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PACIFIC RIM ENTERTAINMENT, INC.
401 City Avenue, Suite 319
Bala Cynwyd, PA 19004
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INFORMATION STATEMENT
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This Information Statement ("Statement") is furnished to
holders of record of Common Stock, par value $.01 per share ("Common Stock"), of
Pacific Rim Entertainment, Inc., a Delaware corporation, (hereinafter the
"Company"), as of September __, 1997, pursuant to Section 14(c) of the
Securities Exchange Act of 1934, as amended, and Rule 14c-2 promulgated
thereunder. The purpose of this Statement is to inform all stockholders of the
approval by the Board of Directors of the Company, and by the written consent of
the holders of Common Stock entitled to cast at least a majority of the votes
entitled to be cast by the holders of Common Stock, of an amendment to the
Company's Certificate of Incorporation (the "Amendment") pursuant to which each
200 shares of Common Stock outstanding on the effective date of the Amendment
(other than the Private Placement Shares, as defined below) shall be converted
into one share of Common Stock (the "Reverse Stock Split"). The complete text of
the Amendment is set forth on Annex "A" attached to this Information Statement.
The purpose of the Amendment is to give legal effect to two separate reverse
stock splits which the Company's Board of Directors previously approved, but
which were subsequently determined to be invalid because stockholder approval of
amendments to the Company's Certificate of Incorporation giving effect to the
prior reverse stock splits was never obtained and such amendments were never
filed with the Secretary of State of the State of Delaware.
The Company is not seeking the consent, authorization or proxy
of its stockholders to file the Amendment, as the consent of stockholders
entitled to cast the requisite number of votes to approve the Amendment has been
obtained pursuant to Section 228 of the Delaware General Corporation law
("Section 228"). The Amendment shall not become effective pursuant to the
written consents so obtained until at least 20 days have elapsed from the date
of this Statement being mailed. This Information Statement also serves as notice
to stockholders of an action taken by less than unanimous written consent as
required by Section 228. Section 228 permits the Company to take the action
approving the filing of the Amendment without a meeting of the stockholders if
written consents are signed by holders of the outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. This Statement is being mailed to stockholders entitled
thereto on or about September __, 1997.
On July 30, 1997, the Company sold 1,320,000 shares of its
Common Stock (the "Private Placement Shares") in a private placement offering.
The Private Placement Shares were offered and sold as if the Reverse Stock Split
had become effective and the Amendment filed. The Company contractually agreed
with each purchaser of Private Placement Shares that the number of Private
Placement Shares purchased by such purchaser would not be decreased by reason of
the filing of the Amendment subsequent to consummation of the private placement
offering.
As of the close of business on August 1, 1997, the record
date for determining stockholders entitled to consent to the Amendment and to
receive this Statement, the Company had outstanding, without giving effect to
either of the two purported reverse stock splits, 5,760,800 shares of Common
Stock. Each share of Common Stock is entitled to one vote per share.
THIS STATEMENT HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES
ONLY. YOUR VOTE IS NOT REQUIRED TO APPROVE AND ADOPT THE AMENDMENT. WE ARE NOT
ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The date of this Information Statement is September __, 1997.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, both as of September 1, 1997
and giving effect to the filing of the Amendment and to the Reverse Split,
certain information (i) as to those persons known to the Company to be the
beneficial owners of more than five percent (5%) of the outstanding shares of
Common Stock of the Company, and (ii) concerning the number of shares of Common
Stock of the Company owned by each Director and by all Directors and executive
officers as a group. Unless otherwise noted, all shares are directly owned and
the sole voting and investment power is held by the persons indicated.
