company pursuant to an agreement between the Company and Mr. Orland
Howard. The agreement provided for, among other things, the exchange of all the
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Company's interest in common shares of Northwest in exchange for forgiveness of
a contingent liability to finance operations of Northwest, estimated to be
approximately $300,000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) The following documents are filed as part of this report:
(1) Exhibits.
The exhibits required to be filed by this report are listed in
the Exhibit Index on the pages 16 and 17.
(2) Audited Financial Statements for the years ended December 31,
1994, December 31, 1993 (Eleven Months), and January 31, 1993.
(B) Reports on Form 8-K.
Current Report on Form 8-K filed September 30, 1994 reporting the
purported acquisition of Glengarry Investment Fund Company.
Current Report on Form 8-K filed September 30, 1994 reporting the
resignation of a Director of the Company.
Current Report on Form 8-K filed September 30, 1994 reporting the
misstatement of the Company's financial statements for the
quarter ended September 30, 1994.
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2.1 Plan of Reorganization and Merger of Aster Development Enterprises
Ltd. into PAN Environmental Services, Inc. Reference is made to
Exhibit 1 of the Company's 8-K filed on March 25, 1993 which is
incorporated herein by reference.
2.2 Plan of Reorganization between PAN Environmental Services, Inc.
and Northwest Specialties, Inc., a Minnesota corporation,
Advantage parking Lot Service, Inc., a California corporation,
and MRR Construction Services, Inc., a California corporation.
Reference is made to Exhibit 2 of the Company's 8-K filed on
March 25, 1993 which is incorporated herein by reference.
3.1 Articles of Incorporation of Aster Development Enterprises.
Reference is made to Exhibit 3.1 of the Company's January 31,
1993 10-K which is incorporated herein by reference.
3.2 Articles of Incorporation of Pan Environmental Services, Inc.
Reference is made to Exhibit 3.2 of the Company's January 31,
1993 10-K and to Exhibit 3.1 of the Company's December 31, 1993
10-K which are incorporated herein by reference.
3.3 Fiscal year change from January 31, 1993 to December 31, 1993.
Reference is made to the Company's form 8-K filed March 2, 1994
which is incorporated herein by reference.
3.4 Restated Certificate of Incorporation of P.A.N. Environmental
Services Corporation changing name to PAN Environmental
Corporation filed with the State of Delaware on February 22,
1994. Reference is made to Exhibit 3.2 of the Company's Form 8-K
filed March 2, 1994 which is incorporated herein by reference.
3.5 Bylaws of P.A.N. Environmental Services Corporation. Reference is
made to Exhibit 3.2 of the Company's January 31, 1993 10-K and to
Exhibit 3.2 of the Company's December 31, 1993 10-K which are
incorporated herein by reference.
3.6 Amended and Restated Bylaws of PAN Environmental Corporation.
Reference is made to Exhibit 3.4 of the Company's Form 8-K filed
March 2, 1994 which is incorporated herein by reference.
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
10.1 The 1994 Employee Benefit Stock Plan.
16.1 Consent of previous auditor, Terrence J. Dunne, CPA.
27 Financial Data Schedule
</TABLE>
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-K Report for the Year ended December 31, 1995, has been signed
below by the following persons on behalf of the Registrant and in the capacity
and on the date indicated.
December 31, 1997
PAN ENVIRONMENTAL CORPORATION
A DELAWARE CORPORATION
by
/s/ Jerry Cornwell /s/ Jerry Cornwell
- -------------------------------- -------------------------------
Jerry Cornwell Jerry Cornwell
Agent on behalf of the Company President, CEO
/s/ Roaul L. Wheeler /s/ Jerry Cornwell
- -------------------------------- ------------------------------
Roaul L. Wheeler Jerry Cornwell, Director
Secretary/Treasurer
/s/ Roaul L. Wheeler
-------------------------------
Roaul L. Wheeler, Director
18
<PAGE> 19
PAN ENVIRONMENTAL CORPORATION
(FORMERLY ASTER DEVELOPMENT ENTERPRISES, LTD.)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994,
DECEMBER 31, 1993 and JANUARY 31, 1993
<PAGE> 20
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report 1
Consolidated Statement of Financial Position at
December 31, 1994, December 31, 1993 (Eleven
Months) and January 31, 1993 2-3
Consolidated Statement of Operations for the
Years Ended December 31, 1994, December 31, 1993
(Eleven Months), and January 31, 1993 4
Consolidated Statement of Changes in Stockholders'
Equity for the Years Ended December 31, 1994,
December 31, 1993 (Eleven Months), and January 31, 1993 5
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1994, December 31, 1993
(Eleven Months), and January 31, 1993 6
Notes to Consolidated Financial Statements 7-9
</TABLE>
<PAGE> 21
[WILLIAM L. BUTCHER, CPA P.S. LOGO]
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors of
PAN Environmental Corporation
I have audited the accompanying consolidated statement of financial position of
PAN Environmental Corporation (formerly known as Aster Development Enterprises,
Ltd.) and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the years ended December 31, 1994,
December 31, 1993 and January 31, 1993. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I have conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PAN
Environmental Corporation and the consolidated results of operations, changes in
stockholders' equity and cash flows for the years ended December 31, 1994,
December 31, 1993, and January 31, 1993 in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As is shown in the
consolidated financial statements, the Company has incurred continued operating
losses and has a working capital deficiency. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans regarding those matters are described in note 5 to the financial
statements. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
/s/ WILLIAM L. BUTCHER, CPA P.S.
- ------------------------------------
WILLIAM L. BUTCHER, CPA P.S.
