<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
................................................................................
For the Quarter Ended Commission File Number: 0-19471
June 30, 1998
PAN ENVIRONMENTAL CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 91-1632888
- -------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
19239 Aurora Avenue North
Shoreline, WA 98133-3930
-------------------------
(Address of principal executive offices)
(Zip Code)
(206) 546-9660
--------------
(Registrant's telephone number, including area code)
14424 SE 78th Way, Renton, WA 98059 (206) 623-8544
--------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Number of common shares outstanding as of the close of the period covered by
this report: 7,268,163 shares of common stock.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENT
PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY
WHITFIELD HOLDINGS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN DOLLARS)
ASSETS
<TABLE>
<CAPTION>
As of As of
June 30 December 31
1998 1997
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash in Bank $ 91,688 $ -0-
----------- ------------
Total Current Assets 91,688 -0-
FIXED ASSETS
Gaming System-Hardware 47,030 -0-
Gaming System-Software 432,970 -0-
----------- ------------
Total Fixed Assets 480,000 -0-
OTHER ASSETS
Settlement agreement - principals 360,000 360,000
Escrowed shares for debt, Millard account 225,000 225,000
Investment-Whitfield Holdings 3,200,000 -0-
Investment-Whitfield/Unearned (3,140,421) -0-
----------- ------------
Total other assets 644,579 585,000
----------- ------------
TOTAL ASSETS $ 1,216,267 $ 585,000
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
<PAGE> 3
PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY
WHITFIELD HOLDINGS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN DOLLARS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 287,501 $ 448,245
Loans Payable 429,230 -0-
Taxes payable 18,795 18,795
Judgment payable 200,909 200,909
Accrued judgment interest 94,902 94,902
----------- -----------
Total current liabilities 1,031,337 762,851
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
3,188,163 issued and outstanding
at December 31, 1997, and
7,268,163 issued and outstanding
at June 30, 1998 7,268 3,188
Additional paid-in capital 4,754,356 1,417,635
Common Stock-Unearned Escrow (3,140,421) -0-
Accumulated deficit (1,436,273) (1,598,674)
----------- -----------
Total stockholders' equity 184,930 (177,851)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,216,267 $ 585,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE> 4
PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY
WHITFIELD HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
------------------------ ---------------------------
June 30 June 30 June 30 June 30
1998 1997 1998 1997
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Sales and Service Revenue $ 37,090 $ -0- $ 37,090 $ -0-
----------- ---------- ----------- -----------
Costs and Expenses
Materials, supplies and
operating expenses 79,832 -0- 99,207 33,296
Interest and other debt expense -0- -0- -0- 47,451
Taxes other than income taxes -0- -0- -0- 10,918
----------- ---------- ----------- -----------
Total Costs and Expenses $ 79,832 $ -0- $ 99,207 $ 91,665
----------- ---------- ----------- -----------
Other Expense $ -0- $ -0- $ 5,000 $ 91,665
----------- ---------- ----------- -----------
Net Income (Loss) $ (42,742) $ -0- $ (67,117) $ (91,665)
=========== ========== =========== ===========
Net Income (Loss) per Common
Share (1) $ (0.01) $ 0.00 $ (0.01) $ (0.03)
=========== ========== =========== ===========
Dividends per Common Share $ -0- $ -0- $ -0- $ -0-
=========== ========== =========== ===========
Notes:
(1) Based on net income,
divided by number common
shares outstanding of 7,268,163 3,028,163 7,268,163 3,028,163
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE> 5
PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY
WHITFIELD HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the six months ended
-------------------------
June 30 June 30
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ (67,117) $ (91,665)
Adjustment to Retained Earnings 229,518
Adjustment to reconcile to net cash
operating activities:
(Increase) decrease in working capital, net (160,744) 57,665
--------- ---------
Net Cash From Operating Activities 1,657 (34,000)
Cash Flow From Investment Activities:
Acquisition of cash, notes, contracts and
other assets 539,579 -0-
--------- ---------
Net Cash Flow From Investing Activities 539,579 -0-
Cash Flow From financing Activities:
(Payment of) proceeds from debt 429,230 -0-
Proceeds from issuance of common stock 4,080 180
Capital contributions from shareholders 196,300 33,820
--------- ---------
Net Cash Used in Financing Activities 629,610 34,000
