-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P7wPxJQmT0rBVxQGSB6VA6EN3S+n2fT9oL21fOwchiyRsldYYH6hdJaQ4SqlILvh o3L1SjmgDUNw4dsEqx6vhw== 0001127855-04-000627.txt : 20041102 0001127855-04-000627.hdr.sgml : 20041102 20041101192317 ACCESSION NUMBER: 0001127855-04-000627 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 20041102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: P--CE Computers, Inc. CENTRAL INDEX KEY: 0001302568 IRS NUMBER: 880512821 STATE OF INCORPORATION: NV FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: SB-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-120148 FILM NUMBER: 041111369 BUSINESS ADDRESS: STREET 1: 45630 CITRUS STREET - SUITE E CITY: INDIO STATE: CA ZIP: 92201 BUSINESS PHONE: 760-864-9901 MAIL ADDRESS: STREET 1: 45630 CITRUS STREET - SUITE E CITY: INDIO STATE: CA ZIP: 92201 SB-2 1 pcecomputerssb2.txt P--CE COMPUTERS, INC. SB-2 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form SB-2 --------- REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 P--CE Computers, Inc. --------------------- (Name of small business issuer in its charter) Nevada 3570 880512821 - ---------------------- ------------------------- --------------------- (State or jurisdiction (Primary Standard (I.R.S. Employer of incorporation or Industrial Classification Identification Number) organization) Code Number) 45630 Citrus Street, Suite E Indio, California 92201 Phone: (760) 347-7322 Fax: (760) 347-7355 ------------------------------------------------------------- (Address and telephone number of principal executive offices) 45630 Citrus Street, Suite E Indio, California 92201 ------------------------------------------------------------- (Address of principal place of business or intended principal place of business) Devlin Jensen Barristers & Solicitors 2550 - 555 West Hastings, Vancouver, British Columbia, Canada, V6B 4N5 Attention: Mike Shannon Phone: (604) 684-2550 Fax: (604) 684-0916 -------------------------------------------------------- (Name, address and telephone number of agent for service) APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] 2 CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------- Title Of Each Class Of Number of Shares Proposed Maximum Proposed Maximum Amount of Securities To Be To Be Registered Offering Price Aggregate Offering Registration Registered Per Share (1) Price Fee - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- Common stock held by selling security holders 5,630,636 $0.50 $2,815,318 356.70 - ---------------------------------------------------------------------------------------------------- (1) There is no current market for the securities and the price at which the shares held by the selling security holders will be sold is at a price of $0.50 per share for outstanding common stock until our securities are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 3 PROSPECTUS Subject to Completion, Dated November 1, 2004 The information contained in this prospectus is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that state. P--CE COMPUTERS, INC. 5,630,636 shares of common stock to be sold by certain selling security holders This prospectus relates to the offer and sale of 5,630,636 shares of our common stock. The selling security holders will offer and sell the shares of outstanding common stock at a price of $0.50 per share, until our securities are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. This registration statement is intended to register the resale of 5,630,636 shares of our common stock. There has been no market for our securities and a public market may not develop, or, if any market does develop, it may not be sustained. The shares will become tradable on the effective date of this prospectus. The selling security holders will receive the proceeds from the sale of their shares and we will not receive any of the proceeds from the sales. THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" CONTAINED IN THE PROSPECTUS BEGINNING ON PAGE 4. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is November 1, 2004. 4 TABLE OF CONTENTS Summary Information and Risk Factors . . . . . . . . . . . . . . . . . .4 Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Company Overview. . . . . . . . . . . . . . . . . . . . . . . . . .4 Selling Security Holders. . . . . . . . . . . . . . . . . . . . . .5 Summary Financial Data. . . . . . . . . . . . . . . . . . . . . . .5 Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Disclosure Regarding Forward-Looking Statements. . . . . . . . . . . . .7 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Determination of Offering Price. . . . . . . . . . . . . . . . . . . . .8 Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . .8 Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 19 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Directors, Executive Officers, Promoters and Control Persons . . . . . 20 Directors and Executive Officers. . . . . . . . . . . . . . . . . 20 Significant Employees . . . . . . . . . . . . . . . . . . . . . . 21 Family Relationships. . . . . . . . . . . . . . . . . . . . . . . 21 Involvement in Certain Legal Proceedings. . . . . . . . . . . . . 21 Security Ownership of Certain Beneficial Owners and Management . . . . 21 Security Ownership of Certain Beneficial Owners . . . . . . . . . 21 Security Ownership of Management. . . . . . . . . . . . . . . . . 22 Changes in Control. . . . . . . . . . . . . . . . . . . . . . . . 22 Description of Securities. . . . . . . . . . . . . . . . . . . . . . . 22 Description of Securities . . . . . . . . . . . . . . . . . . . . 22 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 22 Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . 23 Additional Information Describing Securities . . . . . . . . 23 Penny Stock Regulation . . . . . . . . . . . . . . . . . . . 23 Interest of Named Experts and Counsel. . . . . . . . . . . . . . . . . 23 Disclosure of Commission Position on Indemnification for Securities Act Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Certain Relationships and Related Transactions . . . . . . . . . . . . 24 Description of Business. . . . . . . . . . . . . . . . . . . . . . . . 26 Management's Discussion and Analysis or Plan of Operation. . . . . . . 31 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Management's Discussion and Analysis for the Nine Month period ended May 31, 2004. . . . . . . . . . . . . . . . . . . . 31 Management's Discussion and Analysis for the Year Ended August 31, 2003. . . . . . . . . . . . . . . . . . . . . . . . . 33 Market for Common Equity and Related Stockholder Matters . . . . . . . 34 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 34 Proposed Compensation . . . . . . . . . . . . . . . . . . . . . . 35 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . 35 Long Term Incentive Plans - Awards in Last Fiscal Year. . . . . . 35 Employee Pension, Profit Sharing Insurance or Other Retirement Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Compensation of Directors . . . . . . . . . . . . . . . . . . . . 36 Compensation Committee Interlocks and Insider Participation . . . 36 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 36 Indemnification of Directors and Officers. . . . . . . . . . . . . . . 37 Other Expenses of Issuance and Distribution. . . . . . . . . . . . . . 38 Recent Sales of Unregistered Securities. . . . . . . . . . . . . . . . 38 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Summary Information and Risk Factors. Prospectus Summary This summary provides a brief overview of key aspects of this offering and our company. Because this is only a summary, it does not contain all of the information that may be important to you. You should read the entire prospectus carefully, including "Risk Factors" and our financial statements and the related notes, before making an investment decision regarding our common stock. References herein to "we", "us", "our", or "P--CE" refer to P--CE Computers, Inc. Company Overview P--CE is a development-stage company with limited current operations and net losses aggregating approximately $(1,003,539) up to May 31, 2004. P--CE is an innovative start-up company that has developed an affordable and high-design 5 ergonomic computer station for professional and consumer markets. We were incorporated under the laws of the State of Nevada, in November 2001 and have an August 31 fiscal year end. Our mailing address is 45630 Citrus Street, Suite E, Indio, California, U.S.A. 92201. Selling Security Holders This prospectus relates to the registration for resale of 5,630,636 shares of our common stock. Our outstanding securities are held by 156 security holders. The selling security holders will offer and sell the shares of outstanding common stock at a price of $0.50 per share until our securities are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. We will not receive any proceeds from the sale of the securities by the selling security holders. The Offering Number of shares of common stock outstanding 13,797,302 shares. prior to this offering Number of shares of common stock outstanding 13,797,302 shares. after this offering Common stock offered by selling security 5,630,636 shares of common holders stock already issued and held by certain selling security holders. Summary Financial Data The following table summarizes the consolidated financial data for our business for the years ended August 31, 2003, 2002, and for the nine month periods ended May 31, 2004 and 2003. You should read the following summary financial data together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and the corresponding notes thereto, appearing elsewhere in this prospectus.
Statement of Operations Year ended August 31, Nine Months Ended May 31, 2003 2002 2004 2003 Revenues $90,550 Nil $12,029 $2,500 Gross Margin $53,377 Nil $ 8,031 $2,200 Net Loss ($607,416) Nil ($396,123) ($471,864) Basic and Diluted Earnings (Loss) Per Share $(0.13) Nil $(0.06) $(0.10)
Balance Sheet August 31, May 31, 2003 2002 2004 Cash $16,755 $450 $186,045 Current Assets $18,582 $450 $293,365 Total Assets $30,883 $450 $316,223 Current Liabilities $88,785 Nil $ 24,137 Total Liabilities $88,785 Nil $ 24,137 Shareholders' Equity (Deficit) ($57,902) $450 $292,086 6 Risk Factors Before you invest in our common stock, you should be aware that such an investment involves various risks, including those described below. You should carefully consider these risks as well as all of the other information contained in this prospectus before making a decision to invest in our common stock. As a consequence of any of the following risks, our business, financial condition and operating results could be adversely affected. As a result, the trading price of our common stock could decline, and you could lose all or part of your investment. We have incurred losses and need to raise capital to continue our operations and - -------------------------------------------------------------------------------- growth and if we are unable to secure such financing, we may not be able to - --------------------------------------------------------------------------- expand our business and may even not be able to support our operations. - ----------------------------------------------------------------------- We have yet to be profitable and historically have relied solely on funds raised by the issuance of shares of our common stock to fund our development. We have incurred losses totaling $1,003,539 up to May 31, 2004 and are currently operating at a loss. We may need to seek capital by way of an offering of our equity securities, an offering of debt securities, or by obtaining financing through a bank or other entity. We have not established a limit as to the amount of debt we may incur nor have we adopted a ratio of our equity to debt allowance. If we need to obtain additional financing, there is no assurance that financing will be available from any source, that it will be available on terms acceptable to us, or that any future offering of securities will be successful. If additional funds are raised through the issuance of equity securities, there may be a significant dilution in the value of our outstanding common stock. We could suffer adverse consequences if we are unable to obtain additional capital which would cast substantial doubt on our ability to continue our operations and growth. Because we are relatively poorly financed, failure of a large purchaser to pay - ------------------------------------------------------------------------------ for our goods may adversely affect our ability to continue operations. - ---------------------------------------------------------------------- We are young, and relatively poorly financed. If a large purchaser of our goods failed to pay, we would be put in a difficult financial position from which we may not be able to recover. Our success depends on the ability of a small number of overseas producers with - ------------------------------------------------------------------------------- whom we have business arrangements to provide our product on a consistent basis - ------------------------------------------------------------------------------- in order for us to continue operations. - --------------------------------------- We depend on the ability of a small number of overseas producers to provide the personal computing work environments. Failure to maintain continuous access to the product would have a materially adverse affect on our business, including possibly requiring us to significantly curtail or cease our operations. Producers may experience equipment failures and service interruptions, over which we have no control, which could adversely effect customer confidence, our business operations and our reputation. There is no current trading market for our securities and if a trading market - ----------------------------------------------------------------------------- does not develop, purchasers of our securities may have difficulty selling their - -------------------------------------------------------------------------------- shares. - ------- There is currently no established public trading market for our securities. We can give no assurance that an active trading market in our securities will develop or, if developed, that it will be sustained. We intend to apply for admission to quotation of our securities on the OTC Bulletin Board and, if and when qualified, we intend to apply for admission to quotation on the NASDAQ SmallCap Market. If for any reason our common stock is not listed on the OTC Bulletin Board or a public trading market does not otherwise develop, purchasers of the shares may have difficulty selling their common stock should they desire to do so. No market makers have committed to becoming market makers for our common stock and it is possible that none will do so. The shares available for sale immediately by the selling securityholders along - ------------------------------------------------------------------------------ with shares available pursuant to Rule 144 could significantly reduce the market - -------------------------------------------------------------------------------- price of our common stock, if a market should develop. - ------------------------------------------------------ If a market should develop for the shares of our common stock, the market price could drop if a substantial amount of shares available for public sale without any increase to our capitalization are sold in the public market or if the market perceives that such sales could occur. After a one-year holding period our restricted shares of common stock will become eligible for trading, pursuant to Rule 144, without any additional payment to us or any increase to our capitalization. Of the 13,797,302 shares of common stock currently outstanding, 5,630,636 shares of the common stock are being registered for sale. Our 7 affiliates will be subject to the limitations of Rule 144, including its volume limitations in the sale of their shares. An aggregate of 6,816,666 (49.39%) of the outstanding shares of our common stock are held by officers, directors, affiliates and entities controlled by them and are subject to the limitations of Rule 144. A drop in the market price could adversely effect holders of our common stock and could also harm our ability to raise additional capital by selling equity securities. The concentration of ownership of the shares of our common stock may discourage - ------------------------------------------------------------------------------- purchases of our common stock by persons who might otherwise seek to gain - ------------------------------------------------------------------------- control of us. - -------------- Our executive officers and directors, together with entities affiliated with them, currently beneficially own in excess of 49% of our outstanding common stock, and they are able to exercise a controlling influence over the election of our directors and other matters requiring stockholder approval, including change of control transactions. The effect of such management control could be to delay or prevent any change of our management control. Because one of our officers has other business interests, he may not be able or - ------------------------------------------------------------------------------- willing to devote a sufficient amount of time to our business operations, which - ------------------------------------------------------------------------------- may negatively impact our business. - ----------------------------------- One of our executive officers, Bruce Sheppard, is spending only approximately 5 hours per week of his business time on providing management services to us. While this officer presently possess adequate time to attend to our interests, it is possible that the demands on him from his other obligations could increase with the result that he would no longer be able to devote sufficient time to the management of the business. This could negatively impact our business development. Because we have only recently commenced business operations, we expect to incur - ------------------------------------------------------------------------------- operating losses for the foreseeable future. - -------------------------------------------- We earned revenues of $90,550 in the fiscal year ended August 31, 2003, and $12,029 for the nine month period ended May 31, 2004, however, we have never been profitable. We anticipate that we will incur increased operating expenses without realizing a significant increase in revenues. We therefore expect to incur losses into the foreseeable future. If we are unable to generate significant revenues from the sale of our products, the personal computing work environment, we will fail and you will lose your entire investment in this offering. Non-acceptance of our product by the market will adversely affect our ability to - -------------------------------------------------------------------------------- continue operations. - -------------------- If our potential customers in our market do not accept our product, then we will have difficulty generating revenue, which will affect our ability to continue operations and our venture will fail. Because we only offer one product at this time, competition from other companies - -------------------------------------------------------------------------------- producing a similar type of product may adversely affect our ability to continue - -------------------------------------------------------------------------------- operations. - ----------- If a company begins producing "knock offs" or a similar type of product that is in direct competition with our product, then we may experience difficulty in generating revenues, which would adversely affect our ability to continue operations. Loss of the lawsuit brought against us by Personal Computing Environments Korea, - -------------------------------------------------------------------------------- Inc. would adversely affect our ability to continue operations. - --------------------------------------------------------------- Should Personal Computing Environments Korea, Inc. be successful in its lawsuit brought against us, our ability to continue operation will be jeopardized and our venture may fail. Disclosure Regarding Forward-Looking Statements This prospectus includes "forward-looking statements". For example, statements included in this prospectus regarding our financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future demand for our services and products, supply, costs, 8 marketing and pricing factors are all forward-looking statements. When we use words like "intend," "anticipate," "believe," "estimate," "plan" or "expect," we are making forward-looking statements. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, and are based on information available to us on the date of this prospectus. We cannot, however, assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be planning. We have disclosed certain important factors that could cause our actual results to differ materially from our current expectations under "Risk Factors" and elsewhere in this prospectus. You should understand that forward-looking statements made in connection with this offering are necessarily qualified by these factors. We are not undertaking to publicly update or revise any forward-looking statement if we obtain new information or upon the occurrence of future events or otherwise. Use of Proceeds. The shares of common stock covered by this prospectus are to be sold by our shareholders and we will not receive any proceeds from such sales. Determination of Offering Price. Our shares are not currently traded on any national market. The shares of common stock covered by this prospectus are to be sold by our security holders. The price at which our selling security holders will sell their shares of our common stock at prior to being listed on the OTC Bulletin Board is $0.50, which is the price per share for shares that were privately placed by us in 2004. Once our common stock is listed on the OTC Bulletin Board, then our selling security holders will sell their shares at the prevailing market prices or privately negotiated prices. Dilution. The shares of our common stock covered by this prospectus are to be sold by our security holders. We are not selling any common equity through this registration. Therefore, this item is not applicable to us. Selling Security Holders. On September 30, 2004, there was 13,797,302 shares of our common stock issued. All of the selling security holders' shares registered hereby will become tradable on the effective date of the registration statement of which this prospectus is a part. The following table sets forth as of September 30, 2004: - - the name and address of each selling security holder; - - the number of shares of our common stock beneficially owned; - - the number of shares of our common stock being offered herein; - - the relationship of the security holder to P--CE; - - the percentage of shares of our common stock owned prior to the offering, and - - the amount and percentage of shares of our common stock owned after the offering.
