<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, 2000
PAN INTERNATIONAL GAMING, INC.
------------------------------
(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)
(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: 4,508,413 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
2000 1999
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash in Bank $ 66 $ 89
Loan Receivable - Tropical (Note 9) 566,805 566,805
Less: Reserve For Bad Debt (566,805) (566,805)
License Fee Receiv. - Tropical (Note 10) 499,091 499,091
Less: Reserve For Bad Debt (499,091) (499,091)
------------- -------------
Total Current Assets 66 89
FIXED ASSETS
Gaming System-Hardware (Note 1, Note 11) 47,030 47,030
Less: Reserve For Bad Debt (47,030) (47,030)
Gaming System-Software (Note 1, Note 11) 52,970 52,970
Less: Reserve For Bad Debt (52,090) (52,090)
------------- -------------
Total Fixed Assets -0- -0-
OTHER ASSETS
Prepaid Expenses (Note 3) 23,167 55,667
Settlement Agreement-principals 360,000 360,000
Escrowed shares for debt, Millard account 125,448 125,448
------------- -------------
Total Other Assets 508,615 541,115
------------- -------------
TOTAL ASSETS $ 508,681 $ 541,204
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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
2000 1999
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 323,850 $ 308,270
Conv. Notes Payable (Note 7) 395,250 395,250
Taxes payable 18,795 18,795
------------- -------------
Total Current Liabilities 737,895 722,315
LONG TERM LIABILITIES
Stipulation Payable-Roake (Note 3) 225,000 225,000
------------- -------------
Total Liabilities 962,895 947,315
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value; 50,000,000
shares authorized; 4,508,413 shares
at December 31, 1998; and 4,508,413 shares
at March 31, 1999 4,508 4,508
Additional paid-in capital 2,225,115 2,225,115
Accumulated Deficit (2,683,837) (2,635,734)
------------- -------------
Total Stockholders' Equity (454,214) (406,111)
------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 508,681 $ 541,204
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
PAN ENVIRONMENTAL CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three months ended
---------------------------------
March 31 March 31
2000 1999
------------- -------------
<S> <C> <C>
Sales and Service Revenue (Note 14) $ -0- $ 29,000
------------- -------------
Costs and Expenses
Materials, supplies and operating expenses 48,103 93,016
------------- -------------
Total Costs and Expenses $ 48,013 $ 93,016
------------- -------------
Other Expense (Note 6) $ -0- -0-
------------- -------------
Net Income (Loss) $ (48,013) $ (64,016)
============= =============
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 4,508,413 7,758,413
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
PAN ENVIRONMENTAL CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
(IN DOLLARS)
<TABLE>
<CAPTION>
For the three months ended
---------------------------------
March 31 March 31
2000 1999
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ (48,103) $ (64,016)
Adjustment to reconcile to net cash
operating activities:
(Increase) decrease in working capital, net 15,580 12,989
------------- -------------
Net Cash From Operating Activities (32,523) (51,027)
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:
Decrease in other assets 32,500 51,000
------------- -------------
Net Cash Used in Financing Activities 32,500 51,000
Net (decrease) increase in cash and
cash equivalents (23) (27)
Cash and Cash Equivalents:
Beginning of period 89 50
------------- -------------
End of Period 66 23
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
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 by
6
<PAGE> 7
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.)
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.
7
<PAGE> 8
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 computer 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.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
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.
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.
8
<PAGE> 9
Note 4. Prepaid Expense
The Company accrued $32,500 of salaries payable in the three months ended
December 31, 1999 to the Company's officers, which was settled for stock
pursuant to the S-8 Registration Statement filed October 2, 1998. Stock
settlements for wages 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).
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.
9
<PAGE> 10
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.
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.
10
<PAGE> 11
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 had an investor relations contract for the period beginning January
1, 1998 through December 31, 1999 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 had a consulting agreement for the period beginning January 1,
1998 through December 31, 1999 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.
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.
