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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1996 Commission File Number: 1-10368
PACIFIC INTERNATIONAL ENTERPRISES, INC.
(Name of Small Business Issuer in its Charter)
NEVADA 88-0243669
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4431 Corporate Center Drive
Suite 131
Los Alamitos, California 90720
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (714) 816-0200
Securities registered under Section 12(b) of the Exchange Act:
(Title of each class) (Name of each exchange on which registered)
- --------------------- -------------------------------------------
NONE NONE
Securities registered under Section 12(g) of the Exchange Act:
(Title of each class)
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COMMON STOCK
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 ( ) NO (X)
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. (X)
State issuer's revenues (losses) for its most recent fiscal year: $(3,272,617)
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The aggregate value of the Registrant's Common Stock held by non-affiliates of
the Registrant was approximately $1,079,269 as of June 30, 1997, computed by
reference to the price at which the stock was last sold in negotiated
transactions.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: There were 8,710,190 shares of the
Registrant's Common Stock issued and outstanding as of December 31, 1996.
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ITEM 1. DESCRIPTION OF BUSINESS
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
The following discussion, and the discussion in Item 6 Management's
Discussion and Analysis or Plan of Operation, contain forward-looking statements
which reflect management's current view with respect to future events and the
Company's performance. These forward-looking statements are subject to certain
risks and uncertainties, including, but not limited to, acceptance of the
Company's products, ability to compete with existing and new products, the
ability to price the Company's products competitively, the continued growth of
the snowboard industry, the Company's ability to attract additional capital, and
the establishment of an effective distribution network. Due to such
uncertainties and the risk factors set forth herein, readers are cautioned not
to place undue reliance upon such forward-looking statements and to rely
primarily upon the Company's results to date.
HISTORY
Pacific International Enterprises, Inc., a Nevada corporation ("PIE" or
the "Company"), was originally formed in 1988 to conduct certain offshore gaming
operations. The founders of the Company were Joseph W. Faggard, Dale Edwards and
Martin Shumsky and the initial directors were Shumsky, Stanley Vanderburg and
Gilbert Sakaguchi. From 1989 until October 1995, the Company was inactive and
operated no business and held no significant assets. In October 1995, the
Company acquired all of the outstanding shares of Crush Innovative Sports
Systems, Inc., a California corporation ("Crush"), which is a wholly owned
subsidiary of the Company. None of the original founders or directors has been
involved with the Company since before the merger with Crush in 1995 discussed
below.
Crush was formed in February 1995 for the purpose of developing,
marketing and selling innovative sports products based upon proprietary
fastening systems designed by Laurence/Wayne, Inc. ("L/W"). Founded in 1989, L/W
develops fastening systems that are intended for use in the aerospace and armed
forces market. L/W envisioned numerous commercial applications of its technology
in the sporting goods and other markets. L/W conceived and performed the initial
development of the T-Bone binding system for snowboards. In 1995, L/W assigned
to Crush all rights to the T-Bone system and other sporting good applications of
its fastening system in exchange for shares of Crush Common Stock.
To date the Company has had no significant sales or revenue. Its
primary activities have been research and development, marketing and limited
manufacturing of its initial products, capital raising activities and the
establishment of distribution and manufacturing agreements.
INDUSTRY OVERVIEW
Tracing its roots to surfing and skateboarding, snowboarding was
invented in the late 1970's. The first products available commercially were
unsophisticated in design, were made almost entirely by small "backyard"
manufacturers and were meant largely for use outside of established ski areas.
In the 1980's only a few ski resorts permitted snowboarding. Now, virtually all
ski resorts allow snowboarding, and many have established specific runs for
snowboarder use only. Consistent with snowboarding's increasing appeal, the
International Olympic Committee has proposed that snowboarding be designated a
demonstration event at the 1998 Winter Olympic Games in Nagano, Japan. Lee
Rogers, an advisor to the Company, is currently Coach of the U.S. Amateur
Snowboarding Team.
According to the National Sporting Goods Association, the number of
snowboarders in the United States increased from 2.1 million in the 1994-1995
season to an estimated 2.6 million in the 1995-1996 season, a 24% annual growth
rate. The Company believes that similar growth rates are being experienced in
the other major international markets, making snowboarding one of the fastest
growing sports in the world.
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Based on published industry data, sales of snowboards, boots and
bindings in the United States for the 1995-96 season were approximately $601
million at the retail level, an increase from $532 million in retail sales
during the 1994-95 season. In addition, the number of participants and the
number of snowboards, boots and bindings purchased by consumers in the U.S.
increased. The number of snowboard bindings purchased by consumers in the U.S.
rose from 114,500 in 1994 to 163,500 in 1995 to 187,700 in 1996. Industry
sources anticipate that the number of participants and the total sales revenues
for snowboard equipment will increase in future years.
The Company believes that the growth of the number of participants is
attributable in large part to the advantages that the sport holds over alpine
skiing. Many people find that snowboarding not only is more natural and more
easily learned than alpine skiing, but also provides a greater degree of
excitement over more diverse terrain. Snowboarding may also involve less risk of
knee injury than alpine skiing because both of the rider's feet are mounted on a
single board. Snowboarding equipment is also less cumbersome and more
comfortable than alpine equipment; poles are unnecessary and the boots are
softer and lighter than ski boots.
While a significant percentage of snowboarders are males between the
ages of 13 and 24, the sport is growing in popularity among females and older
sport enthusiasts. In addition, a large number of younger participants (ages 6
through 11) are commencing snowboarding. Ski resorts are also taking an active
role in helping to develop the sport by developing designated runs for
snowboards.
The snowboarding industry is highly fragmented and, therefore, precise
information about many competitors is difficult to obtain. The Company believes
that five primary companies comprise a substantial market share and
approximately 100 other companies share in the remainder of the market. The
Company believes that demographic differences between skiers and snowboarders
have limited the effectiveness of the ski companies' snowboard marketing
programs.
PRODUCTS
The Company's current primary product is the T-Bone binding system. In
1995, Crush began to create industry and consumer awareness by demonstrating the
T-Bone system to a number of snowboarding experts and promoting it to rental
shops in large sporting goods stores as well as at ski and snowboard resorts.
The Company has also developed the Filet, a scaled down version of the T-Bone
system to be used with boots made for women and children, which should greatly
expand the Company's market. In addition, the Company has used its proprietary
fastening technology to create applications for in-line skates, backpacks and
motorcycle saddlebags. The Company anticipates that other applications will be
conceived and developed in the future.
Snowboard Products.
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Bindings. The T-Bone Binding is a light-weight and durable
aluminum binding with a stainless steel armature, comprised of two parts. A
"female" component of the System is attached to the snowboard, and a "male"
component is imbedded in the boot sole. The female component utilizes stainless
steel pins within the binding to lock the boot into place when foot pressure is
applied. The step-in locking mechanism is released with the easy movement of a
protected release lever. This release lever also acts as a safety release for
boarders buried in snow, a feature that is very limited in today's conventional
strap systems. The binding has a single screw center adjustment allowing the
snowboarder to adjust their stance to over 75 positions over a 360 degree arc in
seconds. This feature is especially important to rental shop technicians, who
can adjust the bindings for different riders' stances without removing the
binding from the board, saving time.
The "male" portion of the T-Bone system is attached to the scalloped
sole of the snowboard boot. The scalloped sole allows the boot to fit easily
over the binding thus allowing the boot to rest directly on the board for
maximum control and performance.
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The T-Bone system attaches onto the snowboard using the 4X4 hole
pattern standard on most snowboards. The FZ Upload Moment, the ultimate force
required to hold the rider to the board, exceeds the liability requirements by a
factor of three.
The Company's newest product is the Filet, a new downsized version of
the T-Bone system to be used specifically with women's and children's step-in
boots. The Filet is approximately one inch shorter than the T-Bone, but is
virtually identical in all other respects. Because of the similarities between
the T-Bone and the Filet, the Company anticipates that the retooling necessary
to create the Filet prototype can be done at a fraction of the cost of the
T-Bone.
Boots. The Company has also designed snowboard boots to
incorporate both the T-Bone and Filet systems. The soft boots have a rubber sole
and a leather upper. Attached to the sole is the pin plate that attaches the
boot to the binding. The plate located in the sole of the boot is flexible and
thus makes the boot comfortable to walk in, unlike classic Alpine ski boots.
Additionally, all T-Bone compatible boots can still be used with conventional
strap bindings. This feature is unique to the T-Bone system, and is especially
appealing to rental shops, who can service both step-in and strap binding users
with one boot. This integrated boot and binding system provides the necessary
performance standards for racing, carving, free-style and halfpipe riding with
the convenience of a step-in binding. The boot liner is an insert or sewn-in
liner depending upon boot style desired. In either case, the liner provides
warmth without creating foot perspiration that can moisten socks and feet and
cause coldness.
During 1994 and early 1995, L/W and Crush developed a functional
prototype boot to demonstrate the feasibility and performance characteristics of
the T-Bone System. Additional designs incorporated the T-Bone system into the
more current boot styles (e.g., "sneaker style boots"). The Company currently
has received 400 pairs out of an initial order of 2,500 pairs of the newer
sneaker-style boots from Norlander, Inc. ("Norlander"), a major boot
manufacturer. The Company plans to enter into additional purchase orders with
Norlander for 5,500 more pairs of boots for delivery in October, 1997, pending
trade financing approval for the Company. See Item 6 -- "Plan of Operation"
below. The Company provides Norlander with the T-Bone pin plates to assemble to
the bottom of each boot. Norlander obtains its other supplies for the boots from
various suppliers. The Company believes that eventually additional boot styles
will be developed (with one or more manufacturers) to meet the needs of the
variety of riding styles and fashion preferences.
In-Line Skate Products. The Company is also in the conceptual stage of
designing an in-line skate product using the Company's proprietary locking
technology. The Company's detachable in-line skate truck is based upon the same
concept as the T-Bone snowboard binding system. It is designed for quick and
easy detachment of in-line skates from a soft-shell boot. The Company believes
that the in-line skate market is also rapidly growing and intends to pursue this
market as soon as financially feasible.
Backpack Products. The Company has acquired from L/W a design for a
quick release backpack system for both military and consumer use. The Company
has commenced negotiations with the U.S. Army for a contract to supply such
backpack components. In August 1995, the Company delivered to the U.S. Army a
prototype backpack. The Company intends to explore consumer applications of the
backpack system in 1997 and beyond. In addition, the backpack products division
will include a motorcycle saddlebags product. The Company has entered into
preliminary discussions with a major American motorcycle manufacturer for
potential use on its motorcycles.
Product Development. A key element of the Company's business strategy
is to develop new proprietary products for the growing sporting goods markets.
The Company is committed to continuing product research and development for both
enhancements to existing products and for new products. Unlike many sporting
goods companies, which rely on outside design technicians and engineers, the
Company uses its in-house development team to develop high-performance products
using its proprietary fastening system.
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DISTRIBUTION
Joint Distribution with Boot Manufacturers. The Company's primary
distribution strategy will be to license to, or enter into a joint venture
development arrangement with, key boot manufacturers. The initial sales strategy
for the binding will be to "piggy-back" on the established distribution system
of these boot manufacturers. This will initially be accomplished in either of
two ways or a combination thereof:
(1) Independent sales to the members of the boot manufacturers'
distribution system (i.e. the manufacturers sell a set of
boots which requires the purchase of a companion binding set
sold independently by the Company); or
(2) Single point sales to boot manufacturers with advertising
covenants (i.e. the boot manufacturer purchases bindings to be
sold with its boots and agrees to participate in developing
the T-Bone System brand name).