Number of Number of Percentage of Amount and shares shares stock owned percentage of Name & beneficially offered Relationship prior to the stock owned after address owned(1) herein to P--CE offering(2) the offering(3) - ---------------- -------------- ----------- ------------- --------------- ------------------ 636007 B.C. Ltd. (4) 97,750 97,750 None (*)% Nil (*)% 177 Glynde Ave. North Burnaby, BC V5B 1G8 9 661864 B.C. Ltd. (5) 25,000 25,000 None (*)% Nil (*)% 306 - 255 Newport Dr. Port Moody, BC V3H 5B9 Allingham, Clara 12,000 12,000 None (*)% Nil (*)% 7757 Tommy Dr. #13 San Diego, CA 92119 Amipour, Shahin 2,400 2,400 None (*)% Nil (*)% 969 Congress Street Costa Mesa, CA 92672 Bach, Benjamin 20,000 20,000 None (*)% Nil (*)% 304-2678 West Broadway Vancouver, BC V6K 2G3 Baringer, Judy 1,500 1,500 None (*)% Nil (*)% 155 Pearce Parkway Pearl River, NY 10965 Becer, Aylin 10,274 10,274 None (*)% Nil (*)% 8760 St Albans Road Richmond, BC V6Y 2L4 Beliveau, Karen 3,333 3,333 None (*)% Nil (*)% PO Box 2462 Grand Forks, BC V0H 1H0 Benedet, Ron 8,000 8,000 None (*)% Nil (*)% 3713 Kincaid St. Burnaby, BC V5G 1V4 Birch, Brian 20,000 (6) 10,000 None (*)% Nil (*)% 8626-141 Street Surrey, BC V3W 3A9 Birch, Cheryl 20,000 (7) 10,000 None (*)% Nil (*)% 8626-141 Street Surrey, BC V3W 3A9 Bisset, Clint 10,000 10,000 None (*)% Nil (*)% 2170 Westham Island Rd. Delta, BC V4K 3N2 Braddish, Danny 13,333 13,333 None (*)% Nil (*)% 147-30 22nd Avenue White Stone, NY 113517 Braddish, Doreen 16,666 16,666 None (*)% Nil (*)% 31-72 Crescent Street Astoria, NY 11106 Bridge, Connie 80,000 (8) 40,000 None (*)% Nil (*)% 15084 Victoria Avenue Whiterock, BC V4B 1G3 Bridge, Daryl 80,000 (9) 40,000 None (*)% Nil (*)% 15084 Victoria Avenue Whiterock, BC V4B 1G3 Brown, Doreen 500 500 None (*)% Nil (*)% 1279 28th Avenue East Vancouver, BC V5V 2P8 10 Buitenhuis, Adrian 3,333 3,333 None (*)% Nil (*)% 7019 Marine Drive West Vancouver, BC V7W 2T4 Burke, Valerie 12,000 12,000 None (*)% Nil (*)% 4-4965 47th Avenue Delta, BC V4K 4N9 Cabral, Nelson 16,666 16,666 None (*)% Nil (*)% 103-2979 Panorama Drive Coquitlam, BC V3E 2W8 Casale, Fernando 6,666 6,666 None (*)% Nil (*)% 574 Plainview Rd. Plainview, NY 11803 Cerny, Stacey 16,666 16,666 None (*)% Nil (*)% #4 Cedar Ave. Fernie, BC V0B 1M0 Chanpradith, Somchith 298,686 298,686 None 2.16% Nil (*)% 7241 Fleming Street Vancouver, BC V5P 3J1 Christiansen, Kenneth 4,000 4,000 None (*)% Nil (*)% 551 Mohave Circle Shelton, CT 06484 Classen, Glen 6,666 6,666 None (*)% Nil (*)% P.O. Box 828 Pemberton, BC V0N 2L0 Cook, Robert 4,000 4,000 None (*)% Nil (*)% 3933 Napier Street Burnaby, BC V5C 3G1 Dambrose, Howard 40,000 40,000 None (*)% Nil (*)% 15336 Andorra Way San Diego, CA 92129 Deighton, Michael 6,666 6,666 None (*)% Nil (*)% #301-2119 Yew Street Vancouver, BC V6K 3G8 Deluca, Paul 200,000 200,000 None 1.45% Nil (*)% 25 Green Street Medfield, MA 02052 Deluca, Peter & Rita 6,000 6,000 None (*)% Nil (*)% 15 Spruce Pond Rd. Franklin, MA 02038-2500 DeWinter, Tony 100,000 100,000 None (*)% Nil (*)% 13855 90th Ave. Surrey, BC V3V 1C2 Dube, Martin 1,500 1,500 None (*)% Nil (*)% 25 E12 Avenue, Apt 305 Vancouver, BC V5T 2G6 Edgeworth, Steven 2,000 2,000 None (*)% Nil (*)% 253-5158 48th Ave. Delta, BC V4K 1W3 11 Estabrooks, Ian 20,000 20,000 None (*)% Nil (*)% 4572 River Rd. West Ladner, BC V4K 1S4 Filby, Nathan Lee 2,300 2,300 None (*)% Nil (*)% 63 Keefer St. Apt 308 Vancouver, BC V6E 4R8 Forsyth, Martin 20,000 20,000 None (*)% Nil (*)% P.O. Box 611 Whistler, BC V0N 1B0 Franklin, Malcolm 15,000 15,000 None (*)% Nil (*)% 6044 Sierra View Way San Diego, CA 92120 Furlan, Lisa 15,000 15,000 None (*)% Nil (*)% 187-13210 S. Royalcrest La Miracla, CA 90638 Gabriele, Warren E. 20,000 20,000 None (*)% Nil (*)% 608-1111 Beach Ave. Vancouver, BC V6E 1T9 Gobin, Bryan 130,600 130,600 None (*)% Nil (*)% 421-1820 West 3rd Vancouver, BC V6J 1K8 Gottleib, Adam 6,666 6,666 None (*)% Nil (*)% 3309 Morley Rd. Ashville, NY 14710 Gregor, Alastair 215,100 215,100 None 1.56% Nil (*)% Box 1080 Whistler, BC V0N 1B0 Gregor, Richard 3,333 3,333 None (*)% Nil (*)% 2973 Cove Place Coquitlam, BC V3C 3R6 Guichon, Michael 300,000 (10) 100,000 None (*)% Nil (*)% 3454-41B Street Delta, BC V4K 3N2 Guichon, Susan 300,000 (11) 100,000 None (*)% Nil (*)% 3454-41B Street Delta, Bc V4K 3N2 Hanson, Andrew 8,000 8,000 None (*)% Nil (*)% P.O. Box 198 Whistler, BC V0N 2C1 Harriman, David 6,000 6,000 None (*)% Nil (*)% 5255 9th Avenue Delta, BC V4M 1V8 Henwood, Steve 4,000 4,000 None (*)% Nil (*)% 5478 44th Avenue Delta, BC V4K 1C7 Hinds, Ken 10,000 10,000 None (*)% Nil (*)% 6252-167A Street Surrey, BC V3S 9L4 12 Hurst, Rob 30,000 30,000 None (*)% Nil (*)% 8901 - 118A St. Delta, BC V4C 6L6 Jackson, Clark 60,000 60,000 None (*)% Nil (*)% 5317 Crescent Drive Ladner, BC V4K 2E1 Johnson, Chuck 20,000 20,000 None (*)% Nil (*)% 4501 Woodgreen Dr. West Vancouver, BC V7S 2T8 Jomac Holdings Ltd. 62,000 (12) 12,000 None (*)% Nil (*)% 355-800-15355 24th Avenue Whiterock, BC V4A 2H9 Jones, Lloyd 10,000 10,000 None (*)% Nil (*)% 402-2025 Stephens Street Vancouver, BC V6K 3W2 Keenan, Michael 10,000 10,000 None (*)% Nil (*)% 600-1111 West Georgia St. Vancouver, BC V6E 4M3 Keenan, Robert 10,000 10,000 None (*)% Nil (*)% 1379 Kingsway St. Vancouver, BC V5V 3E3 Keith Lane Holding Ltd 20,000 (13) 20,000 None (*)% Nil (*)% 41-1640-162nd Street Surrey, BC V4A 6Y9 Kembel, Julie 8,000 8,000 None (*)% Nil (*)% 3305 Webber Rd. West Vancouver, BC V4T 1W6 Kubenk, Michael 20,000 20,000 None (*)% Nil (*)% #903-1010 Howe Street Vancouver, BC V6Z 1P5 Kyle, Geoff 20,000 20,000 None (*)% Nil (*)% #437-103 4338 Main St. Whistler, BC V0N 1B4 Langlois, Gabriel Colt 6,666 6,666 None (*)% Nil (*)% Box 202 Pemberton, BC V0N 2C1 Le, Thu 110,000 110,000 None (*)% Nil (*)% 4036 Spruce Street Burnaby, BC V5G 2Z3 Learmonth, Andrew 9,100 9,100 None (*)% Nil (*)% 101-766 West 16th Avenue Vancouver, BC V5Z 1S7 Ly, Cindy 5,000 5,000 None (*)% Nil (*)% 3346 William St. Vancouver, BC V5K 2Z3 MacArthur, Leslie 25,000 25,000 None (*)% Nil (*)% 5373 Maple Cres. Delta, BC V4K 1G1 13 Maciejewski, John 62,000 (14) 50,000 None (*)% Nil (*)% 355-800-15355 24th Avenue Whiterock, BC V4A 2H9 Maciejewski, Sheila 20,000 20,000 None (*)% Nil (*)% 2131 Jordan Drive Burnaby, BC V5B 4G1 Madsen, Eric 19,999 19,999 None (*)% Nil (*)% #2204-1128 Quebec Street Vancouver, BC V6A 6E1 Manley, Blake 20,000 20,000 None (*)% Nil (*)% #4-4965 47th Ave Delta, BC V4K 4N9 Manley, Brian 50,000 50,000 None (*)% Nil (*)% 5144-44 Ave Delta, BC V4K 1G1 Mascitti, Christine 80,000 (15) 40,000 None (*)% Nil (*)% 21-06 Hoyt Avenue South Astoria, NY 11102 Mascitti, Michael 80,000 (16) 40,000 None (*)% Nil (*)% 21-06 Hoyt Avenue South Astoria, NY 11102 Mattern, Sarah 7,000 7,000 None (*)% Nil (*)% 402 Date Street, #4 San Diego, CA 92101 McBean, Jessica 35,000 35,000 None (*)% Nil (*)% 2770 West 14th Ave. Vancouver, BC V6K 2X2 McFadyen, Andrew 10,000 10,000 None (*)% Nil (*)% 4440 Coldfall Rd. Richmond, BC V7C 1P8 MacKenzie, Chris 40,000 40,000 None (*)% Nil (*)% 110-4105 Imperial St. Burnaby, BC V4N 2T4 McKinnon, David 40,000 40,000 None (*)% Nil (*)% 4525-66 Street Delta, BC V4K 4Y8 Mike Guichon Ltd. 300,000 (17) 100,000 None (*)% Nil (*)% 3454-41B St Delta, BC V4K 3N2 Moller, Bernd 3,000 3,000 None (*)% Nil (*)% 3601-1199 Marinaside Cres. Vancouver, BC V6Z 2Y2 Moody, Wendy 3,333 3,333 None (*)% Nil (*)% 1008 Broughton Street Vancouver, BC V6G 2AG Morrison, Robert 175,000 175,000 None 1.27% Nil (*)% 941 Adair Avenue Coquitlam, BC V3K 3T9 14 Naccarato, Norman G. 31,332 31,332 None (*)% Nil (*)% 925 Raymond Ave. Port Coquitlam, BC V3B 2M6 Nagy, Zolton 522,000 522,000 None 3.78% Nil (*)% 807-1003 Pacific Street Vancouver, BC V6E 4J5 Napoli Investments Inc. 10,000 (18) 10,000 None (*)% Nil (*)% 201-7077 Beresford Street Burnaby, BC V5E 4J5 Nault, Michael 1,000 1,000 None (*)% Nil (*)% 15357 Columbia Avenue Whiterock, BC V4B 1J8 O'Bryon, Chris 2,000 2,000 None (*)% Nil (*)% 8557 #14 Lemon Avenue La Mesa, CA 91941 O'Bryon, Doug 200,000 200,000 None 1.45% Nil (*)% 13040 Middlebrook Road Germantown, MD 20874 O'Bryon, James 23,000 23,000 None (*)% Nil (*)% 1608 S. Tolgate Rd. Belair, MD 21015 O'Neill, Jeffrey 22,000 22,000 None (*)% Nil (*)% 1829-141A Street Surrey, BC V4A 6X9 Oliver, Jim 40,000 40,000 None (*)% Nil (*)% Box 46 Jaffray, BC V0B 1T0 P. Steel Productions Ltd. 551,332 (19) 551,332 None 3.99% Nil (*)% P.O. Box CB 13997 Nassau, Bahamas Patterson, Robert 22,000 22,000 None (*)% Nil (*)% 970 Gale Drive Delta, BC V4M 2P5 Peters, Motolani 500 500 None (*)% Nil (*)% 209 Shore Blvd. Keansburg, NJ 07734 Pinkney, Stuart 6,666 6,666 None (*)% Nil (*)% S1-C7 Erickson Road Pemberton, BC V0N 1B6 Pondelicek, Gregory 20,000 20,000 None (*)% Nil (*)% 6204 Oboe Place Whistler, BC V0N 1B6 Quattrin, Jay 16,666 16,666 Brother of (*)% Nil (*)% 925 Raymond Ave Allan Quattrin, Port Coquitlam, BC President V3B 2M6 Quattrin, Joy 170,043 170,043 Mother of 1.23% Nil (*)% 925 Raymond Ave Allan Quattrin, Port Coquitlam, BC President V3B 2M6 Quattrin, Tony 33,333 33,333 Brother of (*)% Nil (*)% Suite 600-1111 West Georgia Street Allan Quattrin, Vancouver, BC President V6E 4M3 15 Ravnic, Joseph 10,000 10,000 None (*)% Nil (*)% 2576 Charles St. Vancouver, BC V5K 3A3 Riva, Ray 20,000 20,000 None (*)% Nil (*)% 663 Redwood Dr. Qualicum Beach, BC V9K 1A2 Robinson, Susan L. 3,000 3,000 None (*)% Nil (*)% Box 1252 Squamish, BC V0N 3G0 Rosenbach, Jessica 3,000 3,000 None (*)% Nil (*)% 402 Date Street #4 San Diego, CA 92101 Saperstein, Ron 70,000 70,000 None (*)% Nil (*)% 3202-1483 Homer Street Vancouver, BC V6Z 3C7 Saw, Damion 10,000 10,000 None (*)% Nil (*)% 2313 Camley Close Whistler, BC V0N 1B2 Sharpe, David 15,000 15,000 None (*)% Nil (*)% 15876-114 Avenue Surrey, BC V4N 1R6 Sikolya, Norbert 12,000 12,000 None (*)% Nil (*)% 6772 Radisson Street Vancouver, BC V5S 3W9 Sires, Steven R. 1,000 1,000 None (*)% Nil (*)% 19300 Grannis Rd. Bothwell, WA 98012-6949 Stevens, Michael 5,000 5,000 None (*)% Nil (*)% 643 Lyon St. San Fransisco, CA 94117 Stewart, Doug 2,000 2,000 None (*)% Nil (*)% 410-1975 Pendrell St. Vancouver, BC V6G 1T6 Stieler, Linda 19,998 19,998 Mother of (*)% Nil (*)% 311-1515 West 2nd Ave Richard Stieler, Vancouver, BC Founder V6J 5C5 Stobbe, Alvin 6,000 6,000 None (*)% Nil (*)% 18171-60th Ave Surrey, BC V3S 1V7 Stobbe, Ken 54,000 54,000 None (*)% Nil (*)% 18171-60 Ave Surrey, BC V3S 1V7 Strath, Mark 26,000 26,000 None (*)% Nil (*)% 5312 Central Ave. Delta, BC V4K 2H3 Swartile, Shirley 4,000 4,000 None (*)% Nil (*)% 1209 Jervis Street, Apt 101 Vancouver, BC V6B 2C9 16 Taylor, David 2,000 2,000 None (*)% Nil (*)% 175 Mountain Park Drive Salt Spring Island, BC V8K 1G3 Taylor, Rick (Bromac) 10,000 10,000 None (*)% Nil (*)% 658 Lambert Avenue Nanaimo, BC V9R 3M8 Taylor, Ryder 3,333 3,333 None (*)% Nil (*)% #2-6554 Balsam Way Whistler, BC V0N 1B6 Tenisei, Jason 8,000 8,000 None (*)% Nil (*)% Apt. 119-1741 West 10th Ave Vancouver, BC V6J 2A5 Tersignj, Enzo 10,000 10,000 None (*)% Nil (*)% 10-6320 Lormer Rd Whistler, BC V0N 1B6 Tesar, Christopher 4,666 4,666 None (*)% Nil (*)% 6305 Wedge Lane Whistler, BC V0N 1B6 The Terrance E. Lee Trust 100,000 (20) 100,000 None (*)% Nil (*)% 3333 Lone Hill Lane Encinitas, CA 92024 Thompson, David 220,000 220,000 Consultant 1.59% Nil (*)% 321 E. 22nd St., Apt. #6R New York, NY 10010 Thompson, Nancy 10,000 10,000 None (*)% Nil (*)% 236 Snowy Egret Lane Thorofare, NJ 08086 Thompson, Russell 10,000 10,000 None (*)% Nil (*)% #102-4000 Whistler Way Whistler, BC V0N 1B4 To, Johnny 20,000 20,000 None (*)% Nil (*)% 4467 Camridge St. Burnaby, BC V5C 1H6 Tolton, Alice 4,000 4,000 None (*)% Nil (*)% 10-6320 Lorimer Rd. Whistler, BC V0N 1B6 Tolton, Michael 29,000 29,000 None (*)% Nil (*)% 10-6320 Lorimer Rd. Whistler, BC V0N 1B6 Townsend, Nancy 2,000 2,000 None (*)% Nil (*)% #10 - 4965 47th Ave. Delta, B.C. V4K 4N9 ULF K Ottho Personnal Law 5,000 (21) 5,000 None (*)% Nil (*)% 4873 Delta Street Delta, BC V4K 2T9 Underwood, Kim 16,666 16,666 None (*)% Nil (*)% 3129 West 16th Ave. Vancouver, BC V6K 3C9 17 Urrea, Andre 34,000 34,000 None (*)% Nil (*)% 1433 Emerson Way North Vancouver, BC V7H 2B9 Urrea, William 25,000 25,000 None (*)% Nil (*)% 1433 Emerson Way North Vancouver, BC V7H 2B9 Vacariello, Jason 3,000 3,000 None (*)% Nil (*)% 969 Congress Street Costa Mesa, CA 92627 Valencia, Ricardo 2,000 2,000 None (*)% Nil (*)% Pasage Machu Picchu R-1-27 Urb. Ttio Cusco - Peru Vance, Melany 2,000 2,000 None (*)% Nil (*)% 3306 Panarama Ridge Whistler, BC V0N 1B3 Varney, David 6,666 6,666 None (*)% Nil (*)% 1324 Flynn Cres Coquitlam, BC V3E 1Y2 Vassos, Don 43,333 43,333 None (*)% Nil (*)% 600-1111 West Georgia Street Vancouver, BC V6E 4M3 Versafab Corporation 30,000 (22) 30,000 None (*)% Nil (*)% 15919 S. Broadway St. Gardena, CA USA 90248 Vitullo, Jason 90,000 90,000 None (*)% Nil (*)% P.O. Box 127063 San Diego, CA 92112 Vitullo, Suzanne 5,000 5,000 None (*)% Nil (*)% P.O. Box 283 Clancy, MT 59634-0203 Vitullo-Ranger, Kim 4,400 4,400 None (*)% Nil (*)% 1531 Knight Street Helena, MT 59601 Voyer, Roberta 5,000 5,000 None (*)% Nil (*)% Apt 3-314 Esmond Avenue Burnaby, BC V5C 4J5 Walton, Judy 30,000 30,000 None (*)% Nil (*)% 533 Hosmer Street El Cajon, CA 92020-2739 Wasyliw, Jeffrey 2,000 2,000 None (*)% Nil (*)% 3306 Panarama Ridge Whistler, BC V0N 1B3 West, Robert 4,000 4,000 None (*)% Nil (*)% 8719 Wedgeview Place Whistler, BC V0N 1B8 Whiteside, Rob 100,000 100,000 None (*)% Nil (*)% P.O. Box 346 Corozal Town, Belize Wilson, Mark 20,000 20,000 None (*)% Nil (*)% 3728 Beach Ave. Roberts Creek, BC V0N 2W2 18 Wolfson, Arnold 1,000 1,000 None (*)% Nil (*)% 350 Prospect Street Norwood, MA 02062 Wong, Pat 10,000 10,000 None (*)% Nil (*)% 8407 165th Street Surrey, BC V4N 3H3 Woolgar, Derek 25,000 25,000 None (*)% Nil (*)% Box 5538 Squamish, BC V0N 3G0 Woolgar, Sharon 20,000 20,000 None (*)% Nil (*)% 2-840 West 1st Avenue Vancouver, BC V6K 1H4 Wright, David John 20,000 20,000 None (*)% Nil (*)% 885 Erickson Road, Comp 7, Site 1 Pemberton, BC V0N 2L1 Yoxall, Chris 10,000 10,000 None (*)% Nil (*)% #403-31 Reliance Crt. New Westminster, BC V3M 6C6 (*) Represents less than 1% of our outstanding shares of common stock. (1) These figures includes all of the shares of our common stock beneficially owned by such individual. (2) This represents the percentage of shares of our common stock owned by the security holder as at September 30, 2004. (3) Individual security holders may or may not choose to sell some or all of their securities at their discretion any time after the registration is complete. These figures assume the sale of all of the shares offered by the selling security holders. (4) Gene Drennan Ltd., of Victoria, B.C., Canada, the court appointed receiver of 636007 B.C. Ltd. has voting and investment control over these shares of our common stock. (5) Darnell Getejane of Port Moody, B.C., Canada, has voting and investment control over these shares of our common stock. (6) This figure includes 10,000 shares of our common stock held directly by Brian Birch and 10,000 shares of our common stock held by Cheryl Birch, Brian Birch's wife. (7) This figure includes 10,000 shares of our common stock held directly by Cheryl Birch and 10,000 shares of our common stock held by Brian Birch, Cheryl Birch's husband. (8) This figure includes 40,000 shares of our common stock held directly by Connie Bridge and 40,000 shares of our common stock held by Daryl Bridge, Connie Bridge's husband. (9) This figure includes 40,000 shares of our common stock held directly by Daryl Bridge and 40,000 shares of our common stock held by Connie Bridge, Daryl Bridge's wife. (10) This figure includes 100,000 shares of our common stock held directly by Michael Guichon, 100,000 shares of our common stock held by Susan Guichon, Michael Guichon's wife, and 100,000 shares of our common stock held by Mike Guichon Ltd., of which Michael Guichon has voting and investment control over such securities. (11) This figure includes 100,000 shares of our common stock held directly by Susan Guichon, 100,000 shares of our common stock held by Michael Guichon, Susan Guichon's husband, and 100,000 shares of our common stock held by Mike Guichon Ltd., of which Michael Guichon has voting and investment control over such shares of our common stock. (12) John Maciejewski, of Whiterock, B.C., Canada, has voting and investment control over these shares of our common stock. (13) Kieth Lane of Surrey, B.C., Canada, has voting and investment control over these shares of our common stock. (14) This figure includes 50,000 shares of our common stock held directly by John Maciejewski and 12,000 shares of our common stock held by Jomac Holdings Ltd., of which John Maciejewski has voting and investment control over such shares of our common stock. (15) This figure includes 40,000 shares of our common stock held directly by Christine Mascitti and 40,000 shares of our common stock held by Michael Mascitti, Christine Mascitti's husband. (16) This figure includes 40,000 shares of our common stock held directly by Michael Mascitti and 40,000 shares of our common stock held by Christine Mascitti, Michael Mascitti's husband. (17) This figure includes 100,000 held directly by Mike Guichon Ltd., of which Michael Guichon has voting and investment control over such shares of our 19 common stock, 100,000 shares of our common stock held by Michael Guichon and 100,000 shares of our common stock held by Susan Guichon, Michael Guichon's wife. (18) John Guadagno, of Burnaby, B.C., Canada, has voting and investment control over these shares of our common stock. (19) R. A. Montgomery, of Nassau Bahamas, has voting and investment control over these shares of our common stock. (20) Terrance E. Lee, of Encinitas, California, has voting and investment control over these shares of our common stock. (21) Ulf K. Ottho, of Delta, B.C., Canada, has voting and investment control over these shares of our common stock. (22) Joe Flynn, of Gardena, California, is the president of Versafab Corporation and has voting and investment control over these shares of our common stock.