Net (decrease) increase in cash and
cash equivalents 91,688 -0-
Cash and Cash Equivalents:
Beginning of period -0- -0-
--------- ---------
End of Period $ 91,688 $ -0-
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5
<PAGE> 6
PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY, WHITFIELD HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
SIX MONTHS PERIODS ENDED JUNE 30, 1998 AND JUNE 30, 1997
NOTE 1 - ORGANIZATION AND BASIS OF ACCOUNTING
The Company was organized as Jilly Bear & Company, Inc., under the laws of
the State of Delaware on February 13, 1986, for the primary purpose of
merchandising a line of plush soft sculpture teddy bears, penguins, ducks
and related motif items. The Company closed its retail store, liquidated
its remaining inventory and ceased operations in March, 1988. On June 30,
1991, Nutec Transmission, Ltd., and Jilly Bear merged into a resulting
Texas corporation. Aster Development Enterprises, Ltd., was organized as a
private Texas corporation on August 6, 1992. Following the rescission of
the merger between Nutec and Jilly Bear on June 1, 1992, Aster Development
became the successor of Jilly Bear and the vehicle for the continued
corporate existence in Delaware of the former Jilly Bear. Aster Development
had been inactive from June 1, 1992, until March, 1993.
On March 4, 1993, the name of the Company was changed from Aster
Development Enterprises, Ltd., to PAN Environmental Corporation and the
Company acquired all of the outstanding common stock of Northwest
Specialities, Inc. ("Northwest"), a Minnesota corporation; Advantage
Parking Lot Service, Inc. ("Advantage"), a California corporation; and MRR
Construction Services, Inc. ("MRR"), a California corporation. The Company
issued a total of 2,650,000 shares of common stock for the acquisition of
these three corporations in a reorganization accounted for as a reverse
acquisition, whereby the shareholders of a privately owned corporation or
corporations obtained controlling ownership interest in a previously
inactive or dormant public "shell" corporation. On October 11, 1993, the
directors of the Company and its three affiliated companies agreed to
reduce by 50% the number of shares of common stock which was originally
issued for the acquisition. The net result of the shares of common stock
issued in the business combination was 1,325,000 shares. The Company
changed its fiscal year from January 31st to December 31st and
reincorporated in the State of Delaware.
The Company was in the business of acquiring and supervising the operations
of businesses engaged in the reclamation, remediation and recycling of
industrial waste materials and by-products. The Company provided its
affiliated operating companies with financing and management services
including accounting, planning, budgeting, computer information systems,
human resources management, contract bonding and liability insurance. The
Company also provided technical environmental management support to its
operating companies. The Company's principal offices are in Shoreline,
Washington.
Page 6
<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.
The Company divested itself of its three subsidiaries, Advantage,
Northwest, and MRR, effective January 2, 1995.
In November and December 1995, the Company attempted to acquire oil and gas
properties in a business combination agreement with Maximum Resources, Inc.
("Maximum"), a Vancouver Stock Exchange company, and two other companies,
NP Energy Corporation ("NP"), a U. S. over the counter electronic bulletin
board (OTCBB) company, and Polaris Equities, Inc. ("Polaris"), a U. S.
private company.
The form of business combination agreement would have taken the following
form: each of the above three oil and gas companies would set up a U. S.
subsidiary into which they would vend in selected oil and gas properties.
These three subsidiaries would then be acquired in a reverse takeover
transaction wherein the Company would issue 4,000,000 new restricted Rule
144 common shares each to Maximum, NP and Polaris in exchange for acquiring
one hundred percent (100%) of the issued and outstanding common shares of
their three U. S. subsidiaries.
Since the Company did not have the necessary funds to do its accounting,
audits, 10-Q's, 10-K's and legal work, Maximum, NP and Polaris agreed to
advance the necessary funds to complete the work. In March and April 1996,
Maximum, NP and Polaris defaulted on their obligations to advance the
necessary funds and the proposed business combination agreements were never
consummated.
Page 7
<PAGE> 8
The Company raised $40,000 in December 1996 in a small private placement
from shareholders of the company and proceeded to complete its accounting,
audits, 10-Q's and 10-K's for December 31, 1994 through December 31,1997,
thus bringing the Company into SEC compliance on February 22, 1998.