Everett, Washington
January 6, 1998
<PAGE> 22
PAN ENVIRONMENTAL CORPORATION
(Formerly Aster Development Enterprises, Ltd.)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
DECEMBER 31, 1994, DECEMBER 31, 1993 and JANUARY 31, 1993
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
December 31 December 31 January 31
1994 1993 1993
----------- ----------- ----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 682 $ -0- $ -0-
Accounts receivable, net of allowance
for doubtful accounts of $34,353 and
$25,808, respectively 244,917 198,121 4,708
Inventory (Notes 1 & 6) 8,149 15,499 10,326
Employee advances 23,577 350 -0-
Notes receivable 200 -0- -0-
Deferred and prepaid expenses 15,011 10,032 -0-
-------- -------- --------
Total current assets 292,536 224,002 15,034
PROPERTY, PLANT AND EQUIPMENT (Notes 1 & 6)
Land 110,499 110,499 110,499
Plant and equipment 916,913 774,302 589,610
Less accumulated depreciation (499,093) (486,897) (439,616)
-------- -------- --------
Net property, plant and equipment 528,319 397,904 260,493
OTHER ASSETS
Loan fees, net of accumulated
amortization (Note 1) 3,621 4,457 5,433
Deposits 7,996 8,381 3,278
Deferred interest on lease 5,980 -0- -0-
-------- -------- --------
Total other assets 17,597 12,838 8,711
-------- -------- --------
TOTAL ASSETS $838,452 $634,744 $284,238
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 23
PAN ENVIRONMENTAL CORPORATION
(Formerly Aster Development Enterprises, Ltd.)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
DECEMBER 31, 1994, DECEMBER 31, 1993 and JANUARY 31, 1993
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31 December 31 January 31
1994 1993 1993
----------- ----------- ----------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable 838,383 382,884 202,620
Bank overdraft 11,677 65,924 59,397
Accrued wages 243,118 96,335 3,190
Accrued interest 10,783 748 16,011
Taxes payable 153,944 80,689 38,014
Equipment contracts payable -0- 3,629 -0-
Loans from officer (Note 3) 180,470 30,707 112,340
Notes payable 30,000 34,162 -0-
Current portion of
long-term debt 77,590 34,790 57,145
----------- ---------- ----------
Total current liabilities 1,545,965 729,868 488,717
----------- ---------- ----------
LONG-TERM DEBT, Net of current
portion 145,214 182,792 204,600
----------- ---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
50,000,000 shares authorized;
2,124,617 shares issued and
outstanding at January 31, 1993,
3,789,427 issued and outstanding
at December 31, 1993, and
1,263,142 issued and outstanding
at December 31, 1994 1,263 3,790 2,125
Additional paid-in capital 642,497 639,970 487,365
Accumulated deficit (1,496,487) (921,676) (898,569)
----------- ---------- ----------
Total stockholders' equity (852,727) (277,916) (409,079)
----------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 838,452 $ 634,744 $ 284,238
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 24
PAN ENVIRONMENTAL CORPORATION
(Formerly Aster Development Enterprises, Ltd.)
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1994, DECEMBER 31, 1993 (Eleven Months) and JANUARY 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31 December 31 January 31
1994 1993 1993
----------- ----------- ----------
<S> <C> <C> <C>
REVENUE $1,163,120 $ 904,007 $ 732,456
COST OF SALES 996,392 786,501 783,449
---------- ---------- ----------
GROSS PROFIT (LOSS) 166,728 117,506 (50,993)
---------- ---------- ----------
OPERATING EXPENSES
Salaries and wages 185,514 249,348 -0-
Professional fees 63,626 59,333 20,613
Depreciation and amortization 42,428 37,589 10,472
Interest 46,357 51,968 43,039
Travel 119,442 74,832 3,335
Bad debts 83,374 25,360 71,145
Insurance 26,109 20,757 6,232
Taxes and licenses 39,343 35,941 18,375
Rent 39,724 23,456 -0-
Repairs and maintenance 18,969 29,795 55,630
Utilities 62,132 36,943 25,525
Office 19,029 16,269 13,509
Consulting commissions 23,383 20,064 3,811
Miscellaneous 2,539 2,339 1,767
---------- ---------- ----------
Total operating expenses 771,969 683,994 273,453
---------- ---------- ----------
(LOSS) FROM OPERATIONS (605,241) (566,488) (324,446)
---------- ---------- ----------
OTHER INCOME
Recovery of bad debts -0- 106,009 -0-
Forgiveness of accrued interest -0- 16,011 -0-
Gain on sale of equipment 30,354 8,493 -0-
Interest income 76 3,679 -0-
Miscellaneous income -0- 16,692 -0-
---------- ---------- ----------
Total other income 30,430 150,884 -0-
---------- ---------- ----------
PROVISION FOR INCOME TAX
NET INCOME (LOSS) $ (574,811) $ (415,604) $ (324,446)
========== ========== ==========
NET INCOME (LOSS) PER SHARE $ (.455) $ (.096) $ (.153)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 25
PAN ENVIRONMENTAL CORPORATION
(Formerly Aster Development Enterprises, Ltd.)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1994, DECEMBER 31, 1993 (Eleven Months) and JANUARY 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid-In Accum.
