<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, 1999
PAN INTERNATIONAL GAMING, INC.
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 91-1942841
- -------- ----------
(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)
PAN Environmental Corporation
-----------------------------
(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: 7,758,413 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
1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash in Bank $ 23 $ 50
Loan Receivable - Tropical (Note 8) 566,805 566,805
Less: Reserve For Bad Debt (566,805) (566,805)
License Fee Receiv. - Tropical (Note 9) 499,091 499,091
Less: Reserve For Bad Debt (499,091) (499,091)
----------- -----------
Total Current Assets 23 50
FIXED ASSETS
Gaming System-Hardware (Note 2) 47,030 47,030
Gaming System-Software (Note 2) 52,970 52,970
----------- -----------
Total Fixed Assets 100,000 100,000
OTHER ASSETS
Prepaid Expenses (Note 4) 208,667 259,667
Settlement Agreement-principals 360,000 360,000
Escrowed shares for debt, Millard account 125,448 125,448
Investment-Whitfield Holdings 3,200,000 3,200,000
Investment-Whitfield/Unearned (3,140,421) (3,140,421)
----------- -----------
Total Other Assets 753,694 804,694
----------- -----------
TOTAL ASSETS $ 853,717 $ 904,744
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
<PAGE> 3
PAN ENVIRONMENTAL CORPORATION
CONDENSED BALANCE SHEET
(IN DOLLARS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
As of As of
March 31 December 31
1999 1998
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 263,872 $ 250,883
Conv. Notes Payable (Note 7) 395,250 395,250
Taxes payable 18,795 18,795
----------- -----------
Total Current Liabilities 677,917 664,298
LONG TERM LIABILITIES
Stipulation Payable-Roake (Note 3) 225,000 225,000
----------- -----------
Total Liabilities 902,917 889,928
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value; 50,000,000
shares authorized; 3,188,163 shares
issued and outstanding at December 31, 1997;
7,758,413 shares at December 31, 1998; and
7,758,413 shares at March 31, 1999 7,758 7,758
Additional paid-in capital 5,421,866 5,421,866
Common Stock-Unearned Escrow (3,140,421) (3,140,421)
Accumulated Deficit (2,338,403) (2,274,387)
----------- -----------
Total Stockholders' Equity (49,200) 14,816
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 853,717 $ 904,744
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE> 4
PAN ENVIRONMENTAL CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three months ended
-------------------------------
March 31 March 31
1999 1998
----------- -----------
<S> <C> <C>
Sales and Service Revenue (Note 14) $ 29,000 $-0-
----------- -----------
Costs and Expenses
Materials, supplies and operating expenses 93,016 19,375
----------- -----------
Total Costs and Expenses $ 93,016 $ 19,375
----------- -----------
Other Expense (Note 6) $-0- 5,000
----------- -----------
Net Income (Loss) $ (64,016) $ (24,375)
=========== ===========
Net Income (Loss) per Common Share (1) $ (0.01) $ (0.01)
=========== ===========
Dividends per Common Share $-0- $-0-
=========== ===========
Notes:
(1) Based on net income, divided by average
number of common shares outstanding of 7,758,413 3,218,163
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE> 5
PAN ENVIRONMENTAL CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three months ended
---------------------------
March 31 March 31
1999 1998
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ (64,016) $ (24,375)
Adjustment to Retained Earnings -0- 229,519
Adjustment to reconcile to net cash
operating activities:
(Increase) decrease in working capital, net 12,989 -0-
--------- ---------
Net Cash From Operating Activities (51,027) 205,144
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 -0- (220,144)
Proceeds from issuance of common stock -0- 30
Decrease in other assets 51,000
Capital contributions from shareholders -0- 14,970
--------- ---------
Net Cash Used in Financing Activities 51,000 (205,144)
Net (decrease) increase in cash and
cash equivalents (27) -0-
Cash and Cash Equivalents:
Beginning of period 50 -0-
--------- ---------
End of Period 23 $-0-
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PAN ENVIRONMENTAL CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARY, WHITFIELD HOLDINGS, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENT
THREE MONTHS PERIODS ENDED MARCH 31, 1999 AND MARCH 31, 1998
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.