Plan of Distribution. We are registering 5,630,636 shares of our common stock covered by this prospectus on behalf of the selling security holders. These 5,630,636 shares of our common stock are already issued and held by the selling security holders. We will not receive any proceeds from the sale of any shares by the selling security holders. We will pay the costs and fees of registering our common stock, but the selling security holders will pay any brokerage commissions, discounts or other expenses relating to the sale of their common stock. The shares owned by the selling security holders are being registered pursuant to Rule 415 of the General Rules and Regulations promulgated under the Securities Act of 1933, which Rule pertains to delayed and continuous offerings and sales of securities. In regard to the selling security holder's shares offered under Rule 415, we have made certain undertakings in Part II of the registration statement of which this prospectus is a part pursuant to which, in general, we have committed to keep this prospectus current during any period in which offers or sales are made pursuant to Rule 415. Sales of the securities by affiliates of P--CE are subject to the volume limitations imposed by Rule 144 even after registration of such securities. An affiliate who holds unrestricted securities may sell, within any three month period, a number of our shares that does not exceed the greater of one percent of the then outstanding shares of the class of securities being sold or, if our securities are trading on the NASDAQ Stock Market or an exchange at some time in the future, the average weekly trading volume during the four calendar weeks prior to such sale. The selling security holders will offer and sell the shares of outstanding common stock at a price of $0.50 per share until our securities are quoted on the OTC Bulletin Board (or other specified market) and thereafter at prevailing market prices or privately negotiated prices. In effecting sales, brokers and dealers engaged by the selling security holders, may arrange for other brokers or dealers to participate. Brokers and dealers may receive commissions, discounts or concessions for their services from the selling security holders or, if any such broker-dealer acts as agent for the purchaser of such shares, from such purchaser, in amounts to be negotiated. These commissions or discounts are not expected to exceed those customary in the types of transactions involved. The selling security holders and any broker-dealer or agent involved in the sale or resale of the common stock may qualify as "underwriters" within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended, and a portion of any proceeds of sale and the broker-dealers' or agents' commissions, discounts, or concessions may be deemed to be underwriters' compensation under the Securities Act. In addition to selling their shares of our common stock under this prospectus, the selling security holders may transfer their common stock in other ways not involving market makers or established trading markets, including directly by gift, distribution, or other transfer; and the sale of such shares may be made by such transferees in the public securities markets by delivery of this prospectus to the buyers in such transactions. However, if the transferee received the shares of our common stock subsequent to the effective date of this registration statement, then such transferee must be named as a selling security holder in a prospectus supplement. We have informed the selling security holders that the anti manipulation provisions of Regulation M promulgated under the Securities Exchange Act of 1934, as amended, may apply to the sales of their shares offered by this prospectus, and we have also advised the selling security holders of the 20 requirement for delivery of this prospectus in connection with any sale of the common stock offered by this prospectus. Legal Proceedings. P--CE entered into a Memorandum of Understanding with Personal Computing Environments Korea, Inc., a Korean company, on September 17, 2003 and an International Distribution Agreement on September 18, 2003. Personal Computing Environments Korea, Inc. has filed a complaint (the "Complaint") against P--CE on March 9, 2004 in the Superior Court of California, County of Orange, Central Justice Center. The Complaint was served on P--CE on March 23, 2004 at the Company's registered agent office in the State of Nevada. The Complaint alleges the following causes of action: (i) Fraud & Concealment; (ii) Negligent Misrepresentation; (iii) Breach of Contract; (iv) Breach of Contract [UCC ss. 2306]; (v) Unlawful Business Practices; and (vi) False Advertising. Personal Computing Environments Korea, Inc. is claiming damages in excess of $400,000.00 and exemplary and punitive damages. As a result of the Complaint filed by Personal Computing Environments Korea, Inc., P--CE has filed an answer to such Complaint as well as a cross-complaint (the "Cross-Complaint") against Personal Computing Environments Korea, Inc. on June 1, 2004. The Cross-Complaint alleges the following causes of action: (i) Breach of Contract; (ii) Recission - Fraud; (iii) Rescission - Lack of Consideration; (iv) Recission - Failure of Consideration; (v) Fraud - Intentional Misrepresentation; (vi) Negligent Misrepresentation; (vii) Intentional Interference with Business and Contractual Relations; (viii) Intentional Interference with Prospective Economic Advantage; (ix) Trade Libel; and (x) Temporary Restraining Order and Permanent Injunction. The Cross-Complaint prays for the following: (i) a Temporary Restraining Order, Preliminary Injunction and Permanent Injunction against the cross-defendants; (ii) Rescission of the Memorandum of Understanding and International Distribution Agreement; (iii) special damages in an amount to be proven at trial; (iv) general damages in an amount to be proven at trial; (v) punitive and exemplary damages in an amount to be proven at arbitration; (vi) prejudgment interest; (vii) attorney's fees and costs of suit; and (viii) such other relief which the Court deems just and proper. This legal matter centers around an invention owned by P--CE, which is a "personal computing environment" that integrates a balanced ergonomic simulator with a series of computer monitors and hand-operated controls (the "product"). Personal Computing Environments Korea, Inc. filed a complaint alleging that P--CE failed to secure the patent for the product (as represented) and failed to deliver ordered products (as promised). Personal Computing Environments Korea, Inc. seeks damages relating to their start-up investment for the product, their expenses for advertisement, their expenses for trade-shows, and punitive damages for purported fraud committed by P--CE's principals, Allan Quattrin and Ben Moglin. P--CE denies Personal Computing Environments Korea, Inc.'s claims in their entirety. P--CE filed a cross-complaint for breach of contract and fraud relating to Personal Computing Environments Korea, Inc.'s failure to comply with its Distributor Agreement, including meeting the minimum sales targets. P--CE made a significant investment in Personal Computing Environments Korea, Inc., in terms of technical support, product testing and refining, marketing and securing a manufacturer. P--CE seeks damages relating to its expenses, as well as for lost sales. This action is still in its infancy. Individual defendant Ben Moglin has not yet been served, and there is a question as to whether he will be dismissed from the lawsuit altogether. Personal Computing Environments Korea, Inc. has obtained a second law firm to represent it. Discovery is ongoing, but it is anticipated that P--CE will take at least three depositions (Personal Computing Environments Korea, Inc.'s, and its designated representatives, Jimmy Kim and Ben Hynes) and that Personal Computing Environments Korea, Inc. will take at least two depositions (P--CE's, Al Quattrin and, if available, Ben Moglin). We believe the above mentioned lawsuit is without merit and we intend to vigorously pursue our defense of the claim. We are not aware of any proceedings being contemplated by any governmental authority. Directors, Executive Officers, Promoters and Control Persons. Directors and Executive Officers The following table sets forth, as of September 30, 2004, the name, age and position of our directors and executive officers. 21 NAME AGE OFFICES HELD - --------------- ----- ---------------------------------- Allan Quattrin 36 CEO, President, CFO and Director Bruce Sheppard 58 COO, Secretary and Director The Directors hold their positions until the next annual general meeting of P--CE's shareholders or until their successors are duly elected and qualified. P--CE's executive officers serve at the pleasure of the Board of Directors. The backgrounds of our directors and executive officers are as follows: ALLAN QUATTRIN, Vancouver B.C.: Mr. Quattrin has been the President, CEO, CFO and a director of P--CE since July 24, 2002. Mr. Quattrin has worked For the past 10 years in the financial investment and venture capital market, and has a successful track record taking start-up companies public. Since graduating with a Commerce Degree (honours) from the University of Manitoba in 1994, Mr. Quattrin has been an investment advisor for such Notable firms as Merrill Lynch, Royal Bank of Canada, and as a branch manager for Global Securities. BRUCE SHEPPARD, Indio, CA: Mr. Sheppard has been the COO, Secretary and a director of P--CE since June 15, 2004. Mr. Sheppard has 30 years experience in furniture manufacturing and distribution. A committed and successful entrepreneur, he has created, managed, and built three profitable businesses. As Chief Operations Officer, his vast experience with manufacturing in China paves the way for P--CE to realize significant cost savings and higher profit margins in manufacturing, sourcing and distribution efficiencies, that are expected to help enable the Company to expand rapidly to anticipated demand. Mr. Sheppard attended Eastern Michigan University for two years in the Business Program before being hired by General Electric. Significant Employees There are no other "significant" employees other than those mentioned. Family Relationships There are no family relationships between any of our directors or officers Involvement in Certain Legal Proceedings There are no legal proceedings pending, or that have occurred in the past five years that are material to an evaluation of the ability or integrity of any persons listed herein as an Officer, Director, or significant employee, except for the recent Complaint filed against Allan Quattrin and P--CE by Personal Computing Environments Korea, Inc. on March 9, 2004 in the Superior Court of California, County of Orange, Central Justice Center. For more information on this Complaint see "Legal Proceedings" hereinabove. Security Ownership of Certain Beneficial Owners and Management. Security Ownership of Certain Beneficial Owners The following table sets out all persons (including any "group", but excluding management) who is known to us to be the beneficial owner of more than 5% of our outstanding common shares. Name and address of Number of Percentage of beneficial owner shares owned(1) shares owned(2) - ------------------------- ----------------- ---------------- RAD Laboratories Inc. (3) 3,000,000 21.74% P.O. Box 346 Corozal Town, Belize 22 Richard Stieler 1,350,000 9.78% P.O. Box 48 Rin Con de Guayabitos Nayarit, Mexico (1) These figures include all of the shares of our common stock beneficially owned by such person as of September 30, 2004. (2) This represents the percentage of the shares of our common stock owned by the security holders as of September 30, 2004. (3) Mr. Benjamin Moglin of Corozal Town, Belize, has voting and investment control over these shares. Security Ownership of Management The following table sets out the security ownership of all of our directors and officers and assumes the exercise of each directors' and officers' stock options, if any, which have vested and are exercisable within 60 days. Name and address Number of Percentage of of beneficial owner shares owned(1) shares owned(2) - -------------------- ----------------- ---------------- Allan Quattrin 3,516,666 (3) 25.49% 1066 W. Hastings St. Suite 2300 Vancouver, B.C. Canada, V6E 3X2 Bruce Sheppard 300,000 2.17% 45630 Citrus Street, Suite E Indio, California 92201 Executive Officers and 3,816,666 27.66% Directors as a Group (2 persons) (1) This represents the number of the shares of our common stock owned by the security holders as of September 30, 2004. (2) This represents the percentage of the shares of our common stock owned by the security holder as at September 30, 2004. (3) This figure includes 1,500,000 shares which are directly owned by Allan Quattrin and 2,016,666 shares that are owned by Evolution Man Inc., of which the sole shareholder is the Onyx Trust, and which Allan Quattrin is the beneficiary. Changes in Control There are no arrangements that management is aware of that may result in a change in control of the Company. Description of Securities. Description of Securities We are authorized to issue 200,000,000 shares of our common stock, par value $0.0001 and 200,000,000 shares of our preferred stock, par value $0.0001. The following is only a summary of provisions of the shares of our common stock and preferred stock. It is not complete and may not contain all the information that an investor should consider before investing in shares of our common stock. One should carefully read our Articles of Incorporation and By-laws, which are included as exhibits to the registration statement containing this prospectus. Common Stock As of September 30, 2004, we had 156 shareholders of record with 13,797,302 shares of our common stock issued and outstanding. The holders of our common stock are entitled to one vote per share for each share held on all matters to be voted on by shareholders, including election of directors. A quorum for a meeting is constituted by the holders of a majority of the shares entitled to 23 vote at such meeting that are represented in person or by proxy. The holders of our common stock are entitled to receive dividends when, as and if declared by our board of directors out of legally available funds. In the event our company is liquidated, dissolved or wound up, the holders of our common stock are entitled to share pro-rata in all assets remaining available for distribution to them after payment of all liabilities. The holders of our common stock do not have any preemptive rights. On August 15, 2002, P--CE received a subscription agreement for 500,000 shares of common stock of P--CE at $0.0001 per share from Douglas Buhler, a director of P--CE at that time. However, the subscription agreement was never accepted by P--CE and Mr. Buhler never paid for the 500,000 shares. Inadvertently P--CE issued a certificate for 500,000 shares to Mr. Buhler. Since the shares were not fully paid at the time of issue, P--CE decided to cancel share certificate #3 registered in the name of Douglas Buhler and returned such shares to P--CE's treasury. Mr. Buhler, however, has never returned share certificate #3 to us. All share figures in this prospectus reflect the cancellation of the shares that were improperly issued to Mr. Buhler. There can be no assurance, however, that Mr. Buhler will not assert rights to such shares. Preferred stock We are authorized to issue 200,000,000 shares of preferred stock, par value $0.0001; however, at this time, we have not issued any shares of preferred stock. Stock Options As of September 30, 2004, there are no outstanding stock options owned by anyone. Additional Information Describing Securities Reference is made to our articles of incorporation and by-laws which are available for inspection at our offices or which can be viewed through the EDGAR data base at http://www.sec.gov as exhibits to this registration statement on Form SB-2. Penny Stock Regulation Penny stocks generally are equity securities with a price of less than $5.00 per share other than securities registered on certain national securities exchanges or listed on the NASDAQ Stock Market, provided that current price and volume information with respect to transactions in such securities are provided by the exchange or system. The penny stock rules impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a disclosure schedule prescribed by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. Because of these penny stock rules, broker-dealers may be restricted in their ability to sell our common stock. The foregoing required penny stock restrictions will apply to our common stock until our common stock reaches and maintains a market price of $5.00 or greater. Interest of Named Experts and Counsel. There are no agreements contingent upon the filing of this registration statement, and no one will receive a direct or indirect interest in us as a result of this registration of securities. The validity of the issuance of the shares of our common stock offered hereby has been passed upon for us by The Law Office of Reed & Reed, P.C. of 4450 Arapahoe Ave., Suite 100, Boulder, Colorado 80303 The audited financial statements of P--CE as at August 31, 2003 and 2002, appearing in this prospectus and registration statement have been prepared by Mendoza, Berger & Company, LLP, as set forth in their report thereon appearing 24 elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The unaudited financial statements for the nine month periods ended May 31, 2004 and May 31, 2003, appearing in this prospectus and registration statement have been prepared by us. Disclosure of Commission Position on Indemnification for Securities Act Liabilities. According to Section 78.7502 of the Nevada Revised Statutes, a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorney's fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful. The directors may cause us to purchase and maintain insurance for the benefit of any person who is or may be entitled to indemnification as mentioned above against any expense or liability from which he is or may be so entitled to be indemnified. