<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: March 31, 1996
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------- --------
Commission File Number 1-10368
PACIFIC INTERNATIONAL ENTERPRISES, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0243669
------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
4431 Corporate Center Drive
Suite 131
Los Alamitos, California 90720
(Address of principal executive offices)
Issuer's telephone number, including area code: (714) 816-0200
Check whether the issuer (1) 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
------ -------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Title of Each Class Outstanding at May 10, 1996
- ------------------- ---------------------------
Common stock, $.001 par value 7,651,509
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
PACIFIC INTERNATIONAL ENTERPRISES, INC.
INDEX
<TABLE>
<CAPTION> Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Consolidated Balance Sheet for the 3
Period ended March 31, 1996
Consolidated Statements of Operations 4
For the Three Months Ended March 31, 1995
and March 31, 1996 and Period From Inception
to March 31, 1996
Consolidated Statements of Cash Flows 5
for the Three Months Ended March 31, 1995
and March 31, 1996 and Period From Inception
to March 31, 1996
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 7
or Plan of Operation
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities. 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31,
1996
-----------
<S> <C>
ASSETS
Current assets:
Cash and equivalents $1,256,141
Accounts receivable 5,775
Inventory 15,168
Other 16,864
-----------
Total current assets 1,293,948
Equipment 137,317
Other 45,294
-----------
$ 1,476,559
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,199,500
Accounts payable 60,670
Accrued expenses 80,612
-----------
Total current liabilities 1,340,782
Shareholder's equity:
Common stock, par value $.001; 50,000,000
shares authorized, 7,631,009 shares issued
and outstanding 7,631
Additional paid-in capital 1,268,657
Deficit accumulated during the development stage (1,140,511)
-----------
Total shareholders' equity 135,777
-----------
$ 1,476,559
===========
See accompanying notes to financial statements
</TABLE>
3
<PAGE>
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION> Cumulative from
Three Months Ended Inception
---------------------------- (December 30
March 31, March 31, 1988) to
1995 1996 March 31, 1996
------------ ------------ ----------------
<S> <C> <C> <C>
Revenues $ 0 $ 5,775 $ 34,400
Costs and expenses:
Research and development 314,462 110,805 475,823
General and administrative --- 291,555 645,926
Interest --- 30,812 52,362
------------ ------------ ----------------
Total costs and expenses 314,462 433,172 1,174,111
------------ ------------ ----------------
Loss before provision for
income taxes (314,462) (427,397) (1,139,711)
Provision for income taxes --- --- (800)
------------ ------------ ----------------
Net loss $ (314,462) $ (427,397) $ (1,140,511)
============ ============ ================
Net loss per share $ (0.79) $ (0.06)
============ ============
Shares used in computing
net loss per share $ 399,095 7,631,009
============ ============
</TABLE>
See acccompanying notes to financial statements
4
<PAGE>
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, March 31,
1995 1996
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(314,462) $ (427,397)
Adjustments to reconcile net loss to net cash
used by operating activites:
Depreciation and amortization 11,232
Write off of acquired research and development 314,462
Changes in operating assets and liabilities:
Decrease in restricted cash 75,000
Increase in accounts receivable (5,775)
Decrease in inventory 8,218
Decrease in other current assets 216
Decrease in accounts payable (16,268)
Decrease in notes payable (224,250)
Increase in accrued expenses 2,069
------------- ------------
Cash used by operating activities 0 (576,955)
Investing activities:
Purchase of equipment (2,610)
------------- ------------
Net cash used in investing activites 0 (2,610)
Financing activities:
Procees from the issuance of common stock 1,176,695
------------- ------------
Net cash provided by financing activities 0 1,176,695
------------- ------------
Net increase in cash 597,130
Cash at beginning of the period 659,010
------------- ------------
Cash at end of period 0 $1,256,140
============= ============
Non cash financing activities:
Conversion of Notes Payable to Common Stock $ 224,250
============
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
PACIFIC INTERNATIONAL ENTERPRISES, INC
AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
------------
Pacific international Enterprises, Inc., a Nevada corporation ("PIE"
or the "Company"), was formed on December 30, 1988. From inception
until October 1995, the Company was inactive and operated no business
and held no significant assets. In October 1995, the Company acquired
all the outstanding shares of Crush Innovative Sports Systems, Inc., a
California corporation("Crush"). All references to the Company herein
include its wholly owned subsidiary, Crush. The Company is classified
as a development stage company since its principal activities have
been capital formation, business development, obtaining rights to
certain technology and conducting research and development activities.
