<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                                WASHINGTON, D.C.

                                   FORM 10-QSB

                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

--------------------------------------------------------------------------------

For the Quarter Ended                           Commission File Number:  0-19471
September 30, 1999

                         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
                                                   September 30         December 31
                                                       1999                1998
                                                   ------------        ------------
<S>                                                <C>                 <C>
CURRENT ASSETS

  Cash in Bank                                     $        114        $         50
  Loan Receivable - Tropical (Note 8)                   566,805             566,805
  Less: Reserve For Bad Debt                           (566,805)           (566,805)
  License Fee Receiv. - Tropical (Note 9)               499,091             499,091
  Less: Reserve For Bad Debt                           (499,091)           (499,091)
                                                   ------------        ------------

         Total Current Assets                               114                  50

FIXED ASSETS

  Gaming System-Hardware (Note 2)                        47,030              47,030
  Gaming System-Software (Note 2)                        52,970              52,970
                                                   ------------        ------------

         Total Fixed Assets                             100,000             100,000

OTHER ASSETS

  Prepaid Expenses (Note 4)                             106,666             259,667
  Settlement Agreement-principals                       360,000             360,000
  Escrowed shares for debt, Millard account             125,448             125,448
  Investment-Whitfield Holdings                             -0-           3,200,000
  Investment-Whitfield/Unearned                             -0-          (3,140,421)
                                                   ------------        ------------

         Total Other Assets                             592,114             804,694
                                                   ------------        ------------

TOTAL ASSETS                                       $    692,228        $    904,744
                                                   ============        ============
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                     Page 2
<PAGE>   3
                          PAN ENVIRONMENTAL CORPORATION
                             CONDENSED BALANCE SHEET
                                  (IN DOLLARS)


                      LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                          As of               As of
                                                      September 30         December 31
                                                          1999                1998
                                                      ------------        ------------
<S>                                                   <C>                 <C>
CURRENT LIABILITIES

  Accounts Payable                                    $    305,564        $    250,883
  Conv. Notes Payable (Note 7)                             395,250             395,250
  Taxes payable                                             18,795              18,795
                                                      ------------        ------------

         Total Current Liabilities                         719,609             664,298

LONG TERM LIABILITIES

  Stipulation Payable-Roake (Note 3)                       225,000             225,000
                                                      ------------        ------------

         Total Liabilities                                 944,609             889,928


STOCKHOLDERS' EQUITY

  Common Stock, $.001 par value; 50,000,000
    shares authorized; 3,188,163 shares issued
    and outstanding at December 31, 1997;
    7,758,413 shares at December 31, 1998; and
    4,508,413 shares at September 30, 1999                   4,508               7,758
  Additional paid-in capital                             2,225,115           5,421,866
  Common Stock-Unearned Escrow                                 -0-          (3,140,421)
  Accumulated Deficit                                   (2,482,004)         (2,274,387)
                                                      ------------        ------------

         Total Stockholders' Equity                       (252,381)             14,816
                                                      ------------        ------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY              $    692,228        $    904,744
                                                      ============        ============
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                     Page 3
<PAGE>   4
                          PAN ENVIRONMENTAL CORPORATION
                        CONDENSED STATEMENT OF OPERATIONS
                                  (IN DOLLARS)


<TABLE>
<CAPTION>
                                           For the three                      For the nine
                                            months ended                       months ended
                                    ----------------------------       ----------------------------
                                      Sept 30           Sept 30         Sept 30           Sept 30
                                       1999              1998             1999              1998
                                    ----------        ----------       ----------        ----------
<S>                                 <C>               <C>              <C>               <C>
Sales and Service Revenue           $      -0-        $  174,011       $      -0-        $  211,091
                                    ----------        ----------       ----------        ----------

Costs and Expenses
Materials, supplies and
  operating expenses                    89,250            63,779          207,617           162,986
                                    ----------        ----------       ----------        ----------

Total Costs and Expenses            $   89,250        $   63,779       $  207,617        $  162,986
                                    ----------        ----------       ----------        ----------

Other Expense                       $      -0-        $      -0-       $      -0-        $    5,000
                                    ----------        ----------       ----------        ----------

Net Income (Loss)                   $  (89,250)       $  110,332       $ (207,617)       $  (43,105)
                                    ==========        ==========       ==========        ==========

Net Income (Loss) per Common
Share (1)                           $    (0.02)       $     0.02       $     (.05)       $    (0.01)
                                    ==========        ==========       ==========        ==========

Dividends per Common Share          $      -0-        $      -0-       $      -0-        $      -0-
                                    ==========        ==========       ==========        ==========

Notes:

(1) Based on net income,
    dividend by number of
    common shares
    outstanding of                   4,508,413         7,268,163        4,508,413         7,268,163
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                     Page 4
<PAGE>   5
                          PAN ENVIRONMENTAL CORPORATION
                        CONDENSED STATEMENT OF CASH FLOWS
                                  (IN DOLLARS)


<TABLE>
<CAPTION>
                                                     For the three months ended
                                                   ----------------------------
                                                    Sept 30            Sept 30
                                                      1999              1998
                                                   ----------        ----------
<S>                                                <C>               <C>

Cash Flows From Operating Activities:

Net Income                                         $  (89,250)       $   13,105
Adjustment to Retained Earnings                           -0-           229,518
Adjustment to reconcile to net cash
operating activities:
(Increase) decrease in working capital, net            38,347          (104,179)
                                                   ----------        ----------

Net Cash From Operating Activities                    (50,903)          168,444

Cash Flow From Investment Activities:
Acquisition of cash, notes, contracts and
other assets                                              -0-           937,475
                                                   ----------        ----------
Net Cash Flow From Investing Activities                   -0-           937,475

Cash Flow From financing Activities:
(Payment of) proceeds from debt                           -0-           390,050
Proceeds from issuance of common stock                (59,580)            4,080
Decrease in other assets                              110,580               -0-
Capital contributions from shareholders                   -0-           374,050
                                                   ----------        ----------

Net Cash Used in Financing Activities                  51,000           769,380

Net (decrease) increase in cash and
cash equivalents                                           97               349

Cash and Cash Equivalents:

Beginning of period                                        17               -0-
                                                   ----------        ----------

End of Period                                             114        $      349
                                                   ----------        ----------
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                     Page 5
<PAGE>   6
                          PAN ENVIRONMENTAL CORPORATION
            AND ITS WHOLLY OWNED SUBSIDIARY, WHITFIELD HOLDINGS, LTD.
                     NOTES TO CONDENSED FINANCIAL STATEMENT
           THREE MONTHS PERIODS ENDED JUNE 30, 1999 AND JUNE 30, 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


                                     Page 6
<PAGE>   7
by subcontractors. Daily administrative support work was provided by personnel
at Advantage Parking Lot Service, Inc.