Sales Representative Network. In addition to utilizing the distribution
network of the boot manufacturers, the Company anticipates establishing a
separate sales and distribution network for snowboard boots. The Company is
hopeful that this network will be established during 1997 and be in full
operation for the 1997-98 season. To establish the network, the Company plans to
divide the U.S. into market areas, identify the key snowboarding resorts within
each of these areas, identify many of the key snowboarding participants in these
areas (resort personnel, instructors, local riders, key representatives, etc.),
identify key ski and specialty shops in both resorts and urban settings, and
identify key local opinion makers within the target markets. During 1997, the
Company will commence establishing formal arrangements with domestic
representatives. In addition, the Company will establish an international
distribution network and anticipates that it also will be fully operational in
time for the 1997-98 season's trade shows.
In conjunction with the Company's marketing plan, the sales
representatives will focus on several distribution channels for the T-Bone
system and snowboard boots, namely rental and specialty snowboard shops.
MARKETING
The Company's marketing plan is to gain essential exposure through
introduction of the T-Bone System. The Company intends to exploit the experience
and knowledge of its management team, especially Lee Rogers, an advisor of the
Company. Such exposure is anticipated through two key marketing plans,
identified below:
Rental Shop Marketing. The Company will concentrate on sales to
snowboard rental outlets. The Company anticipates that its relationship with
Norlander and Lee Rogers will provide immediate access to a significant number
of snowboard rental shops. There are approximately 4,000 snowboard rental shops
in the United States.
The renting of snowboards is often the first exposure to snowboarding
equipment by new participants. A strong presence in the rental shops should
stimulate demand and increase market share. The Company believes that the T-Bone
System technology is attractive to many rental outlets for several reasons.
First, with the T-Bone System, each snowboard rental provides an opportunity to
rent a boot, thereby increasing rental revenues. Second, the T-Bone System
allows for quick and easy adjustment by the renter that does not necessarily
require assistance from rental personnel, while currently, most snowboard rental
bindings must be individually adjusted for each renter. Third, the T-Bone System
is more durable than strap bindings, and therefore has a longer rental life.
The Company notes, however, that such rental shops typically purchase
their rental boots on payment terms of at least 17 months. Such arrangements
would require the Company to finance boot products for at least 17 months. The
Company is currently in the process of obtaining trade financing and finding
additional private equity investors to cover expenses for this period.
Pro Marketing (Snowboard Instructors). The Company believes that ski
resort exposure is an important element of its marketing and that this can be
most effectively accomplished by generating sales to professional riders
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and snowboard instructors. In order to support and generate such sales, the
Company intends to concentrate on snowboard schools in targeted resort areas.
The Company anticipates that it will conduct regional instructor clinics at
individual resorts to demonstrate the T-Bone System during the 1997-1998 season.
The Company has identified 128 snowboard schools to target that are based in
resorts.
COMPETITION
The T-Bone System faces a number of competing technologies. Such
competition includes hard boot systems, strap systems and other step-in systems.
The hard boot systems are comparable to the twin-bale systems associated with
alpine skiing. These systems require hard boots, very similar to ski boots. Such
systems are not considered to be directly competitive with the T-Bone system
since the nature of snowboarding is such that the rider, unlike in skiing, has
his or her front and rear feet perpendicular along the length of the board.
Unlike skiing, and similar to surfing and skateboarding, hard boots are not
required to keep the rider's feet parallel to the skis, and softer boots allow
the rider more comfort and mobility. As a result, snowboarders overwhelmingly
prefer soft boots and tend to reject skiing-related equipment.
The strap systems currently dominate the snowboard market despite the
fact that such bindings are time consuming to enter and exit. Strap bindings
also produce pressure points on the boots which cause discomfort and fatigue and
break and crack from the stress of use. The T-Bone system offers numerous
advantages over such bindings, including instant stance adjustment without
removal of the binding, an automatic hold open lever for an easy exit, easy
mounting onto the 4X4 hole patterns found on most makes of snowboards, the fact
that the attachment to the binding is located completely under the foot and the
fact that the T-Bone compatible boots are both step-in and strap compatible.
The most directly competitive binding products are the "Switch",
manufactured by Switch, Inc., and the K2 "Clicker," manufactured by Shimano
Industries, Inc. Both the "Switch" and the "Clicker" are also step-in bindings
and have significant name recognition in the ski/snowboard market. Other step-in
binding systems exist, but have not attracted significant market share or
attention. The Company anticipates that numerous other competitors are
developing or intend to develop step-in snowboard bindings. Such competitors
have substantially greater financial, management and marketing resources, as
well as greater name recognition.
PATENTS, TRADEMARKS AND TRADENAMES
L/W has obtained several patents relating to its proprietary fastening
devices and has assigned certain uses thereof to the Company. Such uses are for:
1) the snowboard boot and binding; 2) the quick release in-line skate; 3) the
quick release backpack; and 4) the quick release motorcycle accessories. In
addition, the Company has applied for patents relating specifically to its
sporting applications of such devices. Such patents are still pending and there
can be no assurance that a patent will issue or, if issued, will adequately
protect the Company's proprietary designs. However, L/W's patent claims have
been allowed for the key elements of the T-Bone system, the in-line skate
product, the backpack product and the motorcycle saddlebag. These patents offer
the Company a substantial competitive advantage over competing binding
technologies.
The Company has applied and received trademark registration for
"T-Bone", "Crush" and "Step-in" and intends to file for "Filet" and additional
tradenames and trademarks as product development continues. The Company also
claims rights to various tradenames and trademarks arising out of the use of
such marks. Although the Company believes that such rights are enforceable,
there can be no assurance that such tradenames and trademarks are enforceable or
that the Company is capable of protecting the goodwill associated therewith.
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SUPPLIERS
The Company obtains its raw materials, and expects to obtain such
materials in the future, from numerous sources. The Company does not currently
rely on any individual supplier, and is confident that alternative sources for
each raw material are readily available at comparable costs.
CASTERS AND ASSEMBLERS
The Company currently has one subcontractor assembling the bindings.
The Company supplies this subcontractor with the metal parts required for the
bindings, and the parts are then casted and assembled by the subcontractor. The
Company plans, in future purchase orders, to require the subcontractor to supply
the parts needed for casting and assembling. The Company is confident that
should this assembler become unable or unwilling to supply their services that a
replacement could be readily found without delay in delivery.
EMPLOYEES
The Company currently has four full-time management and administrative
employees. The Company intends to engage additional sales, marketing and
manufacturing personnel as needed to conduct operations.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's administrative offices and research facilities currently
occupy approximately 1,800 square feet of leased space in Los Alamitos,
California. The lease expires September 1, 1997 subject to Company's earlier
right to terminate. The lease does not contain any rights of renewal or any
rights of first refusal to expand into adjacent space.
ITEM 3. LEGAL PROCEEDINGS
The Company has been named as a defendant in the case of Chardas v.
Graval currently pending in Los Angeles Superior Court. The allegations against
the Company arise from actions by Binks A. Graval, in his capacity as an officer
of Girls Rule!, Inc. The Company intends to vigorously defend itself in this
action and believes that this matter will not have any material adverse effects
upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth
quarter of 1996.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.001 par value, is traded under the symbol
"PCIE" only through the OTC Electronic Bulletin Board maintained by the National
Association of Securities Dealers, Inc. (the "NASD"), which has no financial
eligibility standards and is totally separate from NASDAQ. The Electronic
Bulletin Board does not constitute an active trading market. The following table
sets forth the range of high bid and low bid quotations for the Common Stock for
the periods indicated. The quotations are inter-dealer prices in the
over-the-counter market without retail mark-ups, mark-downs or commissions, and
may not represent actual transactions.
<TABLE>
<CAPTION>
Period High Bid ($) Low Ask($)
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<S> <C> <C>
October 1, 1995 - December 31, 1995 4 1/2 25/32
January 1, 1996 - March 31, 1996 4 3/8 2 1/4
April 1, 1996 - June 30, 1996 3 1/4 1 1/4
July 1, 1996 - September 30, 1996 2 1/8 1 1/8
October 1, 1996 - December 31, 1996 2 3/8
January 1, 1997 - March 31, 1997 1 5/8 5/16
April 1, 1997 - June 30, 1997 3/16 3/16
</TABLE>
The prices set forth above have been adjusted to reflect the
one-for-five reverse stock split of the Company's Common Stock effected in
October, 1995.
Trading in the Common Stock is limited and sporadic. Prior to the
Company's acquisition of Crush Innovative Sports Systems, Inc. in October 1995,
the Company did not have any substantial operations or assets. Therefore, any
trading activity in the Company's shares of Common Stock prior to October 1995
is not relevant to its current operations or value.
As of June 9, 1997 there were 296 holders of record of the Company's
Common Stock.
The Company has not paid a cash dividend on its Common Stock since its
inception. The Company expects that for the foreseeable future, any earnings
will be retained for use in the business or other corporate purposes, and it is
not expected that cash or share dividends will be paid.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion is based upon and should be read in
conjunction with the Company's financial statements, including the notes
thereto, and the cautionary statements regarding forward-looking statements.
PLAN OF OPERATION
Pacific International Enterprises, Inc., a Nevada corporation (the
"Company") was formed in 1988 with the intention of operating certain offshore
gaming facilities. Such operations were never conducted and the Company remained
inoperative until October 12, 1995, when it acquired all of the capital stock of
Crush Innovative Sports
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Systems, Inc., a California corporation ("Crush"). All of the current operations
of the Company are being conducted through Crush.
The Company's primary business is the development and anticipated
marketing and sale of "T-Bone" snowboard bindings and snowboard boots. The
Company is a development stage enterprise and has not had any revenue from
operations to date since inception. The first salable systems were received by
the Company in April, 1997. The Company currently has orders in place for 8,000
pairs of boots and bindings for delivery to customers between July and December,
1997. These orders should generate a gross revenue of $1.4 million of which
$965,000 is estimated to be collected between July and December, 1997 and
$435,000 in January, 1998. The Company has received preliminary approval for
trade financing for the production and delivery of these orders.
Over the period from February through April, 1996 the Company conducted
a private placement of equity securities and raised $1,165,000. The cost and
commissions of this placement were $136,249, netting the Company $1,028,751, of
which $469,528 was used for partial repayment of loan financing made in October,
1995. The outstanding notes were also reduced through exercise of conversion
options in the amount of $233,357. With the agreement of other noteholders, the
maturity date of the remaining notes of $720,865 was extended to April, 1997.
During 1996 the Company also raised additional capital through private equity in
the amount of $262,500 and notes of $120,000 due June 30, 1997, secured by
400,000 shares of the Company's Common Stock.
To date in 1997 the Company has entered into loans in the amount of
$250,000 and raised equity capital in the amount of $200,000 to sustain
operations, As of June 30, 1997, the Company had cash of approximately $70,000
and accounts payable of approximately $226,000 (of which approximately $57,000
is due to officers of the Company for expenses paid on behalf of the Company and
approximately $65,000 is due for professional services rendered). The Company
estimates that the costs of continuing operations through December 31, 1997 will
be approximately $330,000, Thus, the Company estimates that it will require
approximately $500,000 to sustain operations through fiscal year 1997. The
Company currently has commitments for an additional $100,000 investment in the
Company Common Stock, leaving approximately $400,000 of unfulfilled capital
requirements for fiscal 1997. Every effort is being made to eliminate overhead
and reduce current expenses. Employees and officers of the Company have agreed
to take reduced or no cash salaries in exchange for equity in the Company. In
addition, the Company has been able to enter into long-term payment plans with
certain accounts payable. The Company does not currently have any other
commitments to raise additional funds, but is in the process of attempting to
acquire trade financing of approximately $600,000. There can be no assurance
that the Company will be able to acquire trade financing or will be able to
raise funds through sales of additional equity. Without such additional funds,
there is substantial uncertainty about the ability of the Company to continue as
a going concern.