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers, or controlling persons of P--CE pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by a director, officer or controlling person of P--CE in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. Certain Relationships and Related Transactions. There are no transactions or proposed transactions during the last two years to which we were a party, in which any director, executive officer, or a family member of any director or executive officer had or is to have a direct or indirect material interest exceeding $60,000, except for the following: (i) the acquisition of the intellectual property rights to the workplace environment technology (the "Technology") from Benjamin Moglin, a previous director of P--CE, in exchange for 2,000,000 shares of our common stock, which Technology is to be used by us in our development of our workplace environment product; (ii) the assignment agreement entered into between Benjamin, Moglin, Richard Stieler, Allan Quattrin and P--CE, dated April 2004, whereby Benjamin Moglin, Richard Stieler and Allan Quattrin assigned all of their right title and interest in and to the invention known as the Peripheral Support Apparatus and Method (the workplace environment technology mentioned in (i) immediately above) for which an application has been filed in the United States Patent and Trademark Office as a provisional application on November 15, 2002 and assigned serial number 60/426,447, and replaced on November 14, 2003 and assigned serial number 10/712,395, to P--CE for the consideration of $1.00 and other good and valuable considerations, the receipt of which was acknowledged by each of the parties; (iii) a management agreement (the "Management Agreement") entered into between P--CE and Mr. Quattrin, dated August 1, 2002, whereby Mr. Quattrin provides management services as the President and CEO of P--CE in exchange for $12,500 per month (the "Base Fee"). The Management Agreement includes a termination fee, where in the event that the Management Agreement is terminated, or fails to renew due to failure of 25 agreement after the issuance of a non-renewal notice, or otherwise, Mr. Quattrin shall receive a termination fee equal to the sum of: (a) buy-out of any outstanding stock options for a price equal to the fair market value of P--CE's shares, determined for the 30 days preceding termination and as determined in accordance with accounting principles, multiplied by the number of shares under option and less the exercise price thereof or, at the optionee's election and subject to any required regulatory approval, extension of the option for a period of two (2) years after termination or, at the optionee's election, the immediate vesting and exercise of all granted options and the immediate right to employ `net exercise' privileges in accordance with the practice of U.S. companies or, if established in accordance with P--CE's stock option plan, in accordance with such plan; plus (b) the greater of: (I) the aggregate remaining Base Fee for the unexpired remainder of the Term; or (II) an annual Base Fee (Base Fee multiplied by twelve) plus one month of Base Fee for each year, or portion thereof, served after the Effective Date; but that such aggregate sum of this section (b) (therefore not including section (a) amounts) shall not exceed the Base Fee multiplied by 24. In addition, the Management Agreement includes a disability provision, where if Mr. Quattrin is unable to continue an employment, whether through disability or otherwise, and Mr. Quattrin consequently is unable to provide the services adequately, then P--CE shall fund a disability plan which shall continue for a period of two (2) years of seventy five (75%) percent of the average Base Fee and Incentive Fee (to be defined hereinbelow) of the two years preceding termination ("Disability Fund Sum"). If physically capable, Mr. Quattrin shall be made available for consultation for up to ten (10) hours per week, non-cumulative, at no cost to P--CE. For additional hours per week, Mr. Quattrin shall be paid at a per diem rate (any time spent in a day shall be deemed to be a full day) equal to the per annum Disability Fund Sum divided by 260. Furthermore, the Management Agreement includes a provision for a Base Fee Adjustment, where the Base Fee may be renegotiated annually at the request of either party. In the event that the parties cannot agree then the Base Fee shall be increased by the greater of 5% or the amount of the cost of living index increase as published by the U.S. Federal government in its final annual publication of such reports. The Base Fee may be temporarily adjusted in the event that sales of P--CE in any quarter are less than operating costs of P--CE and then at the end of the subsequent quarter should negative cash flow be still occurring Mr. Quattrin's Base Fee shall, together with other management personnel subject to the same formula, be reduced pro rata to reduce costs to balance incoming revenue and outgoing expense but only up to a 50% reduction of the Base Fee. The reduction of Base Fee shall be ameliorated upon P--CE's revenue increasing sufficiently to pay some or all deferred Base Fee (the Base Fee payment shall increase to its normal rate in direct proportion to positive cash flow). Any reduction of Base Fee shall be treated as a shareholder loan, without interest, and shall be paid from profit before dividends. Moreover, the Management Agreement includes a provision for an incentive fee, where in addition to the Base Fee, Mr. Quattrin shall also receive an incentive fee (the "Incentive Fee") which shall be no less than that established by the Board for other management. For all management, Incentive Fees shall not exceed 20% of before tax profit of P--CE and shall have an aggregate maximum `cap' for all management of one million dollars ($1,000,000). Finally, the Management Agreement includes a provision for vacation, where Mr. Quattrin shall be entitled to up to four weeks paid vacation per year; and Mr. Quattrin was paid $22,500 in the fiscal year ended 2003 and has received approximately $28,000 for the nine month period ended May 31, 2004. Mr. Quattrin has agreed in a letter to the Company to not accrue any compensation owing to him under the Management Agreement up to August 31, 2004. (iv) a consulting agreement (the "Consulting Agreement") entered into between P--CE and Benjamin Moglin, dated November 1, 2003, whereby Mr. Moglin provides consulting services designed to assist P--CE in the area of computer technology, ergonomics and biomechanics to help develop the business of P--CE in exchange for $2,500 per month. The Consulting Agreement is for a term of three months, with such term to be extended on a month to month basis at the sole discretion of the Board of Directors of P--CE. On July 24, 2002, we issued 4,500,000 shares of common stock to Mr. Allan Quattrin, Mr. Benjamin Moglin and Mr. Richard Stieler, at a purchase price of $0.0001 per share for total gross proceeds in cash of $450.00. On July 30, 2002, RAD Laboratories Inc., a Belize company beneficially owned by Mr. Benjamin Moglin, subscribed for 2,000,000 shares of common stock at a deemed price of $0.0001 as consideration for the transfer of the intellectual property rights to the workplace environment technology which is to be used by us in our development of our workplace environment product. 26 On August 15, 2002, Mr. Allan Quattrin subscribed for 2,000,000 shares of common stock at a purchase price of $0.0001 per share for total gross proceeds in cash of $200.00. Description of Business. P--CE was incorporated under the laws of the State of Nevada on November 8, 2001. The current corporate structure is a private company. We are an innovative start-up company that has developed an affordable and high-design ergonomic computer workstation for professional and consumer markets. With a rapid growth of the information industry, more jobs and tasks now revolve around the computer-monitor-keyboard setting, and the increasing amount of time spent in that setting has dramatically hastened the onset of injuries associated with repetitive motion injuries and poor workspace design. Consumer awareness, acceptance and demand for solutions to these problems is just beginning to grow. On March 19, 2004, we entered into a purchase and sale agreement (the "Purchase and Sale Agreement") with PC Frame, Inc., a Korean company, whereby we agreed to purchase 20 personal computing environment unit setting frames (each a "PCE Frame") from PC Frame, Inc., with 5 modifications to be made to 19 of the PCE Frames for a total purchase price of $24,520.00. On March 29, 2004, we entered into a purchase and sale agreement (the "Purchase and Sale Agreement") with PC Frame, Inc., a Korean company, whereby we agreed to purchase 25 PCE Frames from PC Frame, Inc., for a total purchase price of $28,603.00. On August 16, 2004, we entered into a supply contract agreement (the "Supply Contract") with True Corporation Public Company Limited ("True"), a company incorporated under the laws of Thailand, whereby we have agreed to supply, install and assembly train True with twenty-five personal computing environment units (each a "PCE") in accordance with the terms of the Supply Contract in exchange for: (i) True paying us $11,434.50 within 15 days of the date of issuance of a purchase order by True for 3 prototype PCE's that have already been delivered to and accepted by True; (ii) True issuing to us a letter of credit in the amount of $37,268.00, which may be fully drawn against upon proper presentment of a bill of lading, a commercial invoice and a certificate of origin with respect to the frames of the PCE; (iii) within 30 days after the date of acceptance of the PCE's by True in accordance with the terms of the Supply Contract, pay us $46,585.00; and (iv) within 30 days after 12 months from the date of acceptance of the PCE's by True in accordance with the terms of the Supply Contract, pay us $9,317.00. The total consideration expected to be received by us in accordance with this Supply Contract is $105,875.00. Description of the Product Our personal computing environment (the "PCE") product aligns people in comfortable and correct ergonomic position, allows them to adjust the monitors and technologies around them, and thereby reduces susceptibility to musculoskeletal disorders and repetitive strain injuries that result from poor workstation or extended use. Starting from a striking modular frame design, the PCE can be personalized and customized for any user or user group, from frame color and type of chair, to displays, sound systems and desk/shelving options. The PCE's are fully adjustable - from monitor and chair to keyboard support and footrest - and wheels can be added for mobility. The frame of the PCE is made of enamel-coated steel, weighing approximately 160 pounds (including chair), for durability and stability. The frame design is expandable, designed to hold anywhere between one and eight monitors. It can support up to 200 pounds in monitor weight. Recognizing the significant investment businesses and consumers may have in their own devices, we sell our environments with or without technology components, like computers and monitors, so standard hardware and peripherals can be easily installed by the buyer. Wired or wireless, the cable management design makes it simple for users to add or subtract new technologies, entertainment devices and communications products. We are developing our own branded, high-powered computers and displays, as well as a full line of accessories (shelving, desk space, coffee holders, etc.) for intended sale by the first quarter of 2005. We believe this strategy will enable us to capture higher margins rather than selling partner products at lower margins, to build our brand portfolio and provide buyers with robust options to expand and personalize their workspace. Product Sourcing As part of our "best brands"strategy to offer exciting customization choices for customers, P--CE expects to source its ergonomic and technology/ electronic products from leading suppliers in the United States and Korea: Ergonomic Products: P--CE purchases from Humanscale, the U.S. manufacturer of innovative ergonomic office products, two award-winning products - the Freedom Chair, and M7 monitor arms. These components provide buyers with complete adjustability within the PCE. Computer: Initially, P--CE expects to source its computers from leading PC makers, such as Alienware, the largest maker of gaming PC's. We intend to introduce our own line of high performance branded computers in the first quarter of 2005. 27 Computer Components: P--CE has struck alliances with two leading suppliers of semiconductors for its computers in order to offer customers the most powerful processors on the market: Intel Corporation and Advanced Micro Devices (AMD). Following in the successful debut of P--CE at Korea Comdex, AMD Korea approached P--CE and asked us to participate in the launch of their new 64-bit processor, the fastest processor to date. Displays: P--CE currently sells monitors from industry leaders such As Viewsonic, but we intend to soon build our own branded monitors and displays. Future Products P--CE intends to develop and maintain market leadership through aggressive R&D and continuous product improvement based on customer feedback, ongoing assessment of market needs, and product evolution concepts from leading industrial designers and engineers in the United States and Korea. Future P--CE product development is anticipated to focus on using the PCE product as a centerpiece for new computing, display, entertainment and communication technologies that advance the way in which people work, play and exchange information. For example, P--CE intends to showcase a 3D gaming unit at the Korea Electronic Show in October of 2004. P--CE expects the 3D gaming market to boom in the near future, and P--CE intends to be at the forefront of this development, with alliances underway with Pavonine for 3D monitors and AMD and Intel for high-speed processors. Pavonine approached P--CE about a launch partnership because our environments capture the human head in an optimal ergonomic position for 3D applications. For personal entertainment (video gaming on the PC or console, watching DVD's and burning music), P--CE intends to look to integrate audio- visual devices and systems that deliver exciting and immersive entertainment experiences for consumers. Product Patents A U.S. Provisional Application for a utility patent for the PCE unit was submitted by the law firm of Smart & Biggar/Featherstonhaugh on November 15, 2002. This submission of a Provisional Application effectively established a priority date for patent protection against similar technology subsequent to the filing date. A preliminary search conducted through the University of British Columbia was unable to establish the existence of any similar technology registered for patents prior to the submission date of the Provisional Applications. In addition, a US Design Patent Application was also submitted to the U.S. Patent Office on November 15, 2002. After an obligatory 12-month waiting period, P--CE filed for a PCT Application on November 14, 2003, thus securing patent protection for the design in the U.S. and more than 100 other countries. P--CE was issued a PCT number of PCT\CA03\01777 on November 14, 2003. Competition P--CE has created the "personal computing environment" category. There is no clear competition that integrates technology and electronics into a computing workspace. Currently, ergonomic solutions are offered primarily by furniture and ergonomic office products companies, such as Humanscale, which is a key supplier and partner of P--CE. Other leading office suppliers of ergonomic furniture include Herman Miller, Inc., and Biomorph Interactive Desks. Microsoft had unsuccessfully attempted to integrate technology into furniture, with its La-Z-Boy Explorer over three years ago, and a concept product from a collaboration between MIT, Philips Electronics, Nokia, Hewlett- Packard, and Acer America drew media attention, but never made it to market. Even though there is currently no clear competition to our PCE product, other leading office suppliers that are well financed may produce a "knock off" product design until our patents are issued and devote significant financial resources to build a dominant market profile and sales leadership. Strategy P--CE intends to concentrate on building rapid awareness and demand for its products in regions, countries and target markets in which technology adoption is high and profitable, initially concentrating on the United States and Asian countries. 28 We intend to prove the productivity benefits and increases from our ergonomic-designed workstation and demonstrate how they can be adapted for wide range of industries and applications. Through trade shows, research and demonstrations, we have presented the PCE to multiple potential target markets for which the PCE presents an innovative and logical solution and will focus on selling to those markets. From a product development perspective, P--CE intends to partner with leading industrial designers and engineers, as well as best brands in comfort, computing, display and entertainment technologies to incorporate their ideas and products so we continuously provide exciting products and options for our target markets. P--CE intends to sell and market its product through resellers who distribute to our primary target markets, beginning in the United States, Korea, Japan and Thailand. Our secondary distribution phase is expected to focus on securing reseller/distribution agreements in European Union. P--CE's Target Markets Markets segments in which P--CE expects to concentrate its sales and marketing efforts are: Corporate enterprise, including call centers: The two most critical business issues that corporations deal with are the health and productivity of their employees. P--CE provides a long overdue solution for industries and individuals that have a high incidence of workstation-induces injuries and disorders, including repetitive strain injuries and cumulative trauma disorders. In a call center environment, corporations that invest in the PCE provide their employees with the most advanced ergonomic workstation available, one that also offers space utilization benefits. Gaming: LAN and Gaming Centers across the world offer significant volume sales opportunities. With surround sound speakers and a 3-monitor "surround sight" option available, gamers can finally get a true immersion experience as well as correct ergonomics alignment for extended play. PCE's can accommodate both gaming consoles as well, Sony Playstation and X-Box, for a complete gaming system. Small Office/Home Office (SOHO): The mega-trend toward tele- commuting and home-based business has led to explosive growth in the home technology market. The number of home offices numbers more than 36 million and is growing at 15% per year. P--CE has the potential to become the digital epicenter of the home office, by converging the computer, entertainment, information, home control and display technologies into one networked "Digital Home Command Center." Financial brokerages: With a scalable design that can hold four or more LCD monitors, P--CE has attracted interest from the financial brokerage resellers where multi-monitor configurations and instantaneous access to information can be delivered in correct ergonomic positioning. Radiology: P--CE will soon participate in an analytical study with General Electric Medical Systems at UCLA Medical Center to measure the potential productivity gains of P--CE's ergonomic environment, for radiologists in a radiology reading room setting. Should the study yield anticipate results, GE Medical is interested in imbedding its software and digital displays into our PCEs and co-marketing this integrated, ergonomic solution to the radiology community. Education: P--CE has already received an order from New York City- based The King's College to outfit their new computer center with our PCE's. Our ergonomic and progressive form factor is expected to be a clear differentiator in the highly competitive academic marketplace and help colleges attract students seeking progressive technology experience. CAD, Graphic and Web Design and Video Editing: The engineering, design and creative communities that spend 8-12 hours daily in a PC environment, often require multiple monitors, have shown considerable interest. P--CE's Market The rapid growth of computer and video-based products as an intrinsic extension of people's lives, and their increasingly extended use for both business and 29 personal needs, has created an identifiable global market for products that provide healthy support and replace poorly designed computing environments. A consistently growing global appetite for PCs and related technology products further signify a market for an ergonomic computer station. Annual PC shipments totaled more than 136.9 million units in 2003 according to Gartner Dataquest. In addition, year-over-year unit shipment growth for 2004 has increased to 11.4%, with total PC shipments increasing to 152.5 million. In addition, video gaming (including console, PC and online) has surpassed the movie industry as the premiere source of entertainment (in the U.S. alone, over $10 billion is spent annually). Korea alone accounts for 6.7% of the world online gaming market, and posted a 69% revenue growth last year. Gaming "rooms" there number approximately 30,000 with an average of 50 computers per center, and Korean gamers stay online an average of 64 hours a month, compared to 16 hours in the U.S. With strong computer and gaming growth projected, the anticipated rise in injuries from extended use and poorly designed computing stations is also expected to climb. For example: Musculoskeletal disorders are the USA's most costly category of workplace injuries and illnesses. Repetitive Strain Injury (RSI) has become the number one work-related health problem, according to OSHA. In addition to spending $20 billion annually on worker's compensation costs due to RSIs, the U.S. spends another $100 billion on lost productivity, employee turnover, and other indirect expenses. (The Agency for Health Care Policy and Research). Liberty Mutual spent $50 million in a single year on wrist claim injuries, attributable to the fact that when keyboard use increases from 1-4 hours per day, the probability of acquiring Cumulative Trauma Disorders increases from 45% to 92%. Market Needs "Ergonomic and related disorders represent the largest group of preventable job injuries in the U.S.," notes former U.S. Assistant Secretary of Labor for OSHA, Charles Jeffress. Industry experts note the bottom line savings and benefits for corporations from correct ergonomic work environments: "Preventative ergonomics is much more economical than reactive ergonomics," notes Alan Hedge, Ph.D., director of the human factors and ergonomics laboratory at Cornell University (Ithaca, NY). "If you choose the best ergonomic designs from the outset, ergonomics will work like a vaccination, protecting your employees while they are at work. If you treat ergonomics as a Band-Aid, you will spend time forever fighting fires without ever achieving companywide success." "There has been an evolution in the way ergonomics is perceived," says Karl Jacobsen, senior vice president of loss prevention at Liberty Mutual Insurance Company. "Today, the emphasis has shifted from a reactive to a proactive philosophy. The emphasis is now on using ergonomics to achieve strategic business objectives." "Proactive companies realize that ergonomics is not only an injury reduction issue, but that it is a human performance issue," says Ergonomics at Work's Joel McIntyre. "If workstations and work areas are designed to maximize human performance through ergonomics, the performance of the Company is increased as well." Sales and Marketing Distribution Partners Existing and potential product distribution partners for P--CE include international resellers, exclusive country distributorships, retailers, online through www.mypce.com and vendor partners. P--CE is also exploring ------------- direct-to-consumer strategies in several countries including home shopping networks and infomercials. Reseller and distribution partners that P--CE has begun discussion with include: Richards Electronics, a global provider of engineered solutions, serving the RF and wireless communications, medical imaging, security and display systems markets, with more than 70 sales offices and 45 stocking locations throughout the world. 