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
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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. The gaming system license
agreement provided for a quarterly payment of 2.4% of gross betting volume. (See
Note 10.)
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. The Company deducted this purchase
price from its loans receivable to Tropical International Sports, Inc. subject
to proof of payment. These amounts were never paid by Tropical and the loans
receivable account from Tropical have been increased accordingly. (See Note 9.)
In conjunction with the acquisition of Whitfield Holdings, Ltd. and its on going
operations, the Company filed and has conducted a 506 Regulation D offering in
the State of New York. The offering consisted of convertible notes, of which
$391,250 had been received and convertible notes issued as of December 31, 1998.
In addition, the company received $177,750 from a former Whitfield shareholder
and current PAN escrow shareholder which was allocated as additional paid-in
capital. Substantially all of this money was loaned to Tropical International
Sports, Inc. in conjunction with Whitfield's gaming system license agreement
with Tropical.
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<PAGE> 8
As of December 31, 1998 it became evident that Tropical was going to default on
repayment of $566,805 of loans and on payment of an estimated $499,091 of
license fees to Whitfield.
On January 15, 1999 the Company announced legal action to collect monies due
from Tropical subsequent to a demand letter for payment of such amounts from
which the Company received no response. The Company retained attorneys in both
Antigua and Washington, DC to investigate and pursue the Company's claims
against Tropical.
Note 2. Summary of Significant Accounting Policies
Earnings (Losses)
Earnings (losses) per share were calculated on the number of shares outstanding
at the end of the year. No adjustment has been made in earnings per shares on a
fully diluted basis, for conversion of the convertible notes to common stock as
the convertible notes may become a part of the Company's claim against Tropical
International Sports, Inc. (see Note 8).
Acquisition of Whitfield
The acquisition of Whitfield Holdings, Ltd. was accounted for on a purchase
basis. All intercompany accounts have been eliminated.
Depreciation on Gaming System Hardware and Software
No depreciation was taken on the gaming system hardware or the gaming system
software which were listed as fixed assets on the books of Whitfield Holdings,
Ltd. until the legal claims of the Company against Tropical International
Sports, Inc. are resolved. Such assets may well be the subject of additional
claims by the Company.
Income Taxes
The Company has incurred net operating losses from 1992 through 1998 of
$2,274,387. The losses will begin expiring for income tax purposes in the year
2007.
The financial statements include all adjustments which, in the opinion of
management, are necessary in order to make the financial statements not
misleading.
Note 3. Stipulation Payable
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). As of February 12, 1999, the $200,909 judgment was vacated in exchange
for a $225,000 stipulation bearing interest at the rate of 8-1/2% which shall be
due and payable January 31, 2000. The 94,902 of accrued judgment interest was
settled through the transfer of 189,804 shares held by Douglas Millard, Escrow
Agent.
Note 4. Prepaid Expense
The Company accrued $32,500 of salaries payable in the three months ended March
31, 1999 to the Company's officers, $12,000 of investor relations fees payable,
and $3,500 of accounting and administration fees payable, all of which were
settled for stock pursuant to the S-8 Registration Statement filed October 2,
1998. Stock settlements for wages, investor relations fees and accounting and
administration fees not yet accrued were accounted for as prepaid expense. (See
Note 10.)
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<PAGE> 9
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 has conducted a 506 Reg D offering in the State of New
York. The offering consisted of convertible notes, of which $391,250 had been
received and convertible notes issued as of December 31, 1998. The notes are all
due December 31, 1999 and subject to a call by the Noteholder for prepayment at
any time subsequent to September 30, 1998; $85,000 of the notes are convertible
into restricted Rule 144 common stock of the Company at $0.50 per share, and
$306,250 of the notes are convertible into restricted Rule 144 common shares of
the Company at $0.75 per share. Substantially all of the $391,250 was loaned to
Tropical International Sports, Inc. and may be part of the Company's claim
against Tropical.