The Company in January 1998 sought to enter into a letter of intent to
acquire an Internet services company, but the letter of intent was never
consummated.
On February 20, 1998 the Company reached an agreement in principle to
acquire Winner's Way, Inc., an offshore race and sports book, subject to
review and approval of the financial statements of Winner's Way, Inc. by
the Board of Directors of the Company. After careful consideration, the
company's Directors decided that such acquisition would not be in the
Company's best interests.
On May 22, 1998 the Company acquired Whitfield Holdings, Ltd., an Antiguan
corporation, in the business of purchasing and licensing-back gaming
systems from legally licensed offshore race and sports books. Whitfield's
initial licensee is Tropical International Sports, Inc., an Antiguan
corporation, legally licensed as an Antiguan race and sports book.
On June 30, 1998 the Company acquired and licensed-back the gaming system
from Way Communications Race and Sports Book and moved it to Antigua on
July 17, 1998 to be operated by Tropical International Sports, Inc. The
purchase price was $380,000, the terms for which were $160,000 down and a
non-interest bearing note for the balance payable at $10,000 per month.
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
Effective May 23, 1998 the Company issued 3,200,000 shares of restricted
Rule 144 common stock to the shareholders of Whitfield Holdings, Ltd.
("Whitfield") in exchange for 10,000 shares of $10 par value common stock
of Whitfield (100%).
The Company issued the shares into escrow (Louis M. Minicozzi III, Esq.,
Escrow Agent) to be released on a quarterly performance basis based on
Whitfield's licensee, Tropical International Sports, Inc., achieving
$83,000,000 or portion thereof in gross annual betting volume. Whitfield's
license agreement provides that Tropical pays 2.4% of its gross annual
betting volume to Whitfield as a license fee,
Page 8
<PAGE> 9
which would equal $1,992,000 in license fees to Whitfield should Tropical
achieve its initial annual goal of $83,000,000 in gross annual betting
volume. If this occurs, the 3,200,000 shares, or portion thereof, of
restricted Rule 144 common stock would be considered to have been earned
out and, therefore, will be distributed to the Whitfield shareholders.
In addition, effective May 23 1998, the Company issued 800,000 shares of
restricted Rule 144 common stock to TCKTS, L.L.C. dba Bristol Media, Ltd.
for consulting services incident to the Company's acquisition of Whitfield
Holdings, Ltd.
In May 1998 the Company issued 50,000 shares of its restricted Rule 144
common stock for $25,000 pursuant to a private placement in the State of
New York.
In addition, the Company filed and is conducting a 506 Regulation D private
offering in the State of New York. The offering consists of convertible
notes, of which $341,250 had been received and convertible notes issued as
of June 30, 1998.
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.
Page 9
<PAGE> 10
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Attached hereto and incorporated herein by this reference are unaudited
consolidated financial statements for the quarter ending June 30, 1998.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
FINANCIAL CONDITION AND RESULTS OF OPERATION
The results of operations for the quarter ending June 30, 1998 reflect an
operating loss of $67,117 as compared to a loss of $91,665 for the quarter
ending June 30, 1997. Included in the $67,117 loss were $37,090 of revenues; and
expenses of $63,247 in professional fees; $18,199 in investor relations fees and
expenses; $10,092 in SEC electronic filing expense; $5,603 in travel expenses
and $2,066 in office expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was in a deficit position with current liabilities
of $1,031,337 and current assets of $91,668 due to the divestiture of its three
subsidiaries in 1995 (the Company is working out settlement agreements to
satisfy this debt); due to the issuance of $341,250 of convertible notes; and
due to the issuance of a $220,000 note for the acquisition and license-back of a
gaming system for a legally licensed offshore race and sports book.
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
None.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
Effective May 23, 1998 the Company issued 3,200,000 shares of restricted Rule
144 common stock to the eleven shareholders of Whitfield Holdings, Ltd. into
escrow in exchange for 10,000 shares of $10 par value common stock of Whitfield
Holdings, Ltd. (100%). The shares were issued pursuant to an exemption under
Section 4.2 of the Act as a non-public offering.
Effective May 23,1998 the Company issued 800,000 shares of restricted Rule 144
common stock to several consultants for consulting services rendered incident to
the acquisition of Whitfield Holdings, Ltd. The shares were issued pursuant to
an exemption under Section 4.2 of the Act as a non-public offering.