<TABLE>
<CAPTION>
Pre-Reverse Stock Split Basis Post-Reverse Stock Split Basis
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Amount and Percentage Amount and Percentage
Nature of Ownership Nature of Ownership
Beneficial of Outstanding Beneficial of Outstanding
Name and Address Ownership (1) Common Stock(2) Ownership (1) Common Stock(3)
- ---------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Steven Rosner 830,000(4) 14.40% 262,850(4) 19.87%
401 City Avenue, Suite 319
Bala Cynwyd, PA 19004
Bernard Buchwalter 570,000 9.89% 2,850 0.22%
673 Osprey Point Circle
Boca Raton, Fl 33431
Richard Someck 535,000 9.29% 2,675 0.20%
Sutton & Edwards, Inc.
1981 Marcus Avenue
Lake Success, NY 11042
Directors and executive officers 1,935,000 33.59% 268,375 20.29%
as a group (3 persons)
</TABLE>
(1) Common Stock not outstanding but subject to options, warrants and other
rights exercisable within 60 days is deemed to be outstanding for the
purpose of computing the percentages of Common Stock beneficially owned.
(2) Based on 5,760,800 issued and outstanding shares.
(3) Based on 1,322,204 issued and outstanding shares.
(4) Includes 260,000 Private Placement Shares which will remain outstanding
following the Reverse Stock Split.
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AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO EFFECT 1 FOR 200 REVERSE STOCK SPLIT
General
In March 1995, the Company's former Board of Directors
approved a 1 for 20 reverse stock split of the Company's Common Stock. In
February 1996, the Company's former Board of Directors approved a further 1 for
10 reverse stock split of the Company's Common Stock. The Company's new Board of
Directors has determined that neither of the reverse stock splits was legally
effective because of the failure to obtain stockholder approval in compliance
with the proxy rules promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and because no amendment to the Company's
Certificate of Incorporation was ever filed in respect of either purported
reverse stock split.
Notwithstanding the subsequent determination that the prior
reverse stock splits were invalid, the Company's shares have been traded on The
Nasdaq Stock Market as if the reverse stock splits had been effective on the
dates approved by the Board of Directors, and the Company proposes to issue
additional shares as if the reverse stock splits had been effective.
Consequently, the Board of Directors believes that it would be in the best
interests of both the Company and its stockholders for the Company to amend its
Certificate of Incorporation to effect a reverse stock split (the "Reverse Stock
Split") which would effectuate the intention of the two previously purported
reverse stock splits. In the Reverse Stock Split, one share of newly issued
Common Stock would be issued in exchange for every 200 shares of Common Stock
issued and outstanding on the effective date of the Amendment (rounding down to
the nearest whole number of shares). The Reverse Stock Split will become
effective upon filing the Amendment with the Secretary of State of the State of
Delaware. The complete text of the Amendment is set forth on Annex "A" attached
to this Information Statement.
The Company is presently authorized to issue 10,000,000 shares
of Common Stock, of which, without giving effect to the previously ineffective
reverse stock splits, 5,760,800 shares were issued and outstanding as of
September 1, 1997, including 1,320,000 shares of Common Stock offered and sold
on July 30, 1997 in a private placement offering (the "Private Placement
Shares"). The Company agreed that the number of Private Placement Shares sold in
the offering assumed that the Reverse Stock Split had been effective and that
the shares sold in the offering would not be decreased by reason of the Reverse
Stock Split. The Reverse Stock Split will reduce the number of outstanding
shares to 1,322,204 shares (subject to minor adjustment due to the rounding down
of any fractions of shares) including the Private Placement Shares. The
Amendment will not change the presently authorized 10,000,000 shares of Common
Stock or 1,000 shares of Preferred Stock.
Reasons for Proposed Reverse Stock Split
In connection with a general review by the Company's current
Board of Directors and its counsel of the activities of the Company's prior
Board of Directors, and in anticipation of a proposed merger transaction
discussed below, the Company determined that
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the reverse stock splits approved by the former Board of Directors and
stockholders in March 1995 and February 1996 were not legally implemented,
principally because the Company failed to obtain stockholder approval of the
reverse stock splits in compliance with the proxy solicitation rules under the
Exchange Act and because no amendment to the Company's Certificate of
Incorporation giving effect to either of the reverse stock splits was ever filed
with the Secretary of State of the State of Delaware.