PAN divested itself of its three subsidiaries, Advantage Parking Lot Service,
Inc., Northwest Specialties, Inc. and MRR Construction Services, Inc., effective
January 2, 1995.

In November and December 1995, the Company attempted to acquire oil and gas
properties in a business combination agreement with Maximum Resources, Inc., a
Vancouver Stock Exchange company, and two other companies, NP Energy
Corporation, a U. S. over the counter electronic bulletin board (OTC:BB)
company, and Polaris Equities, Inc., a U. S. private company.

The form of business combination agreement would have taken the following form:
each of the above three oil and gas companies would set up a U. S. subsidiary
into which they would vend in selected oil and gas properties. These three
subsidiaries would then be acquired in a reverse takeover transaction wherein
the Company would issue 4,000,000 new restricted Rule 144 common shares each to
Maximum, NP and Polaris in exchange for acquiring one hundred percent (100%) of
the issued and outstanding common shares of their three U. S. subsidiaries.

Since the Company did not have the necessary funds to do its accounting, audits,
10-Q's, 10-K's and legal work, Maximum, NP and Polaris agreed to advance the
necessary funds to complete the work. In March and April 1996, Maximum, NP and
Polaris defaulted on their obligations to advance the necessary funds and the
proposed business combination agreements were never consummated.

The Company raised $40,000 in December 1996 in a small private placement from
shareholders of the Company and proceeded to complete its accounting, audits,
10-Q's and 10-K's for December 31, 1994 through December 31, 1997, thus bringing
the Company into SEC compliance on February 22, 1998.

The Company in January 1998 sought to enter into a letter of intent to acquire
an Internet services company, but the letter of intent was never consummated.

On February 20, 1998 the Company reached an agreement in principle to acquire
Winner's Way, Inc., an offshore race and sports book, subject to review and
approval of the financial statements of Winner's Way, Inc. by the Board of
Directors of the Company. After careful consideration, the company's Directors
decided that such acquisition would not be in the Company's best interests.

On May 22, 1998 the Company acquired Whitfield Holdings, Ltd., an Antiguan
corporation, in the business of purchasing and licensing-back gaming systems
from legally licensed offshore race and sports books. Whitfield's initial
licensee is Tropical International Sports, Inc., an Antiguan corporation,
legally licensed as an Antiguan race and sports book. The gaming system license
agreement provided for a quarterly payment of 2.4% of gross betting volume. (See
Note 10.)

On June 30, 1998 the Company acquired and licensed-back the gaming system from
Way Communications Race and Sports Book and moved it to Antigua on July 17, 1998
to be operated by Tropical International Sports, Inc. The purchase price was
$380,000, the terms for which were $160,000 down and a non-interest bearing note
for the balance payable at $10,000 per month. The Company deducted this purchase
price from its loans receivable to Tropical International Sports, Inc. subject
to proof of payment. These amounts were never paid by Tropical and the loans
receivable account from Tropical have been increased accordingly. (See Note 9.)

In conjunction with the acquisition of Whitfield Holdings, Ltd. and its on going
operations, the Company filed and has conducted a 506 Regulation D offering in
the State of New York. The offering consisted of convertible notes, of which
$391,250 had been received and convertible notes issued as of December 31, 1998.
In addition, the company received $177,750 from a former Whitfield shareholder
and current PAN escrow shareholder which was allocated as additional paid-in
capital. Substantially all of this money was loaned to Tropical International
Sports, Inc. in conjunction with Whitfield's gaming system license agreement
with Tropical.

                                     Page 7
<PAGE>   8
As of December 31, 1998 it became evident that Tropical was going to default on
repayment of $566,805 of loans and on payment of an estimated $499,091 of
license fees to Whitfield. On January 15, 1999 the Company announced legal
action to collect monies due from Tropical subsequent to a demand letter for
payment of such amounts from which the Company received no response. The Company
retained attorneys in both Antigua and Washington, DC to investigate and pursue
the Company's claims against Tropical. On August 25, 1999 the Company filed a
lawsuit in Federal Court in New York to pursue the Company's claims against
Tropical, Whitfield, and the related principals, Thomas D. DiNola and Timothy S.
Shiah.

Note 2.  Summary of Significant Accounting Policies

Earnings (Losses)

Earnings (losses) per share were calculated on the number of shares outstanding
at the end of the year. No adjustment has been made in earnings per shares on a
fully diluted basis, for conversion of the convertible notes to common stock as
the convertible notes may become a part of the Company's claim against Tropical
International Sports, Inc. (see Note 8).

Acquisition of Whitfield

The acquisition of Whitfield Holdings, Ltd. was accounted for on a purchase
basis. All intercompany accounts have been eliminated.

Depreciation on Gaming System Hardware and Software

No depreciation was taken on the gaming system hardware or the gaming system
software which were listed as fixed assets on the books of Whitfield Holdings,
Ltd. until the legal claims of the Company against Tropical International
Sports, Inc. are resolved. Such assets may well be the subject of additional
claims by the Company.

Income Taxes

The Company has incurred net operating losses from 1992 through 1998 of
$2,274,387. The losses will begin expiring for income tax purposes in the year
2007.

The financial statements include all adjustments which, in the opinion of
management, are necessary in order to make the financial statements not
misleading.

Note 3.  Stipulation Payable

The Company also defaulted in a share repurchase agreement with a stockholder of
the Company, resulting in a default judgment in 1995 in the amount of $200,909.
The judgment bears interest at the rate of 25% per annum on $161,250 (principal
portion) and 18% per annum on $39,659 (interest, attorney fee and costs
portion). As of February 12, 1999, the $200,909 judgment was vacated in exchange
for a $225,000 stipulation bearing interest at the rate of 8-1/2% which shall be
due and payable January 31, 2000. The 94,902 of accrued judgment interest was
settled through the transfer of 189,804 shares held by Douglas Millard, Escrow
Agent.