NOTE 2. INTERIM PERIODS
---------------
The unaudited information has been prepared on the same basis as the
annual financial statements and, in the opinion of the Company's
management, reflects normal recurring adjustments necessary for a fair
presentation of the information for the period presented. Operating
results for the quarter are not necessarily indicative of results for
any future period.
NOTE 3. NOTES PAYABLE
-------------
In connection with an August 1995 private placement memorandum, Crush
issued notes payable totaling $1,423,750. These notes bear interest at
9%, payable quarterly and are convertible into shares of the Company's
common stock at a price equal to 70% of the closing bid price on the
date of conversion. During the quarter note holders totaling $224,250
converted their notes into shares of the Company's common stock at an
average price per share of $1.93. In addition, in conjunction with the
equity private placement (see note 4), the Company repaid $469,000 of
the notes in April 1996.
NOTE 4. COMMON STOCK OFFERING
---------------------
The Company offered for sale, through a private placement memorandum
dated February 12, 1996, units comprising 25,500 shares of common
stock and warrants to purchase 25,500 shares of common stock at $3.50
per share. The unit price was $51,000 with a minimum of 20 and a
maximum of 80 units to be sold. On April 2, 1996 the Company
terminated the private placement. A total of 22.84 units were sold
resulting in gross proceeds of $1,165,000 and net proceeds to the
Company of $1,028,750 after deduction of commissions and expenses
associated with the offering.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the
consolidated financial statements and the notes thereto included in
Item 1 of this Quarterly Report, and the financial statements and
notes thereto and Management's Discussion and Analysis or Plan of
Operations contained in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
PLAN OF OPERATION
The Company's primary business is the development and anticipated
marketing and sale of the "T-Bone" snowboard bindings and snowboard
boots. The Company also has a secondary business of developing other
uses for it's proprietary fastening technology known as "Roc-lock".
The Company is a development stage enterprise and has not had any
revenue from operations to date since inception.
RECENT DEVELOPMENTS
Proposed acquisition of Third Rail, Inc. The Company has entered into
a non-binding letter of intent to acquire all the outstanding shares
of capital stock of Third Rail, Inc. The definitive agreement is
currently being finalized with signing anticipated during the second
quarter of 1996.
Proposed acquisition of Laurence/Wayne, Inc. The Company has entered
into a letter of intent to merge Laurence/Wayne, Inc. into the
Company. To date the merger has been approved by the Laurence/Wayne
shareholders and will be submitted to vote of the PIE shareholders at
the Company's annual shareholders meeting scheduled for the third
quarter 1996.
Equity private placement. The Company undertook a private placement of
equity securities during the quarter. As of March 28, 1996 the Company
received the minimum net proceeds of the offering. On April 2, 1996
the Company suspended the private placement offering at which time it
had sold a total of 22.84 units in the offering resulting in gross
proceeds of $1,165,000.
7
<PAGE>
PART 2. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company is not currently in default on any senior indebtedness.
However, the promissory notes issued by Crush commencing in August 1995
provides for mandatory repayment upon the consummation of a private
placement of equity securities resulting in proceeds of $1,000,000 or more.
The Company completed such private placement in April 1996 resulting in
gross proceeds of $1,165,000, of which $469,000 was used to repay a
portion, but not all, of the notes. Pursuant to the terms of the notes, a
default occurs thirty (30) days after any failure to repay the notes.