In spite of the invalidity of the prior reverse stock splits,
however, the Company's Common Stock has been traded on the over-the-counter
market Electronic Bulletin Board as if the reverse stock splits had been valid
on the date approved by the Board of Directors. The Company believes, therefore,
that the trading price for its shares and the valuation of the Company from the
standpoint of the Company's market capitalization have already given effect to
the reverse stock splits.
Additionally, subsequent to the reverse stock splits, the
Company issued shares of its common stock and warrants exercisable to purchase
shares of its common stock as if the reverse stock splits had been effective,
including the Private Placement Shares. Consequently, the Board believes that
the Amendment, giving effect to the Reverse Stock Split should be filed to give
legal effect to what the marketplace has already given economic effect.
The Company has entered into an Agreement and Plan of Merger
dated May 23, 1997 with NSE Technologies, Inc. ("NSE") pursuant to which NSE
will merge with and into a wholly-owned subsidiary of the Company established
for this purpose, in exchange for which the stockholders of NSE will receive
capital stock in the Company (the "Merger"). The Merger is subject to a number
of conditions, including approval by the Company's stockholders. The Company
currently is preparing a preliminary proxy statement for filing with the
Securities and Exchange Commission in respect of a special meeting of the
Company's stockholders at which the Merger will be submitted for consideration
and approval.
The number of shares of Common Stock to be issued in the
Merger is predicated upon there being such number of shares of Common Stock
outstanding as would give effect to the two purported reverse stock splits, and,
accordingly, a condition to consummation of the Merger is the consummation of
the Reverse Stock Split on or prior to the effective time of the Merger.
Equally important is the necessity to attempt to increase the
price of the Company's Common Stock. The Common Stock was previously de-listed
from The Nasdaq SmallCap Market by the National Association of Securities
Dealers, Inc. because, among other reasons, the bid price for the Common Stock
had fallen below the minimum allowable bid price of $1.00. Until such time as
the Company is able to regain its Nasdaq SmallCap Market listing, if ever, the
Common Stock will continue to trade in the over-the-counter market on a bulletin
board which is established for securities that do not meet the Nasdaq
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SmallCap Market listing requirements, or on what is commonly referred to as the
"pink sheets." As a result, holders of Common Stock will find it more difficult
to dispose of, or to obtain accurate quotations for the price of their shares
than if the shares were listed on the Nasdaq SmallCap Market. The Company
believes that the Merger will generate stockholder interest in the Company's
Common Stock and, in combination with the Reverse Stock Split, will help the
Company meet the minimum listing requirements for relisting on the Nasdaq
SmallCap Market, although there can be no assurance that the Reverse Stock Split
will have the effect of increasing the publicly quoted price of the Common
Stock.
The Board of Directors also believes that the relatively low
price of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company. Theoretically, the number of
shares of Common Stock outstanding should not, by itself, affect the
marketability of the Common Stock, the type of investors who acquire it or the
Company's reputation in the financial community. In practice this may not
necessarily be the case, as many investors view low-priced stock as unduly
speculative in nature and, as a matter of practice, avoid or limit investments
in such stocks. The foregoing factors adversely affect not only the liquidity of
the Common Stock, but also its ability to raise additional capital through a
sale of equity securities. Although the Company believes that the Merger and
additional steps which the Company is contemplating will, in theory, lead to an
increase in its value and in the market price of its Common Stock, the failure
to effect the Reverse Stock Split will have a significant negative impact on any
positive steps the Company may be contemplating, because if the Reverse Stock
Split is not effected, the market price will be further diminished because of an
increase in the number of issued and outstanding shares.
Management of the Company is not aware of any present efforts
by any persons, other than with respect to the Merger, to accumulate Common
Stock or to obtain control of the Company, and the Reverse Stock Split is not
intended to be an anti-takeover device. The Amendment has been approved simply
to satisfy a condition to the consummation of the Merger and to give legal
effect to actions which have already been treated as effective by the
shareholders and the marketplace in general.
