<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, 1995
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: 1,076,809 shares of common stock.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENT
PAN ENVIRONMENTAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN DOLLARS)
ASSETS
<TABLE>
<CAPTION>
As of As of
September 30 December 31
1995 1994
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $-0- $ 682
Accounts receivable, net of allowance
for doubtful accounts -0- 244,917
Inventory -0- 8,149
Employee advances -0- 23,577
Notes receivable -0- 200
Deferred and prepaid expenses -0- 15,011
---- ---------
Total current assets -0- 292,536
PROPERTY, PLANT AND EQUIPMENT
Land -0- 110,499
Plant and equipment -0- 916,913
Less accumulated depreciation -0- (499,093)
---- ---------
Net property, plant and equipment -0- 528,319
OTHER ASSETS
Loan fees, net of accumulated
amortization -0- 3,621
Deposits -0- 7,996
Deferred interest on lease -0- 5,980
---- ---------
Total other assets -0- 17,597
---- ---------
TOTAL ASSETS -0- $ 838,452
==== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
<PAGE> 3
PAN ENVIRONMENTAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN DOLLARS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
As of As of
September 30 December 31
1995 1994
------------ -------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable 512,295 838,383
Bank overdraft -0- 11,677
Accrued wages 58,000 243,118
Accrued interest -0- 10,783
Taxes payable 10,092 153,944
Judgment payable 200,909 -0-
Loans from officer 84,218 180,470
Notes payable 17,800 30,000
Current portion of long-term debt -0- 77,590
---------- -----------
Total current liabilities 883,314 1,545,965
---------- -----------
LONG-TERM DEBT, Net of current portion -0- 145,214
---------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
50,000,000 shares authorized;
1,263,142 shares issued and
outstanding at December 31, 1994,
1,076,809 issued and outstanding
at March 31, 1995 1,077 1,263
Additional paid-in capital 467,069 642,497
Accumulated deficit (1,351,460) (1,496,487)
-----------
Total stockholders' equity (883,314) (852,727)
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $-0- $ 838,452
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE> 4
PAN ENVIRONMENTAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
-------------------------- --------------------------
September 30 September 30 September 30 September 30
1995 1994 1995 1994
------- -------- --------- -----------
<S> <C> <C> <C> <C>
Sales and Service Revenue $-0- $ 55,127 -0- 1,090,862
------ -------- --------- -----------
Costs and Expenses
Materials, supplies and
operating expenses 1,811 (45,789) 76,693 1,638,631
Depreciation and amortization -0- 4,222 -0- 25,757
Interest and other debt
expense -0- 15,743 (6,959) 36,319
Taxes other than income taxes -0- 917 -0- 2,353
Income taxes -0- -0- -0- -0-
------ -------- --------- -----------
Total Costs and Expenses $1,811 $(24,907) $ 69,734 $ 1,704,060
------ -------- --------- -----------
Other Expense $-0- $-0- $(769,989) $-0-
------ -------- --------- -----------
Net Income (Loss) $1,811 $ 80,034 $(839,723) $ (612,198)
====== ======== ========= ===========
Net Income (Loss) per Common
Share (1) $ 0.00 $ (0.06) $ (0.78) $ (0.48)
====== ======== ========= ===========
Dividends per Common Share $-0- $-0- $-0- $-0-
====== ======== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Notes:
<S> <C> <C> <C> <C>
(1) Based on net income,
divided by average
number of common shares
outstanding of 1,076,809 1,263,281 1,076,809 1,263,281
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE> 5
PAN ENVIRONMENTAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the nine months ended
-----------------------------
September 30 September 30
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ (839,723) $ (612,198)
Adjustment to reconcile to net cash
operating activities:
Depreciation and amortization (499,093) 25,757
(Increase) decrease in working capital, net (374,187) 773,691
Accrued interest forgiven -0- -0-
----------- -----------
Net Cash From Operating Activities (1,713,003) 187,250
Cash Flow From Investment Activities:
Acquisition of cash, notes, contracts and
other assets 17,797 (1,023,578)
Acquisition of real estate -0- (6,226,971)
Purchases of plant and equipment 1,027,412 (143,581)
Divestiture of subsidiaries 809,322 -0-
----------- -----------
Net Cash Flow From Investing Activities 1,854,531 (7,394,130)
Cash Flow From financing Activities:
(Payment of) proceeds from debt (331,256) 4,104,203
Proceeds from issuance of common stock (186) -0-
Proceeds from issuance of preferred stock -0- 3,155,421
Capital contributions from shareholders -0- -0-
Proceeds from judgment payable 200,909 -0-
----------- -----------
Net Cash Used in Financing Activities (130,533) 7,259,624
Net (decrease) increase in cash and