Note 8. Loans Receivable - Tropical
The Company through its wholly owned subsidiary, Whitfield Holdings, Ltd., made
loans to Whitfield's race and sports book licensee, Tropical International
Sports, Inc., of $566,805 from which it deducted $380,000 for the acquisition of
the gaming system from Way Communications, Inc. subject to the actual proof of
payment from Tropical. Tropical took over operation of the Way Communications
race and sports book as of July 17, 1998. Tropical never paid Way
Communications, Inc. and therefore, as of December 31, 1998 the outstanding
balance was $566,805 after adding back in the $380,000. A reserve for bad debts
has been set up in the same amount, thus zeroing out this item as an asset.
Note 9. License Fees Receivable - Tropical
The Company is owed license fees receivable of $211,091 composed of $37,090 for
nine days operations in May 1998 which ended the first contract fiscal quarter
of operations; $174,001 for the three months operations in June, July and August
1998 which ended the second quarter of operations; and $288,000 in estimated
license fees receivable for the four months operations in September October,
November and December which ended the third quarter's and one month of the
fourth quarter's operations. These amounts totaling $499,091 have been accrued
on the Company's books and have not been paid as of December 31, 1998. A reserve
for bad debts has been set up in the same amount, thus zeroing out this item as
an asset.
Note 10. S-8 Offering
On October 2, 1998 the Company filed an S-8 Registration Statement with the SEC
issuing a total of 490,250 shares including 1) 50,000 shares to Forte
Communications, Inc. for $50,000 of public relations; 2) 6,250 shares to Kaufman
& Associates, Inc. for $6,250 of finders fees incident to the Forte
transaction; 3)
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50,000 shares to TCKTS, L.L.C. dba Bristol Media, Ltd. for $50,000 of services
rendered incident to the Whitfield acquisition; 4) 96,000 shares to TCKTS,
L.L.C. dba Bristol Media, Ltd. for 24 months of investor relations services at
the rate of $4,000 per months which commenced January 1, 1998; 5) 120,000 shares
to Jerry Cornwell, 100,000 shares to Clifford M. Johnston and 40,000 shares to
Judy Morton Johnston for 24 months of wages and salaries commencing July 1, 1998
at the rate of $60,000 per year to Jerry Cornwell, President, $50,000 per year
to Clifford M. Johnston, Vice President, and $20,000 per year to Judy Morton
Johnston, Assistant Secretary/Assistant Treasurer; and 6) 28,000 shares to
Quality Tax Service, Inc. for two years of quarterly administration and
accounting services at the rate of $3,500 per quarter commencing January 1,
1998. The shares were issued to prevent cash flow drain to the Company until the
Company has sufficient capital for pay for needed services.
Note 11. Change of Name and Corporate Domicile by Way of Merger
In December 1998 the Company concluded a merger with PAN International Gaming,
Inc., a new Nevada corporation, on the basis of a one for one exchange of shares
which resulted in a change of name from PAN Environmental Corporation to PAN
International Gaming, Inc. along with a change of corporate domicile from
Delaware to Nevada.
Note 12. Certain Transactions
The Company has an investor relations contract with TCKTS, L.L.C. dba Bristol
Media, Ltd., which is owned by Jerry Cornwell, President and Director of the
Company, and Clifford M. Johnston, Vice President and Director of the Company.
The contract is on terms equal to or better than industry standards for such
contracts.
The Company also has a consulting agreement with Quality Tax Service, Inc.,
which is owned by Clifford M. Johnston, Vice President and Director of the
Company, and Judy Morton Johnston, Assistant Secretary/Assistant Treasurer of
the Company. The contract is on terms equal to or better than industry standards
for such contracts.
Note 13. Default By Tropical
On January 15, 1999 the company announced that the previously reported failure
to pay accrued amounts owed to its wholly owned subsidiary, Whitfield Holdings,
Ltd. by Tropical International Sports, Inc., its race and sports book licensee,
has continued and is now in default.
The Company send a demand letter to Tropical for immediate payment of $566,805
in loans, more than $200,000 in license fees through August 31, 1998 and an
unverified amount of license fees and the related accounting for the period
ended November 30, 1998. The Company received no response to its demand for
payment.