Note 4.  Prepaid Expense

The Company accrued $32,500 of salaries payable in the three months ended
September 30, 1999 to the Company's officers, $12,000 of investor relations fees
payable, and $3,500 of accounting and administration fees payable, all of which
were settled for stock pursuant to the S-8 Registration Statement filed October
2, 1998. Stock settlements


                                     Page 8
<PAGE>   9
for wages, investor relations fees and accounting and administration fees not
yet accrued were accounted for as prepaid expense. (See Note 10.)

Note 5.  Going Concern

Because of a deficiency in working capital and significant operating losses,
there is doubt about the ability of the Company to continue in existence unless
additional working capital is obtained. The Company currently has plans to raise
sufficient working capital through equity financing and through the acquisition
of companies having sufficient assets and cash flow to enable the Company to be
self-sufficient and profitable.

Note 6.  Other Expense

The Company advanced $5,000 to an Internet services company in the first quarter
of 1998 pursuant to a proposed letter of intent to acquire, but the letter of
intent was never consummated. The Company wrote off the $5,000, being unable to
recover the advance.

Note 7.  Convertible Notes

The Company filed and has conducted a 506 Reg D offering in the State of New
York. The offering consisted of convertible notes, of which $391,250 had been
received and convertible notes issued as of December 31, 1998. The notes are all
due December 31, 1999 and subject to a call by the Noteholder for prepayment at
any time subsequent to September 30, 1998; $85,000 of the notes are convertible
into restricted Rule 144 common stock of the Company at $0.50 per share, and
$306,250 of the notes are convertible into restricted Rule 144 common shares of
the Company at $0.75 per share. Substantially all of the $391,250 was loaned to
Tropical International Sports, Inc. and may be part of the Company's claim
against Tropical.

Note 8.  Loans Receivable - Tropical

The Company through its wholly owned subsidiary, Whitfield Holdings, Ltd., made
loans to Whitfield's race and sports book licensee, Tropical International
Sports, Inc., of $566,805 from which it deducted $380,000 for the acquisition of
the gaming system from Way Communications, Inc. subject to the actual proof of
payment from Tropical. Tropical took over operation of the Way Communications
race and sports book as of July 17, 1998. Tropical never paid Way
Communications, Inc. and therefore, as of December 31, 1998 the outstanding
balance was $566,805 after adding back in the $380,000. A reserve for bad debts
has been set up in the same amount, thus zeroing out this item as an asset.

Note 9.  License Fees Receivable - Tropical

The Company is owed license fees receivable of $211,091 composed of $37,090 for
nine days operations in May 1998 which ended the first contract fiscal quarter
of operations; $174,001 for the three months operations in June, July and August
1998 which ended the second quarter of operations; and $288,000 in estimated
license fees receivable for the four months operations in September October,
November and December which ended the third quarter's and one month of the
fourth quarter's operations. These amounts totaling $499,091 have been accrued
on the Company's books and have not been paid as of December 31, 1998. A reserve
for bad debts has been set up in the same amount, thus zeroing out this item as
an asset.


                                     Page 9
<PAGE>   10
Note 10.  S-8 Offering

On October 2, 1998 the Company filed an S-8 Registration Statement with the SEC
issuing a total of 490,250 shares including 1) 50,000 shares to Forte!
Communications, Inc. for $50,000 of public relations; 2) 6,250 shares to Kaufman
& Associates, Inc. for $6,250 of finders fees incident to the Forte!
transaction; 3) 50,000 shares to TCKTS, L.L.C. dba Bristol Media, Ltd. for
$50,000 of services rendered incident to the Whitfield acquisition; 4) 96,000
shares to TCKTS, L.L.C. dba Bristol Media, Ltd. for 24 months of investor
relations services at the rate of $4,000 per months which commenced January 1,
1998; 5) 120,000 shares to Jerry Cornwell, 100,000 shares to Clifford M.
Johnston and 40,000 shares to Judy Morton Johnston for 24 months of wages and
salaries commencing July 1, 1998 at the rate of $60,000 per year to Jerry
Cornwell, President, $50,000 per year to Clifford M. Johnston, Vice President,
and $20,000 per year to Judy Morton Johnston, Assistant Secretary/Assistant
Treasurer; and 6) 28,000 shares to Quality Tax Service, Inc. for two years of
quarterly administration and accounting services at the rate of $3,500 per
quarter commencing January 1, 1998. The shares were issued to prevent cash flow
drain to the Company until the Company has sufficient capital for pay for needed
services.

Note 11.  Change of Name and Corporate Domicile by Way of Merger

In December 1998 the Company concluded a merger with PAN International Gaming,
Inc., a new Nevada corporation, on the basis of a one for one exchange of shares
which resulted in a change of name from PAN Environmental Corporation to PAN
International Gaming, Inc. along with a change of corporate domicile from
Delaware to Nevada.

Note 12.  Certain Transactions

The Company has an investor relations contract with TCKTS, L.L.C. dba Bristol
Media, Ltd., which is owned by Jerry Cornwell, President and Director of the
Company, and Clifford M. Johnston, Vice President and Director of the Company.
The contract is on terms equal to or better than industry standards for such
contracts.

The Company also has a consulting agreement with Quality Tax Service, Inc.,
which is owned by Clifford M. Johnston, Vice President and Director of the
Company, and Judy Morton Johnston, Assistant Secretary/Assistant Treasurer of
the Company. The contract is on terms equal to or better than industry standards
for such contracts.

Note 13.  Default By Tropical

On January 15, 1999 the company announced that the previously reported failure
to pay accrued amounts owed to its wholly owned subsidiary, Whitfield Holdings,
Ltd. by Tropical International Sports, Inc., its race and sports book licensee,
has continued and is now in default.

The Company send a demand letter to Tropical for immediate payment of $566,805
in loans, more than $200,000 in license fees through August 31, 1998 and an
unverified amount of license fees and the related accounting for the period
ended November 30, 1998. The Company received no response to its demand for
payment.

The Company 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 Federal Court in New York to pursue the Company's claims
against Tropical, Whitfield, and the related principals, Thomas D. DiNola and
Timothy S. Shiah.

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.


                                    Page 10
<PAGE>   11
Note 14 - Short Swing Profit By Affiliates

During 1998, an affiliate of the Company realized a short swing profit of
$29,000 which was loaned to the Company. The $29,000 loan was cancelled, giving
rise to $29,000 of income to the Company which was reported in the quarter ended
March 31, 1999. This entry was reversed in the third quarter 1999 as the profit
realized was determined to be for a holding period exceeding six months and,
therefore, the short swing profit rule was not applicable.