The note offering was originally restricted to a maximum offering of
$400,000. The mandatory repayment was, therefore, anticipated only if a
private placement raised proceeds two and one-half times the principal
amount of the notes. As a result of overwhelming subscriptions, the note
offering ultimately resulted in the issuance of notes in a principal amount
of $1,423,750. The Company was therefore unable to repay the full principal
amount of the notes with the proceeds of its private placement raising
$1,165,000. The Company intends to request holders of promissory notes
amend such notes to address the unanticipated oversubscription.
ITEM 5. OTHER INFORMATION
Effective May 10,1996, William Kearns resigned from his position as
director and officer of the Company. Such resignation results in three
unfilled vacancies on the Company's Board of Directors. The Company has not
identified any possible replacements.
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K
4.1 Agreement with Redfield Miller, Inc.
4.2 Warrant Agreement in Connection with Private Placement of Units
27.1 Article 5 of Regulation S-X
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, therefore duly authorized.
PACIFIC INTERNATIONAL ENTERPRISES, INC.
DATE: May 14, 1996
By: \s\ Edward G. Hanson
----------------------------------
Edward G. Hanson
Chief Financial Officer
Secretary, Treasurer and Director
(Principal Financial Officer and Duly
Authorized Officer)
9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NUMBER
<S> <C>
4.1 Agreement with Redfield Miller, Inc.
4.2 Warrant Agreement in Connection with Private Placement of Units
27.1 Article 5 of Regulation S-X
</TABLE>
10
<PAGE>
Exhibit 4.1
AMENDMENT #1
This amendment dated February 1, 1996 shall serve as the 1st Amendment
("Amendment") to that certain agreement dated July 9, 1995 between Crush and RMI
("Agreement") wherein Crush and RMI desire to amend certain provisions of said
Agreement as follows:
Crush, previously known as Crush Snowboard Products, Inc. is now Crush
Innovative Sports Systems, Inc. and shall be defined as Crush and used herein.
PARAGRAPH 2. SECTION A. The following shall be added to the end of Paragraph 2
Section A. Consultant shall provide written monthly reports to Crush describing
the cash position of the company as well as any material income and balance
sheet modifications that may occur during said month. Consultant shall present
such reports to the President and VP of Operations of Crush each month.
PARAGRAPH 2. SECTION C shall be deleted in its entirety and replaced with the
following. Consultant will perform, provide direction and guidance in the
accounting and bookkeeping functions, including but not limited to accounts
payable, accounts receivable, inventory control, payroll and the like as
necessary and in accordance with accounting standards for any similar publicly
trading company.
The following section shall be added to Paragraph 2
SECTION D. SEC and Other Filing Requirements for Public Companies Consultant
acknowledged and understands that Crush is now a publicly trading company on the
NASDAQ Bulletin Board under the trading symbol PCIE. Consultant shall monitory,
advise and direct Crush to insure that the proper regulatory filings and all
legal and financial documents are filed with the proper reporting agencies as
necessary for a publicly trading company.
PARAGRAPH 3. TIME REQUIREMENTS. The following sentence shall be added to
Paragraph 3. Consultant shall use his reasonable best efforts to be at Crush's
offices from 9:00 A.M. to 3:30 P.M. on Tuesday and Thursday of each week.
PARAGRAPH 4. COMPENSATION SECTION B shall be deleted in its entirety and
replaced with the following: Crush and Consultant acknowledge that Crush has
agreed to grant to Consultant 25,000 shares of PCIE stock (the "Earned Stock")
for the services performed to date. Crush now wishes to provide Consultant with
options to purchase additional shares of PCIE stock as follows. During the Term
of the Agreement and prior to the expiration of termination thereof, Consultant
shall have the option to purchase up to a maximum of 40,000 shares of PCIE stock
("Options") at an option price of $.66 per share. Said Options shall be earned
and exercisable in 4 equal allocations of 10,000 shares at the end of each 3
month period from the date hereof until the termination of, or the expiration of
the Agreement. Consultants' right to exercise any or all of such Options earned
under the terms of the Agreement shall expire on July 31, 1997. The Earned
Stock and any future Options earned by Consultant under the terms of the
Agreement shall be subject to the restrictions as described in Paragraph 8 of
this Amendment.