The Company has retained attorneys in both Antigua and Washington, DC to
investigate and pursue the Company's claims against Tropical.
In the meantime, the Company's accounting reflects that all loans receivable and
all license fees receivable have been written off as a bad debt.
Note 14 - Short Swing Profit By Affiliates
During 1998, an affiliate of the Company realized a short swing profit of
$29,000 which was loaned to the Company. The $29,000 loan was cancelled, giving
rise to $29,000 of income to the Company.
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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, 1999.
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, 1999 reflect an
operating loss of $64,016 as compared to a loss of $24,375 for the quarter
ending March 31, 1998. Included in the $64,016 loss were $12,989 increase in
accounts payable amounts due to operating expenses, $32,500 in salaries and
$15,500 in consulting fees and investor relations fees.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was in a deficit position with current liabilities
of $677,917 and current assets of $23.
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.
In conjunction with the acquisition of Whitfield Holdings, Ltd. and its on going
operations, the Company filed and has conducted a 506 Regulation D offering in
the State of New
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York. The offering consisted of convertible notes, of which $391,250 had been
received and convertible notes issued as of December 31, 1998. In addition, the
company received $177,750 from a former Whitfield shareholder and current PAN
escrow shareholder which was allocated as additional paid-in capital.
Substantially all of this money was loaned to Tropical International Sports,
Inc. in conjunction with Whitfield's gaming system license agreement with
Tropical.
As of December 31, 1998 it became evident that Tropical was going to default on
repayment of $566,805 of loans and on payment of an estimated $499,091 of
license fees to Whitfield.
On January 15, 1999 the Company announced legal action to collect monies due
from Tropical subsequent to a demand letter for payment of such amounts from
which the Company received no response. The Company retained attorneys in both
Antigua and Washington, DC to investigate and pursue the Company's claims
against Tropical.
Page 13
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ITEM 6 - EXHIBITS AND REPORTS ON 8-K
(a) EXHIBITS:
27.1 Financial Data Schedules
(b) REPORTS:
None.
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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: September 7, 1999
/s/ Jerry Cornwell
- ---------------------------------
Jerry Cornwell
President & CEO
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PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MARCH 31, 1999 AND
FOR THE YEARS ENDED DECEMBER 31, 1998, AND 1997
<PAGE> 17
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Statement of Financial Position
at March 31, 1999 and December 31, 1998 and 1997 1-2
Consolidated Statement of Operations for the
Period Ended March 31, 1999 and for the Years
Ended December 31, 1998 and 1997 3
Consolidated Statement of Cash Flows for the
Period Ended March 31, 1999 and the Years Ended
December 31, 1998 and 1997 4
Consolidated Statement of Changes in
Stockholders' Equity for the Period Ended
March 31, 1999 and for the Years Ended
December 31, 1998 and 1997 5-6
Notes to Consolidated Financial Statements 7-13
</TABLE>
<PAGE> 18
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
MARCH 31, 1999 and DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
03/31/99 12/31/98 12/31/97
----------- ----------- ------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash in Bank $ 23 $ 50 $ -0-
Loan Receivable - Tropical (Note 8) 566,805 566,805 -0-
Less: Reserve For Bad Debt (566,805) (566,805) -0-
License Fee Receiv. - Tropical (Note 9) 499,091 499,091 -0-
Less: Reserve For Bad Debt (499,091) (499,091) -0-
----------- ----------- ------------
Total Current Assets 23 50 -0-
FIXED ASSETS
Gaming System-Hardware (Note 2) 47,030 47,030 -0-
Gaming System-Software (Note 2) 52,970 52,970 -0-
----------- ----------- ------------
Total Fixed Assets 100,000 100,000 -0-
OTHER ASSETS
Prepaid Expenses (Note 4) 208,667 259,667 -0-
Settlement Agreement-principals 360,000 360,000 360,000
Escrowed shares for debt,