In May 1998 the Company issued 50,000 shares of its restricted Rule 144 common
stock to a private investor for $25,000 pursuant to a private placement in New
York State. The shares were issued pursuant to Rule 506 under Regulation D and
pursuant to an exemption under section 4.2 of the Act as a non-public offering.
The Company issued $341,250 of convertible notes to several private investors,
$85,000 of which are convertible into restricted Rule 144 common stock at $0.50
per share and $256,250 of which are convertible into restricted Rule 144 common
stock at $0.75 per shares. Therefore, if the notes are converted into common
stock the Company would issue 170,000 shares of restricted Rule 144 common stock
at $0.50 per share and 341,667 shares of restricted Rule 144 common stock at
$0.75 per share. The notes were issued pursuant to Rule 506 under Regulation D
and pursuant to an exemption under Section 4.2 of the Act as a non-public
offering.
The $25,000 and $341,250 were used as working capital by Whitfield, the
Company's wholly owned subsidiary, to acquire additional race and sports book
gaming systems.
No underwriting discounts or commissions were paid on any of the above issuances
of stock or notes.
Page 11
<PAGE> 12
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On Tuesday, May 19, 1998 the annual meeting of shareholders was held upon
properly given and timely notice to all shareholders. The shareholders of the
Company adopted resolutions ratifying the actions of the directors of the
Company in filing all necessary reports with the SEC; in securing debt
settlements with the creditors of the company; and in the acquisition of
Whitfield Holdings, Ltd.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON 8-K
(a) EXHIBITS:
None.
(b) REPORTS:
10.1 Agreement and Plan of Business Combination by and between PAN and
Whitfield dated as of April 17, 1998 with attachments:
Exhibit A - Gaming System License Agreement
Exhibit B - Escrow Agreement for Acquisition of Whitfield
Holdings, Ltd. by PAN Environmental Corporation
Exhibit C - Merger and Acquisition Consulting Agreement
Exhibit D - Financial Consulting Agreement
Page 12
<PAGE> 13
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: September 16, 1998
/s/ JERRY CORNWELL
- ---------------------------------
Jerry Cornwell
President & CEO
Page 13
<PAGE> 14
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1998 AND
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<PAGE> 15
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Statement of Financial Position at
June 30, 1998, December 31, 1997, and December 31, 1996 1
Consolidated Statement of Operations for the Period
Ended June 30, 1998 and for the Years Ended December 31,
1997 and December 31, 1996 2
Consolidated Statement of Cash Flows for the Period
Ended June 30, 1998 and for the Years Ended December 31,
1997 and December 31, 1996 3
Consolidated Statement of Changes in Stockholders'
Equity for the Period Ended June 30, 1998 and for the
Years Ended December 31, 1997 and December 31, 1996 4-5
Notes to Consolidated Financial Statements 6-9
</TABLE>
<PAGE> 16
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
JUNE 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
6/30/98 12/31/97 12/31/96
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash in Bank $ 91,688 $ -0- $ -0-
----------- ----------- -----------
Total Current Assets 91,688 -0- -0-
FIXED ASSETS
Gaming System-Hardware (Note 1) 47,030 -0- -0-
Gaming System-Software (Note 1) 432,970 -0- -0-
----------- ----------- -----------
Total Fixed Assets 480,000 -0- -0-
OTHER ASSETS
Settlement Agreement-principals 360,000 360,000 360,000
Escrowed shares for debt,
Millard account 225,000 225,000 225,000
Investment-Whitfield Holdings
(Note 4) 3,200,000 -0- -0-
Investment-Whitfield/Unearned
(Note 4) (3,140,421) -0- -0-
----------- ----------- -----------
Total Other Assets 644,579 585,000 585,000
----------- ----------- -----------
TOTAL ASSETS $ 1,216,267 $ 585,000 $ 585,000