The Company intends to continue on-going development of its products
during fiscal year 1997 to the extent permitted by available financing. Such
development is expected to include the products described under Item 1.
The Company does not anticipate any significant sale of equipment
during fiscal year 1997, but does expect to purchase various equipment for
development purposes at an anticipated cost of $100,000, subject to available
financing.
The Company does not currently anticipate any significant changes in
the number of employees or compensation payable to employees.
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RECENT DEVELOPMENTS
Cancellation of merger with Third Rail, Inc. In May, 1997 the Company
announced that by mutual agreement between the parties, the merger between the
Company and Third Rail, Inc. was canceled. Neither Third Rail, Inc. nor the
Company were financially able to complete the agreement as originally envisaged.
No orders, customers or suppliers will be affected or lost as a result of such
cancellation.
Acquisition of Laurence/Wayne, Inc. The Company has entered into a
letter of intent in 1995 to merge Laurence/Wayne, Inc. ("L/W") into the Company
such that L/W will become an operating subsidiary of the Company. As a result of
the merger, the Company would acquire all of the patents upon which its T-Bone
snowboard binding and other products depend. In the merger, the shares of
Company Common Stock currently held by L/W would be canceled, and new
certificates will be issued directly to the L/W shareholders. Thus, no dilution
to existing shareholders of the Company will occur. The merger has been approved
by the shareholders of L/W but is still subject to the approval of the Company's
shareholders. Therefore, there can be no guarantee that the merger will be
consummated or consummated on the terms of the letter of intent.
Manufacturing Arrangement with Norlander. The Company currently has an
outstanding order with Norlander, Inc. ("Norlander"), a major boot manufacturer,
to produce the specially made boots to fit the T-Bone system. Norlander has
delivered more than 400 units out of the initial 2,500 unit order to the Company
to date, and will be manufacturing an additional 5,500 units to be delivered in
October, 1997. Although the Company anticipates that Norlander will be able to
deliver the additional units on time, there can be no guarantee that this will
happen. If the Company fails to receive the units on time or not at all, it is
unlikely that the Company would be able to find an alternative manufacturer in
time to fill existing orders in time for the 1997-1998 snowboard season.
Execution of Sale Orders. The Company has recently entered into sale
orders for 8,000 pairs of the boots and binding system. Approximately 5,000
pairs of these orders were with a major sporting goods chain and the majority of
the remaining orders were with two other major international customers. The
orders guarantee a 65% sell-through to the purchasers, whereby the Company would
accept back any unsold units if less than 65% were sold. Although the Company
has every reason to believe that these purchase orders will be filled, their
success depends upon the successful delivery by Norlander as described above and
the successful assembly of the binding system by Die-Cast or other assemblers
that the Company may enter into agreements with.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
From time to time the Company or its management may make
forward-looking statements with respect to the business, sales, revenues,
earnings, earnings per share, proposed acquisitions and other matters. Such
forward-looking statements involve risks and uncertainties and there are
important factors that could cause actual results to differ materially from
those anticipated. Some of the important risks are set forth below:
Limited Operating History; Development Stage of Company. The Company
has a very limited history of operations and has not yet had any sales or
revenue. The Company's first salable product became available in April, 1997.
The Company's primary activities to that date had been technology and product
development. The Company's success is dependent upon the successful development
and marketing of its proposed services and products, as to which there is no
assurance. Any future success that the Company might enjoy will depend upon many
factors, including factors which may be beyond the control of the Company or
which cannot be predicted at this time. No assurance can be given that the
Company can or will ever operate profitably.
Need for Additional Capital. Additional capital will be required to
effectively support the operations and to otherwise implement the Company's
overall business strategy. There can be no assurance that financing will be
available when needed on terms that are acceptable to the Company. In addition,
cost and expenses to be incurred for manufacturing, marketing and product
development, other than for the current orders, will require additional working
capital. The inability to obtain additional capital could restrict the Company's
ability to grow and may affect the Company's ability to continue as a going
concern.
10
<PAGE> 11
Dependence on Third-Party Selling Efforts. One of the Company's
principal marketing strategies is to enter into joint development and
distribution agreements with snowboard distributors and boot manufacturers. The
Company has entered into non-exclusive development and distribution agreements
with various boot manufacturers, and retains the right to make and sell boots
incorporating the Company's own technology. With respect to boots, the Company
also intends to establish independent sales representatives. The Company will,
therefore, depend on such manufacturers and independent sales representatives to
sell and distribute its products. The loss of the services of such sales or
distribution channels or difficulties encountered with any of the Company's
independent sales representatives or distributors would have a material adverse
effect on the Company's results of operations.
Expected Seasonality; Expected Fluctuations in Quarterly Operating
Results. Because snowboarding traditionally is a winter sport and the Company's
sales are expected to be concentrated in the northern hemisphere, sales of the
Company's products are expected to occur predominantly in the third and fourth
calendar quarters of 1997 and possibly 1998. Although management believes
distribution in Australia, New Zealand and Argentina will eliminate the
seasonality of its business over time, the Company expects that for the
foreseeable future the majority of net sales will be generated in the third and
fourth calendar quarters. Since much of the Company's operating expense is
expected to be fixed in nature and because relatively lower net sales are
expected to be realized in the first and second calendar quarters of each year,
the Company may incur operating losses in the first calendar quarter, and
possibly in the second calendar quarter. In addition to seasonal fluctuations,
the Company's operating results fluctuate from quarter to quarter as a result of
the timing of order shipments, new product introductions and new distribution
agreements.
Dependence on Outside Manufacturers. The Company will assemble the
finished binding to be attached to both the boots and the snowboards using local
area suppliers. An outside supplier has been contracted to manufacture the boot
sole and uppers. Presently the Company is using one boot supplier, but the
Company has other such suppliers interested in the T-Bone system. The Company
has negotiated minimum performance standards, quality control requirements and
other protective provisions, but there can be no assurance that the
manufacturing process will not be disrupted. Any such disruption could have a
material adverse impact on the revenue, earnings and prospects of the Company.
Competition. The Company will initially compete predominantly in the
snowboard industry. This industry is highly competitive and has relatively few
barriers to entry. The Company will compete with a large number of established
manufacturers and distributors whose brand names enjoy substantially greater
consumer recognition than the Company's products. In addition, there are a large
number of established alpine ski manufacturers and distributors who are
currently not active in the snowboarding industry who could pose a significant
threat by developing snowboard binding systems. Most of the Company's
competitors have greater financial, distribution, advertising and management
resources than the Company. There can be no assurance that the Company will be
able to successfully compete against such companies.
ITEM 7. FINANCIAL STATEMENTS
See "Index to Consolidated Financial Statements" for a listing of the
consolidated financial statements filed with this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company had no such changes or disagreements during the fiscal year
ended December 31, 1996.
11
<PAGE> 12
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
executive officers and directors of the Company as of December 31, 1996:
<TABLE>
<CAPTION>
Name Age Position(s) Held
---- --- ----------------
<S> <C> <C>
Binks Graval 52 Chief Executive Officer and Chairman of the Board
Richard W. Perkins 43 Vice-President and Vice-Chairman of the Board
Anthony Broughton 57 Treasurer, Chief Financial Officer, Chief
Operations Officer and Director
</TABLE>
Richard W. Perkins became a director of the Company on October 12,
1995, when he was elected to fill a vacancy on the Board. Binks Graval became a
director on June 24, 1996. Anthony Broughton became a director on December 19,
1996. The Company currently has two vacancies on its Board. Directors are
elected by the Board of Directors and serve until the next annual meeting of
stockholders and until their successors are elected and qualified. Officers are
elected by the Board of Directors and serve until their successors are appointed
by the Board of Directors. Directors who are employees of the Company do not
receive any compensation for serving on the Board of Directors of the Company.
Directors who are non-employees of the Company do not receive any compensation
for serving on the Board of Directors of the Company. The Company expects that
the Board of Directors will meet at least quarterly. The Company does not
currently have audit or compensation committees.
Binks Graval is the Chairman of the Board and Chief Executive Officer of the
Company. Mr. Graval has been involved in business development for the past 22
years, identifying unique concepts and turning those concepts into profitable
enterprises. Mr. Graval has been involved in more than 40 projects during this
period, with responsibilities ranging from Independent Consultant to
Chairman/CEO.
Most recently, Mr. Graval was a consultant to a major Indonesian conglomerate
and was responsible for developing international trade and projects between
Indonesia and the People's Republic of China. Mr. Graval worked from the Premier
level down to the Minister level with the governments, as well as with the heads
of the largest Indonesian and Chinese companies. He developed and negotiated
$500 million of capital projects in steel, coal extraction, power and plantation
sectors.
As Chairman and CEO of the Company, Mr. Graval's mandate is to complete the
conversion of the Company from a research and development mode into a mode of
manufacturing and sales, all dedicated to operations that increase capital value
and produce an on-going high level of cash flow.
Richard W. Perkins is the founder/President of Crush Innovative Sports Systems
and Vice-President and Vice-Chairman of the Company. Mr. Perkins also founded
Laurence/Wayne Research and Development, Inc. and has served as its Chief
Executive Officer since 1990. Mr. Perkins is primarily responsible for the
design and co-development of various applications of the patented Roclock(TM)
fastening technology, including the T-Bone system.
12
<PAGE> 13
Mr. Perkins graduated in 1975 from St. Michael's College in Vermont and was a
competitive skier for more than fifteen years.
During the 1980s, Mr. Perkins was President of Perkins & Associates, an
advertising and design firm specializing in media buying with a wide range of
national and regional clients in the corporate, entertainment and technical
fields. Mr. Perkins merged his clients with the Fleming Design Group and became
a managing partner in the marketing group, ProMotions, Inc. He also worked as a
marketing consultant to the newly formed EPIC Surf and Skate Sportswear Co. in
Anaheim, California. After EPIC's sales tripled within three years, Mr. Perkins
helped to orchestrate the acquisition of EPIC by the Oregon based conglomerate,
Sun Sportswear.
In 1989, due to the increased potential of the expanding Roclock(TM) product
line and the amount of time the project was consuming, Mr. Perkins divested all
his assets and corporate clients to focus his attention on the development of
the quick release fastening technologies for various industries.
Anthony D. Broughton was appointed Chief Operations Officer of the Company in
June, 1996 and Chief Financial Officer in December, 1996. Mr. Broughton has 30
years of international and financial operations experience in senior positions,
among which was as Chief Executive Officer of a major Security Pacific
subsidiary, as Regional Director, Asia and Chief Financial Officer Multinational
Operations for Motorola, Inc., a major telecommunications conglomerate, and
Chief Financial Officer for Union Carbide Eastern, a major petrochemical
conglomerate, which covered Near and Far East Asia and Australasia. Mr Broughton
is a fellow of the UK Institute of Chartered Accountants.
KEY CONSULTANTS
Lee Rogers is the coach of the U.S. Amateur Snowboarding Team and advisor to the
Company. Mr. Rogers has tested the Company's boots and bindings extensively, and
provides valuable information to the Company regarding the durability,
presentation and marketability of the boots. The Company has agreed to pay Mr.
Rogers $3,000 per month, plus expenses. Since June, 1996, the Company has paid
Mr. Rogers only $1,000 per month. The Company plans to make up for such
shortfall by issuing shares of the Company's Common Stock to Mr. Rogers. The
number of shares to be issued has not been determined and is currently being
negotiated with Mr. Rogers.