Note 16. Subsequent Events
In May 2000, the Company settled out the $395,250 in convertible notes for
475,917 shares of common stock. Concurrent with this settlement of convertible
notes, the company also settled with Timothy S. Shiah dismissing with prejudice
both the Company's lawsuit and Shiah's $500,000 counterclaim.
11
<PAGE> 12
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, 2000.
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, 2000 reflect an
operating loss of $48,103 as compared to a loss of $64,016 for the quarter
ending March 31, 1999. Included in the $48,103 loss were $15,580 increase in
accounts payable amounts due to operating expenses, $32,500 in salaries and
$2,500 in professional.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was in a deficit position with current liabilities
of $737,895 and current assets of $66.
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.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On August 25, 1999, PAN filed a lawsuit in the United States District Court,
Southern District of New York against Tropical International Sports, Inc.,
Whitfield Holdings, Ltd., Timothy S. Shiah and Thomas D. DiNola alleging common
fraud, conversion, breach of contract, and tortious interference, seeking
$8,000,000 in damages from the various causes of action. Timothy S. Shiah
answered the lawsuit and counterclaimed for $500,000 in May 2000. As a
subsequent event the lawsuit and counterclaim were settled by dismissing the
lawsuits with prejudice.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
13
<PAGE> 14
ITEM 6 - EXHIBITS AND REPORTS ON 8-K
(a) EXHIBITS:
27.1 Financial Data Schedules
(b) REPORTS:
None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PAN Environmental Corporation
-----------------------------
(Registrant)
Dated: May 12, 2000
- ---------------------------------
Jerry Cornwell
President & CEO
15
<PAGE> 16
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MARCH 31, 2000 AND
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE> 17
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Consolidated Statement of Financial Position
at March 31, 2000 and December 31, 1999 and 1998 1-2
Consolidated Statement of Operations for the Period Ended
March 31, 2000 and the Years Ended December 31, 1999 and 1998 3
Consolidated Statement of Cash Flows for the Period Ended
March 31, 2000 and the Years Ended December 31, 1999 and 1998 4
Consolidated Statement of Changes in Stockholders'
Equity for the Period Ended March 31, 2000 and the
Years Ended December 31, 1999 and 1998 5-6
Notes to Consolidated Financial Statements 7-14
</TABLE>
<PAGE> 18
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
MARCH 31, 2000 AND DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
03/31/00 12/31/99 12/31/98
------------ ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash in Bank $ 66 $ 89 $ 50
Loan Receivable - Tropical
(Note 9) 566,805 566,805 566,805
Less: Reserve For Bad Debt (566,805) (566,805) (566,805)
License Fee Receiv. - Tropical
(Note 10) 499,901 499,901 499,091
Less: Reserve For Bad Debt (499,901) (499,901) (499,091)
------------ ------------ ------------
Total Current Assets 66 89 50
FIXED ASSETS
Gaming System-Hardware (Note 1,
Note 11) 47,030 47,030 47,030
Less: Reserve For Bad Debt (47,030) (47,030) -0-
Gaming System-Software (Note 1,
Note 11) 52,970 52,970 52,970
Less: Reserve For Bad Debt (52,970) (52,970) -0-
------------ ------------ ------------
Total Fixed Assets -0- -0- 100,000
OTHER ASSETS
Prepaid Expenses (Note 3) 23,167 55,667 259,667
Settlement Agreement-principals 360,000 360,000 360,000
Escrowed shares for debt,
Millard account 125,448 125,448 125,448
Investment-Whitfield Holdings
(Note 5) -0- -0- 3,200,000
Investment-Whitfield/Unearned
(Note 5) -0- -0- (3,140,421)
------------ ------------ ------------
Total Other Assets 508,615 541,115 804,694
------------ ------------ ------------
TOTAL ASSETS $ 508,681 $ 541,204 $ 904,744
============ ============ ============
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-2-
<PAGE> 19
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
MARCH 31, 2000 AND DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
03/31/00 12/31/99 12/31/98
------------ ------------ ------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts Payable (Note 3) $ 323,850 $ 308,270 $ 250,883
Conv. Notes Payable (Note 8) 395,250 395,250 395,250
Taxes payable 18,795 18,795 18,795