<PAGE>
PARAGRAPH 6. LENGTH OF AGREEMENT shall be deleted in its entirely and replaced
with the following. The Term of the Agreement shall be for a period of 12
months commencing on the date hereof and shall be subject to the termination
provisions described in Paragraph 7 of this Amendment.
PARAGRAPH 7 TERMINATION
A1) TERMINATION WITHOUT CAUSE
Crush shall have the right to terminate the Agreement without cause upon giving
60 days written notice ("Notice Period") to Consultant. Should Crush elect to
terminate the Agreement without cause then Consultant shall be entitled to the
Options Consultant would have earned on a prorated basis until Consultants
services are terminated. For example; If Crush were to give notice to terminate
the Agreement without cause in month 3 of the Term, Consultant's services would
be terminated in month 5 and Consultant would be entitled to 5/12th's of the
40,000 Options or 16,667 Options. Consultant shall also be entitled to continue
to receive the monthly retainer as described in Paragraph 4A of the Agreement
until the Notice Period has expired and the Agreement is terminated.
A2) TERMINATION UPON ACQUISITION OR MERGER
Should Crush merge with, acquire, be acquired by or enter into a joint agreement
with another company ("Merger") whereby Consultants services are no longer
deemed necessary by Crush then Crush shall have the right to terminate the
Agreement immediately. Should Crush so notify Consultant in writing of its
desire to terminate the Agreement due to a Merger, then all of Consultants
Options shall be fully earned and excecisable by Consultant at the time the
Agreement is terminated.
B) TERMINATION WITH CAUSE
Should Crush terminate the Agreement in accordance with any of the following
events then the number of Options Consultant shall have earned shall be
determined at the time written notice is received to terminate.
EVENTS CAUSING TERMINATION The Agreement shall terminate upon the first of the
following to occur:
B.1 On the date which Crush gives written notice to Consultant that the
Agreement is being terminated by Crush for any of the following reasons:
B1.1 Any material breach or default by Consultant in the performance of
Consultants duties or obligations under the Agreement, which breach or default
is not cured within thirty days of written notice from Crush to Consultant,
provided that if the material breach or default is of a nature that it cannot be
cured within thirty days, then Crush shall not have the right to terminate the
Agreement on such grounds so long as Consultant has commenced a good faith cure
of such material breach or default and diligently prosecutes such cure to
completion.
B1.2 The conviction of Consult of any criminal office.
B1.3 The date in which Crush and Consult agree in writing to terminate the
Agreement.
<PAGE>
B1.4 Consultant's inability to perform Consultant's services due to a physical
and/or mental condition for thirty or more days.
PARAGRAPH 8 RESTRICTION ON SELLING OF SHARES
Consultant agrees that Consultant will not have the right to sell any shares of
Earned Stock or Options granted to Consultant while Consultant is providing
services to Crush. Consultant further agrees that should Consultant or Crush
terminate the Agreement, or after the expiration of the Agreement, in either
case Consultant shall not be allowed to sell more than 5,000 shares of Earned
Stock or Option stock in any one month. Crush agrees to use its best efforts to
register under a form S-8 Registration the Earned Stock or any Options granted
to Consultant within thirty days of the termination or expiration of the
Agreement.
This Amendment #1 and the original Agreement constitute the entire Agreement as
agreed to between Crush and Consultant and should there be any other written or
verbal agreements that are in conflict with the Amendment or the Agreement then
the terms of the Amendment and the Agreement shall prevail.