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable (Note 3) $ 287,501 $ 448,245 $ 451,633
Loans Payable (Notes 1, 7) 429,230 -0- -0-
Taxes payable 18,795 18,795 18,795
Judgment payable (Note 3) 200,909 200,909 200,909
Accrued judgment interest
(Note 3) 94,902 94,902 47,451
----------- ----------- -----------
Total Current Liabilities $ 1,031,337 $ 762,851 $ 718,788
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value;
50,000,000 shares authorized;
2,848,163 shares issued and
outstanding at December 31,
1996; 3,188,163 shares at
December 31, 1997; and
7,268,163 shares at June
30, 1998 7,268 3,188 2,848
Additional paid-in capital 4,754,356 1,417,635 1,343,976
Common Stock-Unearned Escrow
(Note 4) (3,140,421) -0- -0-
Accumulated Deficit (1,436,273) (1,598,674) (1,480,612)
----------- ----------- -----------
Total Stockholders' Equity 184,930 (177,851) (133,788)
----------- ----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 1,216,267 $ 585,000 $ 585,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-1-
<PAGE> 17
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD ENDED
JUNE 30, 1998 and YEARS ENDED DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Interim
Period Ended Year Ended Year Ended
6/30/98 12/31/97 12/31/96
-------- --------- ---------
<S> <C> <C> <C>
REVENUE $ 37,090 $ -0- $ -0-
COST OF SALES -0- -0- -0-
-------- --------- ---------
GROSS PROFIT (LOSS) 37,090 -0- -0-
-------- --------- ---------
OPERATING EXPENSES
Professional fees 63,247 58,690 61,541
Investor relations expense 3,199 -0- -0-
Investor relations fees 15,000 -0- -0-
SEC electronic filing expense 10,092 -0- -0-
Interest -0- 47,451 47,451
Travel 5,603 -0- -0-
Taxes and licenses -0- 10,918 8,703
Telephone -0- -0- -0-
Office 1,810 3,238 -0-
Bank charges 256
Postage and delivery -0- 154 -0-
-------- --------- ---------
Total Operating Expenses $ 99,207 $ 120,451 $ 117,695
-------- --------- ---------
(LOSS) FROM OPERATIONS (62,117) (120,451) (117,695)
-------- --------- ---------
OTHER EXPENSE (Note 6) (5,000) -0- -0-
OTHER INCOME -0- 2,389 -0-
PROVISION FOR INCOME TAX -0- -0- -0-
NET INCOME (LOSS) $(67,117) $(118,062) $(117,695)
======== ========= =========
NET INCOME (LOSS) PER SHARE $ (.009) $ (.037) $ (.041)
======== ========= =========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-2-
<PAGE> 18
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDING
JUNE 30, 1998 and YEARS ENDED DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Interim
Period Ended Year Ended Year Ended
6/30/98 12/31/97 12/31/96
--------- ----------- ---------
<S> <C> <C> <C>
Cash Flows From
Operating Activities:
Net (Loss) $ (67,117) $ (118,062) $(117,695)
--------- ----------- ---------
Adjustments to Reconcile
Net Loss to Net Cash
Provided by Operating Activities
Net Cash Provided by
Operating Expenses:
Increase (Decrease) In:
Accounts payable (160,744) (3,388) (54,119)
Taxes payable, accrued
wages, accrued interest -0- 47,451 (1,846)
Adjustment to retained earnings 229,518 -0- -0-
--------- ----------- ---------
Net Cash Provided by
Operating Activities: 1,657 (73,999) (173,660)
--------- ----------- ---------
Cash Flows From
Investing Activities:
Increase in fixed assets 480,000 -0- -0-
Increase in other assets 59,579 -0- 585,000
--------- ----------- ---------
Net Cash Used In
Investing Activities: 539,579 -0- 585,000
--------- ----------- ---------
Cash Flows From
Financing Activities:
Proceeds from sale of common stock 4,080 340 1,721
Capital contribution from shareholders 196,300 73,659 858,957
Loans from officers -0- -0- (84,218)
(Payment of) proceeds from debt 429,230 -0- (17,800)
--------- ----------- ---------
Net Cash Received From
Financing Activities: 629,610 73,999 (758,060)
--------- ----------- ---------
NET INCREASE (DECREASE) IN CASH 91,688 -0- -0-
Cash Beginning of Periods -0- -0- -0-
--------- ----------- ---------
Cash End of Periods $ 91,688 $ -0- $ -0-
========= =========== =========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-3-
<PAGE> 19