Millard account 125,448 125,448 225,000
Investment-Whitfield Holdings 3,200,000 3,200,000 -0-
Investment-Whitfield/Unearned (3,140,421) (3,140,421) -0-
----------- ----------- ------------
Total Other Assets 753,694 804,694 585,000
----------- ----------- ------------
TOTAL ASSETS $ 853,717 $ 904,744 $ 585,000
=========== =========== ============
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-1-
<PAGE> 19
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
MARCH 31, 1999 and DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
03/31/99 12/31/98 12/31/97
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 263,872 $ 250,883 $ 448,245
Conv. Notes Payable (Note 7) 395,250 395,250 -0-
Taxes payable 18,795 18,795 18,795
Judgment payable (Note 3) -0- -0- 200,909
Accrued judgment interest (Note 3) -0- -0- 94,902
----------- ----------- -----------
Total Current Liabilities 677,917 664,298 762,851
LONG TERM LIABILITIES
Stipulation Payable-Roake (Note 3) 225,000 225,000 -0-
----------- ----------- -----------
Total Liabilities 902,917 889,928 762,851
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value; 50,000,000
shares authorized; 3,188,163 shares
issued and outstanding at December 31,
1997; 7,758,413 shares at December
31, 1998; and 7,758,413 shares at
March 31, 1999 7,758 7,758 3,188
Additional paid-in capital 5,421,866 5,421,866 1,417,635
Common Stock-Unearned Escrow (3,140,421) (3,140,421) -0-
Accumulated Deficit (2,338,403) (2,274,387) (1,598,674)
----------- ----------- -----------
Total Stockholders' Equity (49,200) 14,816 (177,851)
----------- ----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 853,717 $ 904,744 $ 585,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-2-
<PAGE> 20
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD ENDED
MARCH 31, 1999 AND THE YEARS ENDED DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
03/31/99 12/31/98 12/31/97
------------ ---------- ----------
<S> <C> <C> <C> <C>
REVENUE (Note 9 and Note 14) $ 29,000 $ 499,091 $ -0-
Less: Bad Debt (Note 9) -0- (499,091) -0-
COST OF SALES -0- -0- -0-
--------- --------- ----------
GROSS PROFIT (LOSS) 29,000 -0- -0-
--------- --------- ----------
OPERATING EXPENSES
Bad Debt (Note 8) -0- 566,805 -0-
Professional fees -0- 1,610 120,231
Accounting fees (Note 10) 3,500 14,000 -0-
Consulting fees (Note 10) -0- 51,753 -0-
Legal fees 32,496 25,239 -0-
Transfer Agent fees -0- 3,095 -0-
Internet & web site fees 1,125 12,445 -0-
Investor relations expense 1,005 63,205 -0-
Investor relations fees
(Note 10) 15,000 48,000 -0-
SEC electronic filing expense 3,314 16,584 -0-
Interest -0- 25,424 94,902
Travel 2,443 8,443 -0-
Taxes and licenses 25 260 19,621
Telephone 750 4,450 -0-
Office expense 101 455 3,238
Bank charges 40 274 -0-
Wages and salaries (Note 10) 32,500 65,000 -0-
Postage and delivery 717 2,009 154
--------- --------- ----------
Total Operating Expenses $ 93,016 $ 906,051 $ 238,146
--------- --------- ----------
(LOSS) FROM OPERATIONS (64,016) (906,051) (238,146)
--------- --------- ----------
OTHER EXPENSE (Note 6) -0- (5,000) -0-
OTHER INCOME -0- 5,820 -0-
PROVISION FOR INCOME TAX -0- -0- -0-
NET INCOME (LOSS) $ (64,016) $(905,231) $ (238,146)
========= ========= ==========
NET INCOME (LOSS) PER SHARE $ (.008) $ (.117) $ (.075)
========= ========= ==========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-3-
<PAGE> 21
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED
MARCH 31, 1999 and THE YEARS ENDED DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
03/31/99 12/31/98 12/31/97
------------ ----------- ----------
<S> <C> <C> <C>
Cash Flows From
Operating Activities:
Net Profit (Loss) $ (64,016) $ (905,231) $(118,062)
--------- ----------- ---------
Adjustments to Reconcile
Net Loss to Net Cash
Provided by Operating Activities
Net Cash Provided by
Operating Expenses:
Increase (Decrease) In:
Accounts payable 12,989 (197,362) (3,388)
Taxes payable, accrued
wages, accrued interest -0- -0- 47,451
Judgment payable -0- (200,909) -0-
Accrued judgment interest -0- (94,902) -0-
Stipulation payable -0- 225,000 -0-
Adjustment to retained earnings -0- 229,518 -0-
--------- ----------- ---------
Net Cash Provided by
Operating Activities: (51,027) (38,655) (73,999)
--------- ----------- ---------
Cash Flows From
Investing Activities:
Increase in current assets -0- -0- -0-
Increase in fixed assets -0- 100,000 -0-