------------ ------------ ------------
Total Current Liabilities 737,895 722,315 664,298
LONG TERM LIABILITIES
Stipulation Payable-Roake
(Note 3) 225,000 225,000 225,000
------------ ------------ ------------
Total Liabilities 962,895 947,315 889,928
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value;
50,000,000 shares authorized;
7,758,413 shares at December
31, 1998; and 4,508,413 shares
at December 31, 1999; and
4,508,413 at March 31, 2000 4,508 4,508 7,758
Additional paid-in capital
(Note 5) 2,225,115 2,225,115 5,421,866
Common Stock-Unearned Escrow
(Note 5) -0- -0- (3,140,421)
Accumulated Deficit (2,683,837) (2,635,734) (2,274,387)
------------ ------------ ------------
Total Stockholders' Equity (454,214) (406,111) 14,816
------------ ------------ ------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 508,681 $ 541,204 $ 904,744
============ ============ ============
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-3-
<PAGE> 20
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD ENDED
MARCH 31, 2000 AND THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
03/31/00 12/31/99 12/31/98
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE (Note 10) $ -0- $ -0- $ 499,091
Less: Bad Debt (Note 10) -0- -0- (499,091)
COST OF SALES -0- -0- -0-
------------ ------------ ------------
GROSS PROFIT (LOSS) -0- -0- -0-
------------ ------------ ------------
OPERATING EXPENSES
Bad Debt (Note 9) -0- 100,000 566,805
Professional fees 2,500 3,745 1,610
Accounting fees (Note 12) -0- 14,000 14,000
Consulting fees (Note 12) -0- -0- 51,753
Legal fees 8,644 40,379 25,239
Transfer Agent fees (150) 1,005 3,095
Internet & web site fees 107 1,175 12,445
Investor relations expense
(Note 12) 678 2,117 63,205
Investor relations fees
(Note 12) -0- 60,000 48,000
SEC electronic filing expense 3,765 7,769 16,584
Interest -0- -0- 25,424
Travel -0- 2,729 8,443
Taxes and licenses -0- 110 260
Telephone -0- -0- 1,450
Office expense -0- 742 455
Bank charges 24 96 274
Wages and salaries (Note 12) 32,500 130,000 65,000
Postage and delivery 35 1,075 2,009
------------ ------------ ------------
Total Operating Expenses $ 48,103 $ 364,942 $ 906,051
------------ ------------ ------------
(LOSS) FROM OPERATIONS (48,103) (364,942) (906,051)
------------ ------------ ------------
OTHER EXPENSE -0- -0- (5,000)
OTHER INCOME -0- -0- 5,820
PROVISION FOR INCOME TAX -0- -0- -0-
NET INCOME (LOSS) $ (48,103) $ (364,942) $ (905,231)
------------ ------------ ============
NET INCOME (LOSS) PER SHARE $ (.011) $ (.081) $ (.117)
============ ============ ============
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-4-
16
<PAGE> 21
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED
MARCH 31, 2000 AND THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
03/31/00 12/31/99 12/31/98
------------- ------------- -------------
<S> <C> <C> <C>
Cash Flows From
Operating Activities:
Net Profit (Loss) $ (48,103) $ (364,942) $ (905,231)
------------- ------------- -------------
Adjustments to Reconcile
Net Loss to Net Cash
Provided by Operating Activities
Net Cash Provided by
Operating Expenses:
Increase (Decrease) In:
Accounts payable 15,580 57,387 (197,362)
Taxes payable, accrued
wages, accrued interest -0- -0- -0-
Judgment payable -0- -0- (200,909)
Accrued judgment interest -0- -0- (94,902)
Stipulation payable -0- -0- 225,000
Adjustment to retained earnings
for subsidiary adjustment -0- (3,595) 229,518
------------- ------------- -------------
Net Cash Provided by
Operating Activities: 15,580 60,982 (38,655)
------------- ------------- -------------
Cash Flows From
Investing Activities:
(Increase) Decrease In:
Current assets -0- -0- -0-
Fixed assets -0- 100,000 (100,000)
Other assets 32,500 263,579 (219,694)
------------- ------------- -------------
Net Cash Used In
Investing Activities: 32,500 363,579 (319,694)
------------- ------------- -------------
Cash Flows From
Financing Activities:
Increase (Decrease) In:
Common stock -0- (3,250) 4,570
Additional paid-in capital -0- (56,330) 863,810
Loans from officers -0- -0- -0-
(Payment of) proceeds from debt -0- -0- 395,250
------------- ------------- -------------
Net Cash Received From
Financing Activities: -0- (59,580) 1,263,630
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH 23 39 50
Cash Beginning of Periods 89 50 -0-
------------- ------------- -------------
Cash End of Periods 66 89 50
============= ============= =============
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-5-