Shares Amount Capital Deficit Totals
--------- ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balances at January 31, 1992 2,124,627 212 489,278 (574,123) (84,633)
Change of par value from
$.0001 to $.001 per shares 1,913 (1,913)
Net (loss) for the year
ended January 31, 1993 (324,446) (324,446)
--------- ----- ------- ---------- --------
Balances at January 31, 1993 2,124,627 2,125 487,365 (898,569) (409,079)
Corporate Reorganization
of three private companies
into a common public parent
company 2,650,000 2,650 (340,520) 392,497 54,627
Additional capital cash
contributions by shareholders 70,000 70,000
Conversion of loan payable
to capital 82,340 82,340
Common stock issued for cash
at $1 per share 339,800 340 339,460 339,800
Common stock returned from
shareholders of subsidiaries (1,325,000) (1,325) 1,325
Net (loss) for the year
ended December 31, 1993 (415,604) (415,604)
--------- ----- ------- ---------- --------
Balances at December 31, 1993 3,789,427 3,790 639,970 (921,676) (277,916)
Reverse stock split of one
for three on June 8, 1994 (2,526,285) (2,527) 2,527 -0-
Net (loss) for the year
ended December 31, 1994 (574,811) (574,811)
--------- ----- ------- ---------- --------
Balances at December 31, 1994 1,263,142 1,263 642,497 (1,496,487) (852,727)
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 26
PAN ENVIRONMENTAL CORPORATION
(Formerly Aster Development Enterprises, Ltd.)
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1994, DECEMBER 31, 1993 (Eleven Months) and JANUARY 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31 December 31 January 31
1994 1993 1993
----------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $574,811 $(415,604) $(324,446)
Add (deduct) items not requiring use of cash
Depreciation and amortization 12,196 60,325 59,882
Forgiveness of accrued interest -0- (16,011) -0-
Gain on sale of equipment -0- (1,493) -0-
Forgiveness of debt -0- -0- -0-
Bad debts--employee advances -0- -0- 348
(Increase) decrease in accounts receivable (46,796) (193,413) 159,433
(Increase) decrease in inventories 7,350 (5,173) 26,186
(Increase) in advances to employees (23,227) (350) -0-
(Increase) in deferred and prepaid expenses (4,979) (10,032) -0-
Increase (decrease) in accounts payable 455,499 180,264 86,869
(Decrease) in customer deposits -0- -0- -0-
Increase in taxes payable, accrued wages,
and accrued interest 230,073 120,557 593
-------- --------- ---------
Net cash provided (used) from
operating activities 55,305 (280,930) 8,865
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment (142,611) (124,035) (6,997)
Deposit with State agencies -0- -0- -0-
Increase in other assets (5,144) -0- -0-
Increase in notes receivable (200) -0- -0-
Increase in deposits 385 (5,103) -0-
-------- --------- ---------
Net cash used from
investing activities (147,570) (129,138) (6,997)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of common stock -0- 339,800 -0-
Capital contribution from shareholders -0- 70,000 -0-
Loans from officers 149,763 -0- -0-
Proceeds from loans and notes payable 5,222 34,868 -0-
Payments on loans and notes payable (7,791) (41,127) (49,360)
-------- --------- ---------
Net cash provided (used) from
financing activities 147,194 403,541 (49,360)
-------- -------- ---------
NET (DECREASE) IN CASH 54,929 (6,527) (47,492)
CASH BALANCE AT BEGINNING OF YEAR (65,924) (59,397) (11,905)
-------- --------- ---------
CASH BALANCE AT END OF YEAR $(10,995) $ (65,924) $(59,397)
======== ========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
FINANCING ACTIVITIES
Issuance of common stock for services $ -0- $ -0- $ -0-
======== ======== =========
Conversion of loan payable to capital $ -0- $ 82,340 $ -0-
======== ======== =========
INTEREST PAID IN CASH $ -0- $ 67,231 $ 37,422
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 27
PAN ENVIRONMENTAL CORPORATION
(Formerly Aster Development Enterprises, Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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., 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. On 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) is 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 provides 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 provides technical environmental
management support to its operating companies. PAN's principal offices
are in Seattle, Washington.
Advantage Parking Lot Service, Inc. (incorporated in the State of
California on February 19, 1986) is engaged in the manufacturing and
sale of asphalt-based slurry sealants. The Company applies the slurry
sealants to asphalt surfaces, primarily parking lots. The Company also
has a tank cleaning operation which decontaminates portable commercial
lubricant tanks. The slurry-sealer manufacturing plant is located in
Fontana, California, and is in the process of undergoing a major
expansion. The Company has ten employees.
Northwest Specialties, Inc. (incorporated in 1993) reclaims timber
(poles, ties, etc.) and commodity metals, primarily from obsolete
railroad telecommunications and signaling systems. The Company operates
in the Midwest and Rocky Mountain regions of the United States, and
works on active and inactive railroad right-of-ways. The poles, other
wood products, and wiring are then sorted, graded and processed for
resale.
Northwest Specialties, Inc., currently is approximately fifty percent
complete on an 800 mile reclamation project in North Dakota for Canadian
Pacific Rail and has other smaller projects under contract. The
Company's activities are seasonal and are subject to weather-related
problems and delays. During 1993, the Company's operations were severely
disrupted by the major Midwest flood. the Company's work force is highly
variable, depending upon its workload and weather conditions. At the end
of 1993, the company employed its president, a part-time secretary and
two field staff at its Detroit Lakes, Minnesota headquarters. There was
maximum of ten employees in 1993.
-7-
<PAGE> 28
PAN ENVIRONMENTAL CORPORATION
(Formerly Aster Development Enterprises, Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND BASIS OF ACCOUNTING - continued
MRR Construction Services, Inc. (incorporated in 1992, but inactive
until 1993) performs environmental construction management and related
construction activities, as well as soil remediation, in Southern
California. At the end of 1993, the Company employed its president and a
project manager/superintendent. The majority of the contract work is
performed by subcontractors. Daily administrative support work is
currently provided by personnel at Advantage Parking Lot Services, Inc.