13
<PAGE> 14
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
- --------------------------
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------------
Annual Compensation Awards Payout
- ------------------------------------------------------------------ -------------------------- -------------
Restricted
Name and Stock All Other
Principal Fiscal Award Options/ LTIP Compensation
Position Year Salary($) Bonus($) Other($) ($)(1) SARs(#) Payout($) ($)(2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R.W. Perkins, 1996 $54,000 -0- -0- $24,000 -0- -0- -0-
Vice-President 1995 $32,257 -0- -0- -0- 500,000 -0- -0-
- -----------------------------------------------------------------------------------------------------------------------------
Binks Graval, CEO 1996 $24,000 -0- -0- $27,000 500,000 -0- -0-
1995 -0- -0- -0- -0- -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------------------------
Anthony Broughton, CEO 1996 $15,564 -0- -0- $18,000 500,000 -0- -0-
1995 -0- -0- -0- -0- -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------------------------
E.G. Hanson, CFO (3) 1996 $25,500 -0- -0- -0- -0- -0- -0-
1995 $15,000 -0- -0- $25,000 -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------------------------
W.J. Kearns, COO (4) 1996 $20,000 -0- -0- -0- 400,000 -0- -0-
1995 $15,011 -0- -0- -0- -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Granted in lieu of cash payments for salaries and car allowances.
(2) The remuneration described in the table does not include the cost to the
Company of benefits furnished to all employees generally, including
premiums for health insurance.
(3) The Company had entered into a consulting service agreement with Redfield
Miller, Inc. of which Edward G. Hanson is an employee. Mr. Hanson, who left
the Company in December, 1996, is deemed to have received such amounts paid
to Redfield Miller as salary and other compensation.
(4) William Kearns' service with the Company as Executive Vice-President of
Operations ended in May, 1996.
EMPLOYMENT AGREEMENTS
The Company has entered into five-year employment agreements with Binks
Graval, Richard W. Perkins and Anthony Broughton pursuant to which Mr. Graval
was to become Chief Executive Officer, Mr. Perkins was to become Vice-President
and Mr. Broughton was to become Chief Financial Officer of the Company, all at
annual salaries of $96,000. Additionally, each of the officers will receive
500,000 options to purchase shares of the Company's Common Stock. 100,000 of
such options vested upon the signing of the employment agreements and an
additional 100,000 shall vest on the four subsequent anniversaries of the
signing of the employment agreements. Mr. Graval's and Mr. Perkins' options
shall be at $1.00 per share, representing the fair market value of the Company's
Common Stock on the date of the employment agreement in June, 1996. Mr.
Broughton's options shall be at $0.38 per share, representing the fair market
value of the Company's Common Stock on the date of the employment agreement in
December, 1996. Mr. Perkins' employment agreement has been mutually terminated,
although Mr. Perkins will continue to preform advisory functions to the Company
through his relationship with Laurence/Wayne. Mr. Perkins will remain a director
in the company. Mr. Perkins had been granted options under a prior employment
agreement to purchase 500,000 shares of the Company's Common Stock as follows:
100,000 shares after the first
14
<PAGE> 15
year of employment at an exercise price of $3.50 per share; 200,000 shares after
the second year of employment at an exercise price of $4.50 per share; and
200,000 shares after the third year of employment at an exercise price of $5.50
per share. Such options have been canceled and replaced with the options granted
under the new employment agreement.
STOCK OPTION PLAN
In 1995, the Company adopted, and the shareholders approved, the
Pacific International Enterprises, Inc. 1995 Stock Option Plan (the "Plan")
which provides for the grant by the Company of options to purchase up to 500,000
shares of the Company's Common Stock to officers, directors and employees, and
to consultants, vendors, customers and others expected to provide significant
services to the Company or its subsidiaries. If an option granted under the 1995
Plan expires or terminates, the shares subject to any unexercised portion of
that option will again become available for the issuance of further options
under the applicable plan. Options may be granted under the 1995 Plan which are
intended to qualify as "incentive stock options" under Section 422 of the Code
("Incentive Stock Options") or, alternatively, as stock options which will not
so qualify ("Nonstatutory Options"). The plans will terminate on June 15, 2005,
and no more options may be granted under the 1995 Plan once it has been
terminated. The Board or a committee designated by the Board is empowered to
determine the terms and conditions of each option granted under the 1995 Plan.
However, the exercise price of an incentive stock option cannot be less than the
fair market value of the Common Stock on the date of grant (110% if granted to
an employee who owns 10% or more of the Common Stock), and the exercise price of
a non-statutory option cannot be less than 85% of the fair market value of the
Common Stock on the date of grant. No option can have a term in excess of ten
years (five years if granted to an employee owning 10% or more of the Common
Stock), and no incentive stock option can be granted to anyone other than a
full-time employee of the Company or its subsidiaries. As of the date hereof, no
options to purchase shares of Common Stock or other awards have been granted
under the 1995 Plan.
SUMMARY OPTION TABLE
<TABLE>
<CAPTION>
==============================================================================================
Option/SAR Grants in Last Fiscal year
- ----------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base
Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Binks Graval 100,000 33.3% $1.00 6/30/2001
- ----------------------------------------------------------------------------------------------
Richard Perkins 100,000 33.3% $1.00 6/30/2001
- ----------------------------------------------------------------------------------------------
Anthony Broughton 100,000 33.3% $0.38 12/30/2001
==============================================================================================
</TABLE>
During fiscal year 1996, no options were exercised by any of the
executive officers of the company.
15
<PAGE> 16
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to beneficial
ownership of the Company's Common Stock by directors, executive officers and
persons known to the Company to own 5% or more of the outstanding Common Stock.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name Beneficially Owned Total Outstanding*
---- ------------------ ------------------
<S> <C> <C>
Laurence/Wayne, Inc. (1) 4,175,548 44.89%
Binks Graval (2) 585,135 6.29%
Richard W. Perkins (1)(2) 575,675 6.19%
Anthony Broughton (3) 556,756 5.99%
All Officers and Directors 5,893,114 63.55%
as a Group (3 persons)
</TABLE>
- ----------
* Percentage of ownership with respect to any person assumes that any options
owned by such are exercised, but that no options or warrants are exercised
by any other person.
(1) Richard W. Perkins and Bradley L. Read both own approximately 36.2% of the
outstanding shares of Laurence/Wayne, Inc. Both Mr. Perkins and Mr. Read
may be deemed to have voting control over the Company's shares of Common
Stock owned of record by Laurence/Wayne, Inc. although they disclaim any
direct beneficial ownership.
(2) Includes options to purchase 500,000 shares of Common Stock on June 30,
1996, exercisable as follows: 100,000 at $1.00 at the time of grant; 100,000
at $1.00 on the subsequent four anniversaries of the date of grant.
(3) Includes options to purchase 500,000 shares of Common Stock on December 30,
1996, exercisable as follows: 100,000 at $0.38 at the time of grant; 100,000
at $0.38 on the subsequent four anniversaries of the date of grant.
* Unless otherwise indicated, the business address of each named person is
4431 Corporate Center Drive #131, Los Alamitos, CA 90720
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, the Company entered into a merger agreement with Third Rail,
Inc. Kelly Graval, the son of the Company's CEO, Binks Graval, is an officer and
significant owner of Third Rail, Inc. Pursuant to the merger agreement, the
Company loaned Third Rail, Inc. $250,000 secured by all of the assets of Third
Rail, Inc. The source of the funds was from various loans made to the Company as
well as the proceeds of a private placement conducted by the Company. The
Company's Board of Directors approved the loan, including a majority of
disinterested directors, but such loan was not submitted to the shareholders for
their approval. Third Rail, Inc. has since been foreclosed upon by its primary
creditor. The Company has written off the loan as a loss on its financial
statements as it is highly unlikely the Company will ever be repaid. The merger
agreement has since been mutually terminated by both the Company and Third Rail,
Inc. for financial reasons.
In 1995, the Company entered into a merger agreement with
Laurence/Wayne, Inc. Richard Perkins. a director of the Company, is a founder
and beneficial owner of 36.2% of Laurence/Wayne, Inc. The Company expects this
merger to be completed in 1997.
16
<PAGE> 17
The Company has issued 1,213,860 shares of the Company's Common Stock
through the exercise of warrants to Woodbridge and Associates, Inc. in exchange
for corporate development services under a corporate development agreement. The
agreement provided that Woodbridge and Associates, Inc. would assist in the
search of accountants, legal counsel and other professionals, assist in finding
and retaining outside directors, assist in designing management compensation and
benefits, assist in fulfilling the Company's strategic objectives, assist in the
capitalization of the Company and develop, implement and maintain an ongoing
market support system with the general objective of expanding stockbroker
awareness of the Company's Common Stock. The current agreement with Woodbridge
and Associates, Inc. expired on July 1, 1997. The Company has no intention of
renewing the agreement with Woodbridge and Associates, Inc.
The Company has issued 24,452 shares of the Company's Common Stock to
David Fleming in exchange for design and logo services.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Description of Exhibits.
------------------------
2.1 Merger Agreement and Plan of Reorganization dated October 11,
1995 by and among Pacific International Enterprises, Inc.,
Crush Acquisition Corp. and Crush Innovative Sports Systems,
Inc., together with all exhibits incorporated by reference
from Registrant's Form 8-K dated October 11, 1995, Exhibit A *
3.1 Articles of Incorporation as filed with the Secretary of State
of Nevada on December 30, 1988 *
3.2 Bylaws of the Registrant *
4.1 Specimen Stock Certificate *
4.2 Form of Promissory Note *
4.3 Form of Warrant Agreement *
4.4 Form of Registration Rights Agreement *
4.5 Woodbridge Corporate Development Agreement as amended
10.0 Boot Component Agreement between Crush Innovative Sports
Systems, Inc. (formerly Crush Snowboard Products, Inc.) and
Monark Sporting Goods, Inc. incorporated by reference from
Registrant's Form 8-K filed on October 11, 1995, Exhibit B *
10.1 Binding Component Agreement between Crush Innovative Sports
Systems, Inc. and Monark Sporting Goods, Inc. incorporated by
reference from Registrant's Form 8-K filed on October 11,
1995, Exhibit C *
10.2 Purchase Order between CRUSH and Die Cast of America, Inc. *
10.3 Stock Option Agreements with William Kearns *
10.4 Stock Option Agreements with Eric Anderson *
17
<PAGE> 18
10.5 Stock Option Agreements with Mike Voss *
10.6 Employment Agreements with Bill Kearns *
10.7 Employment Agreements with Edward Hanson *
10.8 Employment Agreements with Richard Perkins *
11.1 Statement re: computation of per share earnings *
21.1 List of Subsidiaries of the Parent Company
23.2 Consent of Independent Auditors
24.1 Power of Attorney
27.1 Financial Data Schedule
- -----------------
* Incorporated by reference from the Company's Form 10-KSB for the fiscal year
ended December 31, 1995.
(b) Reports on Form 8-K.
--------------------
No reports on Form 8-K were filed by the Registrant during the
last quarter of the period covered by this report and through December 31, 1996.
18
<PAGE> 19
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PACIFIC INTERNATIONAL ENTERPRISES, INC.
