<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, 1996
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: 2,848,163 shares of common stock.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENT
PAN ENVIRONMENTAL CORPORATION
CONDENSED BALANCE SHEET
(IN DOLLARS)
<TABLE>
<CAPTION>
ASSETS
------
As of As of
September 30 December 31
1996 1995
----------- -----------
<S> <C> <C>
OTHER ASSETS
Settlement agreement - principals 360,000 -0-
Escrowed shares for debt, Millard account 225,000 -0-
----------- -----------
Total other assets 585,000 -0-
----------- -----------
TOTAL ASSETS $ 585,000 $ -0-
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 451,633 $ 505,752
Accrued wages -0- 58,000
Taxes payable 18,795 10,092
Judgment payable 200,909 200,909
Accrued judgment interest 47,451 -0-
Loans from officer -0- 84,218
Notes payable -0- 17,800
----------- -----------
Total current liabilities 718,788 876,771
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
1,126,809 issued and outstanding
at December 31, 1995, and
2,848,163 issued and outstanding
at March 31, 1996 2,848 1,127
Additional paid-in capital 1,343,976 485,019
Accumulated deficit (1,480,612) (1,362,917)
----------- -----------
Total stockholders' equity (133,788) (876,771)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 585,000 $ -0-
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
<PAGE> 3
PAN ENVIRONMENTAL CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
----------------------- ----------------------------
Sept. 30 Sept. 30 Sept. 30 Sept. 30
1996 1995 1996 1995
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Sales and Service Revenue $ -0- $ -0- $ -0- $ -0-
--------- --------- ----------- -----------
Costs and Expenses
Materials, supplies and
operating expenses 1,882 1,811 61,541 76,693
Interest and other debt
expense -0- -0- 47,451 (6,959)
Taxes other than income taxes 5,691 -0- 8,703 -0-
--------- --------- ----------- -----------
Total Costs and Expenses $ 7,573 $ 1,811 $ 117,695 $ 69,734
--------- --------- ----------- -----------
Other Expense $ -0- $ -0- $ -0- $ -0-
--------- --------- ----------- -----------
Net Income (Loss) $ (7,573) $ (1,811) $ (117,695) $ (839,723)
========= ========= =========== ===========
Net Income (Loss) per Common
Share (1) $ (0.00) $ (0.00) $ (0.04) $ (0.78)
========= ========= =========== ===========
Dividends per Common Share $ -0- $ -0- $ -0- $ -0-
========= ========= =========== ===========
Notes:
(1) Based on net income,
divided by average
number of common shares
outstanding of 2,848,163 1,076,809 2,848,163 1,076,809
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE> 4
PAN ENVIRONMENTAL CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the nine months ended
-------------------------------
September 30 September 30
1996 1995
--------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $(117,695) $ (839,723)
Adjustment to reconcile to net cash
operating activities:
Depreciation and amortization -0- (499,093)
(Increase) decrease in working capital, net (55,965) (374,187)
--------- -----------
Net Cash From Operating Activities (173,660) (1,713,003)
Cash Flow From Investment Activities:
Acquisition of cash, notes, contracts and
other assets 585,000 17,797
Purchases of plant and equipment -0- 1,027,412
Divestiture of subsidiaries -0- 809,322
--------- -----------
Net Cash Flow From Investing Activities 585,000 1,854,531
Cash Flow From financing Activities:
(Payment of) proceeds from debt (102,018) (331,256)
Proceeds from issuance of common stock 1,721 (186)
Capital contributions from shareholders 858,957 -0-
Proceeds from judgment payable -0- 200,909
--------- -----------
Net Cash Used in Financing Activities 758,660 (130,533)
Net (decrease) increase in cash and
cash equivalents -0- 10,995
Cash and Cash Equivalents:
Beginning of period -0- (10,995)
--------- -----------
End of Period -0- $ -0-
--------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE> 5
PAN ENVIRONMENTAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENT
NINE MONTHS PERIODS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
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> 6
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. Avantage 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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<PAGE> 7
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 - 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. 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 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 4 - ISSUANCE/SALES OF STOCK
The Company issued 116,000 shares of restricted Rule 144 common stock
in settlement of a promissory note for $58,000 payable to Jerry
Cornwell for past services rendered.
The Company issued 31,318 shares for $ 15,659 of services rendered by
a consultant of the Company, Valhalla Financial Group, L.L.C.
The Company issued 168,436 shares of restricted Rule 144 common stock
to settle out an $84,218 promissory note payable to Jerry Cornwell for
a cash loan.
The Company issued 155,600 shares of restricted Rule 144 common stock
to settle out a $77,800 debt to Bristol Ltd. for a $17,800 cash loan
and $60,000 for past services rendered.
The Company issued 450,000 shares of restricted Rule 144 common stock
in escrow to Douglas Millard, Escrow Agent, for the purpose of paying
off or settling $225,000 of accrued trade debt, accrued taxes payable
and accrued interest.
The Company issued 800,000 shares of restricted Rule 144 common stock
to: 80,000 shares to a consultant of the Company, Valhalla Financial
Group, L.L.C. for
The accompanying notes are an integral part of these financial statements.
Page 7
<PAGE> 8
services rendered incident to the Settlement Agreement, and 720,000
shares to former or current PAN principals or affiliates pursuant to a
December 5, 1995 Settlement Agreement wherein the shares will be
issued pro rata to the participants in the Stock Option Plan in
exchange for 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, agreement or any other relationship due from or with
the Company.
All such shares issued during the first quarter of 1996 were issued
for a stated value of $0.50 per share.
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.
Page 8
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Attached hereto and incorporated herein by this reference are unaudited
financial statements for the quarter ending September 30, 1996.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FINANCIAL CONDITION AND RESULTS OF OPERATION
The results of operations for the quarter ending September 30, 1996 reflect an
operating loss of $117,695 as compared to a loss of $839,723 for the quarter
ending September 30, 1995. Included in the $117,695 loss were the $61,541 in
losses recorded due to expenses for services rendered incident to attempts to
acquire oil and gas properties in late 1995 and early 1996 and $47,451 in
accrued interest on the $200,909 default judgment obtained against the Company
for a default in a share repurchase agreement with a shareholder of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was in a deficit position with current liabilities
of $718,788 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.
Page 9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
A lawsuit was filed against the Company by its legal counsel which resulted in a
default judgment against the Company of $38,279.
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:
None.
(b) REPORTS:
None.
Page 10
<PAGE> 11
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 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPT 1996 -
FORM 10QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SEPT 1996 -
FORM 10QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 585,000
<CURRENT-LIABILITIES> 718,788
<BONDS> 0
0
0
<COMMON> 2,848
<OTHER-SE> 1,343,976
<TOTAL-LIABILITY-AND-EQUITY> 585,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,573
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,573)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,573)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,573)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> (.00)
</TABLE>