Effect of Reverse Stock Split on Security Holders
The Company will file the Amendment with the Secretary of
State of the State of Delaware as soon as practicable 20 days after the date of
mailing of this Statement. The Reverse Stock Split will become effective on the
date of such filing (the "Filing Date") and the stockholders will be notified on
or after the Filing Date that the Reverse Stock Split has been effected. The
Company's transfer agent, Continental Stock Transfer and Trust Company, will act
as exchange agent for holders of Common Stock in implementing the exchange of
their certificates. Holders of Common Stock (including holders of Private
Placement Shares) and holders of options and warrants to purchase Common Stock
who received such shares, options or warrants
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subsequent to the prior reverse stock splits, were issued such shares, options
and warrants as if the reverse stock splits had been effective. Therefore, such
security holders will not have their stockholdings reduced in the Reverse Stock
Split with respect to such shares or have any adjustments made in the exercise
or conversion prices associated with such options or warrants by reason of
contractual anti-dilution adjustments set forth in such instruments.
Federal Income Tax Consequences
The Company has not sought and will not seek an opinion of
counsel or a ruling from the Internal Revenue Service regarding the Federal
income tax consequences of the Reverse Stock Split. The following summary of
Federal income tax consequences is based on the Internal Revenue Code of 1986,
as amended (the "Code"), the applicable Treasury Regulations promulgated
thereunder, judicial authority and current administrative rulings and practices
as in effect on the date of this Proxy Statement/Prospectus. This summary is for
general information only and does not discuss the Federal income tax
consequences which may apply to non-resident aliens, broker-dealers,
stockholders who receive Common Stock in compensatory transactions or insurance
companies. This discussion does not address any foreign, state or local tax
consequences that may be relevant to the Company's stockholders. Accordingly,
each stockholder is urged to consult his or her own tax advisor to determine the
particular consequences to him or her of the Reverse Stock Split.
The exchange of shares of Common Stock for newly issued shares
of Common Stock will not result in the recognition of gain or loss. The holding
period of the newly issued shares of Common Stock will include the stockholder's
holding period for the shares of Common Stock exchanged therefor, provided that
the shares of Common Stock were held as a capital asset. The adjusted basis of
the newly issued shares of Common Stock will be the same as the adjusted basis
of the Common Stock exchanged therefor. Any restrictive legends affecting the
transfer or sale of the original shares will be affixed to and apply to the
newly issued Common Stock.
No Dissenter's Rights
Under Delaware Law, stockholders are not entitled to
dissenter's rights of appraisal with respect to the Amendment to effect the
Reverse Stock Split.
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THIS STATEMENT HAS BEEN PROVIDED TO STOCKHOLDERS FOR
INFORMATION PURPOSES ONLY. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
By Order of the
Board of Directors,
Steven Rosner, Chairman
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ANNEX "A"
ARTICLE FOURTH of the Certificate of Incorporation of this Corporation be and it
hereby is amended and restated in its entirety as follows:
"FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is Ten Million One Thousand (10,001,000) shares, of which Ten
Million (10,000,000) shall be Common Stock, par value $.01 per share ("Common
Stock"), and One Thousand (1,000) shares shall be Preferred Stock, $.01 par
value per share ("Preferred Stock").
On the effective date of the Certificate of Amendment to the Certificate of
Incorporation of the Corporation containing the provisions set forth herein (the
"Effective Date"), each 200 shares of Common Stock outstanding immediately prior
to the Effective Date shall be reclassified as and converted into, without any
further act by any person, one share of Common Stock, with a par value of $.01
per share, and any fractional shares resulting therefrom shall be rounded down
to the nearest whole number of shares of Common Stock. From and after the
Effective Date, and until exchanged for certificates representing Common Stock
issued and delivered after the Effective Date, certificates representing each
share of Common Stock prior to the Effective Date shall be deemed to represent a
number of shares equal to the product obtained by multiplying the number of
shares represented thereby by a fraction, the numerator of which is one and the
denominator of which is 200."
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