Date: July 2, 1997 By: /s/ BINKS GRAVAL
---------------------
Binks Graval
Chairman of the Board
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
Signatures Title Date Signed
---------- ----- -----------
<S> <C> <C>
/s/ BINKS GRAVAL Chairman of the Board, July 2, 1997
- ------------------------------ Chief Executive Officer
Binks Graval and President
/s/ RICHARD W. PERKINS Vice-Chairman of the July 2, 1997
- ----------------------------- Board and Vice-President
Richard W. Perkins
/s/ ANTHONY BROUGHTON Chief Financial Officer July 2, 1997
- ----------------------------- (Principal Accounting
Anthony Broughton Officer), Chief Operations
Officer and Director
</TABLE>
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED
- ------- ----------- ------------
<S> <C> <C>
3.1 Articles of Incorporation as filed with the Secretary
of State of Nevada on December 30, 1988 *
3.2 Bylaws of the Registrant *
4.1 Specimen Stock Certificate *
4.2 Form of Promissory Note *
4.3 Form of Warrant Agreement *
4.4 Form of Registration Rights Agreement *
4.5 Woodbridge Corporate Development Agreement as amended
10.2 Purchase Order between CRUSH and Die Cast of America, Inc. *
10.3 Stock Option Agreements with William Kearns *
10.4 Stock Option Agreements with Eric Anderson *
10.5 Stock Option Agreements with Mike Voss *
10.6 Employment Agreements with Bill Kearns *
10.7 Employment Agreements with Edward Hanson *
10.8 Employment Agreements with Richard Perkins *
11.1 Statement re: computation of per share earnings *
21.1 List of Subsidiaries of the Parent Company
23.2 Consent of Independent Auditors
24.1 Power of Attorney
27.1 Financial Data Schedule
</TABLE>
- ---------------
* Incorporated by reference from the Company's Form 10-KSB for the fiscal year
ended December 31, 1995.
20
<PAGE> 21
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PACIFIC INTERNATIONAL ENTERPRISES, INC.
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of December 31, 1996 and December 31, 1995
Consolidated Statements of Operations for the Year ended December 31, 1996 and
from inception (February 28, 1995) through December 31, 1995
Consolidated Statements of Shareholders' Deficit from inception (February 28,
1995) to December 31, 1996
Consolidated Statements of Cash Flows for the Year ended December 31, 1996 and
from inception (February 28, 1995) through December 31, 1995
Notes to Consolidated Financial Statements
21
<PAGE> 22
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Financial Statements
December 31, 1996
<PAGE> 23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Pacific International Enterprises, Inc.
We have audited the accompanying consolidated balance sheets of Pacific
International Enterprises, Inc. and subsidiaries (a development stage company)
(the "Company") as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' deficit and cash flows for the year
ended December 31, 1996 and the period from inception (February 28, 1995)
to December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accompanying principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Pacific
International Enterprises, Inc. and subsidiaries as of December 31, 1996 and
1995 and the results of their consolidated operations and cash flows for the
year ended December 31, 1996 and for the period from inception to December 31,
1995, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the consolidated
financial statements, the Company has incurred significant net losses since its
inception, its liabilities exceed its assets, and is experiencing cash flow
shortages; these factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to those matters are
described in Note 7. The consolidated financial statements do not include
adjustments that might result from the outcome of this uncertainty.
CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California
July 1, 1997
<PAGE> 24
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 16,101 $ 659,010
Restricted cash 8,500 75,000
Inventory 26,238 23,385
Other 70,000 21,466
----------- -----------
Total current assets 120,839 778,861
EQUIPMENT 21,291 145,939
PATENTS AND TRADEMARKS 41,477 37,242
----------- -----------
$ 183,607 $ 962,042
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes Payable $ 795,865 $ 1,423,750
Accounts payable 225,865 76,938
Accrued salaries 101,221 --
Accrued interest 33,230 --
Other accrued expenses 44,380 78,543
----------- -----------
Total current liabilities 1,200,561 1,579,231
----------- -----------
SHAREHOLDERS' DEFICIT:
Preferred stock - 3,000,000 authorized, $.001 par value,
zero shares issued and outstanding in 1996 and 1995 -- --
Common stock - 50,000,000 shares authorized, $.001 par
value; 8,710,190 and 6,128,927 shares issued and
outstanding in 1996 and 1995, respectively 8,710 6,129
Additional paid-in capital 3,882,118 938,549
Unamortized common stock and equivalents cost (345,333) (272,035)
Deficit accumulated during the development stage (4,562,449) (1,289,832)
----------- -----------
Net shareholders' deficit (1,016,954) (617,189)
----------- -----------
$ 183,607 $ 962,042
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 25
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Cumulative
Inception from inception
(February 28, (February 28,
Year ended 1995) to 1995) to
December 31, December 31, December 31,
1996 1995 1996
------------ ------------- --------------
<S> <C> <C> <C>
COSTS AND EXPENSES:
Research and development, exclusive
of research and development costs acquired
of $314,462 in 1995.................................... $ (352,517) $ (124,195) $ (476,712)
General and administrative............................... (1,562,880) (702,902) (2,265,782)
Interest................................................. (72,598) (26,789) (99,387)
----------- ---------- -----------
(1,987,995) (853,886) (2,841,881)
----------- ---------- -----------
Non-cash expenses related to issuance of common stock and
equivalents and convertible notes:
Consulting............................................... (911,476) (44,297) (955,773)
Compensation............................................. (113,600) (6,000) (119,600)
Interest................................................. (259,546) (71,187) (330,733)
----------- ---------- -----------
(1,284,622) (121,484) (1,406,106)
----------- ---------- -----------
NET LOSS................................................... $(3,272,617) $ (975,370) $(4,247,987)
=========== ========== ===========
NET LOSS PER COMMON SHARE.................................. $ (0.43) $ (0.18)
=========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES.......................... 7,608,824 5,436,773
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 26
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Consolidated Statement of Shareholders' Deficit
From inception (February 28, 1995) to December 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK DEFICIT
----------------------------------- UNAMORTIZED ACCUMULATED
AMOUNT ADDITIONAL COMMON STOCK DURING THE NET
NUMBER OF ------------------------ PAID IN AND EQUIVALENTS DEVELOPMENT SHAREHOLDERS'
SHARES PER SHARE TOTAL CAPITAL COST STAGE DEFICIT
--------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of capital stock to
Laurence/Wayne, Inc. for
technology rights and assets
on February 28, 1995 4,175,548 $ 0.087 $ 4,176 $ 357,305 -- $ (314,462) $ 47,019
Issuance of common stock
for cash 311,000 0.333 311 105,022 -- -- 105,333
Issuance of common stock
for services 643,452 0.100 643 63,702 -- -- 64,345
Stock issued for acquisition
of Pacific International
Enterprises, Inc. 798,927 -- 799 (799) -- -- --
Exercise of options 50,000 0.250 50 12,450 -- -- 12,500
Issuance of warrants -- 0.250 -- 393,519 (387,519) -- 6,000
Exercise of warrants 150,000 0.050 150 7,350 -- -- 7,500
Amortization of warrant cost -- -- -- -- 115,484 -- 115,484
Net loss for 1995 -- -- -- -- -- (975,370) (975,370)
--------- ----------- ----------- ----------- --------- ----------- -----------
BALANCE, DECEMBER 31, 1995 6,128,927 -- 6,129 938,549 (272,035) (1,289,832) (617,189)
</TABLE>
(continued)
The accompanying notes are an integral part of these financial statements.
<PAGE> 27
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Consolidated Statement of Shareholders' Deficit (Continued)
From inception (February 28, 1995) to December 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK DEFICIT
----------------------------------- UNAMORTIZED ACCUMULATED
AMOUNT ADDITIONAL COMMON STOCK DURING THE NET
NUMBER OF ------------------------ PAID IN AND EQUIVALENTS DEVELOPMENT SHAREHOLDERS'
SHARES PER SHARE TOTAL CAPITAL COST STAGE DEFICIT
--------- ----------- ----------- ---------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 6,128,927 -- 6,129 938,549 (272,035) (1,289,832) (617,189)
Issuance of common stock for cash,
net of offering expenses of
$136,249 1,107,500 0.50 - 2.00 1,108 1,290,143 -- -- 1,291,251
Issuance of common stock for
services 13,125 0.720 13 26,337 -- -- 26,350
Conversion of notes payable to
common stock 183,482 1.270 183 233,174 -- -- 233,357
Issuance of options -- 3.500 -- 113,600 (113,600) -- --
Issuance of warrants -- 0.50 - 3.50 -- 1,124,320 (1,104,071) -- 20,249
Issuance of common stock for
loan collateral 400,000 0.300 400 119,600 (120,000) -- --
Exercise of options 24,000 0.660 24 15,816 -- -- 15,840
Exercise of warrants 853,156 0.025 853 20,579 -- -- 21,432
Amortization of option and
warrant cost -- -- -- -- 1,264,373 -- 1,264,373
Net loss for 1996 -- -- -- -- -- (3,272,617) (3,272,617)
--------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1996 8,710,190 $ 8,710 $ 3,882,118 $ (345,333) $(4,562,449) $(1,016,954)
========= =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 28
PACIFIC INTERNATIONAL ENTERPRISES INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
CUMULATIVE
INCEPTION FROM INCEPTION
(FEBRUARY 28, (FEBRUARY 28,
YEAR ENDED 1995) TO 1995) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996
------------ ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,272,617) $ (975,370) $(4,247,987)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 150,349 16,090 166,439
Issuance of common stock for services 26,350 64,345 90,695
Non-cash interest expense 259,546 71,187 330,733
Non-cash consulting expense 911,476 44,297 955,773
Non-cash compensation expense 113,600 6,000 119,600
(Increase) decrease in assets:
Restricted cash 66,500 (75,000) (8,500)
Inventory (2,853) (23,385) (26,238)
Prepaid expenses (48,534) (21,466) (70,000)
Patents and trademarks (7,365) (37,242) (44,607)
Increase (decrease) in liabilities:
Accounts payable 148,927 76,938 225,865
Accrued expenses 100,288 78,543 178,831
----------- ---------- -----------
Net cash used by operating activities (1,554,333) (775,063) (2,329,396)
----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (22,571) (115,010) (137,581)
----------- ---------- -----------
Net cash used by investing activities (22,571) (115,010) (137,581)
----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (469,528) - (469,528)
Issuance of notes payable 75,000 1,423,750 1,498,750
Exercise of warrants and options 37,272 20,000 57,272
Issuance of common stock 1,291,251 105,333 1,396,584
----------- ---------- -----------
Net cash provided by
financing activities 933,995 1,549,083 2,483,078
----------- ---------- -----------
Net increase in cash (642,909) 659,010 16,101
CASH, BEGINNING OF PERIOD 659,010 0 0
----------- ---------- -----------
CASH, END OF PERIOD $ 16,101 $ 659,010 $ 16,101
=========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES AND CASH FLOW INFORMATION:
Conversion of notes payable
to common stock $ 233,357 $ - $ 233,357
----------- ---------- -----------
Assets acquired through issuance
of capital stock $ - $ 47,019 $ 47,019
----------- ---------- -----------
Cash paid during the year for interest $ 79,203 $ 5,483 $ 84,686
----------- ---------- -----------
Cash paid during the year for
income taxes $ 1,793 $ - $ 1,793
----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 29
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
December 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Crush Innovative Sports Systems, Inc. ("Crush" or the "Company"), a
California corporation, was formed on February 28, 1995 for the purpose
of developing, marketing and selling innovative sports products
incorporating proprietary technology. Crush was formed by
Laurence/Wayne, Inc. ("L/W"), a research and development company
organized in May 1989 to create innovative fastening systems intended
for use in the systems of numerous sporting goods, including snowboard
bindings, backpacks and in-line skates. In 1994, L/W developed a unique
snowboard binding system, the "T-Bone". On February 28, 1995 L/W
contributed to Crush all rights to the T-Bone binding system and for the
application of its fastening system to backpacks, motorcycle saddlebags,
in-line skates and other sporting goods, certain assets and research and
development. The value of the consideration was $361,481, equal to the
historical costs incurred by L/W, allocated $47,019 to equipment and
other assets and $314,462 to research and development. In reaching this
determination, the company considered, among other factors, the stage of
development, the time and resources needed to complete the products,
expected income and associated risks. Crush is classified as a
development stage company because its principal activities involved
obtaining capital, business development, obtaining rights to certain
technology and conducting research and development activities.
