<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
March 31, 1998
PAN ENVIRONMENTAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 91-1632888
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
19239 Aurora Avenue North
Shoreline, WA 98133-3930
(Address of principal executive offices)
(Zip Code)
(206) 546-9660
(Registrant's telephone number, including area code)
14424 SE 78th Way, Renton, WA 98059 (206) 623-8544
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Number of common shares outstanding as of the close of the period covered by
this report: 3,218,163 shares of common stock.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENT
PAN ENVIRONMENTAL CORPORATION
CONDENSED BALANCE SHEET
(IN DOLLARS)
ASSETS
<TABLE>
<CAPTION>
As of As of
March 31 December 31
1998 1997
------------ ------------
<S> <C> <C>
OTHER ASSETS
Settlement agreement - principals 360,000 360,000
Escrowed shares for debt, Millard account 225,000 225,000
------------ ------------
Total other assets 585,000 585,000
------------ ------------
TOTAL ASSETS $ 585,000 $ 585,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 228,101 $ 448,245
Taxes payable 18,795 18,795
Judgment payable 200,909 200,909
Accrued judgment interest 94,902 94,902
------------ ------------
Total current liabilities 542,707 762,851
============ ============
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
3,188,163 issued and outstanding
at December 31, 1997, and
3,218,163 issued and outstanding
at March 31, 1998 3,218 3,188
Additional paid-in capital 1,432,605 1,417,635
Accumulated deficit (1,393,530) (1,598,674)
------------ ------------
Total stockholders' equity 42,293 (177,851)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 585,000 $ 585,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PAN ENVIRONMENTAL CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three months ended
------------------------------
March 31 March 31
1998 1997
--------- ---------
<S> <C> <C>
Sales and Service Revenue $ -0- $ -0-
--------- ---------
Costs and Expenses
Materials, supplies and operating expenses 19,375 59,659
Interest and other debt expense -0- 47,451
Taxes other than income taxes -0- 10,918
--------- ---------
Total Costs and Expenses $ 19,375 $ 91,665
--------- ---------
Other Expense $ 5,000 -0-
--------- ---------
Net Income (Loss) $ (24,375) $ (91,665)
========= =========
Net Income (Loss) per Common Share (1) $ ( 0.01) $ ( 0.03)
========= =========
Dividends per Common Share $ -0- $ -0-
========= =========
Notes:
(1) Based on net income, divided by
average number of common shares
outstanding of 3,218,163 3,028,163
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PAN ENVIRONMENTAL CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three months ended
-------------------------------
March 31 March 31
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ (24,375) $ (91,665)
Adjustment to Retained Earnings 229,519
Adjustment to reconcile to net cash
operating activities:
(Increase) decrease in working capital, net -0- 57,665
--------- ---------
Net Cash From Operating Activities 205,144 (34,000)
Cash Flow From Investment Activities:
Acquisition of cash, notes, contracts and
other assets -0- -0-
--------- ---------
Net Cash Flow From Investing Activities -0- -0-
Cash Flow From financing Activities:
(Payment of) proceeds from debt (220,144) -0-
Proceeds from issuance of common stock 30 180
Capital contributions from shareholders 14,970 33,820
--------- ---------
Net Cash Used in Financing Activities (205,144) 34,000
Net (decrease) increase in cash and
cash equivalents -0- -0-
Cash and Cash Equivalents:
Beginning of period -0- -0-
End of Period -0- $ -0-
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
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PAN ENVIRONMENTAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENT
THREE MONTHS PERIODS ENDED MARCH 31, 1997 AND MARCH 31, 1996
NOTE 1 - ORGANIZATION AND BASIS OF ACCOUNTING
The Company was organized as Jilly Bear & Company, Inc., under the laws
of the State of Delaware on February 13, 1986, for the primary purpose
of merchandising a line of plush soft sculpture teddy bears, penguins,
ducks and related motif items. The Company closed its retail store,
liquidated its remaining inventory and ceased operations in March,
1988. On June 30, 1991, Nutec Transmission, Ltd., and Jilly Bear merged
into a resulting Texas corporation. Aster Development Enterprises,
Ltd., was organized as a private Texas corporation on August 6, 1992.
Following the rescission of the merger between Nutec and Jilly Bear on
June 1, 1992, Aster Development became the successor of Jilly Bear and
the vehicle for the continued corporate existence in Delaware of the
former Jilly Bear. Aster Development had been inactive from June 1,
1992, until March, 1993.
On March 4, 1993, the name of the Company was changed from Aster
Development Enterprises, Ltd., to PAN Environmental Corporation and the
Company acquired all of the outstanding common stock of Northwest
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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Advantage (incorporated in the State of California on February 19,
1986) was engaged in the manufacturing and sale of asphalt-based slurry
sealants. Advantage applied the slurry sealants to asphalt surfaces,
primarily parking lots. Advantage also had a tank cleaning operation
which decontaminated portable commercial lubricant tanks. The
slurry-sealer manufacturing plant is located in Fontana, California.
Advantage had ten employees.