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD ENDED
JUNE 30, 1998 and YEARS ENDED DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid In Accumulated
Shares Amount Capital Deficit Totals
--------- ------ -------- ---------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 1,126,809 1,127 485,019 (1,362,917) (876,771)
Common stock issued at $0.50
per share for services 116,000 116 57,884 -0- 58,000
Common stock issued at $0.50
per share for services 31,318 31 15,629 -0- 15,660
Common stock issued at $0.50
per share in settlement of
promissory note representing
a cash loan 168,436 168 84,050 -0- 84,218
Common stock issued at $0.50
per share for: settlement of
$17,800 promissory note
representing a cash loan,
and $60,000 for services 155,600 156 77,644 -0- 77,800
Common stock issued at $0.50
per share into escrow for
settling the Company's debt 450,000 450 224,550 -0- 225,000
Common stock issued at $0.50
per share for: 80,000 shares
for services, 720,000 shares
for settlement with Company
principals and affiliates 800,000 800 339,200 -0- 400,000
Net (loss) for the period
ended December 31, 1996 -0- -0- -0- (117,695) (117,695)
--------- ----- --------- ---------- --------
BALANCE, DECEMBER 31, 1996 2,848,163 2,848 1,343,976 (1,480,612) (133,788)
Common stock issued at $0.50
per share to C. M. Johnston
for consulting services re:
Williams and Bickel 50,000 50 24,950 -0- 25,000
Common stock issued to
Bristol Media, Ltd. re:
Douthwaite settlement 130,000 130 8,870 -0- 9,000
Common stock issued to
Stephen M. Roake IRA for
payment of accounting, audit
and transfer agent fees 60,000 60 14,940 -0- 15,000
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-4-
<PAGE> 20
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD ENDED
JUNE 30, 1998 and YEARS ENDED DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid In Accumulated
Shares Amount Capital Deficit Totals
--------- ----- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Common stock issued to
Bristol Media, Ltd. for
payment of accounts payable,
audit and legal 100,000 100 24,900 -0- 25,000
Net (loss) for the period
ended December 31, 1997 -0- -0- -0- (118,062) (118,062)
--------- ----- --------- ---------- --------
BALANCE, DECEMBER 31, 1997 3,188,163 3,188 1,417,635 (1,598,674) (177,851)
Common stock issued at $0.50
per share to consummate
settlement re: Williams
and Bickel 30,000 30 14,970 -0- 15,000
Adjustment to retained
earnings -0- -0- -0- 229,518 229,518
Common stock issued at $1.00
per share into escrow
(earned portion only) for
acquisition of Whitfield
Holdings, Ltd. 3,200,000 3,200 156,380 -0- 159,580
Common stock issued for
services rendered incident
to the acquisition of
Whitfield Holdings, Ltd. 800,000 800 -0- -0- 800
Common stock issued at $0.50
per share in New York
private placement 50,000 50 24,950 -0- 25,000
Net (loss) for the period
ended June 30, 1998 -0- -0- -0- (67,117) (67,117)
--------- ----- --------- ---------- --------
BALANCE, JUNE 30, 1998 7,268,163 7,268 1,613,935 1,436,273 184,930
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-5-
<PAGE> 21
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1. Organization and Basis of Accounting
The Company was organized as Jilly Bear & Company, Inc., under the laws of the
State of Delaware on February 13, 1986, for the primary purpose of merchandising
a line of plush soft sculpture teddy bears, penguins, ducks and related motif
items. The Company closed its retail store, liquidated its remaining inventory
and ceased operations in March, 1988. On June 30, 1991, Nutec Transmission,
Ltd., and Jilly Bear merged into a resulting Texas corporation. Aster
Development Enterprises, Ltd., was organized as a private Texas corporation on
August 6, 1992. Following the rescission of the merger between Nutec and Jilly
Bear on June 1, 1992, Aster Development became the successor of Jilly Bear and
the vehicle for the continued corporate existence in Delaware of the former
Jilly Bear. Aster Development had been inactive from June 1, 1992, until March
1993.
