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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1999
Commission File Number: 0-19471
PAN INTERNATIONAL GAMING, INC.
(formerly PAN Environmental Corporation)
(Exact name of registrant as specified in its charter)
Nevada 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)
<TABLE>
<S> <C>
Registrant's telephone number, including area code: (206) 546-9660)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value
</TABLE>
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 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 []
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrants's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
There was no revenue for the fiscal year ended December 31, 1999.
As of December 31, 1999, the aggregate number of shares of Common Stock held by
non-affiliates was 2,736,568 shares.
As of December 31, 1999, the aggregate number of shares outstanding of the
registrant's Common Stock was 4,508,413. Since there was no established market
for the registrants's Common Stock, the registrant cannot estimate the market
value for such shares. See Item 5.
Documents incorporated by reference: See Exhibit Index, pages 16-17.
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TABLE OF CONTENTS
PART I
<TABLE>
<S> <C> <C>
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 7. Financial Statements 11
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Matters 11
PART III
Item 9. Directors, Executive Officers, promoters and Control Persons
Compliance with Section 16(a) of the Exchange Act 12
Item 10. Executive Compensation 13
Item 11. Security Ownership of Certain Beneficial Owners and Management 14
Item 12. Certain Relationships and Related Transactions 15
Item 13 Exhibits 15
</TABLE>
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PART I
ITEM 1. BUSINESS
General
The Company focused its attention during 1997, 1998 and 1999 upon the
acquisition of a company or companies with sufficient capital to sustain the
acquired operations, so as to improve its business prospects.
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 was 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. The Company deducted this
purchase price from its loans receivable to Tropical International Sports, Inc.
subject to proof of payment. In the event these amounts are not paid, the loans
receivable account from Tropical will be increased accordingly.
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
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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.
On August 25, 1999 the Company filed a lawsuit in the United States
District Court, Southern District of New York, against Tropical, Whitfield
Holdings, Ltd., Timothy S. Shiah, and Thomas D. DiNola alleging common law
fraud, securities fraud, conversion, breach of contract, tortuous interference
and seeking $8,000,000 in damages from the various causes of action.
The Company will continue to seek, investigate, and, if warranted,
acquire an interest in a business opportunity. The Company does not propose to
restrict its search for a business opportunity to any particular industry or
geographical area and may therefore engage in essentially any business in any
industry. Business opportunities available to the Company may be in the form of
companies which have recently commenced operations or with established
operations, which desire to establish public trading market for their common
stock. Because of rapid technological advances being made in certain industries
and shortages of available capital, management believes that there are numerous
business entities seeking the benefits of a publicly-traded corporation. The
perceived benefits of a publicly-traded corporation may include facilitating or
improving the terms upon which additional equity financing may be sought,
providing liquidity for the needs of principal shareholders, creating a means
for providing incentive stock options or similar benefits to key employees and
other factors.
There is no assurance that the Company will be able to identify and
acquire any business opportunity which will ultimately prove to be beneficial to
the Company and its shareholders. It is anticipated that business opportunities
will be available to the Company from various sources, including its officers
and directors, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals.
THIS BUSINESS SECTION AND OTHER PARTS OF THIS ANNUAL REPORT ON FORM
10-KSB CONTAIN FORWARD-LOOKING STATEMENTS WHICH MAY INVOLVE RISKS AND
UNCERTAINTIES OR DEAL WITH POTENTIAL FUTURE CIRCUMSTANCES AND DEVELOPMENTS. THE
COMPANY'S ACTUAL RESULTS OR FUTURE EXPERIENCE MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS OR POTENTIAL DEVELOPMENTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
THE COMPANY HAS ATTEMPTED TO IDENTIFY CERTAIN OF THE FACTORS THAT IT CURRENTLY
BELIEVES MAY CAUSE ACTUAL FUTURE EXPERIENCE AND RESULTS TO DIFFER FROM ITS
CURRENT EXPECTATIONS REGARDING THE RELEVANT MATTER OR SUBJECT AREA. FACTORS THAT
MIGHT CAUSE THIS DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE FACTORS
DISCUSSED IN THIS BUSINESS SECTION INCLUDING "ADDITIONAL RISK FACTORS AFFECTING
FUTURE PERFORMANCE" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS."
Common Shares Issuances For Acquisitions
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On May 22, 1998 the Company acquired Whitfield Holdings, Ltd. The Company
issued 3,200,000 shares of restricted Rule 144 common stock into escrow for the
acquisition of Whitfield from its shareholders on a performance basis. The
shares were to have been released out of escrow on a quarterly basis based on
revenues received by Whitfield. If the Company, through Whitfield, were to
receive $1,992,000 in annual revenues, all 3,200,000 shares would have been
released. The Company did release 59,571 shares out of escrow, in good faith,
for the $37,090 revenues accrued for nine days operation for the first quarter
ended May 31, 1998. This money, along with accrued revenues through December 31,
1998 totaling $499,091, was never paid and the shares in escrow will be
canceled. The Company is planning to institute legal action to recover these
accrued revenues along with $566,805 in loans. There is no assurance that the
Company will ever be able to collect on its claims. As of August 25, 1999 the
Company cancelled all 3,200,000 shares for fraud and failure of consideration.