cash equivalents 10,995 52,744
Cash and Cash Equivalents:
Beginning of period (10,995) -0-
----------- -----------
End of Period -0- $ 52,744
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5
<PAGE> 6
PAN ENVIRONMENTAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
NINE MONTHS PERIODS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
NOTE 1 - ORGANIZATION AND BASIS OF ACCOUNTING
The Company was organized as Jilly Bear & Company, Inc., under the
laws of the State of Delaware on February 13, 1986, for the primary
purpose of merchandising a line of plush soft sculpture teddy bears,
penguins, ducks and related motif items. The Company closed its retail
store, liquidated its remaining inventory and ceased operations in
March, 1988. On June 30, 1991, Nutec Transmission, Ltd., and Jilly
Bear merged into a resulting Texas corporation. Aster Development
Enterprises, Ltd., was organized as a private Texas corporation on
August 6, 1992. Following the rescission of the merger between Nutec
and Jilly Bear on June 1, 1992, Aster Development became the successor
of Jilly Bear and the vehicle for the continued corporate existence in
Delaware of the former Jilly Bear. Aster Development had been inactive
from June 1, 1992, until March, 1993.
On March 4, 1993, the name of the Company was changed from Aster
Development Enterprises, Ltd., to PAN Environmental Corporation and
the Company acquired all of the outstanding common stock of Northwest
Specialities, Inc. ("Northwest"), a Minnesota corporation; Advantage
Parking Lot Service, Inc. ("Advantage"), a California corporation; and
MRR Construction Services, Inc. ("MRR"), a California corporation. The
Company issued a total of 2,650,000 shares of common stock for the
acquisition of these three corporations in a reorganization accounted
for as a reverse acquisition, whereby the shareholders of a privately
owned corporation or corporations obtained controlling ownership
interest in a previously inactive or dormant public "shell"
corporation. On October 11, 1993, the directors of the Company and its
three affiliated companies agreed to reduce by 50% the number of
shares of common stock which was originally issued for the
acquisition. The net result of the shares of common stock issued in
the business combination was 1,325,000 shares. The Company changed its
fiscal year from January 31st to December 31st and reincorporated in
the State of Delaware.
The Company was in the business of acquiring and supervising the
operations of businesses engaged in the reclamation, remediation and
recycling of industrial waste materials and by-products. The Company
provided its affiliated operating companies with financing and
management services including accounting, planning, budgeting,
computer information systems, human resources management, contract
bonding and liability insurance. The Company also provided technical
environmental management support to its operating companies. The
Company's principal offices are in Shoreline, Washington.
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<PAGE> 7
Advantage (incorporated in the State of California on February 19,
1986) was engaged in the manufacturing and sale of asphalt-based
slurry sealants. Advantage applied the slurry sealants to asphalt
surfaces, primarily parking lots. Advantage also had a tank cleaning
operation which decontaminated portable commercial lubricant tanks.
The slurry-sealer manufacturing plant is located in Fontana,
California.
Advantage had ten employees.
Northwest (incorporated in 1993) reclaimed timber (poles, ties, etc.)
and commodity metals, primarily from obsolete railroad
telecommunications and signaling systems. Northwest operated in the
Midwest and Rocky Mountain regions of the United States, and worked on
active and inactive railroad right-of-ways. The poles, other wood
products, and wiring were then sorted, graded and processed for
resale.
MRR (incorporated in 1992, but inactive until 1993) performed
environmental construction management and related construction
activities, as well as soil remediation, in Southern California. MRR
employed a president and a project manager/superintendent. The
majority of the contract work was performed by subcontractors.
Pan divested itself of its three subsidiaries, Advantage, Northwest,
and MRR, effective January 2, 1995.
The statements of financial position, operations, changes in
stockholders' equity and cash flows for the year ended December 31,
1994 and the period ended September 30, 1994 included the financial
statements of PAN Environmental Corporation, Advantage, Northwest, and
MRR. The financial statements at September 30, 1995 include only the
financial statements of PAN Environmental Corporation with no
subsidiaries.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Inventories were recorded at the lower of cost or market on a
first-in, first out basis.