Pacific International Enterprises, Inc., a Nevada corporation ("PIE"),
was formed on December 30, 1988. From inception until October 1995, PIE
was inactive and operated no business and held no significant assets.
Effective October 12, 1995, PIE exchanged 798,927 shares of its common
stock for all of the outstanding common stock of Crush. This transaction
was a reverse acquisition whereby PIE was the legal survivor; however,
the accounting reflects Crush as the survivor since Crush, as the
operating entity, was in effect the real acquirer. The transaction was
accounted for as a purchase of PIE by the Company and, accordingly, the
accompanying financial statements include the amounts and operations of
the Company from its inception and of PIE from October 12, 1995.
The following unaudited pro forma summary combines the results of
operations of the Company and PIE, as if the acquisition had occurred at
the inception of Crush (February 28, 1995). This pro forma summary does
not necessarily reflect the results of operations as they would have
been if the Company and PIE had constituted a single entity during such
period.
<TABLE>
<CAPTION>
Period from inception
(February 28, 1995) to
December 31, 1995
(Unaudited)
----------------------
<S> <C>
Net sales $ -
Net loss (975,370)
Net loss per common share $ (0.18)
</TABLE>
(continued)
<PAGE> 30
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries, Crush Innovative Sports Systems,
Inc. and PIE Acquisition Corp. PIE Acquisition Corp. is currently
inactive. All significant intercompany transactions and balances have
been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash and equivalents
The Company considers all liquid investments with a maturity of three
months or less from the date of purchase that are readily convertible
into cash to be cash equivalents. Balances in bank accounts may, from
time to time, exceed federally insured limits.
Inventory
Inventory is reported at the lower of cost (determined on the first-in,
first-out method) or market. Allowances for obsolete inventory are based
on management's estimate of the amount considered obsolete based on
specific reviews of inventory items. In estimating the allowance,
management relies on its knowledge of the industry (including
technological and design changes) as well as its current inventory
levels. The amounts the Company will ultimately realize could differ
materially in the near term from amounts estimated by management.
Patents and trademarks
Patents and trademarks are carried at cost less accumulated amortization
which is calculated on a straight-line basis over their estimated useful
lives of seventeen and ten years, respectively.
Income taxes
The Company reports certain expenses differently for financial and tax
reporting purposes and, accordingly, provides for the related deferred
taxes. Income taxes are accounted for under the liability method in
accordance with SFAS 109.
Fair Value of Financial Instruments
The fair value of financial instruments, consisting principally of notes
payable, are based on interest rates available to the Company and
comparison to quoted prices. The fair value of these financial
instruments approximates carrying value.
(continued)
<PAGE> 31
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation
The Company accounts for compensation costs related to employee stock
options and other forms of employee stock-based compensation plans in
accordance with the requirements of Accounting Principles Board Opinion
25 ("APB 25"). APB 25 requires compensation costs for stock-based
compensation plans to be recognized based on the difference, if any,
between the fair market value of the stock on the date of grant and the
option exercise price. In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards 123,
Accounting for Stock-Based Compensation ("SFAS 123"). SFAS 123
established a fair value-based method of accounting for compensation
costs related to stock options and other forms of stock-based
compensation plans. However, SFAS 123 allows an entity to continue to
measure compensation costs using the principles of APB 25 if certain pro
forma disclosures are made. SFAS 123 is effective for fiscal years
beginning after December 15, 1995. The Company adopted the provisions
for pro forma disclosure requirements of SFAS 123 in fiscal 1996.
Options granted to non-employees are recognized at their estimated fair
value at the date of grant.
Research and development costs
Costs and expenses that can be clearly identified as research and
development are charged to expense as incurred.
Loss per common share
The computation of loss per share is based on the weighted average
number of common shares outstanding during the period. The weighted
average number of common shares outstanding for 1995 includes the
798,927 shares of common stock issued to PIE for the entire period. The
deemed exercise of the outstanding stock options and warrants would be
antidilutive.
2. EQUIPMENT
Equipment at December 31, 1996 and 1995 consists of the following:
<TABLE>
<Caption)
Years of
1996 1995 Useful Life
-------- -------- -----------
<S> <C> <C> <C>
Tooling $ 8,941 $142,018 1
Computers 13,644 11,978 3
Furniture and equipment 9,900 8,033 5
-------- --------
32,485 162,029
Accumulated depreciation (11,194) (16,090)
-------- --------
$ 21,291 $145,939
======== ========
</TABLE>
Depreciation expense for 1996 and 1995 totaled $147,219 and $16,090,
respectively, and is provided over the estimated useful lives of the
related assets using the straight-line method.
(continued)
<PAGE> 32
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
3. CAPITAL AND FINANCING TRANSACTIONS
Preferred stock
In October 1996, the Board of Directors of the Company authorized three
million shares of preferred stock at $.001 par value of which none were
issued or outstanding at December 31, 1996.
Common stock splits
On March 30, 1995, the Company effected a ten for one stock split and,
on October 10, 1995, a one for five reverse stock split. All share and
per share data included in these financial statements have been restated
to reflect the stock splits.
Warrants
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 due the earlier of (i) the closing of a
private placement or public offering of equity securities or (ii) the
first anniversary of the issuance of the notes. The Company may prepay
the notes at any time without penalty. The notes are secured by the
assets of the Company. At any time prior to maturity, the notes are
also convertible into shares of the Company's common stock at a price
equal to 70% of the closing bid price of the Company's common stock on
the date of conversion but not less than $0.95 per share. In connection
with this private placement memorandum, the Company issued 1,423,750
Class A Warrants (the "A Warrants") and 1,423,750 Class B Warrants (the
"B Warrants") to purchase shares of common stock at exercise prices of
$.05 and $.95, respectively. On the same terms, the Company also issued
to registered broker-dealers an aggregate of 141,750 A Warrants and
141,750 B Warrants. The Warrants are exercisable for a period of three
years. In the event the Company does not repay the notes payable
described above in full within six months of the date of investment,
then the exercise price of the B Warrants will automatically decrease at
a rate of $.04 per month, commencing in the seventh month after the date
of the note, but not below $.50. The warrants are callable by the
Company upon 60 days written notice to the holders in the event of
either (i) the ask price of the Company's common stock exceeds $2.00 for
any period of 60 consecutive days or (ii) the notes are paid in full or
converted into common stock. If not exercised within such 60-day
period, the warrants automatically expire. The Company assigned a value
of $313,100 to the detachable warrants described above. This amount is
included in unamortized warrant cost and is amortized as discount on the
notes over twelve months. At December 31, 1996 and 1995, 478,750 and
150,000 A Warrants had been exercised, respectively. During 1996, notes
payable of $233,357 were converted into 183,482 shares of common stock,
and $469,528 were paid off. On September 30, 1996, the remaining
noteholders agreed to extend the maturity date of the notes to March 31,
1997, and the Company issued them warrants to purchase 735,724 shares of
common stock at an exercise price of $1.00 expiring on September 30,
1999. At December 31, 1996, none of these warrants had been exercised.
The remaining notes totaling $720,865 are in default.
(continued)
<PAGE> 33
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
3. CAPITAL AND FINANCING TRANSACTIONS (CONTINUED)
Warrants (continued)
In September 1995, the Company issued warrants to purchase
310,078 shares of common stock at an exercise price of $.01 per
share to its financial advisors expiring in September 1998. The
fair value allocated to the warrants of $74,419 represents
unamortized warrant cost to be amortized over the life of the
agreement, which expires in June 1996. All of these warrants
were exercised in 1996. In February 1996, the Company issued
warrants to purchase 189,328 shares of common stock at an
exercise price of $.01 per share under the same agreement
described above. The warrants expire in February 1999. The fair
value allocated to these warrants of $660,755 represents
unamortized warrant cost to be amortized through June 1996. All
of the warrants were exercised in 1996. A new agreement was
negotiated with the Company's financial advisors that reduced
the fees payable in cash and required the issuance of additional
warrants to purchase 500,000 shares at an exercise price of
$1.00 expiring in June 1999. The fair value allocated to these
warrants of $344,000 represents unamortized warrant cost to be
amortized over the life of the agreement, which expires in June
1997. At December 31, 1996, none of these warrants had been
exercised.
In March 1996, the Company sold in a private placement 582,500
shares of common stock at $2.00 per share with net proceeds of
$1,028,751, after offering costs of $136,249. Warrants were also
issued with the offering to purchase 582,500 shares of common
stock at an exercise price of $3.50 expiring on March 28, 2001.
None of the warrants had been exercised at December 31, 1996.
In October 1996, the Company sold in a private placement 525,000
shares of common stock at a price of $.50 per share.
The Company issued warrants to purchase 45,000 shares of common
stock at an exercise price of $.55 to its legal advisors
expiring on April 1, 2000 in connection with the October 1996
equity offering. The fair value allocated to the warrants of
$20,250 was expensed as offering costs. None of the warrants had
been exercised at December 31, 1996.
In December 1996, the Company offered in a private placement
$120,000 promissory notes, of which $75,000 were issued in 1996
and the remainder in early 1997. The notes bear interest at 10%
and principal and accrued interest are due ninety days from the
date of issuance. Warrants to purchase 15,000 shares of common
stock at an exercise price of $.01 and warrants to purchase
22,500 shares of common stock at an exercise price of $1.00,
both expiring in December 2001, were issued with the notes
issued in 1996. The fair value allocated to the warrants of
$7,350 represents unamortized warrant cost to be amortized over
ninety days. None of these warrants were exercised as of
December 31, 1996. The Company issued 400,000 shares of common
stock to the underwriter as agent for the noteholders as
collateral to secure the notes against default. The $120,000
value assigned to the shares was recorded as unamortized capital
stock to be amortized over ninety days. The maturity date of the
notes was subsequently extended to June 30, 1997.
(continued)
<PAGE> 34
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
3. CAPITAL AND FINANCING TRANSACTIONS (continued)
Warrants (continued)
A summary of warrant activity follows:
<TABLE>
<CAPTION>
Number of Exercise Price
Warrants Per Share Expiration
--------- -------------- ----------
<S> <C> <C> <C>
Outstanding at February 28, 1995 - -
Granted 3,556,078 $ 0.01 - 0.95 1998 - 2000
Exercised (150,000) 0.05
--------- ------------- -----------
Outstanding at December 31, 1995 3,406,078 0.01 - 0.95 1998 - 2000
Granted 2,090,052 0.01 - 3.50 1999 - 2001
Exercised (853,156) 0.01 - 0.05
--------- ------------- -----------
Outstanding at December 31, 1996 4,642,974 0.01 - 3.50 1998 - 2001
========= ============= ===========
Exercisable at December 31, 1996 4,642,974
=========
</TABLE>
Subsequent to year end, 250,000 warrants were exercised in a debt swap
for shares of common stock, and an additional 250,000 warrants were
canceled.