Absence of Revenue-Producing Operations
The Company has produced no revenues during the last three fiscal years,
other than the accrued revenues which it is now seeking to collect, and is
seeking to acquire an interest in a new business opportunity. If a business
combination is consummated, the Company will be subject to all the risks of the
acquired business, which may be a start-up or developmental-stage corporation.
Any purchase of securities of the Company during this stage of its development
must be seen as speculative, along with the placing of funds at a high risk in
an undetermined or start-up venture with all of the unforeseen costs, expenses,
problems and difficulties to which the future business may be subject.
No Assurance of Acquisition or of Profitability
There can be no assurance that the Company will be able to acquire or
enter into a business opportunity, or, if a business acquisition is consummated,
that the business can be operated profitably or develop into a successful
business. Profitability will depend on many factors, including the success of
the Company's marketing program, the control of expense levels and the success
of the Company's business activities.
Dependence Upon Inexperienced, Part-time Management
The Company's management has had limited experience in seeking,
investigating or acquiring interests in business opportunities. The selection of
a business opportunity in which to participate is complex and extremely risky
and will be made on management's analysis of the quality of the other company's
management and personnel, the anticipated acceptability of new products or
services, the merit of technological changes, and numerous other factors which
are difficult to analyze through the application of any objective criteria. The
Company's potential success and its shareholders are dependent on the Company's
management, which will have virtually unlimited discretion in searching for and
entering into an acquisition of any interest in a
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business opportunity. Additionally, the directors of the company may be involved
in other business activities which compete for their time, and will devote only
such time as they deem necessary to manage the business of the Company.
Possible Need for Future Financing
Even if a business combination or acquisition is successfully completed,
there can be no assurance that the working capital of the Company, if any, will
be sufficient to successfully implement the Company's business plan or meet its
financing requirements. In addition, the company may experience rapid growth
after commencing its new operations and may require additional funds to expand
its operations or enlarge its organization. There can be no assurance that
additional financing will be available when needed or on terms favorable to the
Company. Subsequent financing may further reduce the percentage of ownership of
the Company held by present shareholders.
No Present Market for Securities
There is presently a limited market for the Company's securities.
Although the Company intends, if possible, to establish a more active trading
market on the NASD Electronic Bulletin Board, there can be no assurance than an
active trading market for the Company's securities will be developed or
maintained, or that shares of the company's common stock may be resold at any
price.
ITEM 2. PROPERTIES
The Company had no assets nor any property, other than the shares issued
to settle out previous option-holders of PAN, the shares issued in escrow to
settle out debt, and the potential for recovery from the Company's claims
against Tropical International Sports, Inc., Whitfield Holdings, Ltd., Timothy
S. Shiah, and Thomas D. DiNola.
Since May 1996, the company has utilized office space at the offices of
Valhalla Financial Group, L.L.C. Valhalla was previously at 6912-220th Street
SW, Mountlake Terrace, Washington 98043, and since September 1997 is located at
19239 Aurora Avenue North, Shoreline, Washington 98133. To date, the Company has
used this space free of charge and anticipates that it will continue to do so in
the foreseeable future, or until a business acquisition is consummated.
ITEM 3. LEGAL PROCEEDINGS
There are no pending or threatened material legal proceedings to which
the Company or any of its property is subject, except for the counterclaim by
Timothy S. Shiah alleging fraud and seeking $500,000 in damages. The Company
believes this counterclaim to have absolutely no merit.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
There is no established trading market for shares of the Company's Common
Stock. Although the Company's Common Stock is quoted on the NASD's OTC Bulletin
Board from time to time, such quotations are limited, sporadic and often
volatile. Accordingly, shareholders may find it difficult to dispose of, or to
obtain accurate quotations as to the price of the Common Stock. In addition, the
Common Stock is subject to "penny stock" rules that impose restrictive sales
practice and market making requirements on broker-dealers who sell and/or make a
market in the Common Stock. This may affect the willingness of broker-dealers to
sell and/or make a market in the Common Stock as well as the ability of
shareholders to sell the Common Stock in the secondary market. The following
table sets forth the quarterly high and low bid prices for the Company's Common
Stock during 1999 and 1998. Quotations set forth below reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions. As of December 31, 1999 there were approximately 325
holders of record of the Company's Common Stock.
<TABLE>
<CAPTION>
Quarter Year High Low
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<S> <C> <C> <C>
Jan-Mar 1998 .562 .220
Apr-Jun 1998 .875 .688
Jul-Sep 1998 1.125 .750
Oct-Dec 1998 1.188 .563
Jan-Mar 1999 .410 .500
Apr-Jun 1999 .375 .750
Jul-Sep 1999 .281 .563
Oct-Dec 1999 .312 1.750
</TABLE>
Dividends
No dividends on Common Stock of the Company have been paid and no such
payment is anticipated in the foreseeable future.
Recent Sales of Unregistered Securities; Use of Proceeds from Sales of
Unregistered Securities.
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1997
On February 25, 1997 the Company issued 50,000 shares of its Common Stock
for debt settlement at a deemed value of $25,000 to Clifford M. Johnston. The
stock was issued for purposes of settling out judgments against the Company
obtained by Robert Bickel in the amount of $122,709 and by Ronald Williams in
the amount of $121,809. The issuance of these shares was deemed exempt from the
registration provision of the Securities Act in reliance upon Section 4(2) of
the Securities Act, as a transaction by an issuer not involving a public
offering.