Agreed to Accepted
Crush Innovative Sports Systems Inc., A California Corporation
By:/s/ Richard W. Perkins
----------------------------------------------------
Richard W. Perkins
President
Agreed to and Accepted
Redfield Miller, Inc., A California Corporation
By:/s/ Edward Hanson
----------------------------------------------------
Edward Hanson
Executive Vice President
<PAGE>
Exhibit 4.2
PACIFIC INTERNATIONAL ENTERPRISES, INC.
WARRANT AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.
This Warrant (the "Warrant") is entered into by and between PACIFIC
INTERNATIONAL ENTERPRISES, INC., a Nevada corporation (the "Company"), and the
holders identified and the date indicated on Exhibit A attached hereto.
RECITALS
--------
WHEREAS, the Holder has purchased the number of Units set forth in
Exhibit A offered by the Company, each Unit consisting of 25,500 shares of
Common Stock and warrants to purchase 25,500 shares of Common Stock at $3.50 per
share; and
WHEREAS, the Company desires to evidence such warrants (the "Warrant") by
executing and delivering this Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the adequacy and receipt of which are irrevocably
acknowledged, the parties hereto agree as follow.
1. DESCRIPTION; EXECUTION: REGISTRATION.
--------------------------------------
(a) This certifies that, for value received, the Holder is hereby granted
warrants to purchase the number of shares as set forth in Exhibit A of Company
Common Stock at the exercise price and on the terms set forth below. As used
herein, "Shares" refers to the shares of Common Stock issued upon exercise of
the Warrant. The Company shall cause to be issued to the Holder, a certificate
in the form attached hereto, as soon as practicable after the execution of the
Agreement (the "Warrant Certificate").
(b) This Agreement shall be executed on behalf of the Company by its Chief
Executive Officer and attested by any Secretary or Assistant Secretary. Upon
delivery of this Warrant to the Holder, this Agreement shall be binding upon the
Company, and the Holder shall be entitled to all the benefits set forth herein.
2. TERM OF WARRANTS. This Warrant shall remain exercisable as provided in
-----------------
Section 3 until the close of business five years from the date first written
above.
3. EXERCISE OF WARRANT.
-------------------
(a) The Warrant shall be immediately exercisable. At any time until the
Expiration Date, the Holder shall have the right to purchase from the Company
(and the Company shall promptly issue to the Holder) one fully-paid and
nonassessable share of Common Stock at the Exercise Price (as defined below) for
each Warrant by surrendering the appropriate Warrant Certificate and the
Subscription Form attached hereto to the Company at its executive offices and
paying the aggregate Exercise Price for the shares to be purchased, in cash or
by check.
(b) The Warrants may be exercised in whole and in part, but not in
increments of less than 100 shares. In case of a partial exercise, the Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the purchase of the number of shares not purchased upon such partial
exercise shall be
<PAGE>
issued by the Company to the Holder hereof. Warrants shall be
deemed to have been exercised immediately prior to the close of business on the
date of their surrender for exercise as provided above, and the person or entity
entitled to receive the shares of Common Stock issuable upon the exercise shall
be treated for all purposes as the holder of such shares of record as of the
close of business on such date. Prior to any such exercise, neither the Holder
nor any person entitled to receive shares issuable upon exercise shall be or
have any of the rights of a shareholder of the Company. No adjustment shall be
made for dividends or other stockholder rights for which the record date is
prior to the date of exercise. As soon as practicable on or after such date,
the Company shall issue in the name of, and deliver to the person or persons
entitled to receive, a certificate or certificates for the full number of shares
of Common Stock issuable upon such exercise.
4. EXERCISE PRICE; ADJUSTMENT.
---------------------------
4.1 Exercise Price. The initial Exercise Price for each share of
--------------
Common Stock issuable pursuant to the Warrants shall be $3.50 per share,
adjusted as provided below.