Stock options
The Company has granted options to purchase its common stock to various
individuals. The option prices at the time of grant were at or above the
fair value of the Company's common stock. A summary of stock option
activity follows:
<TABLE>
<CAPTION>
Number of Price
Options Per Share Expiration
--------- -------------- ----------
<S> <C> <C> <C>
Outstanding at February 28, 1995 - -
Granted 1,395,000 $ .25 - 5.50 2000
Exercised (50,000) 0.25
--------- ------------ -----------
Outstanding at December 31, 1996 1,345,000 .33 - 5.50 2000
Granted 1,540,000 .38 - 1.00 1999 - 2001
Canceled (500,000) 3.50 - 5.50
Exercised (24,000) 0.66
--------- ------------ -----------
Outstanding at December 31, 1996 2,361,000 .33 - 1.00 1999 - 2001
========= ============ ===========
Exercisable at December 31, 1996 1,148,500
=========
</TABLE>
Subsequent to year end, options granted in 1996 of 40,000 were canceled.
(continued)
<PAGE> 35
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
3. CAPITAL AND FINANCING TRANSACTIONS (CONTINUED)
Stock options (continued)
Statement of Financial Accounting Standards 123, "Accounting for
Stock-Based compensation", encourages but does not require companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees", and related interpretations. Accordingly, compensation cost
for stock options and stock warrants is measured as the excess, if any,
of the quoted market price of the Company's stock at the date of grant
over the amount an employee must pay to acquire the stock.
Had compensation cost for the plan been determined based on the fair
value of the options and warrants at the grant dates consistent with the
method of SFAS 123, the Company's net loss and loss per share would have
been:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Net loss
As reported $(3,272,617) $ (975,370)
Pro forma (4,083,362) (2,889,033)
Primary earnings per share
As reported $ (0.43) $ (0.18)
Pro forma (0.54) (0.53)
</TABLE>
Potential deferred tax benefits of approximately $275,653 in 1996 have
not been reflected in the pro forma amounts due to the uncertainty of
realizing any benefit. The fair value of these options was estimated at
the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions for 1996:
<TABLE>
<S> <C>
Expected life (years) 5
Risk-free interest rate 6.00%
Volatility 200%
</TABLE>
The weighted fair value of warrants granted during the year ended
December 31, 1996 and 1995 for which the exercise price approximated the
market price on the grant date was $.79 and $2.13, respectively.
(continued)
<PAGE> 36
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
4. INCOME TAXES
Deferred tax assets and liabilities are recognized for temporary
differences between the financial reporting basis and the tax basis of
the Company's assets and liabilities. Deferred tax assets are reduced by
a valuation allowance when deemed appropriate. The measurement of
deferred tax assets and liabilities is based on provisions of the
enacted tax law; the effects of future changes in tax laws or rates are
note anticipated. Measurement is computed using applicable current tax
rates (34% for 1996 and 1995).
The Company has a loss carryforward of $3,172,000 for Federal and
$1,580,000 for California as of December 31, 1996 that may be offset
against future taxable income. The Federal carryforwards will expire in
various years through 2010, and the California carryforwards expire in
2005.
The Company's deferred tax assets, which have been offset entirely by
valuation allowances, are comprised of the following at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
FEDERAL CALIFORNIA
----------- ----------
<S> <C> <C>
1996
----
Loss carryforwards $ 3,172,000 $1,580,000
Applicable tax rate 34% 9.3%
----------- ----------
1,078,480 146,940
Valuation allowance (1,078,480) (146,940)
----------- ----------
$ - $ -
=========== ==========
FEDERAL CALIFORNIA
----------- ----------
1995
----
Loss carryforwards $ 1,062,000 $ 526,000
Applicable tax rate 34% 9.3%
----------- ----------
361,080 48,918
Valuation allowance (361,080) (48,918)
----------- ----------
$ - $ -
=========== ==========
</TABLE>
(continued)
<PAGE> 37
PACIFIC INTERNATIONAL ENTERPRISES, INC. AND
SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
5. COMMITMENTS AND CONTINGENCIES
As of December 31, 1996 the Company leases its facilities under a lease
agreement expiring on August 1997 with minimum remaining rental payments
of $9,576 in 1997.
Rent expense totaled $14,536 and $2,194 for the years ended December 31,
1996 and 1995.
The proposed merger with Third Rail, Inc. was canceled by mutual
agreement in May 1997. Neither Third Rail, Inc. nor the Company were
financially able to complete the agreement as originally envisaged. No
orders, customers or suppliers will be affected or lost as a result of
such cancellation.
The Company entered into a letter of intent in 1995 to merge
Laurence/Wayne, Inc. ("L/W") into the Company such that L/W will become
an operating subsidiary of the Company. The merger has been approved by
the shareholders of L/W but is subject to approval by shareholders of
the Company. In the merger, the shares of Company Common Stock currently
held by L/W will be canceled and new certificates will be issued
directly to the L/W shareholders. Thus, no dilution to existing
shareholders of the Company will occur. Since approval of the merger has
not yet been obtained, there can be no guarantee that the merger will be
consummated or consummated on the terms of the letter of intent.
6. LITIGATION
The Company has been named as a defendant in the case of Chardas v
Graval currently pending in Los Angeles Superior Court. The allegations
against the Company arise from actions by Binks A. Graval, the Company's
CEO, in his capacity as an officer of Girls Rule!, Inc. The Company
intends to vigorously defend itself in this action and believes that
this matter will not have any material adverse effects upon the Company.
7. GOING CONCERN
The Company is experiencing cash flow shortages and will need to raise
additional capital in order to become operational. To date in 1997, the
Company has entered into loans in the amount of $250,000 and raised
equity in the amount of $200,000. These amounts have sustained
operations to date and the Company currently has commitments for an
additional $100,000 in exchange for equity. The Company is in the
process of attempting to acquire trade financing of approximately
$600,000. There can be no assurance that the Company will be able to
acquire trade financing or will be able to raise funds through sales of
additional equity. Without such additional funds, there is substantial
doubt about the ability of the Company to continue as a going concern.
<PAGE> 1
EXHIBIT 4.5
WOODBRIDGE CORPORATE DEVELOPMENT AGREEMENT, AS AMENDED
WOODBRIDGE & ASSOCIATES, INC.
CORPORATE DEVELOPMENT AGREEMENT
This Agreement (the "Agreement") is entered into as of this 24 day of
June, 1996, by and between Woodbridge & Associates, Inc., a California
corporation ("WA"), with its principal place of business at 5000 Birch Street,
Suite 6400, Newport Beach, CA 92660, and Pacific International Enterprises, a
Nevada corporation and Crush Innovative Sports Systems, Inc., a California
corporation with its principal place of business at 4431 Corporate Center Dr.,
Suite 131 Los Alamitos, CA 90270 (collectively, with its affiliates, the
"Company").
WHEREAS, Company is a public company which is required to file periodic
and other reports under section 13 or 15(d) of the Securities Exchange Act of
1934 and envisions that it will need the services of corporate development
activities of WA; and
WHEREAS, Company desires to engage WA to perform corporate development
services on behalf of Company; and
WHEREAS, WA has the ability and knowledge necessary for the performance of
such services; and
WHEREAS, WA and Company desire, pursuant to the terms of this Agreement;
to set forth the terms and conditions pursuant to which WA will perform
corporate development services on behalf of Company; and
WHEREAS, as used herein, "Applicable Date" means July 1, 1996 if Agreement
does not terminate this Agreement as provided in Section 1.2.7.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and adequate consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
SCOPE OF SERVICES
1.1 WA agrees to perform for the Company the corporate development
services describe as follows:
1.1.1. Outside Professionals. WA will advise and assist in the
search and selection of accountants, legal counsel, Investment
Bankers and other outside professional consultants. Company
agrees to meet and retain such professionals, provided that
they are agreed upon by the company.
1.1.2. Board of Directors. WA will assist with finding and negotiating
to retain outside directors which the company agrees are
beneficial to its strategy.
1.1.3 Management Compensation and Benefits. WA will assist in design
and determination of a management, compensation and benefits
program. WA recognizes that having management own a significant
ownership position in the Company is a valuable tool for
focusing their attention on increasing shareholder value.
Accordingly, WA recommends that the Board of Directors put into
effect within the next 12 months a stock option plan to be used
for acquiring additional management. Also implement an
incentive plan for the current management, if one is not
already in effect.
-1-
<PAGE> 2
1.1.4 Strategic Repositioning. WA will assist in repositioning of the
company as necessary, to prepare for fulfillment of the
company's strategic objectives. WA will coordinate all
strategic plan preparation including, but not limited to,
organization of your presentation, business plan, and funding
documents. WA will organize all outside professionals to carry
out company's strategic objectives as quickly and cost
effective as possible.
1.1.5 Capitalization. WA shall make all reasonable efforts to help
Company reach the business objectives to be mutually agreed
upon at a later date.
1.1.6 The Support System. WA will develop, implement and maintain an
ongoing stock market support system with the general objective
of expanding stockbroker awareness of the Company's activities,
and hence to generate commensurate interest in the Company's
stock.
1.2 Company acknowledges as follows:
1.2.1 No Guarantees. WA makes no guarantees, representations or
warranties as to the particular results from WA corporate
development services, the response and timeliness of action by
the investment and brokerage community, including but not
limited to guarantees, representations or warranties as to
future stock price of Company.
1.2.2 Administrative Functions only. WA is not a broker dealer and
will not engage in any services requiring registration as such.
WA's involvement in the capital related transactions is limited
to administrative and facilitory functions, but no broker
dealer functions.
1.2.3 Review Responsibility. Company understands that the accuracy
and completeness of any document prepared by WA or its advisors
is dependent upon Company's alertness to assure that such
document contains all material facts which might be important
and that all such documents must not contain any
misrepresentation of a material fact nor omit information
necessary to make the statements therein not misleading. To
that end, Company agrees to review and adopt, and confirm to WA
in writing that you have reviewed and adopted, all materials
for their accuracy, and completeness prior to any use thereof.
Company also acknowledges that this responsibility continues in
the event that the materials become deficient in this regard.
1.2.4 Representations and Warranties. The Company represents and
warrants to WA that all information provided prior to the
execution of this Agreement, in writing or otherwise, is true
and complete. In the event that such information is determined
to be inaccurate, incomplete or otherwise misleading, this
Agreement may be immediately terminated, at the sole discretion
of WA.
1.2.5 Issuance of Additional Securities/Indebtedness. During the one
(1) year period commencing on the Applicable Date, Company will
not issue any additional securities (except securities (I)
issued in connection with the currently proposed private
securities offerings or "bridge financing" and/or (ii) issuable
upon the exercise or conversion of existing warrants, options,
other convertible securities, or employee stock option plans in
existence on the Applicable Date) or incur and additional
indebtedness (except in the ordinary course of business of to
an aggregate of $50,000 during said one (1) year period)
without the prior written consent of WA.
1.2.6 Officer Compensation. During the one (1) year period commencing
on the Applicable Date, no officer or director of the Company
will receive more that $12,000 per month in cash compensation
without the prior written consent of WA. It is contemplated
that the officers of the Company will
-2-
<PAGE> 3
participate in the stock compensation plan, the terms of which
will be mutually agreed upon by the Parties.
1.2.7 Termination by WA. The Company and/or WA may for any reason
terminate this Agreement before July 1, 1996 with no
reimbursement due either party.
ARTICLE II
COMPENSATION FOR SERVICES
2.1 In consideration for entering into this Agreement and
performing the services described immediately above, Company
agrees in lieu of hourly rates, to compensate WA as follows:
2.1.1 Cash Compensation. Commencing on the Applicable Date and
continuing on the first day of each calendar month during the
Applicable Term (as defined in section 3.1), Company agrees to
pay to WA a monthly fee of $7,500. The monthly fee will be
payable in advance on the first of each month commencing on the
Applicable Date.