(Decrease)in other assets (51,000) 219,694 -0-
--------- ----------- ---------
Net Cash Used In
Investing Activities: 51,000 319,694 -0-
--------- ----------- ---------
Cash Flows From
Financing Activities:
Proceeds from sale of common stock -0- 4,570 340
Capital contribution from shareholders -0- 863,810 73,659
Loans from officers -0- -0- -0-
(Payment of) proceeds from debt -0- 395,250 -0-
--------- ----------- ---------
Net Cash Received From
Financing Activities: -0- 1,263,630 73,999
--------- ----------- ---------
NET INCREASE (DECREASE) IN CASH (27) 50 -0-
Cash Beginning of Periods 50 -0- -0-
--------- ----------- ---------
Cash End of Periods 23 50 -0-
========= =========== =========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-4-
<PAGE> 22
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED MARCH 31, 1999 and
THE YEARS ENDED DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid In Accumulated
Shares Amount Capital Deficit Totals
--------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
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
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 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
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-5-
<PAGE> 23
PAN ENVIRONMENTAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE
PERIOD ENDED MARCH 31, 1999 and THE YEARS ENDED DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid In Accumulated
Shares Amount Capital Deficit Totals
--------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Contribution of paid-in
capital from former Whitfield
shareholder and PAN escrow
shareholder (Note 8) -0- -0- 177,750 -0- 177,750
Common stock issued at
$1.00 per share pursuant to
S-8 Offering, December 1998 490,250 490 489,760 -0- 490,250
Net income (loss) for the
period ended
December 31, 1998 -0- -0- -0- (905,231) (905,231)
--------- --------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1998 7,758,413 7,758 2,281,445 (2,274,387) 14,816
========= ========= ========== ========== ==========
Net income (loss) for the period
ended March 31, 1999 -0- -0- -0- (64,016) (64,016)
--------- --------- ---------- ---------- ----------
BALANCE, MARCH 31, 1999 7,758,413 7,758 2,281,445 (2,338,403) (49,200)
========= ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-6-
<PAGE> 24
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 and DECEMBER 31, 1998 and 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 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.
-7-
<PAGE> 25
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 and DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
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. The gaming system license
agreement provided for a quarterly payment of 2.4% of gross betting volume. (See
Note 10.)
-8-
<PAGE> 26
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 and DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
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. The Company deducted this purchase
price from its loans receivable to Tropical International Sports, Inc. subject
to proof of payment. These amounts were never paid by Tropical and the loans
receivable account from Tropical have been increased accordingly. (See Note 9.)
In conjunction with the acquisition of Whitfield Holdings, Ltd. and its on going
operations, the Company filed and has conducted a 506 Regulation D offering in
the State of New York. The offering consisted of convertible notes, of which
$391,250 had been received and convertible notes issued as of December 31, 1998.
In addition, the company received $177,750 from a former Whitfield shareholder
and current PAN escrow shareholder which was allocated as additional paid-in
capital. Substantially all of this money was loaned to Tropical International
Sports, Inc. in conjunction with Whitfield's gaming system license agreement
with Tropical.
As of December 31, 1998 it became evident that Tropical was going to default on
repayment of $566,805 of loans and on payment of an estimated $499,091 of
license fees to Whitfield.
On January 15, 1999 the Company announced legal action to collect monies due
from Tropical subsequent to a demand letter for payment of such amounts from
which the Company received no response. The Company retained attorneys in both
Antigua and Washington, DC to investigate and pursue the Company's claims
against Tropical.