The statements of operations, changes in stockholders' equity and cash
flows for the years ended January 31, 1993 combine the financial
statements of Advantage Parking Lot Service, Inc. and Aster Development
Enterprises, Ltd. The statements of operations, changes in stockholders'
equity and cash flows for the eleven month period ended December 31,
1993 and the year ended December 31, 1994 include the financial
statements of PAN Environmental Corporation, Advantage Parking Lot
Services, Inc., Northwest Specialities, Inc., and MRR Construction
Services, Inc. The statement of financial position at January 31, 1993
combines the balance sheets of Advantage Parking Lot Service, Inc. and
Aster Development Enterprises, Ltd. The statement of financial position
at December 31, 1993 and December 31, 1994 includes the balance sheets
of PAN Environmental Corporation, Northwest Specialties, Inc., MRR
Construction Services, Inc. and Advantage Parking Lot Service, Inc.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Inventories are recorded at the lower of cost or market on a first-in,
first out basis.
Plant and equipment items are recorded at cost and depreciated on a
straight-line basis over their estimated useful lives.
Earnings (loss) per share are calculated on the number of shares
outstanding at year end.
NOTE 3 - LOANS FROM OFFICERS
Officers of the Company have loaned the Company various amounts on
short-term demand basis.
NOTE 4 - LONG-TERM DEBT
The Company has a long-term contract payable for the construction of a
batch plant for the production of various asphalt slurries. The original
balance of the contract payable was $31,620 and monthly payments are
$510.
On March 27, 1989, Advantage Parking Lot Services, Inc. borrowed
$300,000 from Frontier Bank in La Palma, California, under a Small
Business Administration guaranty. The loan requires a monthly payment of
$4,524 including interest at two and three-fourths percent above the low
New York prime rate as published in the Money Rate Section of the West
Coast Edition of the Wall Street Journal. The loan is scheduled to be
paid in full in March 1999 and is collateralized by a first lien on land
and improvements owned by the Company and located at 14388 Santa Ana
Avenue, Fontana, California, plus all equipment, furniture and fixtures,
accounts receivable and inventory.
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.
-8-
<PAGE> 29
PAN ENVIRONMENTAL CORPORATION
(Formerly Aster Development Enterprises, Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6 - STOCK OPTION PLAN
Three corporate officers have options to acquire a total of 1,325,000
shares of common stock at $2.00 per share. In addition, the Company has
allocated and plans to issue common stock options to employees totaling
250,000 shares and exercisable at $1.00 per share. All of the above
stock options expired on December 31, 1994 and were not exercised.
The Company has existing agreements to issue 2,350,000 shares of common
stock to corporate officers, directors and corporate consultants for
services provided and to other parties who made capital contributions.
The agreements provide for the issuance of these shares upon receipt by
the Company of aggregate equity financing in the amount of $4,000,000 or
more. The agreements provide for the issuance of shares as follows:
<TABLE>
<S> <C>
Corporate officers and directors 750,000
Corporate consultants for services 500,000
Other parties for capital contributions 1,100,000
---------
Total 2,350,000
=========
</TABLE>
All capital contributions were made prior to the March 4, 1993 plan of
reorganization. All shares issued under these agreements are subject to
Rule 144 of the Securities and Exchange Commission with respect to the
holding period by the shareholder along with other restrictions.
NOTE 7 - SUBSEQUENT EVENTS
All agreements and stock options in Note 6 above were cancelled pursuant
to a Settlement Agreement entered into in December 1995.
Pan divested itself of all three subsidiaries in January 1995 pursuant
to various agreements with the principals of those companies, and will
seek new acquisitions together with equity financing.
-9-
<PAGE> 1
Exhibit 10.1
PAN ENVIRONMENTAL CORPORATION
1994 STOCK OPTION PLAN
1. PURPOSE
This 1994 Stock Option Plan (the "Plan") is intended to be an incentive
and to encourage stock ownership by the key employees of PAN Environmental
Corporation (the "Company") or any of its subsidiary corporations (the
"Subsidiaries") as that term is defined in Section 425 of the Internal Revenue
Code of 1986, as amended (the "Code"), so that such employees may acquire or
increase their proprietary interest in the success of the Company, and so that
they may be encouraged to remain in the employ of the Company. It is further
intended that options issued pursuant to the Plan shall constitute either
incentive stock options within the meaning of Section 422 of the Code, or
nonqualified stock options, for federal income tax purposes, as designated by
the Compensation and Stock Option Committee of the Board of Directors (the
"Committee"). Further, the Committee may grant Stock Appreciation Rights
("SARs") to any optionee pursuant to the provisions of Sections 5 and 8 hereof.
2. ADMINISTRATION
The Plan shall be administered by the Compensation and Stock Option
Committee as appointed by the Board of Directors of the Company. The Committee
shall be comprised of not less than two Directors, none of whom has received a
discretionary grant or award under any stock plan of the Company during the one
year prior to serving on the Committee. The Board of Directors may from time to
time remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors;
provided, however, that any individual appointed to the Committee shall be a
Director who has not received a discretionary grant or award under any stock
plan of the Company during the one year prior to appointment to the Committee.
The Committee shall hold meetings at such times and places as it may determine.