30 CDW: a leading provider of technology solutions for business, government and education, a principal source of technology products and services for such leading brands as Apple, Cisco, HP, IBM and Sony. Seanx: IT supplier to Canadian retail chains, including Best Buy. Shenkle Shultz: Largest reseller to the U.S. security monitoring industry. Sound and Cinema Inc.: Large reseller for home theater and networking products. Office Elements: Ergonomic office furniture distributor based in the U.S. Sanwa Supply (Japan): The #1 positioned IT related supplier (Computer furniture, Computer accessories, and Computer peripherals) in Japan in terms of the number of products, retail stores (7000 retailers) and yearly sales turnover. P--CE is currently solidifying a number of vendor-partner online selling relationships, including: - Alienware, the dominant manufacturer of high-end gaming PC - Humanscale, the leading manufacturer of ergonomic office products. There can be no assurance, however, that P--CE will actually achieve a distribution or reseller relationship with any of the aforementioned companies. Marketing Our global marketing strategy is anticipated to create brand and product awareness, and generate customer demand and sales within targeted professional and consumer vertical markets. We expect to create awareness through public relations and face-to-face marketing programs that allow influential media and potential customers to experience the product, and drive traffic to www.mypce.com. These programs ------------- include international, national and regional trade shows, launch events, major city road shows, mall tours and sponsorship of video gaming championships. We expect to undertake high profile co-marketing promotions that have the greatest potential to drive sales with vendor partners, resellers, and media companies, including MTV, TechTV and Video Gaming media companies. We expect to implement direct-to-consumer programs, including infomercials, online and home shopping networks that are proven sales generators, especially for new products and technology introductions. We expect to target our vertical professional markets with direct marketing campaigns that present a compelling problem-solution benefit for P--CE ergonomic products. Governmental Regulations Currently, we are not subject to any unique government regulations, beyond that of any other computer workplace manufacturer. P--CE's workplace environment may be manufactured, imported, and exported to and from the U.S. and Canada with no special regulations. Research and Development During the fiscal years ended August 31, 2002 and 2003, we spent Nil and $166,864, respectively on research and development of P--CE's workplace environment. Reports to Security Holders We are not currently required to deliver an annual report to security holders. None will be provided until such time as one is required. Once we become a reporting issuer in the United States upon the effectiveness of this registration statement and the filing of a Form 8-A, we will be required to deliver an annual report to our stockholders prior to or with the distribution of proxy materials relating to annual stockholder meetings. 31 We have not previously filed reports with the Securities and Exchange Commission, nor with any other securities regulator. However, once we become subject to reporting requirements under section 13 or 15(d) of the U.S. Securities and Exchange Act of 1934, as amended, we will be required to file the following with the SEC: (i) quarterly reports on Form 10-QSB; (ii) an annual report on Form 10-KSB; (iii) a Form 8-K to report the occurrence of certain reportable events; (iv) preliminary and definitive copies of our proxy statement and form of proxy to be submitted to our stockholders; and (v) the annual report to stockholders. Copies of this, and all future reporting materials filed with the SEC may be obtained at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information as to the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically at http://www.sec.gov. Management's Discussion and Analysis or Plan of Operation. The following discussion is intended to provide an analysis of our financial condition and should be read in conjunction with our financial statements and the notes thereto. The matters discussed in this section that are not historical or current facts deal with potential future circumstances and developments. Such forward-looking statements include, but are not limited to, the development plans for our growth, trends in the results of its development, anticipated development plans, operating expenses and our anticipated capital requirements and capital resources. Our actual results could differ materially from the results discussed in the forward-looking statements. Overview This management's discussion and analysis focuses on key statistics from the unaudited Financial Statements for the third quarter of 2004 and the Audited Financial Statements for the year ended August 31, 2003, and pertains to known risks and uncertainties relating to the computer environment manufacturing sector. Management knows of no known trend, events or uncertainties that have or are reasonably likely to have a material impact on our liquidity or revenues or income. The reported financial information is not necessarily indicative of future operating results and future financial condition as consumer awareness, acceptance and demand for our product are just beginning to grow. This discussion and analysis of the financial condition and results of operations of the Company should be read in conjunction with our Financial Statements and related notes and material contained in other parts of this registration statement. All monetary amounts are expressed in US dollars. Management's Discussion and Analysis for the Nine Months ended May 31, 2004 Results of Operations Nine months ended ------------------------------- May 31, 2004 May 31, 2003 % Change ------------ ------------ -------- Revenues $12,029 $2,500 381% Gross Margin $ 8,031 $2,200 265% Net Loss $(396,123) $(471,864) 16% Basic and Diluted Earnings (Loss) Per Share $(0.06) $(0.10) Revenues Revenue for the third quarter ending May 31, 2004 was $12,029, a 381% increase over revenues of $2,500 in the third quarter ended May 31, 2003. Our continuous sales increases are the result of expanding market awareness of our products created through our tradeshow appearances and ongoing advertising campaigns in key industry periodicals. Expenses Cost of goods sold for the third quarter ending May 31, 2004 were $3,998 (33% of Sales) compared to $300 (2% of sales) for the third quarter ended May 31, 2003. 32 The corresponding gross margins were $8,031 in May 31, 2004 compared with $2,200 in May 31, 2003. The increase was due to product purchases which were being shipped from Korea to California, which arrived in Dec. 2003 in Vancouver and April 2004 in California. Advertising and promotion expenses decreased from $3,603 for the period ended May 31, 2003 to $444 for the period ended May 31, 2004. Legal and accounting fees increased to $78,507 for the period ended May 31, 2004 compared to $5,090 for the period ended May 31, 2003 predominantly due to additional professional fees associated with P--CE's reporting issuer efforts. Rent expense decreased from $35,383 for the period ended May 31, 2003 to $30,671 for the period ended May 31, 2004. The majority of the rent expense is for maintaining a warehouse presence in California. Consulting fees have increased to $45,179 for the period ended May 31, 2004 compared to $22,509 for the period ended May 31, 2003. This increase was a result of increased use of consultants associated with product marketing and reporting issuer effort. Travel expenses have decreased from $49,077 for the period ended May 31, 2003 to $35,589 for the period ended May 31, 2004. The most significant decrease in expenses was the decrease in conferences and trade shows from $107,392 for the period ended May 31, 2003 to Nil for the period ended May 31, 2004. Earnings/Losses From the sales of PCE units during the period ended May 31, 2004, we had a gross profit of $8,031 as compared to $2,200 for the period ended May 31, 2003 as we had more PCE units available for sale at May 31, 2004 than at May 31, 2003. The net loss from May 31, 2003 to May 31, 2004 decreased from $(471,864) to $(396,123). Business Expansion We continued to expand our base of operations between third quarter ended May 31, 2003 and the third quarter ended May 31, 2004, as we pursued our ongoing investment in manufacturing and technology alliances, warehousing/ distribution facilities and marketing activities. We finalized manufacturing agreements with partners in South Korea and China to produce the PCE units more cost efficiently and to prepare for volume demand increases. We secured technology suppliers in China for computer production, and the sourcing of LCD monitors, monitor arms and sound systems. We established US headquarters and warehousing facilities in Indio, CA, for shipping and customs coordination, and product distribution. Offices for our Canadian headquarters were secured in Vancouver, B.C. Marketing activities undertaken included a three-month advertising campaign by Stuff magazine that featured our product, the production of sales and marketing kits, and initiating the re-design of an enhanced website. Capital Expenditures Additions to capital expenditures for the third quarter ending May 31, 2004 were $12,816 compared to $4,697 for the third quarter ending May 31, 2003 as we pursued our ongoing investment in manufacturing and also purchased more fixed assets for us during this period. Liquidity and Capital Resources We raised a total of $1,278,423 by way of equity investment from inception to May 31, 2004, of which $728,909 was raised during the nine month period ended May 31, 2004. 33 Management's Discussion and Analysis for the Year Ended August 31, 2003 Results of Operations YEAR ENDED YEAR ENDED 2003 2002 % CHANGE ---------- ---------- -------- Revenues $ 90,550 $ - N/A Gross Margin $ 53,377 $ - N/A Net Loss $(607,416) $ - N/A Basic and Diluted Earnings (Loss) per Share $ (0.13) - N/A Revenues For the year ended August 31, 2003, our net sales were $90,550 compared to Nil for the year ended August 31, 2002 as we had no sales in the year ended August 31, 2002. Pursuant to the continued equity funding received throughout fiscal 2002 and 2003, we have continued with the development of the PCE and have noticed an increased demand for the PCE. Expenses Cost of goods sold for the year ended August 31, 2003 were $37,173 (41% of Sales) compared to Nil (0% of sales) year ended August 31, 2002 due to production of PCE units for trade shows and promotion. The corresponding gross margins were $53,377 for year ended August 31, 2003 compared with Nil for August 31 2002. Advertising and promotion expenses increased from Nil for the year ended August 31, 2002 to $12,766 for the year ended August 31, 2003. Legal and accounting fees increased from Nil for the year ended August 31, 2002 to $17,452 for the year ended August 31, 2003, predominantly due to additional professional fees associated with P--CE's reporting issuer efforts. Rent expense increased as we needed a presence in California, which comprised a majority of the rent expense of Nil for the year ended August 31, 2002 to $74,107 for the year ended August 31, 2003, predominantly due to the expansion to California. Consultant fees have increased from Nil for the year ended August 31, 2002 to $85,347 for the year ended August 31, 2003. This rise was a result of compensation being paid out based on sales and manufacturing and marketing efforts. Compensation was paid to key subcontractors and consultants to support our substantially increased activities such as engineering and design, administration, sales and marketing initiatives and product production. Earnings/Losses PCE units were in the planning stages for the delivery of systems to customers and resellers. The net loss from September 1, 2002 to August 31, 2003 was $(607,416). Business Expansion During the fiscal year ended August 31, 2003, the company researched, designed and manufactured prototypes units; established product sourcing arrangements for software and hardware components; secured booth space and exhibit property for the product launch at the Comdex IT Show in November 2002 in Las Vegas; participated in other trade shows in the video gaming, radiology and technology markets; created a website and marketing and public relations materials; sought strategic alliances with leading manufacturers of computers and ergonomic products, both for product sourcing as well as sales and co-marketing opportunities; continued to conduct market and consumer research to determine how to adapt the product to different industries and applications; entered into an international distribution agreement with a group called PCE Korea for Korea distribution; manufactured units for the product launch in Korea, and launched the product in Asia at Comdex Korea in August 2003. Capital Expenditures From August 31, 2002 to August 31, 2003 we purchased office computers and furniture totaling $4,697. 34 Liquidity and Capital Resources For the year ended August 31 2003, our loss from operations of $(607,416) resulted from only having net sales of $90,550 and total expenses of $660,793 compared to Nil for the fiscal year ended August 31, 2002. The increase being attributable to our marketing activities and product customization for our various target markets. During the fiscal year ended August 31, 2003, we raised $546,564 by way of equity investment into the Company. Market for Common Equity and Related Stockholder Matters. There are currently no markets where our common equity is traded. There are no options, warrants to purchase, or securities convertible into our common equity. Our common equity that, as of September 30, 2004, could be sold pursuant to Rule 144 and are not being registered pursuant to this registration statement would include shares issued to certain seed shareholders. The following is a comprehensive list of those seed shareholders and their share holdings as at September 30, 2004: Name Date Shares were Issued Holdings as at September 30, 2004 - ------------------- ----------------------- --------------------------------- Evolution Man Inc. Aug. 15, 2002 2,016,666 (1) Quattrin, Allan July 24, 2002 1,500,000 RAD Laboratories Inc. July 24, 2002 3,000,000 (2) Stieler, Richard July 24, 2002 1,350,000 (1) Onyx Trust, a Belize trust with Eddie Blackwell, Director of Providian Financial Group Ltd. S.A., as Trustee, has voting and investment control over these shares. Mr. Allan Quattrin is the beneficiary of the Onyx Trust. (2) Mr. Benjamin Moglin has voting and investment control over these shares. As of September 30, 2004, we had 156 shareholders on record, with a total of 13,797,302 shares of our common stock issued and outstanding. As of September 30, 2004, there were no other classes of shares of our common stock optioned or subject to a warrant to purchase. We do not plan to pay dividends for the foreseeable future. Holders of our common stock are entitled to receive dividends as may be declared by our board of directors. Our board of directors may, from time to time, declare and we may pay dividends in cash, property, or its own shares, except when we are insolvent or when the payment thereof would render us insolvent. The board is not obligated to declare a dividend. We have not paid any dividends since our inception. It is not anticipated that dividends will be paid in the foreseeable future. Executive Compensation. The person acting as the President and Chief Executive Officer within P--CE has remained consistent throughout fiscal years ended August 31, 2002 and 2003. The person acting as COO and Secretary of P--CE was appointed to these positions on June 15, 2004. While we were in a start-up phase, management decided to work for little compensation in order to allow for additional funds to be put towards growing the business. We do not, as of September 30, 2004, offer any bonus plans, group or individual medical plans, or insurance coverage of any type. The following table sets forth in summary form all the compensation awarded to, earned by, or paid to our President and Chief Executive Officer. None of our other executive officers received salary, bonus and any other form of compensation exceeding $100,000 during the fiscal years ended August 31, 2002 and 2003. 35
Other Re- Securities All Name and Annual stricted Underlying Other Principal Fiscal Compen- Stock Options/ LTIP Compen- Position Year Salary Bonus sation Awards SARs Payouts sation - ----------------- ------ ---------- ------- ------- -------- ---------- ------- ------- Quattrin, Allan 2003 $22,500(1) Nil Nil Nil Nil Nil Nil President and CEO 2002 Nil Nil Nil Nil Nil Nil Nil Director (1) Mr. Quattrin entered into a Management Agreement with P--CE on August 1, 2002, whereby he was to receive $12,500 per month as compensation for acting as the President, CEO, CFO and director of P--CE. However, during the fiscal year ended August 31, 2003, Mr. Quattrin only received a salary of $22,500 and during the nine months ended May 31, 2004, he only received a salary of approximately $28,000. Mr. Quattrin has agreed in a letter to the Company to not accrue any compensation owing to him under the Management Agreement up to August 31, 2004.