5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES OF COMMON STOCK. The
----------------------------------------------------------------
number and kind of securities purchasable upon the exercise of the Warrants and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
5.1 Adjustments. The number of shares of Common Stock purchasable upon
-----------
the exercise of each Warrant and the Exercise Price thereof shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend in Common Stock or make a
distribution in Common Stock, (ii) subdivide its outstanding Common Stock, (iii)
combine its Stock, or (iv) issue, by reclassification of its Common Stock, other
securities of the Company, the number of shares of Common Stock purchasable upon
exercise of the Warrant immediately prior thereto shall be adjusted so that the
holder of the Warrant shall be entitled to receive the kind and number of shares
of Common Stock or other securities of the Company which such holder would have
owned or would have been entitled to receive immediately after the happening of
any of the events described above, had the Warrant been exercised immediately
prior to the happening of such event or any record date with respect thereto.
Any adjustment made pursuant to this Subsection 5.1(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
(b) In case the Company shall distribute to all or substantially all
holders of its Common Stock, evidences of its indebtedness or assets (excluding
cash dividends or distributions out of earnings) or rights, options, warrants or
convertible securities containing the right to subscribe for or purchase Common
Stock, then in each case the number of shares of Common Stock thereafter
purchasable upon the exercise of the Warrant shall be determined by multiplying
the number of shares of Common Stock theretofore purchasable upon exercise of
such Warrant by a fraction, of which the numerator shall be the then Current
Market Price on the date of such distribution, and of which the denominator
shall be such Current Market Price on such date minus the then fair value
(determined by the Company's Board of Directors) of the portion of the assets or
evidences of indebtedness so distributed or of such subscription rights,
options, warrants or convertible securities applicable to one share. Such
adjustment shall be made whenever any such distribution is made and shall become
effective on the date of distribution retroactive to the record date for the
determination of stockholders entitled to receive such distribution.
(c) No adjustment in the number of shares of Common Stock purchasable
pursuant to the Warrants shall be required unless such adjustment would require
an increase or decrease of at least one percent in the number of shares of
Common Stock then purchasable upon the exercise of the Warrant or, if the
Warrant is not then exercisable, the number of shares of Common Stock
purchasable upon the exercise of the Warrants on the first date thereafter that
the Warrant become exercisable; provided, however, that any adjustments which by
reason of this Subsection 5.1(c) are not required to be made immediately shall
be carried forward and taken into account in any subsequent adjustment.
<PAGE>
(d) Whenever the number of shares of Common Stock purchasable upon the
exercise of a Warrant is adjusted as herein provided, the Exercise Price payable
upon exercise of the Warrant shall be adjusted by multiplying such Exercise
Price immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of shares of Common Stock purchasable upon the exercise of
such Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of shares of Common Stock so purchasable immediately
thereafter.
(e) Whenever the number of shares of Common Stock purchasable upon the
exercise of a Warrant or the Exercise Price is adjusted as herein provided, the
Company shall cause to be promptly mailed to the Holder by first class mail,
postage prepaid, notice of such adjustment or adjustments.
(f) For the purpose of this Section 5, the term "Common Stock" shall mean
(i) the class of stock designated as the Common Stock of the Company at the date
of this Agreement, or (ii) any other class of stock resulting from successive
changes or reclassification of such Common Stock consisting solely of changes in
par value, or from par value to no par value, or from no par value to par value.
5.2 No Adjustment for Dividends. Except as provided in Section 5.1
---------------------------
hereof, no adjustment in respect of any dividends or distributions out of
earnings shall be made during the term of a Warrant or upon the exercise of a
Warrant.
5.3 No Adjustment in Certain Cases. No adjustments shall be made pursuant
------------------------------
to Section 5 hereof in connection with the grant or exercise of presently
authorized or outstanding options to purchase Common Stock under the Company's
existing stock option plan or the exercise of presently outstanding warrant to
purchase Common Stock.