Plant and equipment items were recorded at cost and were depreciated
on a straight-line basis over their estimated useful lives.
Earnings (loss) per share were calculated on the number of shares
outstanding at the end of the year.
The accompanying notes are an integral part of these financial statements.
Page 7
<PAGE> 8
NOTE 3 - LOANS FROM OFFICERS
An officer of the Company has loaned the Company various amounts on a
short-term demand basis, which had a balance due of $84,218 as of
September 30, 1995.
NOTE 4 - NOTES PAYABLE
The Company owed a balance of $17,800 to Bristol Ltd., an investor in
the Company.
NOTE 5 - LONG-TERM DEBT
Advantage had 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 were $510.
On March 27, 1989, Advantage borrowed $300,000 from Frontier Bank in
La Palma, California, under a Small Business Administration guaranty.
The loan required 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 was scheduled to be paid in full in
March 1999 and was collateralized by a first lien on land and
improvements owned by Advantage and located at 14388 Santa Ana Avenue,
Fontana, California, plus all equipment, furniture and fixtures,
accounts receivable and inventory.
NOTE 6 - OTHER EXPENSE
The Company incurred other expenses as a result of recording losses
due to the divestiture of its three subsidiary companies in the amount
of $324,563. The Company also defaulted in a share repurchase
agreement with a stockholder of the Company, resulting in a default
judgment in the amount of $200,909. In addition, Kenneth Williams and
Robert Bickel sued MRR, a former subsidiary of the Company, and the
Company for alleged consulting fees owed for 1993 and 1994 and
obtained default judgments against the Company in the amounts of
$121,809 and $122,709 respectively.
NOTE 7 - 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
Page 8
<PAGE> 9
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 8 - 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 100,000
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 9 - SUBSEQUENT EVENTS
All agreements and stock options in Note 8 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.
Page 9
<PAGE> 10
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Attached hereto and incorporated herein by this reference are consolidated
unaudited financial statements for the quarter ending September 30, 1995.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FINANCIAL CONDITION AND RESULTS OF OPERATION
The consolidated results of operations for the quarter ending September 30, 1995
reflect an operating loss of $839,723 as compared to a loss of $612,198 for the
quarter ending September 30, 1994. Included in the $839,723 loss were the losses
recorded due to the divestiture of the three subsidiary companies in the amount
of $324,563. Also included in the $839,723 loss was the default by the Company
in a share repurchase agreement with a stockholder of the Company resulting in a
default judgment in the amount of $200,909. In addition, Kenneth Williams and
Robert Bickel sued MRR, a former subsidiary of the Company, and the Company for
alleged consulting fees owed for 1993 and 1994 and obtained default judgments
against the Company in the amounts of $121,809 and $122,709 respectively, which
is also included in the $839,723 loss.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was in a deficit position and current liabilities
far exceeded current assets due to the operations of its three subsidiary
companies in 1993 and 1994. Therefore, the Company divested itself of its three
subsidiaries leaving itself with no assets and $883,314 of debt. The Company is
working out settlement agreements to satisfy this debt.
Additional equity capital is essential to the Company's ability to maintain
ongoing operations. Therefore, the Company has plans to raise additional working
capital through equity financing and debt restructuring and through the
acquisition of companies having sufficient assets and cash flow to enable the
Company to be self-sufficient and profitable.
Page 10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
A lawsuit was filed against the Company for a default in a share repurchase
agreement with a shareholder of the Company. A default judgment was entered
against the Company in the amount of $200,909. In addition, Kenneth Williams and
Robert Bickel sued MRR, a former subsidiary of the Company, and the Company for
alleged consulting fees owed for 1993 and 1994 and obtained default judgments
against the Company in the amounts of $121,809 and $122,709 respectively.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON 8-K
(a) EXHIBITS:
Exhibit 27 Financial Data Schedule.
(b) REPORTS:
None.
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<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PAN Environmental Corporation
(Registrant)
Dated: December 31, 1997
/s/ Jerry Cornwell
- ---------------------------------
Jerry Cornwell
President & CEO
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPT 1995 -
FORM 10QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SEPT 1995 -
10QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 883,314
<BONDS> 0
0
0
<COMMON> 1,077
<OTHER-SE> 467,069
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,811
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,811)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,811)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,811)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> (.00)
</TABLE>