On March 4, 1993, the name of the Company was changed from Aster Development
Enterprises, Ltd., to PAN Environmental Corporation and the Company acquired all
of the outstanding common stock of Northwest Specialties, Inc., a Minnesota
corporation; Advantage Parking Lot Service, Inc., a California corporation; and
MRR Construction Services, Inc., a California corporation. The Company issued a
total of 2,650,000 shares of common stock for the acquisition of these three
corporations in a reorganization accounted for as a reverse acquisition, whereby
the shareholders of a privately owned corporation or corporations obtained
controlling ownership interest in a previously inactive or dormant public
"shell" corporation. October 11, 1993, the directors of PAN Environmental
Corporation and its three affiliated companies agreed to reduce by 50% the
number of shares of common stock which was originally issued for the
acquisition. The net result of the shares of common stock issued in the business
combination was 1,325,000 shares. PAN Environmental Corporation changed its
fiscal year from January 31st to December 31st and reincorporated in the State
of Delaware.
PAN Environmental Corporation (PAN) was in the business of acquiring and
supervising the operations of businesses engaged in the reclamation, remediation
and recycling of industrial waste materials and by-products. PAN provided its
affiliated operating companies with financing and management services including
accounting, planning, budgeting, computer information systems, human resources
management, contract bonding and liability insurance. The Company also provided
technical environmental management support to its operating companies. PAN's
principal offices are in Shoreline, Washington.
Advantage Parking Lot Service, Inc. (incorporated in the State of California on
February 19, 1986) was engaged in the manufacturing and sale of asphalt-based
slurry sealants. Advantage applied the slurry sealants to asphalt surfaces,
primarily parking lots. Advantage also had a tank cleaning operation which
decontaminated portable commercial lubricant tanks. The slurry-sealer
manufacturing plant is located in Fontana, California. Advantage had ten
employees.
Northwest Specialties, Inc. (incorporated in 1993) reclaimed timber (poles,
ties, etc.) and commodity metals, primarily from obsolete railroad
telecommunications and signaling systems. The Company operated in the Midwest
and Rocky Mountain regions of the United States, and worked on active and
inactive railroad right-of-ways. The poles, other wood products, and wiring were
then sorted, graded and processed for resale.
-6-
<PAGE> 22
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1. Organization and Basis of Accounting - continued
MRR Construction Services, Inc. (incorporated in 1992, but inactive until 1993)
performed environmental construction management and related construction
activities, as well as soil remediation, in Southern California. MRR employed
its president and a project manager-superintendent. The majority of the contract
work was performed by subcontractors. Daily administrative support work was
provided by personnel at Advantage Parking Lot Service, Inc.
PAN divested itself of its three subsidiaries, Advantage Parking Lot Service,
Inc., Northwest Specialties, Inc. and MRR Construction Services, Inc., effective
January 2, 1995.
In November and December 1995, the Company attempted to acquire oil and gas
properties in a business combination agreement with Maximum Resources, Inc., a
Vancouver Stock Exchange company, and two other companies, NP Energy
Corporation, a U. S. over the counter electronic bulletin board (OTC:BB)
company, and Polaris Equities, Inc., a U. S. private company.
The form of business combination agreement would have taken the following form:
each of the above three oil and gas companies would set up a U. S. subsidiary
into which they would vend in selected oil and gas properties. These three
subsidiaries would then be acquired in a reverse takeover transaction wherein
the Company would issue 4,000,000 new restricted Rule 144 common shares each to
Maximum, NP and Polaris in exchange for acquiring one hundred percent (100%) of
the issued and outstanding common shares of their three U. S. subsidiaries.
Since the Company did not have the necessary funds to do its accounting, audits,
10-Q's, 10-K's and legal work, Maximum, NP and Polaris agreed to advance the
necessary funds to complete the work. In March and April 1996, Maximum, NP and
Polaris defaulted on their obligations to advance the necessary funds and the
proposed business combination agreements were never consummated.
The Company raised $40,000 in December 1996 in a small private placement from
shareholders of the Company and proceeded to complete its accounting, audits,
10-Q's and 10-K's for December 31, 1994 through December 31, 1997, thus bringing
the Company into SEC compliance on February 22, 1998.
The Company in January 1998 sought to enter into a letter of intent to acquire
an Internet services company, but the letter of intent was never consummated.
On February 20, 1998 the Company reached an agreement in principle to acquire
Winner's Way, Inc., an offshore race and sports book, subject to review and
approval of the financial statements of Winner's Way, Inc. by the Board of
Directors of the Company. After careful consideration, the company's Directors
decided that such acquisition would not be in the Company's best interests.