5.4 Preservation of Purchase Rights upon Reclassification, Consolidation,
---------------------------------------------------------------------
etc. In case of any consolidation of the company with or merger of the Company
- ---
into another corporation or in case of any sale or conveyance to another
corporation of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Holder an agreement that
the Holder shall have the right thereafter, upon payment of the Exercise Price
in effect immediately prior to such action, to purchase, upon exercise of each
Warrant, the kind and amount of shares and other securities and property which
it would have owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had each Warrant been exercised
immediately prior to such action. In the event of a merger described in Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, in which the
Company is the surviving corporation, the right to purchase shares of Common
Stock under the Warrant shall terminate on the date of such merger and thereupon
the Warrant shall become null and void, but only if the controlling corporation
shall agree to substitute for the Warrant its warrant which entitle the holders
thereof to purchase upon their exercise the kind and amount of shares and other
securities and property which they would have owned or been entitled to receive
had the Warrant been exercised immediately prior to such merger. Any such
agreements referred to in this Subsection 5.4 shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in Section 5 hereof. The provisions of this Subsection 5.4 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
6. FRACTIONAL SHARES; ISSUANCE OF SHARES; LEGENDS.
----------------------------------------------
6.1 Fractional Shares. The Company shall not be required to issue
-----------------
fractional shares of Common Stock on the exercise of the Warrant. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 10, be issuable on the exercise of a Warrant (or specified portion
thereof), the Company shall in lieu thereof pay an amount in cash equal to the
then Current Market Price, multiplied by such fraction. For purposes of this
Agreement, the term "Current Market Price" shall mean (i) if the Common Stock is
traded in the over-the-counter market and not in the NASDAQ National Market
System nor on any national securities exchange, the average of the per share
closing bid price of the Common Stock on the 30 consecutive trading days
immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted
<PAGE>
reporting service, or (ii) if the Common Stock is traded in the NASDAQ National
Market System or on a national securities exchange, the average for the 30
consecutive trading days immediately preceding the date in question of the daily
per share closing prices of the Common Stock in the NASDAQ National Market
System or on the principal stock exchange on which it is listed, as the case may
be. For purposes of clause (i) above, if trading in the Common Stock is not
reported by NASDAQ, the bid price referred to in said clause shall be the lowest
bid price as reported in the "pink sheets" published by National Quotation
Bureau, Incorporated. The closing price referred to in clause (ii) above shall
be the last reported sale price or, in the case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices, in
either case in the NASDAQ National Market System or on the national securities
exchange on which the Common Stock is then listed.
6.2 Issuance of Shares. All shares of Common Stock issued upon exercise of
------------------
the Warrant will be duly authorized, validly issued, fully paid and
nonassessable.
6.3 Legends. If the Common Stock to be issued upon exercise of this
-------
Warrant has not been registered under the Securities Act of 1933, as amended,
then the stock certificates representing such shares of Common Stock shall bear
a legend substantially in the following form:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE
SECURITIES LAWS AND ARE RESTRICTED SECURITIES. SUCH SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE ACT AND STATE SECURITIES LAWS.
7. TRANSFERABILITY.
---------------
The Warrant may not be transferred, sold or otherwise disposed of, except
by will or devise and by the laws of descent. Any attempt to transfer, sell or
otherwise dispose of this Warrant (except as provided above) shall be void and
shall not convey any rights or privileges to the transferee.
8. MISCELLANEOUS.
-------------
8.1 Notices.
-------
All notices, requests, demands and other communications required or
permitted to be given hereunder shall be deemed to have been duly given if in
writing and delivered personally, given by prepaid telegram, or mailed first
class, postage prepaid, registered or certified mail, return receipt requested,
to the following addresses:
If to the Company: Pacific International Enterprises, Inc.