                                    Page 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 September 30, 1999.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION

FINANCIAL CONDITION AND RESULTS OF OPERATION

The results of operations for the quarter ending September 30, 1999 reflect an
operating loss of $207,617 as compared to income of $110,332 for the quarter
ending June 30, 1998. Included in the $207,617 loss were $97,500 in salaries,
$46,500 in consulting fees and investor relations fees, and $63,617 in other
general and administrative fees.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital was in a deficit position with current liabilities
of $719,609 and current assets of $114.

Additional equity capital is essential to the Company's ability to maintain
ongoing operations. Therefore, the Company has plans to raise additional working
capital through equity financing and debt restructuring and through the
acquisition of companies having sufficient assets and cash flow to enable the
Company to be self-sufficient and profitable.


                                    Page 12
<PAGE>   13
                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

On August 25, 1999 the Company filed a lawsuit in Federal Court in New York to
pursue the Company's claims against Tropical International Sports, Inc.,
Whitfield Holdings, Ltd., and the related principals, Thomas D. DiNola and
Timothy S. Shiah.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

On August 25, 1999 the Company cancelled 50,000 common shares to Joseph Shiah,
Timothy S. Shiah's father, and 3,200,000 common shares to Whitfield shareholders
pursuant to the Company's lawsuit against Tropical International Sports, Inc.,
Whitfield Holdings, Ltd. and the related principals, Thomas D. DiNola and
Timothy S. Shiah.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4  - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5 - OTHER INFORMATION

On February 20, 1998, PAN reached an agreement in principle to acquire Winner's
Way, Inc., an offshore race and sports book, subject to review and approval of
the financial statements of Winner's Way, Inc. by the Board of Directors of PAN.

After careful consideration, the Directors of PAN decided that such acquisition
would not be in PAN's best interests.

Alternatively, on May 22, 1998, PAN Environmental Corporation, a Delaware
Corporation ("PAN"), acquired all of the issued and outstanding capital stock of
Whitfield Holdings, Ltd., an Antigua, West Indies corporation ("Whitfield"),
pursuant to an Agreement and Plan of Business Combination, effective as of April
17, 1998, in exchange for a maximum of 12,800,000 shares of common stock of PAN,
subject to earn-out provisions. The amount of common stock payable by PAN to
Whitfield is subject to earn-out provisions based on the achievement of certain
betting volume, resulting in licensing fees to Whitfield, over a one year


                                    Page 13
<PAGE>   14
period. The amount and type of consideration was determined on the basis of
negotiations between PAN and Whitfield.

In conjunction with the acquisition of Whitfield Holdings, Ltd. and its on going
operations, the Company filed and has conducted a 506 Regulation D offering in
the State of New York. The offering consisted of convertible notes, of which
$391,250 had been received and convertible notes issued as of December 31, 1998.
In addition, the company received $177,750 from a former Whitfield shareholder
and current PAN escrow shareholder which was allocated as additional paid-in
capital. Substantially all of this money was loaned to Tropical International
Sports, Inc. in conjunction with Whitfield's gaming system license agreement
with Tropical.

As of December 31, 1998 it became evident that Tropical was going to default on
repayment of $566,805 of loans and on payment of an estimated $499,091 of
license fees to Whitfield.

On January 15, 1999 the Company announced legal action to collect monies due
from Tropical subsequent to a demand letter for payment of such amounts from
which the Company received no response. The Company retained attorneys in both
Antigua and Washington, DC to investigate and pursue the Company's claims
against Tropical. On August 25, 1999 the Company filed a lawsuit in Federal
court in New York to pursue the Company's claims against Tropical International
Sports, Inc., Whitfield Holdings, Ltd., and the related principals, Thomas D.
DiNola and Timothy S. Shiah.

ITEM 6 - EXHIBITS AND REPORTS ON 8-K

        (a)     EXHIBITS:

                27.1    Financial Data Schedules

        (b)     REPORTS:

                None.


                                    Page 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:  November 10, 1999




/s/ Jerry Cornwell
---------------------------------
Jerry Cornwell
President & CEO


                                    Page 15
<PAGE>   16
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY














                        CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND
                 FOR THE YEARS ENDED DECEMBER 31, 1998, AND 1997


<PAGE>   17
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
<S>                                                                     <C>

Consolidated Statement of Financial Position
at September 30, 1999 and December 31, 1998 and 1997                     1-2

Consolidated Statement of Operations for the
Period Ended September 30, 1999 and for the Years
Ended December 31, 1998 and 1997                                           3

Consolidated Statement of Cash Flows for the
Period Ended September 30, 1999 and the Years Ended
December 31, 1998 and 1997                                                 4

Consolidated Statement of Changes in
Stockholders' Equity for the Period Ended
September 30, 1999 and for the Years Ended
December 31, 1998 and 1997                                               5-6

Notes to Consolidated Financial Statements                              7-13
</TABLE>


<PAGE>   18
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
                 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
                SEPTEMBER 30, 1999 and DECEMBER 31, 1998 and 1997
--------------------------------------------------------------------------------


                                     ASSETS


<TABLE>
<CAPTION>
                                           09/30/99            12/31/98            12/31/97
                                         -----------         -----------         -----------
<S>                                      <C>                 <C>                 <C>
CURRENT ASSETS

  Cash in Bank                           $       114         $        50         $       -0-
  Loan Receivable - Tropical
    (Note 8)                                 566,805             566,805                 -0-
  Less: Reserve For Bad Debt                (566,805)           (566,805)                -0-
  License Fee Receiv. - Tropical
    (Note 9)                                 499,091             499,091                 -0-
  Less: Reserve For Bad Debt                (499,091)           (499,091)                -0-
                                         -----------         -----------         -----------

         Total Current Assets                    114                  50                 -0-

FIXED ASSETS

  Gaming System-Hardware (Note 2)             47,030              47,030                 -0-
  Gaming System-Software (Note 2)             52,970              52,970                 -0-
                                         -----------         -----------         -----------

         Total Fixed Assets                  100,000             100,000                 -0-

OTHER ASSETS

  Prepaid Expenses (Note 4)                  106,666             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                  -0-           3,200,000                 -0-
  Investment-Whitfield/Unearned                  -0-          (3,140,421)                -0-
                                         -----------         -----------         -----------

         Total Other Assets                  592,114             804,694             585,000
                                         -----------         -----------         -----------

TOTAL ASSETS                             $   692,228         $   904,744         $   585,000
                                         ===========         ===========         ===========
</TABLE>


  The accompanying notes are an integral parts of these financial statements.