2.1.2 Stock Compensation. Effective as of the Applicable Date,
Company agrees to issue to WA warrants to purchase 500,000
shares of common stock of the Company. Such Warrants shall be
exercisable for a period of three years from the Applicable
Date at an initial price of $1.00 per share. The Company shall
execute and deliver a customary Warrant Agreement evidencing
the Warrants. WA acknowledges that the Warrants and the shares
issuable upon exercise of the Warrants (the "Shares") will
initially be "restricted securities" (as such term is define in
Rule 144 promulgated under the Securities Act of 1933, as
amended ("Rule 144"), that the Warrants and Shares will include
a restrictive legend, and that the Warrants and Shares cannot
be sold unless registered with the United States Securities and
Exchange Commission ("SEC") and qualified by appropriate state
securities regulators, or unless WA complies with an exemption
from such registration and qualification (including without
limitation, compliance with Rule 144).
The following formulas apply to the exercise of WA's options.
After Richard Perkins and/or Binks Graval sell 100,000 shares
combined of due stock, WA can exercise 200,000 options. After
Perkins and Graval sell 200,000 shares, WA can exercise an
additional 200,000 options. After Perkins and Graval sell
300,000 shares, WA can exercise 500,000 options.
Company shall issue the stock certificate for the Shares within
five (5) days after the exercise of any Warrants.
Within 30 days of any shares of the Company becomes publicly
traded, the Company will use its best efforts to cause all the
Shares (whether or not the Warrants have been exercised) to be
registered under the Securities Act of 1933 on Form S-8 or
other appropriate form, all the extent requisite to permit the
sale of other disposition by the prospective sellers of the
shares of Common Stock so registered; provided, however, that
the Company may, as a condition precedent to effectiveness of
such registration, require each prospective seller to agree
with the Company and managing underwriter or underwriters of
any concurrent secondary public offering to be made by the
Company in connection with such registration that such seller
will not sell any securities of the same class or convertible
into the same class as those registered by the Company for such
reasonable period after such registration becomes effective
(not exceeding 90 days) as shall then be specified in writing
by such underwriter or underwriters if in the opinion of such
underwriter or underwriters the Company's offering would be
materially adversely affected in the absence of such an
agreement.
-3-
<PAGE> 4
2.1.3 Expenses. Company agrees to pay all costs and expenses incurred
by WA in connection with WA's rendering of services hereunder,
provided such costs and expenses are of a nature which is
customary for such services, such costs to be covered by funds
including but not limited to funds in the Escrow Account in
excess of funds needed to pay WA's monthly fees. Such expenses
are separate from cash compensation as set out above, and
include but not limited to such incidental costs and expenses
as travel and lodging, copying charges, printing charges, long
distance telephone charges, facsimile charges, postage, special
mailings and other reasonable expenses. All expenses to be
approved in advance by Company.
ARTICLE III
3.1 This Agreement shall commence upon execution of this Agreement
and continue during the one year period of time following the
date of this Agreement. Renewal shall be determined by a vote
of the Board of Directors of the Company. As used herein,
"Applicable Term" means the periods which commences on the
Applicable Date and continues until this Agreement is
terminated regardless of t he reason for such termination
Notwithstanding the foregoing, WA may terminate this Agreement
immediately upon written notice to t he Company upon the
occurrence of any of the following: (a) the Company becomes
insolvent or makes an assignment for the benefit of Creditors;
and/or (b) the Company breaches any of the material terms of
this Agreement. If this Agreement is terminated on or before
the termination date of this Agreement (as set forth above) for
any reason, the entire cash fee shall immediately become due
and payable, shall be deemed to be earned as of such date, and
no offset, refund or reduction of payments shall be
attributable to such termination. The provisions of Article II
shall survive the termination of this Agreement. Company can
terminate with cause with no further reimbursements to WA.
Cause can be defined as gross negligence or dereliction of
duty.
-4-
<PAGE> 5
ARTICLE IV
STATUS OF PARTIES
4.1 Nothing contained in this Agreement shall be construed to imply
that either WA, the Company, or any employee, agent or other
authorized representative of any such party, is a partner,
joint venturer, agent officer or employee of the other. Neither
party hereto shall have any authority to bind the other in any
respect vis a vis any third party, it being intended that each
shall remain an independent contractor and responsible only for
its own actions, The company and WA are independent
contractors, each responsible for its own actions, costs and
expenses. Neither WA nor the Company shall have any right to,
and shall not, commit the other party to any agreement,
contract, or undertaking or waive or compromise any of such
other party's rights against customers or other parties. All
compensation paid to WA shall constitute earnings from
self-employment income and the Company shall not withhold any
amounts therefrom as federal or state income tax withholding
from wages or as employee contributions under the Federal
Insurance Contribution Act (Social Security) or any similar
federal or state law applicable to employers and employees.
ARTICLE V
INDEMNIFICATION
5.1 Company acknowledges that WA must at all times rely upon the
accuracy and completeness of information and documents supplied
to WA by the Company's officers, directors, agents and
employees. consequently, Company and the entities affiliated
with Company agree to indemnify and hold harmless WA, its
officers, directors, employees and agents (collectively, the
"Indemnitees") against and from any and all losses, claims,
damages or liabilities, joint or several, which Indemnities or
any of them may become subject, and to reimburse Indemnitees or
any of them any legal or other expenses (including the cost of
any investigation and preparation) incurred by Indemnitees or
any of them, arising out of or in connection with any inquiry
litigation or other proceeding, whether or not resulting in any
liability, insofar as such losses, claims, damages, liabilities
or expenses arise out of, or are based upon (i) any act taken
or omitted to be taken by any Indemnity requested or approved
by the Company, or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any information
(written or oral) furnished by you to Indemnities or the
omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading.
-5-
<PAGE> 6
ARTICLE VI
CONFIDENTIALITY
6.1 WA agrees not at any time (during or after the term of this
Agreement) to disclose or use, except in pursuit of the
business of the Company and Proprietary Information for the
Company acquired during the term of this Agreement. For
purposes of this Agreement the phrase "Proprietary Information"
means all information which is known or intended to be known
only to WA or employees of the Company any document, record or
other information of the Company or other in a confidential
relationship with the Company and relates to specific business
matters such as patents, patent applications, trade secrets,
secret processes, proprietary know-how, information of the
Company's business, and identity of suppliers or customers or
accounting procedures of the Company or relates to other
business of the Company. WA agrees not to remove from the
premises of the Company except in the pursuit of business of
the Company any document, record or other information, whether
developed by WA or by someone else for the Company are the
exclusive property of t he Company, as the case may be.
ARTICLE VII
MISCELLANEOUS
7.1 Waiver. No waiver of any breach of default of this Agreement by
WA shall be considered to be a waiver of any other breach or
default of this Agreement.
7.2 Severability. If any portion of this Agreement is found by a
court of competent jurisdiction to be void or unenforceable,
that portion hereof shall be deemed to be reformed to the
extent necessary to cause such portion to be enforceable and
the same shall not affect the remainder of this Agreement,
which shall be given full force and effect without regard to
the invalid or unenforceable portions.
7.3 Entire Agreement. This Agreement, which may be signed in
duplicate or counterparts, replaces and supersedes all previous
Agreements between WA and the Company, contains the entire
understanding between the parties, and may not be changed,
altered, amended, or modified, except in writing, duly executed
by each of the parties.
7.4 Assignment. This Agreement may not be assigned or transferred
by either party hereto without the prior written consent of the
other.
7.5 Governing Law. This Agreement shall be governed by the laws of
the State of California without regard to any choice of law
provisions thereof.
7.6 Attorneys' Fees. Should any action be commenced between the
parties to this Agreement concerning the matters set forth in
this Agreement concerning the matters set forth in this
Agreement or the right and duties of either in relation
thereto, the prevailing party in such action shall be entitled,
in addition to such other relief as may be granted, to a
reasonable sum as and for its attorneys' fees and costs.
7.7 Arbitration and Venue. Any controversy arising out of or
relating to this Agreement or any modification or extension
thereof, including any claim for damages and/or recision, shall
be settled by arbitration in Orange, county, California in
accordance with the commercial Arbitration Rules of the
American Arbitration Association before one arbitrator. The
arbitrator sitting in any such controversy shall have no power
to alter or modify any express provisions of this Agreement or
to render any award which by its terms effects any such
alteration, or modification. The parties consent to the
jurisdiction of the Superior Court of California, and of the
United States District Court for the Central District of
California for all purposes in connection with such arbitration
including the entry of judgment on any award. The parties
consent that any process or notice of motion or other
application to either of said courts, and any paper in
connection with arbitration , may be served by certified mail
or the equivalent , return receipt requested, or by personal
service or in such manner as may be permissible under the rules
of the applicable court of arbitration tribunal, provided
-6-
<PAGE> 7
a reasonable time for appearance is allowed. The parties
further agree that arbitration proceedings must be instituted
within one year after the claimed breach occurred, and that
such failure to institute arbitration proceedings within such
period shall constitute an absolute bar or the institution of
any proceedings and a waiver of all claims. This section shall
survive the termination of this Agreement.
7.8 Facsimile Signature. Any signature on a facsimile copy of this
Agreement shall be binding and valid as if made on the original
copy of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
WOODBRIDGE & ASSOCIATES, INC.
By: /s/ BRUCE BERMAN
---------------------------
Bruce Berman
"COMPANY" CRUSH
By: /s/ RICHARD PERKINS
---------------------------
Richard Perkins
Its: President/CEO
By: /s/ ED HANSON
---------------------------
Ed Hanson
Its: CFO
-7-
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF THE PARENT COMPANY
Crush Innovative Sports Systems, Inc.
PIE Acquisition Corp.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this registration statement on
Form 10-KSB of Pacific International Enterprises, Inc. and Subsidiary of our
report dated July 1, 1997 on our audit of the consolidated financial statements
of Pacific International Enterprises, Inc. and Subsidiary as of and for the
years ended December 31, 1996 and 1995, which report is included in this Annual
Report on Form 10-KSB
CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California
July 1, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
We, the undersigned directors of PACIFIC INTERNATIONAL ENTERPRISES, INC.,
do hereby constitute and appoint Binks Graval, our true and lawful attorney and
agent, to do any and all acts and things in our name and behalf in our
capacities as directors and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorney and agent may deem
necessary or advisable to enable said corporation to comply with the Securities
Exchange Act of 1934, as amended, and any rules, regulations, and requirements
of the Securities and Exchange Commission, in connection with this Annual Report
on Form 10-KSB, including specifically, but without limitation, power and
authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments hereof; and we do hereby ratify and
confirm all that the said attorney and agent shall do or cause to be done by
virtue hereof.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ BINKS GRAVAL Director July 2, 1997
- ----------------------------
Binks Graval
/s/ RICHARD W. PERKINS Director July 2, 1997
- ----------------------------
Richard W. Perkins
/s/ ANTHONY BROUGHTON Director July 2, 1997
- ----------------------------
Anthony Broughton
</TABLE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 24,601
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 26,238
<CURRENT-ASSETS> 120,839
<PP&E> 32,485
<DEPRECIATION> 11,194
<TOTAL-ASSETS> 183,607
<CURRENT-LIABILITIES> 1,200,561
<BONDS> 0
0
0
<COMMON> 8,710
<OTHER-SE> (1,020,845)
<TOTAL-LIABILITY-AND-EQUITY> 183,607
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 352,517
<OTHER-EXPENSES> 2,587,956
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 332,144
<INCOME-PRETAX> (3,272,617)
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