On March 25, 1997 the Company issued 130,000 shares of its Common Stock
for debt settlement of a judgment against the company to Bristol Media, Ltd. The
stock was issued for purposes of settling out a judgment against the Company
obtained by John Douthwaite in the amount of $8,000. The issuance of these
shares was deemed exempt from the registration provision of the Securities Act
in reliance upon Section 4(2) of the Securities Act, as a transaction by an
issuer not involving a public offering.
On December 11, 1997 the Company issued 160,000 shares of its Common
Stock for an aggregate consideration of $40,000 to Stephen M. Roake IRA (60,000
shares) and to Bristol Media, Ltd. (100,000 shares). The consideration of
$40,000 was used for legal fees, accounting fees, past audit fees, current audit
fees, transfer agent fees and payment of small cash loans to the Company. The
issuance of these shares was deemed exempt from the registration provision of
the Securities Act in reliance upon Section 4(2) of the Securities Act, as a
transaction by an issuer not involving a public offering.
1998
The Company issued 30,000 shares of restricted Rule 144 common stock on
February 3, 1998 for debt settlement at a deemed value of $15,000 to Clifford M.
Johnston. The additional stock was issued for the purpose of the final
settlement agreement of 80,000 shares to be issued, 40,000 shares each, to
Robert Bickel and Ronald Williams for settling out judgments of$122,709 and
$121,809 respectively. The issuance of these shares was deemed exempt from the
registration provision of the Securities Act in reliance upon Section 4(2) of
the Securities Act, as a transaction by an issuer not involving a public
offering.
The Company issued 3,200,000 shares of restricted Rule 144 common stock
into escrow for the shareholders of Whitfield Holdings, Ltd. The stock was
issued to acquire 100% of the issued and outstanding stock of Whitfield. The
shares were to be released out of escrow on a quarterly basis based on actual
revenues received by Whitfield. The issuance of these shares was deemed exempt
from the registration provision of the Securities Act in reliance upon Section
4(2) of the Securities Act, as a transaction by an issuer not involving a public
offering. As of August 25, 1999 the Company cancelled all 3,200,000 shares for
fraud and failure of consideration.
The Company issued 800,000 shares of restricted Rule 144 common stock to
Bristol Media, Ltd. for services rendered incident to the acquisition of
Whitfield Holdings,
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Ltd. The issuance of these shares was deemed exempt from the registration
provision of the Securities Act in reliance upon Section 4(2) of the Securities
Act, as a transaction by an issuer not involving a public offering.
The Company issued 50,000 shares of restricted Rule 144 common stock to
Joseph Shiah for $25,000 in cash. The stock was issued for the purpose of making
a loan to Tropical International Sports, Inc. The issuance of these shares was
deemed exempt from the registration provision of the Securities Act in reliance
upon Section 4(2) of the Securities Act, as a transaction by an issuer not
involving a public offering. As of August 25, 1999 the Company cancelled all
50,000 shares for fraud and failure of consideration.
ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company has produced no revenues during the last three fiscal years,
other than the accrued revenues which it is now seeking to collect, and is
seeking to acquire an interest in a business opportunity. If a business
combination is consummated, the Company will be subject to all the risks of the
acquired business, which may be a start- up or developmental-stage corporation.
If a business acquisition is consummated, there can be no assurance that the
business can be operated profitably or develop into a successful business.
Profitability will depend on many factors, including the success of the
Company's marketing program, the control of expense levels and the success of
the Company's business activities. The Company may incur substantial operating
losses after the proposed business acquisition. The Company's ability to
continue its operations is also dependent upon the availability of additional
capital. See "Liquidity and Capital Resources".
The results of operations for the year ending December 31, 1999 reflect
an operating loss of $364,942 compared to a loss of $905,231 for the year ending
December 31, 1998. Included in the $364,942 loss were the $100,000 in Whitfield
equipment write-offs, the $3,745 in professional fees, $2,117 in investor
relations expense, $60,000 in investor relations fees, $40,379 in legal fees,
$7,769 in SEC electronic filing expense, $14,000 in accounting fees, $1,175 in
Internet and website expense, $130,000 in wages and salaries, and $5,757 in
other expenses.
Included in the $905,231 loss were the $566,805 in bad debts for loans
made to Tropical, $63,205 in investor relations expense, $51,753 in consulting
fees, $48,000 in investor relations fees, $25,424 in interest expense, $25,239
in legal fees, $16,584 in SEC electronic filing expense, $14,000 in accounting
fees, $12,445 in Internet and web-site expense, and $17,596 in other expenses.
The accumulated deficit at December 31, 1999 was $2,635,734, compared to
$2,274,387 at December 31, 1998. The Company sponsored no research and
development during fiscal 1999, 1998 or 1997. The rate of inflation as measured
by changes in the consumer price index had no effect on the revenues or net
earnings of
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the Company in its two most recent fiscal years.
The was no provision for federal income tax for the years ended December
31, 1999, 1998, 1997 as the Company incurred net operating losses.
Liquidity and Capital Resources; Plan of Operation
As of December 31, 1999 the Company had no cash reserves or cash
equivalents. During the last two fiscal years, the Company has financed itself
through the issuance of common stock and through loans and capital contributions
from certain shareholders. At December 31, 1999 the Company had current assets
of $89 and current liabilities of $722,315, resulting in a working capital
deficiency of $722,226. This can be compared to current assets of $50 and
current liabilities of $664,928 at December 31, 1998, and a working capital
deficiency of $664,878.