Proposed Compensation While we are in our development stage, management has decided to work for little or no compensation until September 1, 2004, in order to allow for additional funds to be put towards growing the business. The following table shows the amount which we intend to pay our executive officers starting as of September 1, 2004, and the time which our executive officers are expected to devote to our business. If the Company is unable to pay the proposed compensation to the executive officers in cash, then the executive officers have verbally indicated to the Company that they will take stock based on the market value at that time as consideration for their services rendered to the Company. There can be no assurance, however, that such verbal agreements to take stock in lieu of cash will be binding upon the officers. Approximate Approximate time time devoted to intended to be devoted Proposed P--CE's Business to P--CE's Business Annual Fiscal year ending Fiscal year ending Name Compensation Aug. 31, 2004 Aug. 31, 2005 - ------------------ ------------ ------------------ ---------------------- Quattrin, Allan $150,000 100% 100% Sheppard, Bruce(1) $75,000 5% 12% (1) Mr. Sheppard was appointed as the COO, Secretary and a Director of P--CE on June 15, 2004. Employment Agreements We have entered into a Management Agreement with Mr. Allan Quattrin, dated August 1, 2002, whereby Mr. Quattrin provides management services as the President and CEO of P--CE in exchange for $12,500 per month. See "Certain Relationships and Related Transactions" for a detailed description of this agreement. Long Term Incentive Plans - Awards in Last Fiscal Year As at September 30, 2004, there were no Long Term Incentive Plans implemented or awarded. Employee Pension, Profit Sharing Insurance or Other Retirement Plans As at September 30, 2004, we did not have a benefit, pension plan, profit sharing, insurance plan or other retirement plan, although we may adopt one or more of such plans in the future. 36 Compensation of Directors We do not pay our directors for attending meetings of the board of directors, although we expect to adopt a director compensation policy in the future. We have no standard arrangement pursuant to which our directors are compensated for any services provided as a director or for committee participation or special assignments. Compensation Committee Interlocks and Insider Participation We do not currently have a compensation committee. Decisions as to compensation are made from time to time with no set policies, or formulas used as a guide. The following table shows the persons who participated in deliberations of our board of directors concerning executive officer compensation. Name Offices Held - ----------------- -------------- Douglas Buhler Director (1) Benjamin Moglin Director (2) Allan Quattrin President, CEO and Director (1) Douglas Buhler was removed from the board of directors by a majority of the shareholders of P--CE effective September 19, 2003. (2) Benjamin Moglin resigned as a director of P--CE on September 22, 2003. Financial Statements The unaudited financial statements for the nine month period ended May 31, 2004 and the audited financial statements for the years ended August 31, 2003 and 2002 are included herein. F-1
P--CE COMPUTERS, INC. (A Development Stage Company) BALANCE SHEETS MAY 31, 2004 AND AUGUST 31, 2003 ASSETS May 31, 2004 (Unaudited) August 31, 2003 ---------------- ---------------- Current assets: Cash $ 186,045 $ 16,755 Accounts receivable 6,775 -- Other receivable 10,500 -- Inventory 88,518 -- Prepaid expenses 1,527 1,827 ---------------- ---------------- Total current assets 293,365 18,582 Equipment, net of accumulated depreciation 13,783 2,749 Patent, net of amortization 9,075 9,552 ---------------- ---------------- Total assets $ 316,223 $ 30,883 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 11,477 $ 7,913 Accrued liabilities 9,066 68,192 Employee payables 3,594 12,680 ---------------- ---------------- Total current liabilities 24,137 88,785 Commitments and contingencies -- -- Stockholders' equity (deficit): Preferred stock:$0.0001 par value; 200,000,000 shares authorized; 0 shares issued and outstanding -- -- Common Stock: $0.0001 par value; 200,000,000 shares authorized; 13,797,302 shares and 4,500,000 shares issued and outstanding at May 31, 2004 and August 31, 2003, respectively 1,380 450 Paid in capital 1,294,245 -- Common stock subscribed, 0 and 7,808,842 shares at May 31, 2004 and August 31, 2003, respectively -- 549,064 Deficit accumulated during development stage (1,003,539) (607,416) ---------------- ---------------- Total stockholders' equity (deficit) 292,086 (57,902) ---------------- ---------------- Total liabilities and stockholders' equity (deficit) $ 316,223 $ 30,883 ================ ================
The accompanying notes are an integral part of these financial statements 1 F-2
P--CE COMPUTERS, INC. (A Development Stage Company) STATEMENTS OF INCOME FOR THE NINE MONTHS AND THREE MONTHS ENDED MAY 31, 2004 AND 2003 AND FROM INCEPTION (November 8, 2001) THROUGH MAY 31, 2004 (UNAUDITED) Cumulative amount from inception (November 8, For the nine months ended For the three months ended 2001) ------------------------------- ------------------------------- through May 31, May 31, May 31, May 31, May 31, 2004 2003 2004 2003 2004 -------------- -------------- -------------- -------------- ---------------- Net sales $ 12,029 $ 2,500 $ 5,116 $ -- $ 102,579 Cost of sales 3,998 300 733 -- 41,171 -------------- -------------- -------------- -------------- ---------------- Gross profit 8,031 2,200 4,383 -- 61,408 Expenses Product development and promotion 60,611 253,644 55,168 23,316 378,028 General and administrative 343,543 220,420 202,024 47,260 686,919 -------------- -------------- -------------- -------------- ---------------- Total expenses 404,154 474,064 257,192 70,576 1,064,947 Loss before provision for income taxes (396,123) (471,864) (252,809) (70,576) (1,003,539) Provision for income tax -- -- -- -- -- -------------- -------------- -------------- -------------- ---------------- Net loss $ (396,123) $ (471,864) $ (252,809) $ (70,576) $ (1,003,539) ============== ============== ============== ============== ================ Loss per share (basic and diluted) $ (0.06) $ (0.10) $ (0.02) $ (0.02) ============== ============== ============== ============== Weighted average number of shares Outstanding (basic and diluted) 6,917,980 4,500,000 11,675,092 4,500,000 ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements 2 F-3
P--CE COMPUTERS, INC. (A Development Stage Company) STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) FROM INCEPTION (November 8, 2001) THROUGH MAY 31, 2004 (UNAUDITED) Common stock Deficit --------------------------------------------------------- accumulated Total Par value during Stockholders' Number of $0.0001 Paid in Common stock development Equity shares per share capital subscribed stage (deficit) ------------ ------------ ------------ ------------ ------------ ------------ Balance at inception (November 8, 2001) -- $ -- $ -- $ -- $ -- $ -- Issuance of common stock for cash 4,500,000 450 -- -- -- 450 Net income (loss) -- -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Balance at August 31, 2002 4,500,000 450 -- -- -- 450 Common stock subscribed at various dates during 2003 (7,808,842 shares) -- -- -- 549,064 -- 549,064 Net loss -- -- -- -- (607,416) (607,416) ------------ ------------ ------------ ------------ ------------ ------------ Balance at August 31, 2003 4,500,000 450 -- 549,064 (607,416) (57,902) Common stock issued for cash 9,209,902 921 1,277,052 (549,064) -- 728,909 Common stock issued for services 87,400 9 17,193 -- -- 17,202 Net loss -- -- -- -- (396,123) (396,123) ------------ ------------ ------------ ------------ ------------ ------------ Balance at May 31, 2004 (Unaudited) 13,797,302 $ 1,380 $ 1,294,245 $ -- $(1,003,539) $ 292,086 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements 3 F-4
P--CE COMPUTERS, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MAY 31, 2004 AND 2003 AND FROM INCEPTION (November 8, 2001) THROUGH MAY 31, 2004 (UNAUDITED) Cumulative Amount from Inception For the nine For the nine (November 8, months ended months ended 2001) through May 31, 2004 May 31, 2003 May 31, 2004 ---------------- ---------------- ---------------- Cash flows from operating activities: Net loss $ (396,123) $ (471,864) $ (1,003,539) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,259 1,461 4,207 Stock issued for services 17,202 -- 17,202 Changes in operating assets and liabilities: Accounts receivable (6,775) -- (6,775) Other accounts receivable (10,500) -- (10,500) Inventory (88,518) -- (88,518) Prepaid expenses 300 (25,139) (1,527) Accounts payable 3,563 300 11,477 Accrued liabilities (59,125) -- 9,066 Employee payables (9,086) 9,933 3,594 Bank overdraft -- 12,428 -- ---------------- ---------------- ---------------- Net cash used in operating activities (546,803) (472,881) (1,065,313) ---------------- ---------------- ---------------- Cash flows from investing activities: Acquisition of patent and equipment (12,816) (4,697) (17,513) Development of patent -- (9,552) (9,552) ---------------- ---------------- ---------------- Net cash used in investing activities (12,816) (14,249) (27,065) ---------------- ---------------- ---------------- Cash flows from financing activities: Issuance of common stock for cash 728,909 -- 1,278,423 Common stock subscribed -- 486,680 -- ---------------- ---------------- ---------------- Net cash provided by financing activities 728,909 486,680 1,278,423 ---------------- ---------------- ---------------- Net increase (decrease) in cash 169,290 (450) 186,045 Cash, beginning of period 16,755 450 - ---------------- ---------------- ---------------- Cash, end of period $ 186,045 $ -- $ 186,045 ================ ================ ================ SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Issuance of stock for services $ 17,202 $ -- $ 17,202 ================ ================ ================
The accompanying notes are an integral part of these financial statements 4 F-5 P--CE COMPUTERS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED MAY 31, 2004 AND FROM INCEPTIONS (November 8, 2001) THROUGH MAY 31, 2004 (UNAUDITED) 1. BUSINESS AND ORGANIZATION ------------------------- P--CE Computers, Inc. (the Company) was incorporated on November 8, 2001 as Coleman Energy U.S., Inc. in the state of Nevada. On December 6, 2001, the name of the corporation was changed to World Energy Resource Group, Inc., and on July 9, 2002, to P--CE Computers, Inc. The Company is developing a computer workspace station and intends to sell distributorships for the workstation internationally. The Company has completed its prototype units and is in the process of developing a commercial product. The Company has been in the development stage since its inception, November 8, 2001. It is primarily engaged in raising capital and developing a marketable computer workstation product. 2. INTERIM FINANCIAL INFORMATION ----------------------------- The financial statements of the Company as of May 31, 2004 and for the nine months ended May 31, 2004 and 2003 and related footnote information are unaudited. All adjustments (consisting only of normal recurring adjustments) have been made which, in the opinion of management, are necessary for a fair presentation. Results of operations for the nine months ended May 31, 2004 and 2003 are not necessarily indicative of the results that may be expected for any future period. The balance sheet at August 31, 2003 was derived from audited financial statements. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been omitted. These financial statements should be read in conjunction with the financial statements and notes for the year ended August 31, 2003 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Property and Equipment Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful life of the assets, which is three to seven years. Patent The cost of the patent development is being capitalized and will be amortized on a straight-line basis over its useful life of 15 years. Amortization expense for the nine months ended May 31, 2004 was $477. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company is of the opinion that it has made no estimates or assumptions that could result in any significant or material difference in the results reported. Revenue Recognition The Company recognizes revenue when both title and risk of loss transfers to the customer, provided that no significant obligations remain Pursuant to Securities and Exchange Commission's Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, the Company does not recognize revenue for product shipments until received by the customer, although title transfers to the 5 F-6 customer on substantially all products when shipped. There was no in-transit customer shipment for the period ended May 31, 2004. Warranty The Company sells its products to customers together with repair or replacement warranties. The accompanying financial statements from inception through May 31, 2004 do not include any amounts for estimated warranty claims based on the Company's experience with of not having actually paid any claims to date and management's estimate of future expectations. All equipment resale are covered by manufacturers' limited warranty. Inventories Substantially all inventories $88,518 consist of finished products. Inventories are valued at cost, as determined by the first-in, first-out method; in the aggregate, such valuations are not in excess of market. Income Taxes Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Net Loss Per Share In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 128 "Earnings Per Share" which requires the Company to present basic and diluted earnings per share, for all periods presented. The computation of loss per common share (basic and diluted) is based on the weighted average number of shares actually outstanding during the period. The Company has no common stock equivalents, which would dilute earnings per share. Fair Value of Financial Instruments Financial instruments consist principally of cash and payables. The estimated fair value of these instruments approximate their carrying value. Foreign Currency Translation The Company translates the foreign currency financial statements of its foreign operations by translating balance sheet accounts at the exchange rate on the balance sheet date and the income statement accounts using the prevailing exchange rates at the transaction date. Translation gains and losses are recorded in stockholders' equity and realized gains and losses are reflected in operations. There were no material translation or exchange gains and losses for the nine months ended May 31, 2004. Research and Development Costs The Company is currently in the process of establishing the technological feasibility of its computer workstation product. All costs incurred related to the product development have been charged to expense. Impairment of Long-Lived Assets FASB issued in August 2001, SFAS 144, "Accounting for the Impairment or Disposal of Long-lived Assets". In accordance with this statement, the Company periodically reviews its long-lived assets to be held and used by the Company to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company bases its evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, the Company determines whether an impairment has occurred through the use of an undiscounted cash flow analysis of assets at the lowest level for which identifiable cash flows exist. If an impairment has occurred, the Company 6 F-7 recognizes a loss for the difference between the carrying amount and the estimated value of the asset. The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, fair value is based on an estimated discounted cash flow analysis. The company has experienced no impairment losses to date. 4. GOING CONCERN ------------- The accompanying financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America, contemplates the continuation of the Company as a going concern. However, the Company has been in the development stage since its inception (November 8, 2001), sustained significant losses and has used capital raised through the issuance of stock and stock subscriptions to fund activities. Continuation of the Company as a going concern is contingent upon establishing and achieving profitable operations. Such operations will require management to secure additional financing for the Company in the form of debt or equity. Management believes that actions currently being taken to revise the Company's funding requirements will allow the Company to continue its development stage operations. However, there is no assurance that the necessary funds will be realized by securing debt or through stock offerings. No adjustment has been recorded in the financial statements to reflect this uncertainty. 5. PROPERTY AND EQUIPMENT ---------------------- Property and equipment consist of the following: May 31, 2004 August 31, (Unaudited) 2003 ---------------- ---------------- Computers $ 14,763 $ 4,697 Office furniture 2,750 -- ---------------- ---------------- 17,513 4,697 Accumulated depreciation (3,730) (1,948) ---------------- ---------------- $ 13,783 $ 2,749 ================ ================ Depreciation expense for the nine months ended May 31, 2004 and 2003 was $1,782 and $1,948, respectively. 6. CAPITAL STOCK ------------- Common Stock In July 2002, the Company issued 4,500,000 shares of $0.0001 par value common stock to its directors for a capital contribution of $450. During the nine months ended May 31, 2004, the Company issued 9,209,902 shares of common stock in a private placement for a total sales price of $1,277,973 an average sales price of $0.14 per share. Included in the Company issuance was 7,808,842 of stock subscribed at August 31, 2003. During the nine months ended May 31, 2004 the Company issued 87,400 shares of common stock for services valued at the fair market value price of the Company's stock on the dates issued $17,202 and average of $0.20 per share. 7. INCOME TAXES ------------ The components of the deferred tax asset is as follows: May 31, 2004 (Unaudited) August 31, 2003 ---------------- ---------------- Deferred tax assets: Net operating loss carryforward $ 430,000 $ 260,000 Valuation allowance (430,000) (260,000) ---------------- ---------------- Net deferred tax assets $ - $ - ================ ================ 7 F-8 The Company had available approximately $1,003,539 and $607,000 of unused Federal and state net operating loss carryforwards at May 31, 2004 and August 31, 2003, respectively, that may be applied against future taxable income. These net operating loss carryforwards expire through 2022 and 2012 for federal and state purposes, respectively. The State of California has suspended the use of net operating losses for years ended August 31, 2003 and 2002. There is no assurance that the Company will realize the benefit of the net operating loss carryforwards. SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. At May 31, 2004 and August 31, 2003, valuation allowances for the full amount of the net deferred tax asset were established due to the uncertainties as to the amount of the taxable income that would be generated in future years. Reconciliation of the differences between the statutory tax rate and the effective income tax rate is as follows:
May 31, 2004 (Unaudited) August 31, 2003 ---------------- ---------------- Statutory federal tax (benefit) rate (34.00)% (34.00)% Statutory state tax (benefit) rate (5.83)% (5.83)% ---------------- ---------------- Effective tax rate (39.83)% (39.83)% Valuation allowance 39.83% 39.83% ---------------- ---------------- Effective income tax rate 0.00% 0.00% ================ ================
8. COMMITMENTS ----------- The Company has a five year management agreement with its President and Chief Executive Officer which expires in 2007 if not automatically renewed for consecutive two year periods. The agreement includes a base fee of $150,000 annually, plus an incentive fee and possible stock options in the future. The agreement has been modified and the start date has been deferred until the 2004 fiscal year. The amount of the fee to be paid under this agreement is currently being renegotiated and therefore no amount has been reflected in the financial statements. 9. LITIGATION ---------- The Company and two stockholders are defendants in a lawsuit filed by a distributor for alleged fraud, misrepresentation, breach of contract, unlawful business practices and false advertising. The suit seeks $400,000. The Company intends to explore all settlement opportunities; however, if it is refused to be resolved amicably, the Company intends to vigorously defend its position. The Company has filed a cross-complaint for breach of contract and other causes of actions. No amounts have been reflected in the financial statements related to this litigation. 8 F-9 P--CE COMPUTERS, INC. (A Development Stage Company) FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002 AND FOR THE PERIOD FROM INCEPTION (November 8, 2001) THROUGH AUGUST 31, 2003 F-10 TABLE OF CONTENTS ----------------- Report of Independent Registered Public Accounting Firm.................... 1 Balance Sheets ............................................................ 2 Statements of Income ...................................................... 3 Statement of Stockholders' Equity (Deficit)................................ 4 Statements of Cash Flows .................................................. 5 Notes to Financial Statements ............................................. 6 F-11 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Board of Directors and Stockholders P--CE Computers, Inc. Vancouver, B.C. We have audited the accompanying balance sheets of P--CE Computers, Inc., a Nevada corporation and a development stage company (the Company), as of August 31, 2003 and 2002, and the related statements of income, stockholders' equity (deficit), and cash flows for the years then ended and for the period from inception (November 8, 2001) through August 31, 2003. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 accounting 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 financial position of P--CE Computers, Inc. as of August 31, 2003 and 2002, and the results of its operations and cash flows for the years then ended and for the period from inception (November 8, 2001) through August 31, 2003 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has been in the development stage since its inception (November 8, 2001) and continues to incur significant losses. The Company's viability is dependent upon its ability to obtain future financing and the success of its future operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plan in regard to these matters is also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Mendoza Berger & Company, LLP - ----------------------------- January 26, 2004, except for the second and third paragraphs of Note 5 and Notes 6 and 8 which are dated October 7, 2004. Irvine, California 1 F-12
P--CE COMPUTERS, INC. (A Development Stage Company) BALANCE SHEETS AUGUST 31, 2003 AND 2002 ================================================================================ ASSETS 2003 2002 ---------------- ---------------- Current assets: Cash $ 16,755 $ 450 Prepaid expenses 1,827 - ---------------- ---------------- Total current assets 18,582 450 Equipment, net of accumulated depreciation (Note 4) 2,749 - Patent 9,552 - ---------------- ---------------- Total assets $ 30,883 $ 450 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 7,913 $ - Accrued liabilities 68,192 - Employee payables 12,680 - ---------------- ---------------- Total current liabilities 88,785 - Commitments and contingencies (Notes 7 and 8) - - Stockholders' equity (deficit) (Note 5): Preferred stock: $0.0001 par value; 200,000,000 shares authorized; 0 shares issued and outstanding - - Common stock: $0.0001 par value; 200,000,000 shares authorized; 4,500,000 shares issued and outstanding 450 450 Common stock subscribed, 7,808,842 shares 549,064 - Deficit accumulated during development stage (607,416) - ---------------- ---------------- Total stockholders' equity (deficit) (57,902) 450 ---------------- ---------------- Total liabilities and stockholders' equity (deficit) $ 30,883 $ 450 ================ ================
The accompanying notes are an integral part of these financial statements 2 F-13