Note 2. Summary of Significant Accounting Policies
Earnings (Losses)
Earnings (losses) per share were calculated on the number of shares outstanding
at the end of the year. No adjustment has been made in earnings per shares on a
fully diluted basis, for conversion of the convertible notes to common stock as
the convertible notes may become a part of the Company's claim against Tropical
International Sports, Inc. (see Note 8).
Acquisition of Whitfield
The acquisition of Whitfield Holdings, Ltd. was accounted for on a purchase
basis. All intercompany accounts have been eliminated.
Depreciation on Gaming System Hardware and Software
No depreciation was taken on the gaming system hardware or the gaming system
software which were listed as fixed assets on the books of Whitfield Holdings,
Ltd. until the legal claims of the Company against Tropical International
Sports, Inc. are resolved. Such assets may well be the subject of additional
claims by the Company.
Income Taxes
The Company has incurred net operating losses from 1992 through 1998 of
$2,274,387. The losses will begin expiring for income tax purposes in the year
2007.
-9-
<PAGE> 27
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 and DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
Note 2. Summary of Significant Accounting Policies - Income Taxes - continued
The financial statements include all adjustments which, in the opinion of
management, are necessary in order to make the financial statements not
misleading.
Note 3. Stipulation Payable
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). As of February 12, 1999, the $200,909 judgment was vacated in exchange
for a $225,000 stipulation bearing interest at the rate of 8-1/2% which shall be
due and payable January 31, 2000. The 94,902 of accrued judgment interest was
settled through the transfer of 189,804 shares held by Douglas Millard, Escrow
Agent.
Note 4. Prepaid Expense
The Company accrued $65,000 of salaries payable in the six months ended December
31, 1998 to the Company's officers, $50,000 of services payable incident to the
Whitfield acquisition, $48,000 of investor relations fees payable, and $14,000
of accounting and administration fees payable, all of which were settled for
stock pursuant to the S-8 Registration Statement filed October 2, 1998. Stock
settlements for wages, investor relations fees and accounting and administration
fees not yet accrued were accounted for as prepaid expense. (See Note 10.)
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 has conducted a 506 Reg D offering in the State of New
York. The offering consisted of convertible notes, of which $391,250 had been
received and convertible notes issued as of December 31, 1998. The notes are all
due December 31, 1999 and subject to a call by the Noteholder for prepayment at
any time subsequent to September 30, 1998; $85,000 of the notes are convertible
into restricted Rule 144 common stock of the Company at $0.50 per share, and
$306,250 of the notes are convertible into restricted Rule 144 common shares of
the Company at $0.75 per share. Substantially all of the $391,250 was loaned to
Tropical International Sports, Inc. and may be part of the Company's claim
against Tropical.
-10-
<PAGE> 28
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 and DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
Note 8. Loans Receivable - Tropical
The Company through its wholly owned subsidiary, Whitfield Holdings, Ltd., made
loans to Whitfield's race and sports book licensee, Tropical International
Sports, Inc., of $566,805 from which it deducted $380,000 for the acquisition of
the gaming system from Way Communications, Inc. subject to the actual proof of
payment from Tropical. Tropical took over operation of the Way Communications
race and sports book as of July 17, 1998. Tropical never paid Way
Communications, Inc. and therefore, as of December 31, 1998 the outstanding
balance was $566,805 after adding back in the $380,000. A reserve for bad debts
has been set up in the same amount, thus zeroing out this item as an asset.
Note 9. License Fees Receivable - Tropical
The Company is owed license fees receivable of $211,091 composed of $37,090 for
nine days operations in May 1998 which ended the first contract fiscal quarter
of operations; $174,001 for the three months operations in June, July and August
1998 which ended the second quarter of operations; and $288,000 in estimated
license fees receivable for the four months operations in September October,
November and December which ended the third quarter's and one month of the
fourth quarter's operations. These amounts totaling $499,091 have been accrued
on the Company's books and have not been paid as of December 31, 1998. A reserve
for bad debts has been set up in the same amount, thus zeroing out this item as
an asset.