In light of the Company's significant working capital deficiency, the
Company's independent auditor included an explanatory paragraph in his audit
opinion with respect to the Company's 1999 financial statements which indicated
substantial doubt about the Company's ability to continue as a going concern.
Due to the plans of the Company to acquire a business entity having sufficient
assets and cash flow to enable the Company to be self-sufficient and to raise
additional working capital through equity financing, the financial statements
were prepared on the assumption that the Company would continue its operations
as a going concern, rather than based on the assumption of liquidation. The
factors leading to, and the existence of, the explanatory paragraph may
materially adversely affect the Company's ability to acquire a business entity
or obtain financing.
The Company is attempting to settle with certain of its creditors through
the issuance of common stock. However, the Company's ability to satisfy its debt
obligations and settle with judgment creditors may ultimately depend upon the
future operating performance of an acquired business entity, the performance of
which will be affected by prevailing economic conditions and financial, business
and other factors, many of which are beyond its control. There is no assurance
that the company's operating cash flow will be sufficient in the near term to
meet its operating expenses or to service debt requirements as they become due.
Furthermore, there can be no assurance that the Company will be able to acquire
a business entity having sufficient assets and cash flow to enable the Company
to be self-sufficient.
If the Company is unable to settle with its creditors or service its
indebtedness, or acquire a solvent business entity, it will be forced to adopt
an alternative strategy that may include actions such as restructuring or
refinancing its indebtedness or seeking additional equity capital. There can be
no assurance that any of these strategies could be effected on satisfactory
terms, it at all, and the implementation of any of these alternative strategies
could have a negative impact on the Company's operations, financial condition,
and capital structure, and may be dilutive to existing stockholders.
The Company has no bank line or credit arrangements. Subsequent to a
business
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acquisition, if any, the Company's losses may continue. There can be no
assurance that the Company will ever achieve profitability. Whether or not a
business acquisition is completed, it is likely that the Company will require
additional capital to fund its operations. If equity financing is attempted,
there can be no assurance that additional financing will be available when
needed or on terms favorable to the Company.
If a business acquisition is consummated, the Company's actual working
capital needs will then depend upon numerous factors, including the extent and
timing of acceptance of the Company's products in the market, the Company's
operating results, the progress of the Company's research and development
activities, the cost of increasing the Company's sales and marketing activities,
the status of competitive products, and the continued availability of working
capital and equity financing, none of which can be predicted at this point in
time.
The inability to locate a business acquisition or obtain financing would
have a material adverse effect on the Company's operations. The Company could be
required to suspend its operations or sell additional securities on terms that
are highly dilutive to current investors in the Company.
ITEM 7. FINANCIAL STATEMENTS
Attached hereto and incorporated herein by this reference are audited
financial statements for the fiscal years ending December 31, 1999, 1998 and
1997.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors, Executive Officers, Promoters and Control Persons
The directors and executive officers of the Company as of December 31,
1999 were as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jerry Cornwell 61 President, Chief Executive Officer, Director
Clifford M. Johnston 60 Vice President, Chief Financial Officer, Director
Kenneth A. Burns 47 Secretary/Treasurer, Director
Judy Morton Johnston 52 Assistant Secretary/Assistant Treasurer
</TABLE>
Officers are appointed by and serve at the pleasure of the Board of
Directors. Other than the fact that Clifford M. Johnston and Judy Morton
Johnston are married, there are no arrangements or understandings between any
director or officer and any other person pursuant to which such director officer
was elected to serve. The named officers and directors devote only such time as
may be necessary to the Company's business and affairs.
Jerry Cornwell was President and Chief Executive Officer of the Company
from January 1993 until March 15, 1995 when Dennis Brewer was appointed
President and Chief Executive Officer. Mr. Cornwell reassumed his position as
President and Chief Executive Officer on June 19, 1995 when Dennis Brewer
resigned. For the prior ten years, he was principal of Corn-Mill Enterprises, a
business investment advisory firm. Mr. Cornwell was previously President and
Chief Executive Officer of J. A. Cornwell, Inc., a land reclamation and
irrigation development firm, from 1975 to 1983. From 1996 to the present, Mr.
Cornwell also served as a Managing member of Bristol Media, Ltd. and Valhalla
Financial Group, L.L.C., companies in the business of providing investor
relations services to public companies.
Clifford M. Johnston was appointed Vice President and Chief Financial
Officer of the Company on July 1, 1998. For the past 25 years Mr. Johnston has
provided corporate planning, business consulting assistance with accounting and
tax planning and has held various financial management and marketing positions
with U. S. corporations from 1970 to the present. From 1990 to 1999, Mr.
Johnston served as Secretary/Treasurer of Quality Tax Service, Inc. responsible
for corporate planning, business consulting, accounting and tax service.
Kenneth A. Burns was appointed Secretary/Treasurer of the Company on May
19, 1998. Mr. Burns is an attorney in Las Vegas, Nevada practicing primarily in
the fields of tax, business and estate planning, tax litigation, probate and
estate administration. Mr. Burns is a member of the State Bar of Nevada and the
Florida Bar and is admitted to
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practice before the United States District Court for the State of Nevada, the
United States Court of Appeals for the Ninth Circuit and the United States Tax
Court. Mr. Burns was formerly in the Office of District Counsel to the Internal
Revenue Service in the Reno and Las Vegas offices. During his tenure with the
Internal Revenue Service, he was the primary legal counsel for a study to
determine whether gaming should be a national coordinated specialization. He was
instrumental in developing a number of Internal Revenue Service positions on
gaming.