P--CE COMPUTERS, INC. (A Development Stage Company) STATEMENTS OF INCOME FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002 AND FROM INCEPTION (November 8, 2001) THROUGH AUGUST 31, 2003 ================================================================================ Cumulative Amount from Inception (November 8, 2001) through 2003 2002 August 31, 2003 ---------------- ---------------- ---------------- Net sales $ 90,550 $ - $ 90,550 Cost of sales 37,173 - 37,173 ---------------- ---------------- ---------------- Gross profit 53,377 - 53,377 Expenses: Product development and promotion 317,417 - 317,417 General and administrative 343,376 - 343,376 ---------------- ---------------- ---------------- Total expenses 660,793 - 660,793 ---------------- ---------------- ---------------- Loss before provision for income taxes (607,416) - (607,416) ---------------- ---------------- ---------------- Provision for income taxes (Note 6) - - - ---------------- ---------------- ---------------- Net loss $ (607,416) $ - (607,416) ================ ================ ================ Loss per share (basic and diluted) $ (0.13) $ - ================ ================ Weighted average number of shares outstanding (basic and diluted) 4,500,000 470,000 ================ ================
The accompanying notes are an integral part of these financial statements 3 F-14
P--CE COMPUTERS, INC. (A Development Stage Company) STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) FROM INCEPTION (November 8, 2001) THROUGH AUGUST 31, 2003 ================================================================================ Preferred Stock Common Stock -------------------------- ------------------------------------------------------- Common Number of Number of Number of Stock Shares Amount Shares Amount Shares Subscribed ------------ ------------ ------------ ------------ ------------ ------------ Balance at inception (November 8, 2001) - $ - - $ - - $ - Issuance of common stock for cash - - 4,500,000 450 - - Net Income (loss) - - - - - - ------------ ------------ ------------ ------------ ------------ ------------ Balance at August 31, 2002 - - 4,500,000 450 - - Common stock subscribed at various dates - - - - 7,808,842 549,064 Net loss - - - - - - ------------ ------------ ------------ ------------ ------------ ------------ Balance at August 31, 2003 - $ - 4,500,000 $ 450 7,808,842 $ 549,064 ============ ============ ============ ============ ============ ============ (con't) Deficit Accumulated Total During Stockholders' Development Equity Stage (Deficit) ------------ ------------ Balance at inception (November 8, 2001) $ - $ - Issuance of common stock for cash - 450 Net Income (loss) - - ------------ ------------ Balance at August 31, 2002 - 450 Common stock subscribed at various dates - 549,064 Net loss (607,416) (607,416) ------------ ------------ Balance at August 31, 2003 $ (607,416) $ (57,902) ============ ============
The accompanying notes are an integral part of these financial statements 4 F-15
P--CE COMPUTERS, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002 AND FROM INCEPTION (November 8, 2001) THROUGH AUGUST 31, 2003 ================================================================================ Cumulative Amount from Inception (November 8, 2001) through 2003 2002 August 31, 2003 ---------------- ---------------- ---------------- Cash flows from operating activities: Net loss $ (607,416) $ - $ (607,416) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,948 - 1,948 Changes in operating assets and liabilities: Prepaid expenses (1,827) - (1,827) Accounts payable 7,913 - 7,913 Accrued liabilities 68,192 - 70,692 Employee payables 12,680 - 12,680 ---------------- ---------------- ---------------- Net cash used in operating activities (518,510) - (516,010) ---------------- ---------------- ---------------- Cash flows from investing activities: Acquisition of patent and equipment (4,697) - (4,697) Development of patent (9,552) - (9,552) ---------------- ---------------- ---------------- Net cash used in investing activities (14,249) - (14,249) ---------------- ---------------- ---------------- Cash flows from financing activities: Issuance of common stock for cash - 450 450 Common stock subscribed 549,064 - 546,564 ---------------- ---------------- ---------------- Net cash provided by financing activities 549,064 450 547,014 ---------------- ---------------- ---------------- Net increase in cash 16,305 450 16,755 Cash, beginning of period 450 - - ---------------- ---------------- ---------------- Cash, end of period $ 16,755 $ 450 $ 16,755 ================ ================ ================
The accompanying notes are an integral part of these financial statements 5 F-16 P--CE COMPUTERS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002 ================================================================================ 1. BUSINESS AND ORGANIZATION ------------------------- P--CE Computers, Inc. (the Company) was incorporated on November 8, 2001 as Coleman Energy U.S., Inc. in the state of Nevada. On December 6, 2001, the name of the corporation was changed to World Energy Resource Group, Inc., and on July 9, 2002, to P--CE Computers, Inc. The Company is developing a computer workspace station and intends to sell distributorships for the workstation internationally. The Company has completed its prototype units and is in the process of developing a commercial product. The Company has been in the development stage since its inception, November 8, 2001. It is primarily engaged in raising capital and developing a marketable computer workstation product. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Property and Equipment ---------------------- Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful life of the assets, which is three years. Patent ------ The cost of the patent development is being capitalized and will be amortized on a straight-line basis over its useful life of 15 years. Amortization expense for the year ended August 31, 2003 was immaterial. Use of Estimates ---------------- The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 6 F-17 P--CE COMPUTERS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002 ================================================================================ 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) ------------------------------------------ Revenue Recognition ------------------- The Company recognizes revenue when both title and risk of loss transfers to the customer, provided no significant obligations remain pursuant to Securities and Exchange Commission's Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, the Company does not recognize revenue for product shipments until received by the customer, although title transfers to the customer on substantially all products when shipped. There were no in-transit customer shipments for the period ended August 31, 2003. Effective July 22, 2003, the Company entered into a distribution agreement whereby it received an initial fee of $30,000 which was recognized in the year ended August 31, 2003 in exchange for the distributor being appointed as exclusive distributor in South and North Korea and distribution rights in other countries listed in the agreement. The Company had no further obligations with regards to the fee. Royalty payments will be recognized on each unit sold under this agreement. The distributor has filed a law suit related to this agreement. (Note 8) Warranty -------- The Company sells its products to customers together with repair or replacement warranties. The accompanying financial statements from inception (November 8, 2001) through August 31, 2003, do not include any amounts for estimated warranty claims based in the Company's experience of not having actually paid any claims to date and management's estimate of future expectations. All equipment resales are covered by the manufacturers' limited warranty. Income Taxes ------------ Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 7 F-18 P--CE COMPUTERS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002 ================================================================================ 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) ------------------------------------------ Net Loss Per Share ------------------ In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 128 "Earnings Per Share" which requires the Company to present basic and diluted earnings per share, for all periods presented. The computation of loss per common share (basic and diluted) is based on the weighted average number of shares actually outstanding during the period. The Company has no common stock equivalents, which would dilute earnings per share. Fair Value of Financial Instruments ----------------------------------- Financial instruments consist principally of cash and payables. The estimated fair value of these instruments approximate their carrying value. Foreign Currency Translation ---------------------------- The Company translates the foreign currency financial statements of its foreign operations by translating balance sheet accounts at the exchange rate on the balance sheet date and the income statement accounts using the prevailing exchange rates at the transaction date. Translation gains and losses are recorded in stockholders' equity and realized gains and losses are reflected in operations. There were no material translation or exchange gains and losses for the year ended August 31, 2003. Research and Development Costs ------------------------------ The Company is currently in the process of establishing the technological feasibility of its computer workstation product. All costs incurred related to the product development have been charged to expense. 8 F-19 P--CE COMPUTERS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002 ================================================================================ 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) ------------------------------------------ Impairment of Long-Lived Assets ------------------------------- FASB issued in August 2001, SFAS 144, "Accounting for the Impairment or Disposal of Long-lived Assets". In accordance with this statement, the Company periodically reviews its long-lived assets to be held and used by the Company to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company bases its evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions of factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, the Company determines whether an impairment has occurred through the use of an undiscounted cash flow analysis of assets at the lowest level for which identifiable cash flows exist. If an impairment has occurred, the Company recognizes a loss for the difference between the carrying amounts and the estimated value of the asset. The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, fair value is based on an estimated discounted cash flow analysis. The company has experienced no impairment losses to date. 3. GOING CONCERN ------------- The accompanying financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America, contemplates the continuation of the Company as a going concern. However, the Company has been in the development stage since its inception (November 8, 2001), sustained significant losses and has used capital raised through the issuance of stock and stock subscriptions to fund activities. Continuation of the Company as a going concern is contingent upon establishing and achieving profitable operations. Such operations will require management to secure additional financing for the Company in the form of debt or equity. Management believes that actions currently being taken to revise the Company's funding requirements will allow the Company to continue its development stage operations. However, there is no assurance that the necessary funds will be realized by securing debt or through stock offerings. 9 F-20 P--CE COMPUTERS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002 ================================================================================ 4. PROPERTY AND EQUIPMENT ---------------------- Property and equipment consist of the following at August 31: 2003 2002 ---------------- ---------------- Computers $ 4,697 $ - ---------------- ---------------- 4,697 - Accumulated depreciation (1,948) - ---------------- ---------------- $ 2,749 $ - ================ ================ Depreciation expense for the year ended August 31, 2003 and 2002 was $1,948 and $0, respectively. 5. CAPITAL STOCK ------------- Common Stock ------------ In July 2002, the Company issued 4,500,000 shares of $0.0001 par value common stock to its directors for a capital contribution of $450. From September 1, 2002 through August 31, 2003, the Company subscribed 7,808,842 shares of common stock at prices ranging from $0.0001 to $0.50 for a total of $549,064. From September 1, 2003 through March 22, 2004, the Company subscribed 1,461,860 shares of common stock at prices ranging from $0.05 to $0.50 for a total of $715,430. 6. INCOME TAXES ------------ The components of the deferred tax asset is as follows at August 31: 2003 2002 ---------------- ---------------- Deferred tax assets: Net operating loss carryforward $ 260,000 $ - Valuation allowance (260,000) - ---------------- ---------------- Net deferred tax assets $ - $ - ================ ================ 10 F-21 P--CE COMPUTERS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002 ================================================================================ 6. INCOME TAXES (Continued) ------------ The Company had available approximately $607,000 and $0 of unused Federal and state net operating loss carryforwards at August 31, 2003 and 2002, respectively, that may be applied against future taxable income. These net operating loss carryforwards expire through 2022 and 2012 for federal and state purposes, respectively. The State of California has suspended the use of net operating losses for years ended August 31, 2003 and 2002. There is no assurance that the Company will realize the benefit of the net operating loss carryforwards. SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. At August 31, 2003 and 2002, valuation allowances for the full amount of the net deferred tax asset were established due to the uncertainties as to the amount of the taxable income that would be generated in future years. Reconciliation of the differences between the statutory tax rate and the effective income tax rate is as follows at August 31:
2003 2002 ---------------- ---------------- Statutory federal tax (benefit) rate (34.00)% (34.00)% Statutory state tax (benefit) rate (5.83)% (5.83)% ---------------- ---------------- Effective tax rate (39.83)% (39.83)% Valuation allowance 39.83% 39.83% ---------------- ---------------- Effective income tax rate 0.00% 0.00% ================ ================
7. COMMITMENTS ----------- The Company conducts its operations in facilities occupied pursuant to lease agreements that expire in June and July of 2004. Subsequent to year-end, the Company entered into an arena event box occupation agreement. The term of the agreement is September 2003 through June 2006. 11 F-22 P--CE COMPUTERS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002 ================================================================================ 7. COMMITMENTS (Continued) ----------- Future minimum payments are as follows:
For the year ended August 31, Facilities Arena Box Total ----------------------------- -------------- --------------- ------------ 2004 $ 51,700 $ 129,920 $ 181,620 2005 - 69,216 69,216 -------------- -------------- ------------ $ 51,700 $ 199,136 $ 250,836 ============== =============== ============
Rent expense included in the statements of income for the years ended August 31, 2003 and 2002 is $74,107 and $0, respectively. The Company has a five year management agreement with its President and Chief Executive Officer which expires in 2007 if not automatically renewed for consecutive two year periods. The agreement includes a base fee of $150,000 annually, plus an incentive fee and possible stock options in the future. 8. LITIGATION ---------- The Company and two stockholders are defendants in a lawsuit filed by a distributor for alleged fraud, misrepresentation, breach of contract, unlawful business practices and false advertising. The suit seeks $400,000. The Company intends to explore all settlement opportunities, however, if it is refused to be resolved amicably, the Company intends to vigorously defend its position. The Company has filed a cross-complaint for breach of contract and other causes of actions. No amounts have been reflected in the financial statements related to this litigation. 12 37 P--CE COMPUTERS, INC. 5,630,636 shares of common stock to be sold by certain selling security holders -------------------------------- PROSPECTUS -------------------------------- November 1, 2004 No dealer, salesman or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and, if given or made, such information or representations may not be relied on as having been authorized by us or any of the underwriters. Neither the delivery of this prospectus nor any sale make hereunder shall under any circumstances create an implication that there has been no change in our affairs since the date of this prospectus. This prospectus does not constitute and offer to sell, or solicitation of any offer to buy, by any person in any jurisdiction in which it is unlawful for any such person to make such an offer or solicitation. Neither the delivery of this prospectus nor any offer, solicitation or sale made hereunder, shall under any circumstances create any implication that the information herein is correct as of any time subsequent to the date of the prospectus. Dealer Prospectus Delivery Obligation Until ________, _____, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. 38 PART II - INFORMATION NOT REQUIRED IN PROSPECTUS Indemnification of Directors and Officers. Our Articles of Incorporation and By-laws do not speak to indemnification of every person who is or was a director of P--CE or is or was serving at our request as a director of another corporation of which we are or were a shareholder. However, according to Section 78.7502 of the Nevada Revised Statutes, our board of directors may determine whether or not to indemnify any person who is or was an officer, employee, agent, or person working to the benefit of P--CE against all costs, charges and expenses actually incurred by him. In the Management Agreement between Allan Quattrin (the "Consultant") and P--CE (the "Company"), Article VI includes the following indemnification provisions: "The Consultant (the "Indemnified Party") shall be indemnified and funded on a current basis for all losses, damages, legal expenses, and any other expenses or costs of any nature which may be occasioned by its service with the Company. Inter alia, this indemnity shall apply to all manner of actions, proceedings, or prosecutions, whether civil, regulatory, or criminal, to which the Indemnified Party may be subject due in whole or in part to the Services provided herein or by virtue of any office held. This indemnity shall apply both during and after its Term for all matters arising during the Term, and any extension, until any limitation period has expired in respect to any action which might be contemplated. The Company shall not refuse coverage for any purpose or reason and a strict presumption of innocence shall be applied and the Company may only seek refund of any coverage in the case of finding of fraud or criminal culpability, after exhaustion of all appeals. The Company shall diligently seek and support any such court approvals for the within indemnity as the Indemnified Party may require. The Company shall pay all such retainers and trust requirements as counsel for the Indemnified Party may require and shall pay all accounts of counsel as they come due and such accounts shall be rendered in the name of the Company and, further, should the Company fail to pay any reasonable account, it shall attorn to all such actions, summary judgments, and garnishing orders as such counsel may consider fit to enforce and receive payment of its account. The Company shall not seek to settle or compromise any action without the approval of the Indemnified Party. The Company warrants it shall employ due diligence and good faith and seek the best interests of the Indemnified Party as defendants in any action or prosecution. The Indemnified Party shall permit the Company to consult with their counsel and to be informed of any matters thereof, subject only to any requirements for legal privilege purposes. The Company shall make the Consultant party to all liability insurance policies, to the full extent permitted by such policies, which may be acquired for the benefit of all or any of the Board or management." Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers, or controlling persons of P--CE pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. Other Expenses of Issuance and Distribution. The following table sets forth our expenses in connection with this registration statement. All such expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission. Filing Fee - Securities and Exchange Commission $ 356.70 Fees and Expenses of accountants and legal counsel $ 55,000.00 Printing Costs $ 1,500.00 State Taxes $ 0 Federal Taxes $ 0 Miscellaneous Expenses $ 500.00 ------------- Total $ 57,356.70 Recent Sales of Unregistered Securities. Since November 8, 2001, the date of our incorporation, we have issued the following shares of our common stock for cash rendered to us, absent registration under the Securities Act of 1933, as amended (the "Securities Act"). The securities listed below were issued to persons in offshore transactions which were negotiated outside of the United States or such securities were issued pursuant to the exemption provided in Section 4(2) of the Securities Act for transactions by an issuer not involving a public offering or the exemption provided in Regulation D. 39 Some of the holders of the shares of our common stock issued below may have subsequently transferred or disposed of their shares and the list does not purport to be a current listing of our shareholders. On July 24, 2002, we issued 4,500,000 shares of common stock to Mr. Allan Quattrin, Mr. Benjamin Moglin and Mr. Richard Stieler, at a purchase price of $0.0001 per share for total gross proceeds in cash of $450.00. We believe that such issuances were exempt from registration as the securities were issued in an offshore transaction which was negotiated outside of the United States and consummated outside of the United States. On July 30, 2002, RAD Laboratories Inc., a Belize company beneficially owned by Mr. Benjamin Moglin, subscribed for 2,000,000 shares of common stock at a deemed price of $0.0001 as consideration for the transfer of the intellectual property rights to the workplace environment technology which is to be used by us in our development of our workplace environment product. We believe that such issuance was exempt from registration as the securities were issued in an offshore transaction which was negotiated outside of the United States and consummated outside of the United States. On August 15, 2002, Mr. Allan Quattrin subscribed for 2,000,000 shares of common stock at a purchase price of $0.0001 per share for total gross proceeds in cash of $200.00. We believe that such issuance was exempt from registration as the securities were issued in an offshore transaction which was negotiated outside of the United States and consummated outside of the United States. From August 23, 2002 to Mar. 12, 2004, we issued 1,344,131 shares of common stock to 32 United States residents at prices ranging from $0.0001 per share to $1.00 per share for total gross proceeds in cash of $157,989.70. We believe that such issuances were exempt from registration as the securities were issued under Regulation D Rule 504. From August 23, 2002 to May 31, 2004, we issued 3,953,171 shares of common stock to 121 individuals who are non residents of the United States at prices ranging from $0.0001 per share to $0.50 per share for total gross proceeds in cash of $1,140,235.60. We believe that such issuances were exempt from registration as the securities were issued in offshore transactions which were negotiated outside of the United States and consummated outside of the United States. The gross proceeds from the sale of all the securities will or have been used for our general operations. Exhibits. Exhibits 3.1 Articles of Incorporation of P--CE Computers, Inc. 3.2 By-laws of P--CE Computers, Inc. 3.3 Articles of Amendment dated December 6, 2001 3.4 Articles of Amendment dated July 9, 2002 5.1 Opinion of Reed & Reed, P.C. 10.1 Management Agreement between P--CE Computers, Inc. and Allan Quattrin, dated August 1, 2002 10.2 Consulting Agreement between P--CE Computers, Inc. and Benjamin Moglin, dated November 1, 2003 10.3 Purchase and Sale Agreement between P--CE Computers, Inc. and PC Frame, Inc., dated March 19, 2004 10.4 Purchase and Sale Agreement between P--CE Computers, Inc. and PC Frame, Inc., dated March 29, 2004 10.5 Assignment Agreement between Benjamin Moglin, Allan Quattrin, Richard Stieler and P--CE Computers, Inc., dated April 2004 10.6 Supply Contract entered into between P--CE Computers, Inc. and True Corporation Public Company Limited, dated August 16, 2004. 