Northwest (incorporated in 1993) reclaimed timber (poles, ties, etc.)
and commodity metals, primarily from obsolete railroad
telecommunications and signaling systems. Northwest operated in the
Midwest and Rocky Mountain regions of the United States, and worked on
active and inactive railroad right-of-ways. The poles, other wood
products, and wiring were then sorted, graded and processed for resale.
MRR (incorporated in 1992, but inactive until 1993) performed
environmental construction management and related construction
activities, as well as soil remediation, in Southern California. MRR
employed a president and a project manager/superintendent. The majority
of the contract work was performed by subcontractors.
The Company divested itself of its three subsidiaries, Advantage,
Northwest, and MRR, effective January 2, 1995.
In November and December 1995, the Company attempted to acquire oil and
gas properties in a business combination agreement with Maximum
Resources, Inc. ("Maximum"), a Vancouver Stock Exchange company, and
two other companies, NP Energy Corporation ("NP"), a U. S. over the
counter electronic bulletin board (OTCBB) company, and Polaris
Equities, Inc. ("Polaris"), a U. S. private company.
The form of business combination agreement would have taken the
following form: each of the above three oil and gas companies would set
up a U. S. subsidiary into which they would vend in selected oil and
gas properties. These three subsidiaries would then be acquired in a
reverse takeover transaction wherein the Company would issue 4,000,000
new restricted Rule 144 common shares each to Maximum, NP and Polaris
in exchange for acquiring one hundred percent (100%) of the issued and
outstanding common shares of their three U. S. subsidiaries.
Since the Company did not have the necessary funds to do its
accounting, audits, 10-Q's, 10-K's and legal work, Maximum, NP and
Polaris agreed to advance the necessary funds to complete the work. In
March and April 1996, Maximum, NP and Polaris defaulted on their
obligations to advance the necessary funds and the proposed business
combination agreements were never consummated.
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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Earnings (loss) per share were calculated on the number of shares
outstanding at the end of the year.
NOTE 3 - ISSUANCE/SALES OF STOCK
The Company issued 30,000 additional shares of restricted Rule 144
common stock for $15,000 of services rendered incident to the Williams
and Bickel settlements for a total of 80,000 shares instead of 50,000
shares to consummate the settlement.
The shares issued during the first quarter of 1998 were issued for a
stated value of $0.50 per share.
NOTE 4 - 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
and/or debt financing and through the acquisition of companies having
sufficient assets and cash flow to enable the Company to be self-
sufficient and profitable.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Attached hereto and incorporated herein by this reference are unaudited
financial statements for the quarter ending March 31, 1998.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FINANCIAL CONDITION AND RESULTS OF OPERATION
The results of operations for the quarter ending March 31, 1998 reflect an
operating loss of $24,375 as compared to a loss of $91,665 for the quarter
ending March 31, 1997. Included in the $24,375 loss were the $15,000 in losses
recorded due to shares issued for consulting fees incident to the Williams and
Bickel settlements and increased accounts payable amounts due to operating
expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was in a deficit position with current liabilities
of $776,453 and no current assets due to the divestiture of its three
subsidiaries in 1995. The Company is working out settlement agreements to
satisfy this debt.
Additional equity capital is essential to the Company's ability to maintain
ongoing operations. Therefore, the Company has plans to raise additional working
capital through equity financing and debt restructuring and through the
acquisition of companies having sufficient assets and cash flow to enable the
Company to be self-sufficient and profitable.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
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
On February 20, 1998, PAN reached an agreement in principle to acquire Winner's
Way, Inc., an offshore race and sports book, subject to review and approval of
the financial statements of Winner's Way, Inc. by the Board of Directors of PAN.
After careful consideration, the Directors of PAN decided that such acquisition
would not be in PAN's best interests.
Alternatively, on May 22, 1998, PAN Environmental Corporation, a Delaware
Corporation ("PAN"), acquired all of the issued and outstanding capital stock of
Whitfield Holdings, Ltd., an Antigua, West Indies corporation ("Whitfield"),
pursuant to an Agreement and Plan of Business Combination, effective as of April
17, 1998, in exchange for a maximum of 12,800,000 shares of common stock of PAN,
subject to earn-out provisions. The amount of common stock payable by PAN to
Whitfield is subject to earn-out provisions based on the achievement of certain
betting volume, resulting in licensing fees to Whitfield, over a one year
period. The amount and type of consideration was determined on the basis of
negotiations between PAN and Whitfield.
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ITEM 6 - EXHIBITS AND REPORTS ON 8-K
(A) EXHIBITS:
None.
(B) REPORTS:
None.
The accompanying notes are an integral part of these financial statements.
Page 10
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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: May 15, 1998
/s/ JERRY CORNWELL
- ---------------------------------
Jerry Cornwell
President & CEO
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH
1998 - FORM 10 QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
MARCH 1998 - FORM 10 QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 542,707
<BONDS> 0
0
0
<COMMON> 3,218
<OTHER-SE> 1,432,605
<TOTAL-LIABILITY-AND-EQUITY> 585,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (24,375)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,375)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,375)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