Judy Morton Johnston was appointed Assistant Secretary/Assistant
Treasurer of the Company on May 19, 1998. Ms. Johnston has been a tax
practitioner with Quality Tax Service, Inc. since 1989, currently serving as
President. Quality Tax Service, Inc. provides on-going accounting, tax
preparation and administrative services for the Company.
Compliance with Section 16(a) of the Exchange Act
Based solely on review of the copies of the forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the fiscal year ended December 31, 1999 all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with; except that Clifford M. Johnston
and Judy Morton Johnston failed to file seven monthly reports covering ten
transactions on Form 4, but did report the transactions on their 1999 year end
report on Form 5; and that Jerry Cornwell failed to file nine monthly reports
covering forty transactions on Form 4, but did report the transactions on his
year end Form 5.
ITEM 10. EXECUTIVE COMPENSATION
During fiscal year ended December 31, 1999 Jerry Cornwell was issued
90,000 shares of S-8 registered stock in lieu of $60,000 in current salary and
$30,000 in future salary; Clifford M. Johnston was issued 75,000 shares of S-8
registered stock in lieu of $50,000 in current salary and $25,000 in future
salary; Judy Morton Johnston was issued 30,000 shares of S-8 registered stock in
lieu of $20,000 in current salary and $10,000 in future salary. The future
salaries were accounted for as prepaid expense. No other executive officer's
salary and bonus exceeded $10,000 during any of the Company's last three fiscal
years.
There were no cash bonus, deferred compensation plans, or stock option
plans in effect at December 31, 1999. The Company does not maintain or
contribute to any pension or retirement plan in which the directors or executive
officers of the Company are participants or are entitled to receive benefits,
but the Board of Directors may recommend one or more programs for adoption in
the future. No stock options were issued by the Company in 1999.
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Directors received no cash compensation for serving on the Board of
Directors or its committees during the year ended December 31, 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Option Other
Principle Position Year Salary Grants Compensation
------------------ ---- ------ ------ ------------
<S> <C> <C> <C> <C>
Jerry Cornwell 1999 -0- -0- $60,000
President, CEO 1998 -0- -0- $30,000
1997 -0- -0- -0-
Clifford M. Johnston 1999 -0- -0- $50,000
Vice President 1998 -0- -0- $25,000
1997 -0- -0- -0-
Judy Morton Johnston 1999 -0- -0- $20,000
Asst. Sec./Asst. Treas. 1998 -0- -0- $10,000
1997 -0- -0- -0-
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1999, the beneficial
ownership of Common Stock of all directors of the Company, all directors and
officers of the Company as a group, and each person who is known to the Company
to own beneficially more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
Name and Address Amount / Nature Percent
of Beneficial Owner of Ownership (1) of Class
- ------------------- ---------------- --------
<S> <C> <C>
Jerry Cornwell (2) 1,622,575 35.99%
14424 SE 78th Way
Newcastle, WA 98059
Clifford M. Johnston (3) 853,729 18.94%
19111 3rd Ave NW
Seattle, WA 98177
Judy Morton Johnston (4) 853,729 18.94%
19111 3rd Ave NW
Seattle, WA 98177
All officers and directors
as a group 1,771,845 39.30%
</TABLE>
14
<PAGE> 15
(1) Pursuant to applicable rules of the Securities and Exchange Commission,
"beneficial ownership" as used in this table means the sole or shared power to
vote shares (voting power) or the sole or shared power to dispose of shares
(investment power). Unless otherwise indicated, the named individual has sole
voting and investment power with respect to the shares shown as beneficially
owned. In addition, a person is deemed the beneficial owner of those securities
not outstanding which are subject to options, warrants, rights or conversion
privileges if that person has the right to acquire beneficial ownership within
sixty days.
(2) Because of his sole or shared investment power over the Company's Common
Stock beneficially owned by the corporation and limited liability companies,
Jerry Cornwell is deemed beneficial owner of the 713,940 shares owned by XXX
Enterprises Corp. and 682,806 shares owned by Bristol Media, Ltd., and the
21,653 shares owned by Valhalla Financial Group, L.L.C.
(3) Because of his shared investment power over the Company's Common Stock
beneficially owned by the business trust and limited liability companies,
Clifford M. Johnston is deemed beneficial owner of the 72,270 shares owned by J
& J Family Business Trust, the 21,653 shares owned by Valhalla Financial Group,
L.L.C., the 682,806 shares owned by Bristol Media, Ltd., and the 59,500 shares
owned by 4 Point Lake, LLC.
(4) Because of her shared investment power over the Company's Common Stock
beneficially owned by the business trust and the limited liability company, Judy
Morton Johnston is deemed the beneficial owner of the 72,270 shares owned by J &
J Family Business Trust, the 682,806 shares owned by Bristol Media, Ltd., the
21,653 shares owned by Valhalla Financial Group, L.L.C., and the 59,500 shares
owned by 4 Point Lake, LLC.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 13. EXHIBITS
The following documents are filed as part of this report:
(1) Exhibits.