If the Committee consists of three or more members, the Committee shall select
one of its members as Chairman. Acts by a majority of the Committee at a meeting
at which a quorum is present, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee. No person while a member of the Committee shall receive a
discretionary grant or award under any stock plan of the Company. The Committee
shall have, subject to, and within the limits of, the express provisions of the
Plan, the following powers:
(a) to designate which of the eligible persons shall be granted options
under the Plan, and the time or times when, and the number of shares for
which,
<PAGE> 2
an option or options shall be granted to each of them, and which of
them, shall also be granted SARs,
(b) to construe and interpret the Plan and options and SARs granted
under it, and to establish, amend, and revoke rules and regulations for
its administration. The Committee in the exercise of its power, may
correct any defect, or supply any omission in the Plan or in any option
agreement, in a manner and to the extent it shall be necessary or
expedient to make the Plan fully effective. The interpretation and
construction by the Committee of any provision of the Plan or of any
option or SAR granted under it shall be final. No member of the
Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any option granted thereunder; and
(c) to prescribe the terms and provisions of each option granted,
including whether the option is an incentive stock option or a
nonqualified stock option, which terms and provisions need not be
identical as to each option granted, and including whether or not SARs
are to be included in any option grant.
3. ELIGIBILITY
Any salaried employee or director of, and any consultant or advisor
rendering bona fide services to, the Company and any of its Subsidiaries
(including any Subsidiary acquired after adoption of this Plan) who in the
judgment of the Committee occupies a key position in which his efforts
contribute to the profit and growth of the Company or a Subsidiary may be
granted an option and, in the discretion of the Committee, may also be granted
SARs. An optionee may hold more than one option but only on the terms and
subject to the restrictions hereinafter set forth.
4. STOCK
The stock subject to options and SARs shall be shares of the Company's
authorized but unissued or reacquired common stock (hereinafter sometimes
called "Common Stock"). The aggregate number of shares which may be issued
under all options and SARs shall not exceed 3,500,000 shares of Common Stock.
The limitation established by the preceding sentence shall be subject to
adjustment as provided in Section 5(g) of this Plan. The Committee will
maintain records showing the cumulative total of all shares subject to options
outstanding under this Plan.
In the event that any outstanding option under the Plan for any reason
expires or is terminated, other than automatic termination on exercise of a
related SAR, the shares of Common Stock allocable to the unexercised portion of
such option may again be subject to an option under the Plan. If an option
expires by reason of the exercise of a related SAR, the shares of Common Stock
allocable to
2
<PAGE> 3
such expired option shall again be subject to an option under the plan if
permissible under Section 422 of the Code.
5. TERMS AND CONDITIONS OF OPTIONS
When the Committee shall have granted stock options to employees, Notices
of Grant of Stock Option shall be given to such employee in such form as the
Committee shall from time to time approve, which Notices shall comply with and
be subject to the terms and conditions set forth below and in Section 9 hereof.
A grant of an SAR in conjunction with the grant of an option shall also be
subject to the terms and conditions of Section 8 hereof.
(a) Number of Shares and Designation of Options. Each Notice of Grant of
Stock Option shall state the number of shares to which it pertains and
shall state clearly which portion, if any, of such option is intended to be
an incentive stock option and which portion, if any, of such option is
intended to be a nonqualified option, and shall also state if an SAR is
being granted in conjunction with all or any portion of such option. Such
designations shall be determined in the sole discretion of the Committee.
(b) Option Price. Each Notice of Grant of Stock Option shall state the
option price, which shall not be less than 100% of the fair market value of
the shares of Common Stock of the Company on the day of granting of the
option. Provided, however, that employees, consultants and advisors
eligible for compensation under the Plan shall may receive Common Stock or
options in lieu of compensation at a price of $0.001 per share for bona
fide services rendered to the Company. The fair market value of the Common
Stock shall be the closing bid price of the Common Stock on the NASDAQ
Bulletin Board, or such other exchange as the Committee shall from time to
time designate, on the day the option is granted.
(c) Medium and Time of Payment. The price for the exercise of an option
hereunder shall be payable in United States Dollars upon the exercise of
the option and may be paid in cash or by check. However, this provision
shall not preclude exercise of, or payment for, an option by the tender of
shares of Company stock already in the possession of the optionee making
the exercise.
(d) Term and Exercise of Options and SARs. Each Notice of Grant of Stock
Option shall state the date on which the option shall expire. No option
shall be exercisable after ten (10) years from the date on which it is
granted, unless extended by the Committee. Options may only be exercised by
an optionee for so long as he is employed by the Company except as
otherwise provided in Sections 5(e) and 5(f) of the Plan. An option or SAR
shall be
3
<PAGE> 4
exercised by the holder thereof providing written notice to the Company of
the decision to exercise.
Unless otherwise determined by the Committee, no option shall be
exercisable prior to six months from the date it is granted. Six months
after the date of the grant of the option, the optionee may exercise up to
50% of the option. One year after the date of the grant of the option, the
optionee may exercise the remaining 50% of the option or up to 100% of that
option if previously unexercised. However, the Committee may provide, in
the case or an option not immediately exercisable in full, for the
acceleration of the time at which the option may be exercised.
Not less than 100 shares may be purchased at any one time unless the number
purchased is the total number at the time purchasable under the option.
Except as specifically provided otherwise in this Plan, during the lifetime
of the optionee, the option shall be exercisable only by him and shall not
be assignable or transferable by him and no other person shall acquire any
rights therein. To the extent not exercised installments shall accumulate
and be exercisable in whole or in part, in any subsequent period but not
later than ten (10) years from the date the option is granted.
(e) Termination of Employment Except by Death, Disability, or Retirement.
In the event that the employment of an optionee by the Company or any
Subsidiary shall terminate for any reason, voluntary or involuntary, other
than his death, disability or retirement, then as of a date one year after
the optionee has notice of such termination (three (3) months for Incentive
stock options and Stock appreciation rights), such optionee shall have no
further right to exercise any option. Whether authorized leave of absence
or absence for military or governmental service shall constitute
termination of employment, for the purposes of the Plan, shall be
determined by the Committee, which determination shall be final and
conclusive.