On May 22, 1998 the Company acquired Whitfield Holdings, Ltd., an Antiguan
corporation, in the business of purchasing and licensing-back gaming systems
from legally licensed offshore race and sports books. Whitfield's initial
licensee is Tropical International Sports, Inc., an Antiguan corporation,
legally licensed as an Antiguan race and sports book.
-7-
<PAGE> 23
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1. Organization and Basis of Accounting - continued
On June 30, 1998 the Company acquired and licensed-back the gaming system from
Way Communications Race and Sports Book and moved it to Antigua on July 17, 1998
to be operated by Tropical International Sports, Inc. The purchase price was
$380,000, the terms for which were $160,000 down and a non-interest bearing note
for the balance payable at $10,000 per month.
Note 2. Summary of Significant Accounting Policies
Earnings (loss) per share were calculated on the number of shares outstanding at
the end of the year.
Note 3. Accounts Payable and Judgments Payable
The Company incurred other expenses in 1995 as a result of recording losses due
to the divestiture of its three subsidiary companies in the amount of $324,563.
The Company also defaulted in a share repurchase agreement with a stockholder of
the Company, resulting in a default judgment in 1995 in the amount of $200,909.
The judgment bears interest at the rate of 25% per annum on $161,250 (principal
portion) and 18% per annum on $39,659 (interest, attorney fee and costs
portion). In addition, Kenneth Williams and Robert Bickel sued MRR, a former
subsidiary of the Company, and the Company in 1995 for alleged consulting fees
owed for 1993 and 1994 and obtained default judgments against the Company in the
amounts of $121,809 and $122,709 respectively. In a settlement agreement
Williams and Bickel received 80,000 shares and an adjustment to retained
earnings was made in the amount of $229,518, the net settlement amount.
Note 4. Issuance/Sales of Stock
The Company issued 30,000 additional shares of restricted Rule 144 common stock
at $0.50 per share for $15,000 of services rendered incident to the Williams and
Bickel settlement for a total of 80,000 shares instead of 50,000 shares to
consummate the settlement.
The Company issued 3,200,000 shares of restricted Rule 144 common stock into
escrow for the acquisition of Whitfield Holdings, Ltd. on a performance basis.
The shares are released out of escrow on a quarterly basis based on revenues
received by Whitfield. When Whitfield receives $1,992,000 in annual revenues,
all 3,200,000 shares will be released.
The Company issued 800,000 shares of restricted Rule 144 common stock for
services rendered incident to the acquisition of Whitfield Holdings, Ltd.
The Company issued 50,000 shares of restricted Rule 144 common stock for $25,000
at $0.50 per share in a New York private placement.
-8-
<PAGE> 24
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 and DECEMBER 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 5. Going Concern
Because of a deficiency in working capital and significant operating losses,
there is doubt about the ability of the Company to continue in existence unless
additional working capital is obtained. The Company currently has plans to raise
sufficient working capital through equity financing and through the acquisition
of companies having sufficient assets and cash flow to enable the Company to be
self-sufficient and profitable.
Note 6. Other Expense
The Company advance $5,000 to an Internet services company in the first quarter
of 1998 pursuant to a proposed letter of intent to acquire, but the letter of
intent was never consummated. The Company wrote off the $5,000, being unable to
recover the advance.
Note 7. Convertible Notes
The Company filed and is conducting a 506 Reg D offering in the State of New
York. The offering consists of convertible notes, of which $341,250 had been
received and convertible notes issued as of June 30, 1998.
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PAN
ENVIRONMENTAL CORPORATION AND SUBSIDIARY - INTERIM CONSOLIDATED FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1998 AND FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-QSB FOR 2ND QUARTER, 1998 ENDED JUNE 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 91,688
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 480,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,216,267
<CURRENT-LIABILITIES> 1,031,337
<BONDS> 0
0
0
<COMMON> 7,268
<OTHER-SE> 1,613,935
<TOTAL-LIABILITY-AND-EQUITY> 1,216,267
<SALES> 37,090
<TOTAL-REVENUES> 37,090
<CGS> 0
<TOTAL-COSTS> 99,207
<OTHER-EXPENSES> 5,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (67,117)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,117)
<EPS-PRIMARY> (.009)
<EPS-DILUTED> (.008)
</TABLE>