                                      -1-
<PAGE>   19
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
                 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
                SEPTEMBER 30, 1999 and DECEMBER 31, 1998 and 1997
--------------------------------------------------------------------------------

                      LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                           09/30/99            12/31/98            12/31/97
                                                         -----------         -----------         -----------
<S>                                                      <C>                 <C>                 <C>

CURRENT LIABILITIES

  Accounts Payable                                       $   305,564         $   250,883         $   448,245
  Conv. Notes Payable (Note 7)                               395,250             395,250                 -0-
  Taxes payable                                               18,795              18,795              18,795
  Judgment payable (Note 3)                                      -0-                 -0-             200,909
  Accrued judgment interest
    (Note 3)                                                     -0-                 -0-              94,902
                                                         -----------         -----------         -----------

         Total Current Liabilities                           719,609             664,928             762,851

LONG TERM LIABILITIES
  Stipulation Payable-Roake
    (Note 3)                                                 225,000             225,000                 -0-
                                                         -----------         -----------         -----------

         Total Liabilities                                   944,609             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
    September 30, 1999                                         4,508               7,758               3,188
  Additional paid-in capital                               2,225,115           5,421,866           1,417,635
  Common Stock-Unearned Escrow                                   -0-          (3,140,421)                -0-
  Accumulated Deficit                                     (2,482,004)         (2,274,387)         (1,598,674)
                                                         -----------         -----------         -----------

         Total Stockholders' Equity                         (252,381)             14,816            (177,851)
                                                         -----------         -----------         -----------

TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY                                     $   692,228         $   904,744         $   585,000
                                                         ===========         ===========         ===========
</TABLE>


  The accompanying notes are an integral parts of these financial statements.


                                      -2-
<PAGE>   20
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
            CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD ENDED
        SEPTEMBER 30, 1999 AND THE YEARS ENDED DECEMBER 31, 1998 and 1997
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                       Period Ended       Year Ended        Year Ended
                                         09/30/99          12/31/98          12/31/97
                                       ------------      ------------      ------------
<S>                                    <C>               <C>               <C>
REVENUE (Note 9 and Note 14)           $        -0-      $    499,091      $        -0-

  Less: Bad Debt (Note 9)                       -0-          (499,091)              -0-

COST OF SALES                                   -0-               -0-               -0-
                                       ------------      ------------      ------------

GROSS PROFIT (LOSS)                             -0-               -0-               -0-
                                       ------------      ------------      ------------

OPERATING EXPENSES

  Advertising                                   286               -0-               -0-
  Bad Debt (Note 8)                             -0-           566,805               -0-
  Professional fees                             245             1,610           120,231
  Accounting fees (Note 10)                  10,500            14,000               -0-
  Consulting fees (Note 10)                     -0-            51,753               -0-
  Legal fees                                 39,182            25,239               -0-
  Transfer Agent fees                           855             3,095               -0-
  Internet & web site fees                    1,150            12,445               -0-
  Investor relations expense                  1,797            63,205               -0-
  Investor relations fees
    (Note 10)                                45,000            48,000               -0-
  SEC electronic filing expense               6,799            16,584               -0-
  Interest                                      -0-            25,424            94,902
  Travel                                      2,729             8,443               -0-
  Taxes and licenses                            110               260            19,621
  Telephone                                     -0-             4,450               -0-
  Office expense                                305               455             3,238
  Bank charges                                  128               274               -0-
  Wages and salaries (Note 10)               97,500            65,000               -0-
  Postage and delivery                        1,031             2,009               154
                                       ------------      ------------      ------------

Total Operating Expenses               $    207,617      $    906,051      $    238,146
                                       ------------      ------------      ------------

(LOSS) FROM OPERATIONS                     (207,617)         (906,051)         (238,146)
                                       ------------      ------------      ------------

OTHER EXPENSE (Note 6)                          -0-            (5,000)              -0-

OTHER INCOME                                    -0-             5,820               -0-

PROVISION FOR INCOME TAX                        -0-               -0-               -0-

NET INCOME (LOSS)                      $   (207,617)     $   (905,231)     $   (238,146)
                                       ============      ============      ============

NET INCOME (LOSS) PER SHARE            $      (.046)     $      (.117)     $      (.075)
                                       ============      ============      ============
</TABLE>


  The accompanying notes are an integral parts of these financial statements.


                                      -3-
<PAGE>   21
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
            CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED
        SEPTEMBER 30, 1999 and THE YEARS ENDED DECEMBER 31, 1998 and 1997
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                      Period Ended         Year Ended          Year Ended
                                                                        09/30/99            12/31/98            12/31/97
                                                                      ------------        ------------        ------------
<S>                                                                   <C>                 <C>                 <C>

Cash Flows From
Operating Activities:

Net Profit (Loss)                                                     $   (207,617)       $   (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                                                      54,681            (197,362)             (3,388)
      Taxes payable, accrued
        wages, accrued interest                                                -0-                 -0-              47,451
      Judgment payable                                                         -0-            (200,909)                -0-
      Accrued judgment interest                                                -0-             (94,902)                -0-
         Stipulation payable                                                   -0-             225,000                 -0-
         Adjustment to retained earnings                                       -0-             229,518                 -0-
                                                                      ------------        ------------        ------------
Net Cash Provided by

Operating Activities:                                                       54,681             (38,655)            (73,999)
                                                                      ------------        ------------        ------------

Cash Flows From
Investing Activities:
  Increase in fixed assets                                                     -0-             100,000                 -0-
  (Decrease)in other assets                                               (212,580)            219,694                 -0-
                                                                      ------------        ------------        ------------

Net Cash Used In

Investing Activities:                                                     (212,580)            319,694                 -0-
                                                                      ------------        ------------        ------------

Cash Flows From
Financing Activities:

  Proceeds from sale of common stock                                        (3,250)              4,570                 340
  Capital contribution from shareholders                                   (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                                                 50                 -0-

Cash Beginning of Periods                                                       50                 -0-                 -0-
                                                                      ------------        ------------        ------------

Cash End of Periods                                                            114                  50                 -0-
                                                                      ============        ============        ============
</TABLE>


  The accompanying notes are an integral parts of these financial statements.