(f) Retirement, Death or Permanent Disability of Optionee and Transfer of
Option. If the optionee shall retire, die or become permanently disabled
while in the employ of the Company or any Subsidiary and shall not have
fully exercised an option, the option may be exercised, subject to the
condition that no option shall be exercisable after the expiration of ten
(10) years from the date it is granted. To the extent that the optionee's
right to exercise such option had accrued pursuant to Section 5(d) of the
Plan at the time of his retirement, death or disability (as the case may
be) and had not previously been exercised, at any time within three (3),
twelve (12), and twelve (12) months after the optionee's retirement,
permanent disability or death (as the case may be) by the optionee or by
the executors or administrators of the optionee or by any person or persons
who shall have acquired the option directly from the optionee by bequest or
inheritance, respectively. The
4
<PAGE> 5
determination of whether a disability is permanent shall be made in the
sole discretion of the Committee.
No option shall be transferable by the optionee otherwise than by will or
the laws of descent and distribution.
(g) Recapitalization, Merger, etc. Subject to any required action by the
stockholders, the number of shares of Common Stock covered by the Plan and
by each outstanding option, and the price per share thereof in each such
option, shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock of the Company resulting from a
subdivision or consolidation of shares or the payment of a stock dividend
(but only on the Common Stock) or any other increase or decrease in the
number of such shares affected without receipt of consideration by the
Company.
Subject to any required action by the stockholders, if the Company shall be
the surviving corporation in any merger or consolidation, each outstanding
option shall pertain to and apply to the securities to which a holder of
the number of shares of Common Stock subject to the option would have been
entitled. A dissolution or liquidation of the Company or a merger or
consolidation in which the Company is not the surviving corporation, or a
sale of substantially all of the assets or all of the stock of the Company,
shall cause each outstanding option to terminate, provided that each
options shall, in such event, have the right immediately prior to such
dissolution, or liquidation, or sale, or merger or consolidation in which
the Company is not the surviving corporation, to exercise his option in
whole or in part without regard to the installment provisions of Section
5(d) of the Plan. Notwithstanding the above provisions, an option will not
terminate if assumed by the surviving or acquiring corporation, or its
parent, upon a merger or consolidation under circumstances which are not
deemed a modification of the option within the meaning of Sections 425(a)
and 425(h)(3)(A) of the Code.
In the event of a change in the Common Stock of the Company as presently
constituted, which is limited to a change in all of its authorized shares
with par value into the same number of shares with a different par value
or without par value, the shares resulting from any change shall be deemed
to be the Common Stock within the meaning of the Code.
To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive,
provided that each incentive stock option granted pursuant to this Plan
shall not be
5
<PAGE> 6
adjusted in a manner that causes such option to fail to continue to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
Except as hereinbefore expressly provided in this Section 5(g), the
optionee shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class or the payment of any stock dividend or any
other increase or decrease in the number of shares or stock of any class or
by reason of any dissolution, liquidation, sale, merger or consolidation
or spin-off of assets or stock of another corporation, and any issue by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of
Common Stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge
or to consolidate or to dissolve, liquidate or sell, or transfer all or any
part of its business or assets.
(h) Rights as a Stockholder. An optionee, or a transferee of an option
pursuant to the provisions of Section 5(f) of the Plan, shall have no
rights as a stockholder with respect to any shares covered by his option
until the date of exercise (that is, written notice of exercise and payment
therefor). No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the
date of exercise, except as provided in Section 5(g) hereof.
(i) Modification, Extension and Renewal of Options. Subject to the terms
and conditions and within the limitations of the Plan, the Committee may
modify, extend or renew outstanding options granted under the Plan, or
accept the surrender of outstanding options (to the extent not theretofore
exercised). Notwithstanding the foregoing, however, no modification of an
option shall, without the consent of the optionee, alter or impair any
rights or obligation, under any option theretofore granted under the Plan.
(j) Disqualifying Disposition. Any optionee who disposes of shares of
Common Stock acquired in the exercise of an incentive stock option by sale
or exchange either:
(i) within two years of the date of the grant of the option under
which the stock was acquired, or
(ii) within one year after the acquisition of such shares,
6
<PAGE> 7
shall notify the Company of such disposition and of the amount realized and
of his adjusted basis in such shares.
(k) Employment Agreement, Covenant Not to Compete. The Notice of Grant of
Stock Option may provide that, as a condition of the employee's acceptance
of the option, the employee shall agree to be bound by an employment
agreement and/or a covenant not to compete with the Company containing such
term as the Committee shall deem advisable.
(l) Other Provisions. The Notice of Grant of Stock Option shall contain
such other provisions, including, without limitation, restrictions upon the
exercise of the option or the transfer of the shares received upon an
exercise, as the Committee shall deem advisable. Any Notice of Grant of
Stock Option for an incentive stock option shall contain such limitations
and restrictions upon the exercise of the option as shall be necessary in
order that such option will be an "incentive stock option" as defined in
Section 422 of the Code or to conform to any change in the law.
6. INCENTIVE STOCK OPTIONS TO CERTAIN STOCKHOLDERS
Notwithstanding any other provision herein, in any incentive stock option
granted to an individual who, at the time the incentive stock option is granted,
possesses more than 10% of the total combined voting power of all classes of
stock of the Company (or of its parent, if any, or any Subsidiary corporation),
the incentive stock option price must be at least 110% of the fair market value
of the stock subject to the incentive stock option on the date such option is
granted and such incentive stock option by its terms must not be exercisable
after the expiration of five (5) years from the date such incentive stock option
is granted.