<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, 2000 AND THE YEARS ENDED DECEMBER 31,
1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
----------------------------- Additional
Paid In Accumulated
Shares Amount Capital Deficit Totals
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
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
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) (56,380) -0- (59,580)
Cancellation of 50,000
shares for fraud and
failure of consideration
August 1999 (50,000) (50) 50 -0- -0-
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-6-
<PAGE> 23
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>
Net income (loss) for the
period ended
December 21, 1999 -0- -0- -0- (364,942) (364,942)
Adjustment to retained
earnings -0- -0- -0- 3,595 3,595
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 4,508,413 4,508 2,225,115 (2,635,734) (406,111)
=========== =========== =========== =========== ===========
Net income (loss) for the
period ended
March 31, 2000 -0- -0- -0- (48,103) (48,103)
----------- ----------- ----------- ----------- -----------
BALANCE, MARCH 31, 2000 4,508,413 4,508 2,225,511 (2,683,837) 454,214
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-7-
<PAGE> 24
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999 AND 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.
-8-
<PAGE> 25
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
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> 26
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
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 computer 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.
-10-
<PAGE> 27
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 2. Summary of Significant Accounting Policies - continued
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
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.
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 $32,500 of salaries payable in the three months ended
December 31, 1999 to the Company's officers, which was settled for stock
pursuant to the S-8 Registration Statement filed October 2, 1998. Stock
settlements for wages 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.
-11-
<PAGE> 28
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 5. Stockholders' Equity and Capital Stock - continued
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).
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
-12-
<PAGE> 29
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 9. Loans Receivable - Tropical - continued
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 Communica-tions, 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.
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.
-13-
<PAGE> 30
PAN INTERNATIONAL GAMING, INC.
(FORMERLY PAN ENVIRONMENTAL CORPORATION)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 14. Certain Transactions
The Company had an investor relations contract for the period beginning January
1, 1998 through December 31, 1999 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 had a consulting agreement for the period beginning January 1,
1998 through December 31, 1999 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.
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.
Note 16. Subsequent Events
In May 2000, the Company settled out the $395,250 in convertible notes for
475,917 shares of common stock. Concurrent with this settlement of convertible
notes, the company also settled with Timothy S. Shiah dismissing with prejudice
both the Company's lawsuit and Shiah's $500,000 counterclaim.
-14-
<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 MARCH 31, 2000 AND FOR THE YEARS ENDED DEC. 31,
1999 AND DEC. 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10 QSB FOR 1ST QUARTER, 2000 ENDED MARCH 31, 2000.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 66
<SECURITIES> 0
<RECEIVABLES> 1,066,706
<ALLOWANCES> 1,066,706
<INVENTORY> 0
<CURRENT-ASSETS> 66
<PP&E> 100,000
<DEPRECIATION> 100,000
<TOTAL-ASSETS> 508,681
<CURRENT-LIABILITIES> 737,895
<BONDS> 225,000
0
0
<COMMON> 4,508
<OTHER-SE> 2,225,115
<TOTAL-LIABILITY-AND-EQUITY> 508,681
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 48,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (48,103)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (48,103)
<EPS-BASIC> (.011)
<EPS-DILUTED> (.011)
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