The exhibits required to be filed by this report are listed in the
Exhibit Index on pages 16 and 17.
(2) Audited Financial Statements for the years ended December 31, 1999,
December 31, 1998, and December 31, 1997.
(3) 27.1 Financial Data Schedule
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.1 Plan of Reorganization and Merger of Aster Development Enterprises Ltd.
into PAN Environmental Services, Inc. Reference is made to Exhibit 1 of the
Company's 8-K filed on March 25, 1993 which is incorporated herein by
reference.
2.2 Plan of Reorganization between PAN Environmental Services, Inc. and
Northwest Specialties, Inc., a Minnesota corporation, Advantage Parking Lot
Service, Inc., a California corporation, and MRR Constructions Services,
Inc., a California corporation. Reference is made to Exhibit 2 of the
Company's 8-K filed on March 25, 1993 which is incorporated herein by
reference.
2.3 Divestiture Agreement between PAN Environmental Corporation and
Northwest Specialties, Inc. Reference is made to Exhibit 2.3 of the
Company's 10-K for the year ended December 31, 1995 which is
incorporated herein by reference.
2.4 Divestiture Agreement between PAN Environmental Corporation and
Advantage Parking Lot Service, Inc. Reference is made to Exhibit 2.4 of the
Company's 10-K for the year ended December 31, 1995 which is
incorporated herein by reference.
2.5 Divestiture Agreement between PAN Environmental Corporation and MRR
Construction Services, Inc. Reference is made to Exhibit 2.5 of the
Company's 10-K for the year ended December 31, 1995 which is
incorporated herein by reference.
2.6 Agreement and Plan of Business Combination for acquisition of Whitfield
Holdings, Ltd. Reference is hereby made to Exhibit 10.1 of the Company's
8-K filed on June 5, 1998.
2.7 Articles of Merger between PAN Environmental Corporation and PAN
International Gaming, Inc. The name of the surviving corporation is PAN
International Gaming, Inc., a Nevada corporation. The name of the
corporation being merged into this surviving corporation is PAN
Environmental Corporation, a Delaware corporation, which is incorporated
herein by reference.
3.2 Articles of Incorporation of PAN Environmental Services, Inc. Reference is
made to Exhibit 3.2 of the Company's January 31, 1993 10-K and to
Exhibit 3.1 of the Company's December 31, 1993 10-K which are
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
incorporated herein by reference.
3.4 Restated Certificate of Incorporation of P.A.N. Environmental
Services Corporation changing name to PAN Environmental Corporation
filed with the State of Delaware on February 22, 1994. Reference is
made to Exhibit 3.2 of the Company's Form 8-K filed March 2, 1994
which is incorporated herein by reference.
3.5 Bylaws of P.A.N. Environmental Services Corporation. Reference is made to
Exhibit 3.2 of the Company's January 31, 1993 10-K and to Exhibit 3.2 of
the Company's December 31, 1993 10-K which are incorporated herein by
reference.
3.6 Amended and Restated Bylaws of PAN Environmental Corporation.
Reference is made to Exhibit 3.4 of the Company's Form 8-K filed March 2,
1994 which is incorporated herein by reference.
10.1 The 1994 Employee Benefit Stock Plan. Reference is made to Exhibit 10.1
of the Company's December 31, 1994 10-K which is incorporated herein by
reference.
</TABLE>
17
<PAGE> 18
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<PAGE> 19
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Accountant's Report 1
Consolidated Statement of Financial Position
at December 31, 1999, 1998, and 1997 2-3
Consolidated Statement of Operations for the
Years Ended December 31, 1999, 1998 and 1997 4
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1999, 1998 and 1997 5
Consolidated Statement of Changes in
Stockholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997 6-7
Notes to Consolidated Financial Statements 8-14
</TABLE>
<PAGE> 20
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
PAN International Gaming, Inc.
(formerly PAN Environmental Corporation)
Shoreline, Washington
I have audited the accompanying Consolidated Balance Sheet of PAN International
Gaming, Inc. and subsidiary as of December 31, 1999, 1998 and 1997 and the
related Consolidated Statements of Loss and Deficit, Consolidated Statement of
Cash Flows for the periods then ended, and the Consolidated Statement of Changes
in Shareholders' Equity. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of PAN International Gaming, Inc. and
subsidiary as of December 31, 1999, 1998 and 1997, and the results of its
operations and its cash flows for the periods then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that PAN
International Gaming, Inc. will continue as a going concern. As discussed in
Note 6 to the financial statements, PAN International Gaming, Inc. is engaged in
new operations, and the ability to continue to exist as a going concern relies
on the company's ability to retain adequate financing and to generate sufficient
sales. Management plans in this regard are described in Note 6. The financial
statements do not include any adjustment that might result from the outcome of
the uncertainty of future agreements, financings or sales.
WILLIAM L. BUTCHER, CPA P.S.