7
<PAGE> 8
7. ANNUAL LIMITATION PER EMPLOYEE
The aggregate fair market value (determined as of the time the option is
granted under the Plan) of the stock for which any employee may be granted
incentive stock options which are first exercisable in any calendar year (under
all such plans of his or her employer corporation and its parent and all
subsidiary corporations) shall not exceed $100,000.
8. GRANT AND EXERCISE OF STOCK APPRECIATION RIGHTS (SARs)
The grant and exercise of SARs granted in conjunction with an option
hereunder shall be governed by the following terms and conditions:
(a) The Committee may grant SARs in connection with all or part of any
option, incentive or nonqualified, granted under the Plan at the time of
the grant of the option.
(b) SARs entitle the holder of an option in connection with which such
SAR is granted, upon exercise of the SAR, to surrender the option, or any
applicable portion thereof, to the extent unexercised, and to receive a
number of shares, or cash or cash and shares determined pursuant to
subparagraph (iii) of paragraph (c) of this Section 5. The option shall,
to the extent so surrendered, thereafter cease to be exercisable.
(c) SARs shall be subject to the following terms and conditions and to
other terms and conditions not inconsistent with the Plan as shall from
time to time be approved by the Committee:
(i) SARs shall be exercisable at such time or times, and to the
extent, but only to the extent, that the option to which they
relate shall be exercisable.
(ii) SARs shall in no event be exercisable unless and until the
holder of the SAR has completed one year of continuous service
with the Company or a Subsidiary, or both, immediately following
the date upon which the SAR was granted.
(iii) Upon exercise of SARs, the holder shall be entitled to
receive a number of shares, or cash, or shares and cash, equal
in aggregate fair market value to the excess or the fair market
value per share on the date of such exercise over the option
price per share of the related option, multiplied by the
number of shares in respect of which the SARs have been exercised.
8
<PAGE> 9
(iv) Any exercise of SARs by any officer or director of the
Company, or by any person who is the beneficial owner of more
than ten percent of the Company's outstanding shares of Common
Stock, shall be made only during the period beginning on the
third business day following the date of release for publication
of quarterly and annual financial information by the Company and
ending on the twelfth business day following such date, except
where the exercise occurs on the automatic expiration date of the
related option.
(v) The Committee shall have complete authority either to
determine the form in which payment of the SAR will be made
(shares or cash or shares and cash) upon the exercise by any
officer or director, or by any person who is the beneficial
owner of more than ten percent of the Company's outstanding
shares of Common Stock, or to consent to or to disapprove of
such officer's, director's or person's election to receive cash
in full or partial settlement of his SARs.
(vi) A person who ceases to be an employee as a result of
retirement, disability or death may exercise up to 100% of any
option and/or related SARs within either the three, twelve or
twelve month periods, respectively, immediately following his
date of retirement, disability or death, as specified in Section
5(f), of the Plan, without regard to the waiting periods
specified in Section 5(d), provided that no option or stock
appreciation right shall be exercisable after the expiration of
its fixed term.
(vii) SARs may be exercised only when the underlying options are
eligible to be exercised, expire no later than the expiration of
the underlying option, and are transferable only when the
underlying options are transferable, and under the same
conditions.
(viii) SARs may be exercised only when the fair market value of
the stock subject to the options exceed the exercise price of
the options.
(d) To the extent that SARs shall be exercised in conjunction with
the grant of a nonqualified stock option, the option in connection
with the SAR shall be deemed to have terminated for a reason other
than the exercise thereof for the purpose of the maximum limitation
in the aggregate number of shares that may be delivered under this
Plan, and only the number of shares, if any, delivered on exercise of
the SARs shall be charged against the maximum number of shares which
may be granted and delivered under this Plan. To the extent permitted
under Section 422 of the Code, the provisions of the
9
<PAGE> 10
preceding sentence shall also apply to any grant of SARs in
connection with an incentive stock option.
9. GENERAL TERMS OF OPTION GRANTS AND SAR GRANTS
(a) All grants of options and/or SARs shall be subject to the
following provisions required under Rule 16b-3 of the Securities
Exchange Act of 1904 (the "Exchange Act") and the terms used herein
shall be interpreted in a manner consistent with Rule 16a-1, Rule
16b-3 and related rules as in effect from time to time.
(1) any equity security, as defined by the Exchange Act, offered
pursuant to the Plan to an optionee who is at the time subject
to Section 16 of the Exchange Act may not be sold for at least
six months after grant of the option pursuant to which the
equity security is acquired, except in case of death or
disability, and any optionee who acquires a derivative security
pursuant to the Plan and who is at the time subject to Section
16 of the Exchange Act must wait six months from the date or the
acquisition of the derivative security before selling the
underlying security, unless such sale or exercise is permissable
under the provisions of Rule 16b-3;
(ii) option grants and SAR grants which constitute derivative
securities shall not be transferable by an optionee except by
will or the laws of descent and distribution and shall be
exercisable during the optionee's lifetime only by such optionee
or his guardian or legal representative; provided, however, that
the Committee may determine that these restrictions on
transferability shall not apply to options or SARs granted to
any optionee who, at the time of the initial grant and the
transfer, is not subject to Section 16 or the Exchange Act.