Note 10. S-8 Offering
On October 2, 1998 the Company filed an S-8 Registration Statement with the SEC
issuing a total of 490,250 shares including 1) 50,000 shares to Forte
Communications, Inc. for $50,000 of public relations; 2) 6,250 shares to Kaufman
& Associates, Inc. for $6,250 of finders fees incident to the Forte transaction;
3) 50,000 shares to TCKTS, L.L.C. dba Bristol Media, Ltd. for $50,000 of
services rendered incident to the Whitfield acquisition; 4) 96,000 shares to
TCKTS, L.L.C. dba Bristol Media, Ltd. for 24 months of investor relations
services at the rate of $4,000 per months which commenced January 1, 1998; 5)
120,000 shares to Jerry Cornwell, 100,000 shares to Clifford M. Johnston and
40,000 shares to Judy Morton Johnston for 24 months of wages and salaries
commencing July 1, 1998 at the rate of $60,000 per year to Jerry Cornwell,
President, $50,000 per year to Clifford M. Johnston, Vice President, and $20,000
per year to Judy Morton Johnston, Assistant Secretary/Assistant Treasurer; and
6) 28,000 shares to Quality Tax Service, Inc. for two years of quarterly
administration and accounting services at the rate of $3,500 per quarter
commencing January 1, 1998. The shares were issued to prevent cash flow drain to
the Company until the Company has sufficient capital for pay for needed
services.
Note 11. Change of Name and Corporate Domicile by Way of Merger
In December 1998 the Company concluded a merger with PAN International Gaming,
Inc., a new Nevada corporation, on the basis of a one for one exchange of shares
which resulted in a change of name from PAN Environmental Corporation to PAN
International Gaming, Inc. along with a change of corporate domicile from
Delaware to Nevada.
Note 12. Certain Transactions
The Company has an investor relations contract with TCKTS, L.L.C. dba Bristol
Media, Ltd., which is owned by Jerry Cornwell, President and Director of the
Company, and
-11-
<PAGE> 29
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 and DECEMBER 31, 1998 and 1997
- --------------------------------------------------------------------------------
Note 12. Certain Transactions - continued
Clifford M. Johnston, Vice President and Director of the Company. The contract
is on terms equal to or better than industry standards for such contracts.
The Company also has a consulting agreement with Quality Tax Service, Inc.,
which is owned by Clifford M. Johnston, Vice President and Director of the
Company, and Judy Morton Johnston, Assistant Secretary/Assistant Treasurer of
the Company. The contract is on terms equal to or better than industry standards
for such contracts.
Note 13. Default By Tropical
On January 15, 1999 the company announced that the previously reported failure
to pay accrued amounts owed to its wholly owned subsidiary, Whitfield Holdings,
Ltd. by Tropical International Sports, Inc., its race and sports book licensee,
has continued and is now in default.
The Company send a demand letter to Tropical for immediate payment of $566,805
in loans, more than $200,000 in license fees through August 31, 1998 and an
unverified amount of license fees and the related accounting for the period
ended November 30, 1998. The Company received no response to its demand for
payment.
The Company has retained attorneys in both Antigua and Washington, DC to
investigate and pursue the Company's claims against Tropical.
In the meantime, the Company's accounting reflects that all loans receivable and
all license fees receivable have been written off as a bad debt.
Note 14 - Short Swing Profit By Affiliates
During 1998, an affiliate of the Company realized a short swing profit of
$29,000 which was loaned to the Company. The $29,000 loan was cancelled, giving
rise to $29,000 of income to the Company.
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Pan
International Gaming, Inc. and Subsidiary - Interim Consolidated Financial
Statements for the period ending Mar. 31, 1999 and for the years ended Dec. 31,
1998 and Dec. 31, 1997 and is qualified in its entirety by reference to such
Form 10-QSB for 1st Quarter, 1999 ended March 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 23
<SECURITIES> 0
<RECEIVABLES> 1,065,896
<ALLOWANCES> (1,065,896)
<INVENTORY> 0
<CURRENT-ASSETS> 23
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0
0
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</TABLE>