Everett, Washington
March 15, 2000
<PAGE> 21
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
DECEMBER 31, 1999, 1998 and 1997
ASSETS
<TABLE>
<CAPTION>
12/31/99 12/31/98 12/31/97
----------- ----------- ---------
<S> <C> <C> <C>
CURRENT ASSETS
Cash in Bank $ 89 $ 50 $ -0-
Loan Receivable - Tropical
(Note 9) 566,805 566,805 -0-
Less: Reserve For Bad Debt (566,805) (566,805) -0-
License Fee Receiv. - Tropical
(Note 10) 499,901 499,091 -0-
Less: Reserve For Bad Debt (499,901) (499,091) -0-
-------- -------- -------------
Total Current Assets 89 50 -0-
FIXED ASSETS
Gaming System-Hardware (Note 1,
Note 11) 47,030 47,030 -0-
Less: Reserve For Bad Debt (47,030) -0- -0-
Gaming System-Software (Note 1,
Note 11) 52,970 52,970 -0-
Less: Reserve For Bad Debt (52,970) -0- -0-
-------- -------- -------------
Total Fixed Assets -0- 100,000 -0-
OTHER ASSETS
Prepaid Expenses (Note 3) 55,667 259,667 -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
(Note 5) -0- 3,200,000 -0-
Investment-Whitfield/Unearned
(Note 5) -0- (3,140,421) -0-
-------- -------- -------------
Total Other Assets 541,115 804,694 585,000
-------- -------- -------------
TOTAL ASSETS $ 541,204 $ 904,744 $ 585,000
=========== =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 22
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
DECEMBER 31, 1999, 1998 and 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
12/31/99 12/31/98 12/31/97
-------- -------- --------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts Payable (Note 3) $308,270 $250,883 $448,245
Conv. Notes Payable (Note 8) 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 722,315 664,298 762,851
LONG TERM LIABILITIES
Stipulation Payable-Roake
(Note 3) 225,000 225,000 -0-
-------- -------- --------
Total Liabilities 947,315 889,928 762,851
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
4,508,413 shares at
December 31, 1999 4,508 7,758 3,188
Additional paid-in capital
(Note 5) 2,225,115 5,421,866 1,417,635
Common Stock-Unearned Escrow
(Note 5) -0- (3,140,421) -0-
Accumulated Deficit (2,635,734) (2,274,387) (1,598,674)
---------- ---------- ----------
Total Stockholders' Equity (406,111) 14,816 (177,851)
---------- ------ ----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 541,204 $ 904,744 $ 585,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 23
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97
-------- -------- --------
<S> <C> <C> <C>
REVENUE (Note 10) $ -0- $ -0- $ -0-
Less: Bad Debt (Note 10) -0- (499,091) -0-
COST OF SALES -0- -0- -0-
--------- --------- ---------
GROSS PROFIT (LOSS) -0- -0- -0-
--------- --------- ---------
OPERATING EXPENSES
Bad Debt (Note 9) 100,000 566,805 -0-
Professional fees 3,745 1,610 58,690
Accounting fees (Note 12) 14,000 14,000 -0-
Consulting fees (Note 12) -0- 51,753 -0-
Legal fees 40,379 25,239 -0-
Transfer Agent fees 1,005 3,095 -0-
Internet & web site fees 1,175 12,445 -0-
Investor relations expense
(Note 12) 2,117 63,205 -0-
Investor relations fees
(Note 12) 60,000 48,000 -0-
SEC electronic filing expense 7,769 16,584 -0-
Interest -0- 25,424 47,451
Travel 2,729 8,443 -0-
Taxes and licenses 110 260 10,918
Telephone -0- 1,450 -0-
Office expense 742 455 3,238
Bank charges 96 274 -0-
Wages and salaries (Note 12) 130,000 65,000 -0-
Postage and delivery 1,075 2,009 154
--------- --------- ---------
Total Operating Expenses $ 364,942 $ 906,051 $ 120,451
--------- --------- ---------
(LOSS) FROM OPERATIONS (364,942) (906,051) (120,451)
--------- --------- ---------
OTHER EXPENSE -0- (5,000) -0-
OTHER INCOME -0- 5,820 2,389
PROVISION FOR INCOME TAX -0- -0- -0-
NET INCOME (LOSS) $(364,942) $(905,231) $(118,062)
--------- ========= =========
NET INCOME (LOSS) PER SHARE $ (.081) $ (.117) $ (.037)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 24
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE
YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From
Operating Activities:
Net Profit (Loss) $ (364,942) $ (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 57,387 (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
for subsidiary adjustment (3,595) 229,518 -0-
----------- ----------- ---------
Net Cash Provided by
Operating Activities: 60,982 (38,655) (73,999)
----------- ----------- ---------
Cash Flows From
Investing Activities:
Increase (Decrease) In:
Current assets -0- -0- -0-
Fixed assets (100,000) 100,000 -0-
Other assets (263,579) 219,694 -0-
----------- ----------- ---------
Net Cash Used In
Investing Activities: (363,579) 319,694 -0-
----------- ----------- ---------
Cash Flows From
Financing Activities:
Increase (Decrease) In:
Common stock (3,250) 4,570 340
Additional paid-in capital (56,330) 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: (59,580) 1,263,630 73,999
----------- ----------- ---------
NET INCREASE (DECREASE) IN CASH 39 50 -0-
Cash Beginning of Periods 50 -0- -0-
----------- ----------- ---------
Cash End of Periods 89 50 -0-
=========== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 25
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 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
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
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 26
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 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
========== ====== ========= ========== ==========
Cancellation of 3,200,000
shares for fraud and
failure of consideration
August 1999 (3,200,000) (3,200) -0- -0- -0-
Cancellation of 50,000
shares for fraud and
failure of consideration
August 1999 (50,000) (50) -0- -0- -0-
Net income (loss) for the
period ended
December 21, 1999 -0- -0- -0- (364,942) (364,942)
Adjustment to retained
earnings -0- -0- -0- -0- 3,595
---------- ------ --------- ---------- ----------
BALANCE, DECEMBER 31, 1999 4,508,413 4,508 2,281,455 (2,639,291) 364,531
========== ====== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE> 27
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 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.