                                      -4-
<PAGE>   22
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
 FOR THE PERIOD ENDED SEPTEMBER 30, 1999 and THE YEARS ENDED DECEMBER 31, 1998
                                    and 1997
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                    Common Stock                 Additional
                                            ------------------------------        Paid In          Accumulated
                                               Shares            Amount           Capital             Deficit            Totals
                                            ------------      ------------      ------------       ------------       ------------
<S>                                         <C>               <C>               <C>                <C>                <C>
BALANCE, DECEMBER 31, 1996                     2,848,163             2,848         1,343,976         (1,480,612)          (133,788)

Common stock issued at $0.50
per share to C. M. Johnston
for consulting services re:
Williams and Bickel                               50,000                50            24,950                -0-             25,000

Common stock issued to
Bristol Media, Ltd. re:
Douthwaite settlement                            130,000               130             8,870                -0-              9,000

Common stock issued to
Stephen M. Roake IRA for
payment of accounting, audit
and transfer agent fees                           60,000                60            14,940                -0-             15,000

Common stock issued to
Bristol Media, Ltd. for
payment of accounts payable,
audit and legal                                  100,000               100            24,900                -0-             25,000

Net (loss) for the period
ended December 31, 1997                              -0-               -0-               -0-           (118,062)          (118,062)
                                            ------------      ------------      ------------       ------------       ------------

BALANCE, DECEMBER 31, 1997                     3,188,163             3,188         1,417,635         (1,598,674)          (177,851)

Common stock issued at $0.50
per share to consummate
settlement re:  Williams
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 parts of these financial statements.


                                      -5-
<PAGE>   23
                          PAN ENVIRONMENTAL CORPORATION
                                 AND SUBSIDIARY
        CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE
 PERIOD ENDED SEPTEMBER 30, 1999 and THE YEARS ENDED DECEMBER 31, 1998 and 1997
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                              Common Stock                 Additional
                                     ------------------------------          Paid In          Accumulated
                                        Shares             Amount            Capital            Deficit             Totals
                                     -----------        -----------        -----------        -----------        -----------
<S>                                  <C>                <C>                <C>                <C>                <C>

Contribution of paid-in
capital from former Whitfield
shareholder and PAN escrow
shareholder (Note 8)                           0                  0            177,750                  0            177,750

Common stock issued at
$1.00 per share pursuant to
S-8 Offering, December 1998              490,250                490            489,760                  0            490,250

Net income (loss) for the
period ended
December 31, 1998                              0                  0                  0           (905,231)          (905,231)
                                     -----------        -----------        -----------        -----------        -----------

BALANCE, DECEMBER 31, 1998             7,758,413              7,758          2,281,445         (2,274,387)            14,816
                                     ===========        ===========        ===========        ===========        ===========

50,000 shares private
placement (Shiah)
cancelled August 25, 1999                (50,000)               (50)                 0                  0                (50)

3,200,000 escrow shares
(Whitfield) cancelled
August 25, 1999                       (3,200,000)            (3,200)           (56,330)                 0            (59,530)

Net income (loss) for
the period ended
September 30, 1999                             0                  0                  0           (207,617)          (207,617)
                                     -----------        -----------        -----------        -----------        -----------

BALANCE, SEPTEMBER 30, 1999            4,508,413              4,508          2,225,115         (2,482,004)          (252,381)
                                     ===========        ===========        ===========        ===========        ===========
</TABLE>


  The accompanying notes are an integral parts of these financial statements.


                                      -6-
<PAGE>   24
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                SEPTEMBER 30, 1999 and DECEMBER 31, 1998 and 1997

--------------------------------------------------------------------------------


Note 1.  Organization and Basis of Accounting

The Company was organized as Jilly Bear & Company, Inc., under the laws of the
State of Delaware on February 13, 1986, for the primary purpose of merchandising
a line of plush soft sculpture teddy bears, penguins, ducks and related motif
items. The Company closed its retail store, liquidated its remaining inventory
and ceased operations in March, 1988. On June 30, 1991, Nutec Transmission,
Ltd., and Jilly Bear merged into a resulting Texas corporation. Aster
Development Enterprises, Ltd., was organized as a private Texas corporation on
August 6, 1992. Following the rescission of the merger between Nutec and Jilly
Bear on June 1, 1992, Aster Development became the successor of Jilly Bear and
the vehicle for the continued corporate existence in Delaware of the former
Jilly Bear. Aster Development had been inactive from June 1, 1992, until March
1993.

On March 4, 1993, the name of the Company was changed from Aster Development
Enterprises, Ltd., to PAN Environmental Corporation and the Company acquired all
of the outstanding common stock of Northwest Specialties, Inc., a Minnesota
corporation; Advantage Parking Lot Service, Inc., a California corporation; and
MRR Construction Services, Inc., a California corporation. The Company issued a
total of 2,650,000 shares of common stock for the acquisition of these three
corporations in a reorganization accounted for as a reverse acquisition, whereby
the shareholders of a privately owned corporation or corporations obtained
controlling ownership interest in a previously inactive or dormant public
"shell" corporation. October 11, 1993, the directors of PAN Environmental
Corporation and its three affiliated companies agreed to reduce by 50% the
number of shares of common stock which was originally issued for the
acquisition. The net result of the shares of common stock issued in the business
combination was 1,325,000 shares. PAN Environmental Corporation changed its
fiscal year from January 31st to December 31st and reincorporated in the State
of Delaware.

PAN Environmental Corporation (PAN) was in the business of acquiring and
supervising the operations of businesses engaged in the reclamation, remediation
and recycling of industrial waste materials and by-products. PAN provided its
affiliated operating companies with financing and management services including
accounting, planning, budgeting, computer information systems, human resources
management, contract bonding and liability insurance. The Company also provided
technical environmental management support to its operating companies. PAN's
principal offices are in Shoreline, Washington.

Advantage Parking Lot Service, Inc. (incorporated in the State of California on
February 19, 1986) was engaged in the manufacturing and sale of asphalt-based
slurry sealants. Advantage applied the slurry sealants to asphalt surfaces,
primarily parking lots. Advantage also had a tank cleaning operation which
decontaminated portable commercial lubricant tanks. The slurry-sealer
manufacturing plant is located in Fontana, California. Advantage had ten
employees.

Northwest Specialties, Inc. (incorporated in 1993) reclaimed timber (poles,
ties, etc.) and commodity metals, primarily from obsolete railroad
telecommunications and signaling systems. The Company operated in the Midwest
and Rocky Mountain regions of the United States, and worked on active and
inactive railroad right-of-ways. The poles, other wood products, and wiring were
then sorted, graded and processed for resale.