4431 Corporate Center Drive, Suite 131
Los Alamitos, CA 90720
Attn: Richard W. Perkins
With a copy to: Jeffers, Wilson & Shaff
18881 Von Karman Avenue, Suite 1400
Irvine, CA 92715
Attention: Christopher A. Wilson, Esq.
If to the Holder: To the Address set forth in Exhibit A
Any party may change the address to which such communications are to be directed
to it by giving written notice to the other party. Except as otherwise provided
in this Warrant, all notices shall be deemed to be given when
<PAGE>
delivered in person, or if placed in the mail as aforesaid, then two (2) days
thereafter.
8.2 Modifications.
-------------
The parties may, by mutual consent, amend, modify, supplement and waive any
right under this Warrant in any manner agreed by them in writing at any time.
8.3 Entire Agreement.
----------------
This Agreement and any documents, instruments or agreements specifically
referred to herein, set forth the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof.
8.4 Headings.
--------
The section and paragraph headings contained in this Warrant are for
convenient reference only, and shall not in any way affect the meaning or
interpretation hereof.
8.5 Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of California, without any regard to the choice of law
provisions thereof.
8.6 Severability.
------------
If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, it shall be deemed severable from the remaining provisions of
this Agreement which shall remain in full force and effect.
8.7 Waiver.
------
No waiver of any provision of this Agreement or any breach thereof shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar) or any other breach hereunder nor shall such waiver constitute a
continuing waiver. Either party may waive performance of any provision of this
Agreement, the non-performance of which would otherwise constitute a breach of
this Agreement, including but not limited to the non-performance of any
condition precedent to such party's performance, without affecting the
enforceability of this Agreement or the provisions contained herein.
8.8 Successors and Assigns.
----------------------
The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties hereto.
The Company may not assign this Agreement without the prior written consent of
the Holder. Holders may transfer and assign the Warrant only as provided in
Section 7. Any assignment by either party in violation of the foregoing shall
be void.
8.9 Attorneys' Fees.
---------------
If any legal action is instituted to enforce or interpret the terms of this
Warrant, the prevailing party in such action shall be entitled to actual
attorneys' fees in addition to any other relief to which the party is entitled.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
date first written above.
<PAGE>
HOLDER PACIFIC INTERNATIONAL ENTERPRISES, INC.
_________________________________ By:__________________________________
Signature Richard Perkins, President
<PAGE>
WARRANT 1
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned Holder of this Warrant hereby irrevocably exercises this
Warrant for the purchase of that number of shares of the Common Stock, no par
value, of PACIFIC INTERNATIONAL ENTERPRISES, INC. set forth below, up to a
maximum of shares (or such other number of shares as may be issuable upon the
exercise of this Warrant pursuant to the adjustment provisions hereof), and
hereby makes payment of the aggregate Exercise Price therefor which is also set
forth below, all on the terms and subject to the conditions specified in this
Warrant.
Number of Shares: _______________
x $3.50
Aggregate Purchase
Price paid: $______________
Dated: ______________, 1996
HOLDER:
_____________________________
(Signature)
______________________________
(Please print)
ACCEPTED:
PACIFIC INTERNATIONAL ENTERPRISES, INC.,
a Nevada corporation
By: ______________________________
Title: ___________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,256,141
<SECURITIES> 0
<RECEIVABLES> 5,775
<ALLOWANCES> 0
<INVENTORY> 15,168
<CURRENT-ASSETS> 1,293,948
<PP&E> 164,639
<DEPRECIATION> 27,322
<TOTAL-ASSETS> 1,476,559
<CURRENT-LIABILITIES> 1,340,782
<BONDS> 0
0
0
<COMMON> 1,276,288
<OTHER-SE> (1,140,511)
<TOTAL-LIABILITY-AND-EQUITY> 1,476,559
<SALES> 5,775
<TOTAL-REVENUES> 5,775
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 402,360
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,812
<INCOME-PRETAX> (427,397)
<INCOME-TAX> 0
<INCOME-CONTINUING> (427,397)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (427,397)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