However, the provisions of Section 422 of the Code shall
continue to apply to any grant of an option or SAR whether or
not Section 16 of the Exchange Act applies; and
(iii) other provisions of the Plan and any Notice of Grant of
Stock Option notwithstanding, if any decision regarding an
option or SAR or the exercise or any right by an optionee, at
any time such optionee is subject to Section 16 of the Exchange
Act, is required to be made or approved by the Committee in
order that the Plan will continue to meet the requirements of
Rule 16b-3 or in order that transaction by such optionee will be
exempt under Rule 16b-3, then the Committee shall retain full
and exclusive power and authority to make such decision or to
approve or disapprove any such decision by the optionee.
10
<PAGE> 11
(b) No Common Stock shall be issued and no cash shall be paid to an
optionee pursuant to the exercise of an option or SAR, respectively, in a
transaction subject to the registration requirements of the Securities Act
of 1933, or any state securities law or subject to a listing requirement
under any listing agreement between the Company and any national
securities exchange, and no grant of an option shall confer upon any
optionee rights to such delivery or distribution until such laws and
contractual obligations of the Company have been complied with in all
material respects. Any share certificate issued to evidence shares for
which an option is exercised may bear legends and statements that the
Committee shall deem advisable to assure compliance with Federal and state
laws and regulations.
(c) No option and no SAR shall be exercisable and no shares will be
delivered under this Plan except in compliance with all applicable Federal
and state laws and regulations including, without limitation, compliance
with withholding tax requirements.
(d) In the case of the exercise of an option or SAR by a person or estate
acquiring the right to exercise by bequest or inheritance, the Committee
may require reasonable evidence as to the ownership of the option or SAR
and may require consents and releases of taxing authorities that it may
deem advisable.
10. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date the Plan is adopted by the Board of
Directors.
11. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members or the Committee, the members of the Committee shall be
indemnified by the Company against the reasonable expenses, including
attorney's fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Committee member is
liable for gross negligence or intentional misconduct in the performance of his
duties; provided that within 80 days after institution of any such action, suit
or proceeding the Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
11
<PAGE> 12
12. AMENDMENT OF THE PLAN
The Board of Directors of the Company may, insofar as permitted by law,
from time to time, with respect to any shares at the time not subject to
options, suspend or discontinue the Plan or revise or amend it in any respect
whatsoever except that, without approval of the stockholders, no such revision
or amendment shall:
(a) Change the number of shares subject to the Plan, except as otherwise
provided in Section 5.
(b) Change the designation of the class of employee eligible to receive
options.
(c) Decrease the price at which options may be granted or change the
manner of determining the option price.
(d) Permit the grant of a SAR other than in connection with the grant of
an option.
(e) Permit the exercise of an SAR without the cancellation of the related
portion of the option.
(f) Change the provisions for determining the total number of shares or
amount of cash the Company shall deliver upon the exercise of an SAR.
(g) Assign the administration of the Plan otherwise than to a committee of
disinterested Directors.
(h) Permit any person while a member of the Committee or any other
committee of the Board of Directors administering the Plan to be eligible
to receive an option under the Plan or any other discretionary plan of the
Company.
(i) Amend the Plan in any manner that will cause options issued under it
to fail to meet the requirements of incentive stock options as defined in
Section 422 of the Code, where it is intended that such options qualify
for treatment as incentive stock options.
12
<PAGE> 13
13. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
pursuant to options will be used for general corporate purposes.
14. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee to
exercise such option.
15. APPROVAL OF STOCKHOLDERS
The Plan shall take effect as of August 4, 1994, the date of adoption by
the Board of Directors, contingent on the approval by a majority of the holders
of the outstanding shares of Common Stock of the Company.
16. CONTINUED EMPLOYMENT
Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part thereof, shall confer upon any
employee any right to continue in the employ of the Company or any Subsidiary,
or shall in any way affect the right and power of the Company to terminate the
employment of any employee or to alter the responsibilities, duties, or
authority of any employee, at any time with or without assigning a reason
therefor to the same extent as the Company might have done if the Plan had not
been adopted.
13
<PAGE> 1
Exhibit 16.1
[TERRENCE J. DUNNE, MBA, MST LETTERHEAD]
January 21, 1998
Securities and Exchange Commission
450 Fifth Street N.W.
Washington D.C. 20549
Gentlemen:
I have read the statements made by PAN Environmental Corporation, which I
understand will be filed with the Commission pursuant to Part II, Item 8 of
Form 10-KSB as part of the company's Form 10-KSB for the fiscal years ended
December 31, 1994, 1995, 1996 and 1997, and in the subsequent reports under the
Securities and Exchange Act of 1934, as amended. I agree with the statement
concerning my firm in the Form 10-KSB.
Sincerely,
/s/ TERRENCE J. DUNNE
- ---------------------------------
Terrence J. Dunne
Certified Public Accountant
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1994 FORM
10KSB/A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 1994 FORM 10KSB/A.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 682
<SECURITIES> 0
<RECEIVABLES> 268,694
<ALLOWANCES> 0
<INVENTORY> 8,149
<CURRENT-ASSETS> 292,536
<PP&E> 1,027,412
<DEPRECIATION> 499,093
<TOTAL-ASSETS> 838,452
<CURRENT-LIABILITIES> 1,545,965
<BONDS> 0
0
0
<COMMON> 1,263
<OTHER-SE> 642,497
<TOTAL-LIABILITY-AND-EQUITY> 838,452
<SALES> 166,728
<TOTAL-REVENUES> 1,163,120
<CGS> 996,392
<TOTAL-COSTS> 996,392
<OTHER-EXPENSES> 771,969
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,357
<INCOME-PRETAX> (574,811)
<INCOME-TAX> 0
<INCOME-CONTINUING> (605,241)
<DISCONTINUED> 0
<EXTRAORDINARY> 30,354
<CHANGES> 0
<NET-INCOME> (574,811)
<EPS-PRIMARY> (.455)
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