                                      -7-
<PAGE>   25
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                SEPTEMBER 30, 1999 and DECEMBER 31, 1998 and 1997

--------------------------------------------------------------------------------


Note 1.  Organization and Basis of Accounting - continued

MRR Construction Services, Inc. (incorporated in 1992, but inactive until 1993)
performed environmental construction management and related construction
activities, as well as soil remediation, in Southern California. MRR employed
its president and a project manager-superintendent. The majority of the contract
work was performed by subcontractors. Daily administrative support work was
provided by personnel at Advantage Parking Lot Service, Inc.

PAN divested itself of its three subsidiaries, Advantage Parking Lot Service,
Inc., Northwest Specialties, Inc. and MRR Construction Services, Inc., effective
January 2, 1995.

In November and December 1995, the Company attempted to acquire oil and gas
properties in a business combination agreement with Maximum Resources, Inc., a
Vancouver Stock Exchange company, and two other companies, NP Energy
Corporation, a U. S. over the counter electronic bulletin board (OTC:BB)
company, and Polaris Equities, Inc., a U. S. private company.

The form of business combination agreement would have taken the following form:
each of the above three oil and gas companies would set up a U. S. subsidiary
into which they would vend in selected oil and gas properties. These three
subsidiaries would then be acquired in a reverse takeover transaction wherein
the Company would issue 4,000,000 new restricted Rule 144 common shares each to
Maximum, NP and Polaris in exchange for acquiring one hundred percent (100%) of
the issued and outstanding common shares of their three U. S. subsidiaries.

Since the Company did not have the necessary funds to do its accounting, audits,
10-Q's, 10-K's and legal work, Maximum, NP and Polaris agreed to advance the
necessary funds to complete the work. In March and April 1996, Maximum, NP and
Polaris defaulted on their obligations to advance the necessary funds and the
proposed business combination agreements were never consummated.

The Company raised $40,000 in December 1996 in a small private placement from
shareholders of the Company and proceeded to complete its accounting, audits,
10-Q's and 10-K's for December 31, 1994 through December 31, 1997, thus bringing
the Company into SEC compliance on February 22, 1998.

The Company in January 1998 sought to enter into a letter of intent to acquire
an Internet services company, but the letter of intent was never consummated.

On February 20, 1998 the Company reached an agreement in principle to acquire
Winner's Way, Inc., an offshore race and sports book, subject to review and
approval of the financial statements of Winner's Way, Inc. by the Board of
Directors of the Company. After careful consideration, the company's Directors
decided that such acquisition would not be in the Company's best interests.

On May 22, 1998 the Company acquired Whitfield Holdings, Ltd., an Antiguan
corporation, in the business of purchasing and licensing-back gaming systems
from legally licensed offshore race and sports books. Whitfield's initial
licensee is Tropical International Sports, Inc., an Antiguan corporation,
legally licensed as an Antiguan race and sports book. The gaming system license
agreement provided for a quarterly payment of 2.4% of gross betting volume. (See
Note 10.)


                                      -8-
<PAGE>   26
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                SEPTEMBER 30, 1999 and DECEMBER 31, 1998 and 1997

--------------------------------------------------------------------------------


Note 1.  Organization and Basis of Accounting - continued

On June 30, 1998 the Company acquired and licensed-back the gaming system from
Way Communications Race and Sports Book and moved it to Antigua on July 17, 1998
to be operated by Tropical International Sports, Inc. The purchase price was
$380,000, the terms for which were $160,000 down and a non-interest bearing note
for the balance payable at $10,000 per month. The Company deducted this purchase
price from its loans receivable to Tropical International Sports, Inc. subject
to proof of payment. These amounts were never paid by Tropical and the loans
receivable account from Tropical have been increased accordingly. (See Note 9.)

In conjunction with the acquisition of Whitfield Holdings, Ltd. and its on going
operations, the Company filed and has conducted a 506 Regulation D offering in
the State of New York. The offering consisted of convertible notes, of which
$391,250 had been received and convertible notes issued as of December 31, 1998.
In addition, the company received $177,750 from a former Whitfield shareholder
and current PAN escrow shareholder which was allocated as additional paid-in
capital. Substantially all of this money was loaned to Tropical International
Sports, Inc. in conjunction with Whitfield's gaming system license agreement
with Tropical.

As of December 31, 1998 it became evident that Tropical was going to default on
repayment of $566,805 of loans and on payment of an estimated $499,091 of
license fees to Whitfield.

On January 15, 1999 the Company announced legal action to collect monies due
from Tropical subsequent to a demand letter for payment of such amounts from
which the Company received no response. The Company retained attorneys in both
Antigua and Washington, DC to investigate and pursue the Company's claims
against Tropical. On August 25, 1999 the Company filed a lawsuit in Federal
Court in New York to pursue the Company's claims against Tropical, Whitfield and
the related principals, Thomas D. DiNola and Timothy S. Shiah.

Note 2.  Summary of Significant Accounting Policies

Earnings (Losses)

Earnings (losses) per share were calculated on the number of shares outstanding
at the end of the year. No adjustment has been made in earnings per shares on a
fully diluted basis, for conversion of the convertible notes to common stock as
the convertible notes may become a part of the Company's claim against Tropical
International Sports, Inc. (see Note 8).

Acquisition of Whitfield

The acquisition of Whitfield Holdings, Ltd. was accounted for on a purchase
basis. All intercompany accounts have been eliminated.

Depreciation on Gaming System Hardware and Software

No depreciation was taken on the gaming system hardware or the gaming system
software which were listed as fixed assets on the books of Whitfield Holdings,
Ltd. until the legal claims of the Company against Tropical International
Sports, Inc. are resolved. Such assets may well be the subject of additional
claims by the Company.


                                      -9-
<PAGE>   27
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                SEPTEMBER 30, 1999 and DECEMBER 31, 1998 and 1997

--------------------------------------------------------------------------------


Note 2.  Summary of Significant Accounting Policies - continued

Income Taxes

The Company has incurred net operating losses from 1992 through 1998 of
$2,274,387. The losses will begin expiring for income tax purposes in the year
2007.

The financial statements include all adjustments which, in the opinion of
management, are necessary in order to make the financial statements not
misleading.