-8-
<PAGE> 28
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 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.)
-9-
<PAGE> 29
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 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.)
Tropical is in default on all agreements and PAN has filed a lawsuit against
Tropical, Whitfield Holdings, Ltd., Timothy S. Shiah, and Thomas D. DiNola. (See
Note 15.)
Note 2. Summary of Significant Accounting Policies
This summary of significant accounting policies of PAN International Gaming,
Inc. (the Company) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations of
the company's management who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
Nature of Operations
See the Company above.
Acquisition of Whitfield
The acquisition of Whitfield Holdings, Ltd. was accounted for on a purchase
basis. All intercompany accounts have been eliminated.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Property and Equipment
Property and equipment are stated at the lower of cost or fair market value.
Depreciation is computed for financial statement purposes as well as for
federal income tax purposes using the MACRS (Modified Accelerated Cost Recovery
System) method of depreciation. Equipment is depreciated over five years.
Software is amortized over five years.
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 not filed any tax returns since inception. It is anticipated
that if tax returns were filed, the company would have net operating losses.
The current deficit of $2,635,734 at December 31, 1999 would potentially create
a similar net operating loss.
Note 3. Judgments 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.
-10-
<PAGE> 30
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 and 1997
Note 3. Judgments Payable - continued
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. Prepaid Expense
The Company accrued $130,000 of salaries payable in the twelve months ended
December 31, 1999 to the Company's officers, $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 12.)
Note 5. Stockholders' Equity and Capital 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, increased by this transaction, to 80,000 shares
from 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 released 59,579 shares out of
escrow in good faith for the revenues accrued for nine days operations for the
first contract fiscal quarter ended May 31, 1998; however, this amount still has
not been paid. No further stock will be released from escrow until the
$37,089.63 has been paid for the first quarter, until $174,001.36 has been paid
for the second quarter, and until the estimated $288,000 has been paid for the
third and fourth quarters.
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. All of this $25,000 was
loaned to Tropical International Sports, Inc. and may be a part of the Company's
claim against Tropical.
The Company issued 490,250 shares of free trading S-8 common stock for $490,250
of consulting services, investor relations fees and expenses, accounting
services and salaries pursuant to an S-8 registration statement.
The Company received $177,750 from a former Whitfield shareholder and current
PAN escrow shareholder which the Company allocated as additional paid-in
capital. Substantially all of the $177,750 was loaned to Tropical International
Sports, Inc. and may be part of the Company's claim against Tropical.
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).
-11-
<PAGE> 31
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 and 1997
Note 6. 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 7. 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 8. 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 9. 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 10. 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.
-12-
<PAGE> 32
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 and 1997
Note 11. Gaming System Hardware and Software - Tropical
The Company cannot locate the $100,000 of gaming system hardware and software
and believes it was taken out of Antigua or sold. A reserve for bad debts has
been set up in the same amount, thus zeroing out this item as an asset.
Note 12. S-8 Offering
On October 2, 1998 the Company filed an S-8 Registrations 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 13. 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 14. 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 15. Litigation - 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.
-13-
<PAGE> 33
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 and 1997
Note 3. Litigation - Tropical - continued
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.
On August 25, 1999 the Company filed a lawsuit in the United States District
Court, Southern District of New York, against Tropical, Whitfield Holdings,
Ltd., Timothy S. Shiah and Thomas D. DiNola alleging common law fraud,
securities fraud, conversion, breach of contract, tortuous interference and
seeking $8,000,000 in damages from the various causes of action. Timothy S.
Shiah is counterclaiming against the Company for damages of$500,000 which the
Company believes is absolutely without merit.
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.
-14-
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-K Report for the year ended December 31, 1998, has been signed
below by the following persons on behalf of the Registrant and in the capacity
and on the date indicated.
March 15, 2000
PAN INTERNATIONAL GAMING, INC.
A NEVADA CORPORATION
by
- ------------------------------- ------------------------------------
Jerry Cornwell Jerry Cornwell
Agent on behalf of the Company President, CEO
- ------------------------------ ------------------------------------
Kenneth A. Burns Jerry Cornwell, Director
Secretary/Treasurer
------------------------------------
Kenneth A. Burns, Director
/S/ CLIFFORD M. JOHNSTON
------------------------------------
Clifford M. Johnston, Director
Page 18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PAN
INTERNATIONAL GAMING, INC. AND SUBSIDIARY - AUDITED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31,
1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 89
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 89
<PP&E> 1,066,706
<DEPRECIATION> 1,066,706
<TOTAL-ASSETS> 541,204
<CURRENT-LIABILITIES> 722,315
<BONDS> 0
0
0
<COMMON> 4,508
<OTHER-SE> 2,225,115
<TOTAL-LIABILITY-AND-EQUITY> 541,204
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (364,942)
<INCOME-TAX> 0
<INCOME-CONTINUING> (364,942)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (364,942)
<EPS-BASIC> (.081)
<EPS-DILUTED> (.081)
</TABLE>