Note 3. Stipulation Payable

The Company also defaulted in a share repurchase agreement with a stockholder of
the Company, resulting in a default judgment in 1995 in the amount of $200,909.
The judgment bears interest at the rate of 25% per annum on $161,250 (principal
portion) and 18% per annum on $39,659 (interest, attorney fee and costs
portion). As of February 12, 1999, the $200,909 judgment was vacated in exchange
for a $225,000 stipulation bearing interest at the rate of 8-1/2% which shall be
due and payable January 31, 2000. The 94,902 of accrued judgment interest was
settled through the transfer of 189,804 shares held by Douglas Millard, Escrow
Agent.

Note 4.  Prepaid Expense

The Company accrued $97,500 of salaries payable in the nine months ended
September 30, 1999 to the Company's officers, $36,000 of investor relations fees
payable, and $10,500 of accounting and administration fees payable, all of which
were settled for stock pursuant to the S-8 Registration Statement filed October
2, 1998. Stock settlements for wages, investor relations fees and accounting and
administration fees not yet accrued were accounted for as prepaid expense.
(See Note 10.)

Note 5.  Going Concern

Because of a deficiency in working capital and significant operating losses,
there is doubt about the ability of the Company to continue in existence unless
additional working capital is obtained. The Company currently has plans to raise
sufficient working capital through equity financing and through the acquisition
of companies having sufficient assets and cash flow to enable the Company to be
self-sufficient and profitable.

Note 6.  Other Expense

The Company advanced $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.


                                      -10-
<PAGE>   28
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                SEPTEMBER 30, 1999 and DECEMBER 31, 1998 and 1997

--------------------------------------------------------------------------------


Note 7.  Convertible Notes

The Company filed and has conducted a 506 Reg D offering in the State of New
York. The offering consisted of convertible notes, of which $391,250 had been
received and convertible notes issued as of December 31, 1998. The notes are all
due December 31, 1999 and subject to a call by the Noteholder for prepayment at
any time subsequent to September 30, 1998; $85,000 of the notes are convertible
into restricted Rule 144 common stock of the Company at $0.50 per share, and
$306,250 of the notes are convertible into restricted Rule 144 common shares of
the Company at $0.75 per share. Substantially all of the $391,250 was loaned to
Tropical International Sports, Inc. and may be part of the Company's claim
against Tropical.

Note 8.  Loans Receivable - Tropical

The Company through its wholly owned subsidiary, Whitfield Holdings, Ltd., made
loans to Whitfield's race and sports book licensee, Tropical International
Sports, Inc., of $566,805 from which it deducted $380,000 for the acquisition of
the gaming system from Way Communications, Inc. subject to the actual proof of
payment from Tropical. Tropical took over operation of the Way Communications
race and sports book as of July 17, 1998. Tropical never paid Way
Communications, Inc. and therefore, as of December 31, 1998 the outstanding
balance was $566,805 after adding back in the $380,000. A reserve for bad debts
has been set up in the same amount, thus zeroing out this item as an asset.

Note 9.  License Fees Receivable - Tropical

The Company is owed license fees receivable of $211,091 composed of $37,090 for
nine days operations in May 1998 which ended the first contract fiscal quarter
of operations; $174,001 for the three months operations in June, July and August
1998 which ended the second quarter of operations; and $288,000 in estimated
license fees receivable for the four months operations in September October,
November and December which ended the third quarter's and one month of the
fourth quarter's operations. These amounts totaling $499,091 have been accrued
on the Company's books and have not been paid as of December 31, 1998. A reserve
for bad debts has been set up in the same amount, thus zeroing out this item as
an asset.

Note 10.  S-8 Offering

On October 2, 1998 the Company filed an S-8 Registration Statement with the SEC
issuing a total of 490,250 shares including 1) 50,000 shares to Forte!
Communications, Inc. for $50,000 of public relations; 2) 6,250 shares to Kaufman
& Associates, Inc. for $6,250 of finders fees incident to the Forte!
transaction; 3) 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.


                                      -11-
<PAGE>   29
                         PAN INTERNATIONAL GAMING, INC.
                    (FORMERLY PAN ENVIRONMENTAL CORPORATION)
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                SEPTEMBER 30, 1999 and DECEMBER 31,1998 and 1997

--------------------------------------------------------------------------------


Note 11.  Change of Name and Corporate Domicile by Way of Merger

In December 1998 the Company concluded a merger with PAN International Gaming,
Inc., a new Nevada corporation, on the basis of a one for one exchange of shares
which resulted in a change of name from PAN Environmental Corporation to PAN
International Gaming, Inc. along with a change of corporate domicile from
Delaware to Nevada.

Note 12.  Certain Transactions

The Company has an investor relations contract with TCKTS, L.L.C. dba Bristol
Media, Ltd., which is owned by Jerry Cornwell, President and Director of the
Company, and Clifford M. Johnston, Vice President and Director of the Company.
The contract is on terms equal to or better than industry standards for such
contracts.

The Company also has a consulting agreement with Quality Tax Service, Inc.,
which is owned by Clifford M. Johnston, Vice President and Director of the
Company, and Judy Morton Johnston, Assistant Secretary/Assistant Treasurer of
the Company. The contract is on terms equal to or better than industry standards
for such contracts.

Note 13.  Default By Tropical

On January 15, 1999 the company announced that the previously reported failure
to pay accrued amounts owed to its wholly owned subsidiary, Whitfield Holdings,
Ltd. by Tropical International Sports, Inc., its race and sports book licensee,
had continued and was now in default.

The Company send a demand letter to Tropical for immediate payment of $566,805
in loans, more than $200,000 in license fees through August 31, 1998 and an
unverified amount of license fees and the related accounting for the period
ended November 30, 1998. The Company received no response to its demand for
payment.

The Company retained attorneys in both Antigua and Washington, DC to investigate
and pursue the Company's claims against Tropical. After legal investigation, a
lawsuit was filed on August 25, 1999 in Federal Court in New York to pursue the
Company's claims against Tropical, Whitfield, and the related principals, Thomas
D. DiNola and Timothy S. Shiah.

In the meantime, the Company's accounting reflects that all loans receivable and
all license fees receivable have been written off as a bad debt.

Note 14 - Short Swing Profit By Affiliates

During 1998, an affiliate of the Company realized a short swing profit of
$29,000 which was loaned to the Company. The $29,000 loan was cancelled, giving
rise to $29,000 of income to the Company. This entry was reversed in the third
quarter 1999 as the profit realized was determined to be for a holding period
exceeding six months and, therefore, the short swing profit rule was not
applicable.


                                      -12-