10.7 Letter from Allan Quattrin to P--CE Computers, Inc., dated Oct. 26, 2004, confirming non-accrual of compensation owing up to Aug. 31, 2004 23.1 Consent of Accountants 23.2 Consent of Reed & Reed, P.C. (included in Exhibit 5.1) 99.1 Complaint filed by Personal Computing Environments Korea, Inc., A Thousand Steps, Inc., Ben Hynes and Jimmy Kim against P--CE Computers, Inc., Ben Moglin and Allan Quattrin in the Superior Court of the Sate of California for the County of Orange, Central Justice Center, filed on March 9, 2004 99.2 P--CE Computers, Inc. and Allan Quattrin's Answer to the Complaint, filed on June 1, 2004 99.3 First Amended Cross Complaint filed by P--CE Computers, Inc. against Personal Computing Environments Korea, Inc., Ben Hynes and Jimmy Kim, filed on June 1, 2004 Undertakings The undersigned registrant hereby undertakes: (a) (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: 40 (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) For determining liability under the Securities Act of 1933, treat such post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defence of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrant hereby undertakes that for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, Province of British Columbia, on November 1, 2004. P--CE COMPUTERS, INC. Per: /s/ Allan Quattrin ------------------------- Allan Quattrin, President CEO, CFO and Director In accordance with the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates stated. /s/ Bruce Sheppard - -------------------------- Bruce Sheppard, COO, Secretary and Director November 1, 2004 /s/ Allan Quattrin - -------------------------- Allan Quattrin, President CEO, CFO and Director November 1, 2004 41 EXHIBIT INDEX Exhibit # Page# - ------------------ ------- 3.1 Articles of Incorporation of P--CE Computers, Inc. 3.2 By-laws of P--CE Computers, Inc. 3.3 Articles of Amendment dated December 6, 2001 3.4 Articles of Amendment dated July 9, 2002 5.1 Opinion of Reed & Reed, P.C. 10.1 Management Agreement between P--CE Computers, Inc. and Allan Quattrin dated August 1, 2002 10.2 Consulting Agreement between P--CE Computers, Inc. and Benjamin Moglin dated November 1, 2003 10.3 Purchase and Sale Agreement between P--CE Computers, Inc. and PC Frame, Inc., dated March 19, 2004 10.4 Purchase and Sale Agreement between P--CE Computers, Inc. and PC Frame, Inc., dated March 29, 2004 10.5 Assignment Agreement between Benjamin Moglin, Allan Quattrin, Richard Stieler and P--CE Computers, Inc., dated April 2004 10.6 Supply Contract entered into between P--CE Computers, Inc. and True Corporation Public Company Limited, dated August 16, 2004. 10.7 Letter from Allan Quattrin to P--CE Computers, Inc., dated Oct. 26, 2004, confirming non-accrual of compensation owing up to Aug. 31, 2004 23.1 Consent of Accountants 23.2 Consent of Reed & Reed, P.C. (included in Exhibit 5.1) 99.1 Complaint filed by Personal Computing Environments Korea, Inc., A Thousand Steps, Inc., Ben Hynes and Jimmy Kim against P--CE Computers, Inc., Ben Moglin and Allan Quattrin in the Superior Court of the Sate of California for the County of Orange, Central Justice Center, filed on March 9, 2004 99.2 P--CE Computers, Inc. and Allan Quattrin's Answer to the Complaint, filed on June 1, 2004 99.3 First Amended Cross Complaint filed by P--CE Computers, Inc. against Personal Computing Environments Korea, Inc., Ben Hynes and Jimmy Kim, filed on June 1, 2004 EX-3.1 2 pceexh3_1.txt P--CE COMPUTERS SB-2, ARTICLES OF INCORPORATION EXHIBIT 3.1 - ----------- -------------------- ARTICLES OF INCORPORATION |FILED #C20949-2001| ------------------------- | NOV 08 2001 | OF | IN THE OFFICE OF | -- | | Coleman Energy U.S., Inc. | DEAN HELLER | ------------------------- |SECRETARY OF STATE| -------------------- ARTICLE I: NAME --------------- The name of the Corporation is: Coleman Energy U.S., Inc. ARTICLE II: RESIDENT AGENT -------------------------- The Resident Agent of the Corporation is: Nevada Corporation Services Ltd The address of the Resident Agent where process may be served is: 237 Tramway Dr., Suite B, Lake Tahoe (Stateline), Nevada 89449 ARTICLE III: AUTHORIZED SHARES ------------------------------ The Corporation is authorized to issue the following shares: Two Hundred Million (200,000,000) shares of common stock at a par value of $0.0001 Two Hundred Million (200,000,000) shares of common stock at a par value of $0.0001 ARTICLE IV: GOVERNING BOARD --------------------------- A Board of Directors shall govern the Corporation. The First Board of Directors shall consist of one (1) member whose name and address is listed as follows: D. Batrick, P.O. Box 6957, Lake Tahoe, NV 89449-6957 ARTICLE V: PURPOSE ------------------ The Purpose of the Corporation shall be general business and any legal activity. ARTICLE VI: INCORPORATOR ------------------------ The Name and address of the Incorporator is listed as follows: Nevada Corporation Services Ltd 237 Tramway Dr., Suite B, Box 6957, Lake Tahoe, Nevada 89449-6957 I, the undersigned, being the incorporator herein before named for the purpose of forming a corporation pursuant to NRS 78, do make and file these Articles of Incorporation, hereby declaring and certifying that the facts herein stated are true. Nevada Corporation Services Ltd By: /s/ David Batrick Date: 11/07/2001 ---------------------------------------- Authorized Officer EX-3.2 3 pceexh3_2.txt P--CE COMPUTERS SB-2, BYLAWS EXHIBIT 3.2 - ----------- Bylaws of --------- P--Ce Computers, Inc. --------------------- a Nevada Corporation -------------------- ARTICLE I - OFFICES ------------------- The registered office of the Corporation in the State of Nevada shall be located in the City and State designated in the Articles of Incorporation. The Corporation may also maintain offices at such other places within or without the State of Nevada as the Board of Directors may, from time to time, determine. ARTICLE II - MEETING OF STOCKHOLDERS ------------------------------------ Section 1 - Annual Meetings: (Chapter 78.310) - ---------------------------- The annual meeting of the Stockholders of the Corporation shall be held at the time fixed, from time to time, by the Directors. Section 2 - Special Meetings: (Chapter 78.310) - ----------------------------- Special meetings of the Stockholders may be called by the Board of Directors or such person or persons authorized by the Board of Directors and shall be held within or without the State of Nevada. Section 3 - Place of Meetings: (Chapter 78.310) - ------------------------------ Meetings of Stockholders shall be held at the registered office of the Corporation, or at such other places, within or without the State of Nevada as the Directors may from time to time fix. If no designation is made, the meeting shall be held at the Corporation's registered office in the state of Nevada. Section 4 - Notice of Meetings: (Section 78.370) - ------------------------------- (a) Written or printed notice of each meeting of Stockholders, whether annual or special, signed by the president, vice president or secretary, stating the time when and place where it is to be held, as well as the purpose or purposes for which the meeting is called, shall be served either personally or by mail, by or at the direction of the president, the secretary, or the officer or the person calling the meeting, not less than ten or more than sixty days before the date of the meeting, unless the lapse of the prescribed time shall have been waived before or after the taking of such action, upon each Stockholder of record entitled to vote at such meeting, and to any other Stockholder to whom the giving of notice may be required by law. If mailed, such notice shall be deemed to be given when deposited in the United States mail, addressed to the Stockholder as it appears on the share transfer records of the Corporation or to the current address, which a Stockholder has delivered to the Corporation in a written notice. 1 (b) Further notice to a Stockholder is not required when notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to him or her during the period between those two consecutive annual meetings; or all, and at least two payments sent by first-class mail of dividends or interest on securities during a 12-month period have been mailed addressed to him or her at his or her address as shown on the records of the Corporation and have been returned undeliverable. Section 5 - Quorum: (Section 78.320) - ------------------- (a) Except as otherwise provided herein, or by law, or in the Articles of Incorporation (such Articles and any amendments thereof being hereinafter collectively referred to as the "Articles of Incorporation"), a quorum shall be present at all meetings of Stockholders of the Corporation, if the holders of a majority of the shares entitled to vote on that matter are represented at the meeting in person or by proxy. (b) The subsequent withdrawal of any Stockholder from the meeting, after the commencement of a meeting, or the refusal of any Stockholder represented in person or by proxy to vote, shall have no effect on the existence of a quorum, after a quorum has been established at such meeting. (c) Despite the absence of a quorum at any meeting of Stockholders, the Stockholders present may adjourn the meeting. Section 6 - Voting and Acting: (Section 78.320 & 78.350) - ------------------------------ (a) Except as otherwise provided by law, the Articles of Incorporation, or these Bylaws, any corporate action, the affirmative vote of the majority of shares entitled to vote on that matter and represented either in person or by proxy at a meeting of Stockholders at which a quorum is present, shall be the act of the Stockholders of the Corporation. (b) Except as otherwise provided by statute, the Certificate of Incorporation, or these bylaws, at each meeting of Stockholders, each Stockholder of the Corporation entitled to vote thereat, shall be entitled to one vote for each share registered in his name on the books of the Corporation. (c) Where appropriate communication facilities are reasonably available, any or all Stockholders shall have the right to participate in any Stockholders' meeting, by means of conference telephone or any means of communications by which all persons participating in the meeting are able to hear each other. Section 7 - Proxies: (Section 78.355) - -------------------- Each Stockholder entitled to vote or to express consent or dissent without a meeting, may do so either in person or by proxy, so long as such proxy is executed in writing by the Stockholder himself, his authorized officer, director, employee or agent or by causing the signature of the stockholder to be affixed to the writing by any reasonable means, including, but not limited to, a facsimile signature, or by his attorney-in-fact there unto duly authorized in writing. Every proxy shall be revocable at will unless the proxy conspicuously states that it is irrevocable and the proxy is coupled with an interest. A telegram, telex, cablegram, or similar transmission by the Stockholder, or a photographic, photostatic, facsimile, shall be treated as a valid proxy, and 2 treated as a substitution of the original proxy, so long as such transmission is a complete reproduction executed by the Stockholder. If it is determined that the telegram, cablegram or other electronic transmission is valid, the persons appointed by the Corporation to count the votes of Stockholders and determine the validity of proxies and ballots or other persons making those determinations must specify the information upon which they relied. No proxy shall be valid after the expiration of six months from the date of its execution, unless otherwise provided in the proxy. Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation. If any Stockholder designates two or more persons to act as proxies, a majority of those persons present at the meeting, or, if one is present, then that one has and may exercise all of the powers conferred by the Stockholder upon all of the persons so designated unless the Stockholder provides otherwise. Section 8 - Action Without a Meeting: (Section 78.320) - ------------------------------------- Unless otherwise provided for in the Articles of Incorporation of the Corporation, any action to be taken at any annual or special Stockholders' meeting, may be taken without a meeting, without prior notice and without a vote if written consents are signed by a majority of the Stockholders of the Corporation, except however if a different proportion of voting power is required by law, the Articles of Incorporation or these Bylaws, than that proportion of written consents is required. Such written consents must be filed with the minutes of the proceedings of the Stockholders of the Corporation. ARTICLE III - BOARD OF DIRECTORS -------------------------------- Section 1 - Number, Term, Election and Qualifications: (Section 78.115, 78.330) - ------------------------------------------------------ (a) The first Board of Directors and all subsequent Boards of the Corporation shall consist of not less than 1 nor more more than 10, unless and until otherwise determined by vote of a majority of the entire Board of Directors. The Board of Directors or Stockholders all have the power, in the interim between annual and special meetings of the Stockholders, to increase or decrease the number of Directors of the Corporation. A Director need not be a Stockholder of the Corporation unless the Certificate of Incorporation of the Corporation or these Bylaws so require. (b) Except as may otherwise be provided herein or in the Articles of Incorporation, the members of the Board of Directors of the Corporation shall be elected at the first annual Stockholders' meeting and at each annual meeting thereafter, unless their terms are staggered in the Articles of Incorporation of the Corporation or these Bylaws, by a plurality of the votes cast at a meeting of Stockholders, by the holders of shares entitled to vote in the election. (c) The first Board of Directors shall hold office until the first meeting of Stockholders and until their successors have been duly elected and qualified or until there is a decrease in the number of Directors. Thereinafter, Directors will be elected at the annual meeting of Stockholders and shall hold office until the annual meeting of the Stockholders next succeeding his election, unless their terms are staggered in the Articles of Incorporation of the Corporation (so long as at least one - fourth in number of the Directors of the Corporation are elected at each annual Stockholders' meeting) or these Bylaws, or until his prior death, resignation or removal. Any Director may resign at any time upon written or verbal notice of such resignation to the Corporation. (d) All Directors of the Corporation shall have equal voting power unless the 3 Articles of Incorporation of the Corporation provide that the voting power of individual Directors or classes of Directors are greater than or less than that of any other individual Directors or classes of Directors, and the different voting powers may be stated in the Articles of Incorporation or may be dependent upon any fact or event that may be ascertained outside the Articles of Incorporation if the manner in which the fact or event may operate on those voting powers is stated in the Articles of Incorporation. If the Articles of Incorporation provide that any Directors have voting power greater than or less than other Directors of the Corporation, every reference in these Bylaws to a majority or other proportion of Directors shall be deemed to refer to a majority or other proportion of the voting power of all the Directors or classes of Directors, as may be required by the Articles of Incorporation. Section 2 - Duties and Powers: (Section 78.120) - ------------------------------ The Board of Directors shall be responsible for the control and management of the business and affairs, property and interests of the Corporation, and may exercise all powers of the Corporation, except such as those stated under Nevada state law, are in the Articles of Incorporation or by these Bylaws, expressly conferred upon or reserved to the Stockholders or any other person or persons named therein. Section 3 - Regular Meetings; Notice: (Section 78.310) - ------------------------------------- (a) A regular meeting of the Board of Directors shall be held either within or without the State of Nevada at such time and at such place as the Board shall fix. (b) No notice shall be required of any regular meeting of the Board of Directors and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting when such time and place was fixed before such change, notice of such action shall be given to each director who shall not have been present at the meeting at which such action was taken within the time limited, and in the manner set forth in these Bylaws with respect to special meetings, unless such notice shall be waived in the manner set forth in these Bylaws. Section 4 - Special Meetings; Notice: (Section 78.310) - ------------------------------------- (a) Special meetings of the Board of Directors shall be held at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Except as otherwise required statute, written notice of special meetings shall be mailed directly to each Director, addressed to him at his residence or usual place of business, or delivered orally, with sufficient time for the convenient assembly of Directors thereat, or shall be sent to him at such place by telegram, radio or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meeting is to be held. If mailed, the notice of any special meeting shall be deemed to be delivered on the second day after it is deposited in the United States mails, so addressed, with postage prepaid. If notice is given by telegram, it shall be deemed to be delivered when the telegram is delivered to the telegraph company. A notice, or waiver of notice, except as required by these Bylaws, need not specify the business to be transacted at or the purpose or purposes of the meeting. (c) Notice of any special meeting shall not be required to be given to any Director who shall attend such meeting without protesting prior thereto or at 4 its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notice of any adjourned meeting shall not be required to be given. Section 5 - Chairperson: - ------------------------ The Chairperson of the Board, if any and if present, shall preside at all meetings of the Board of Directors. If there shall be no Chairperson, or he or she shall be absent, then the President shall preside, and in his absence, any other director chosen by the Board of Directors shall preside. Section 6 - Quorum and Adjournments: (Section 78.315) - ------------------------------------ (a) At all meetings of the Board of Directors, or any committee thereof, the presence of a majority of the entire Board, or such committee thereof, shall constitute a quorum for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation, or these Bylaws. (b) A majority of the directors present at the time and place of any regular or special meeting, although. less than a quorum, may adjourn the same from time to time without notice, whether or not a quorum exists. Notice of such adjourned meeting shall be given to Directors not present at time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other Directors who were present at the adjourned meeting. Section 7 - Manner of Acting: (Section 78.315) - ----------------------------- (a) At all meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by law, by the Articles of Incorporation, or these bylaws, action approved by a majority of the votes of the Directors present at any meeting of the Board or any committee thereof, at which a quorum is present shall be the act of the Board of Directors or any committee thereof. (c) Any action authorized in writing made prior or subsequent to such action, by all of the Directors entitled to vote thereon and filed with the minutes of the Corporation shall be the act of the Board of Directors, or any committee thereof, and have the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board or committee for all purposes. (d) Where appropriate communications facilities are reasonably available, any or all directors shall have the right to participate in any Board of Directors meeting, or a committee of the Board of Directors meeting, by means of conference telephone or any means of communications by which all persons participating in the meeting are able to hear each other. Section 8 - Vacancies: (Section 78.335) - ---------------------- (a) Unless otherwise provided for by the Articles of Incorporation of the Corporation, any vacancy in the Board of Directors occurring by reason of an increase in the number of directors, or by reason of the death, resignation, disqualification, removal or inability to act of any director, or other cause, shall be filled by an affirmative vote of a majority of the remaining directors, though less than a quorum of the Board or by a sole remaining Director, at any 5 regular meeting or special meeting of the Board of Directors called for that purpose except whenever the Stockholders of any class or classes or series thereof are entitled to elect one or more Directors by the Certificate of Incorporation of the Corporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the Directors elected by such class or classes or series thereof then in office, or by a sole remaining Director so elected. (b) Unless otherwise provided for by law, the Articles of Incorporation or these Bylaws, when one or more Directors shall resign from the board and such resignation is effective at a future date, a majority of the directors, then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote otherwise to take effect when such resignation or resignations shall become effective. Section 9 - Resignation: (Section 78.335) - ------------------------ A Director may resign at any time by giving written or verbal notice of such resignation to the Corporation. Section 10 - Removal: (Section 78.335) - --------------------- Unless otherwise provided for by the Articles of Incorporation, one or more or all the Directors of the Corporation may be removed with or without cause at any time by a vote of two-thirds of the Stockholders entitled to vote thereon, at a special meeting of the Stockholders called for that purpose, unless the Articles of Incorporation provide that Directors may only be removed for cause, provided however, such Director shall not be removed if the Corporation states in its Articles of Incorporation that its Directors shall be elected by cumulative voting and there are a sufficient number of shares cast against his or her removal, which if cumulatively voted at an election of Directors would be sufficient to elect him or her. If a Director was elected by a voting group of Stockholders, only the Stockholders of that voting group may participate in the vote to remove that Director. Section 11 - Compensation: (Section 78.140) - -------------------------- The Board of Directors may authorize and establish reasonable compensation of the Directors for services to the Corporation as Directors, including, but not limited to attendance at any annual or special meeting of the Board. Section 12 - Committees: (Section 78.125) - ------------------------ Unless otherwise provided for by the Articles of Incorporation of the Corporation, the Board of Directors, may from time to time designate from among its members one or more committees, and alternate members thereof, as they deem desirable, each consisting of one or more members, with such powers and authority (to the extent permitted by law and these Bylaws) as may be provided in such resolution. Unless the Articles of Incorporation or Bylaws state otherwise, the Board of Directors may appoint natural persons who are not Directors to serve on such committees authorized herein. Each such committee shall serve at the pleasure of the Board and, unless otherwise stated by law, the Certificate of Incorporation of the Corporation or these Bylaws, shall be governed by the rules and regulations stated herein regarding the Board of Directors. 6 ARTICLE IV - OFFICERS --------------------- Section 1 - Number, Qualifications, Election and Term of Office: (Section - ---------------------------------------------------------------------- 78.130) (a) The Corporation's officers shall have such titles and duties as shall be stated in these Bylaws or in a resolution of the Board of Directors which is not inconsistent with these Bylaws. The officers of the Corporation shall consist of a president, secretary and treasurer, and also may have one or more vice presidents, assistant secretaries and assistant treasurers and such other officers as the Board of Directors may from time to time deem advisable. Any officer may hold two or more offices in the Corporation. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of Stockholders. (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor shall have been duly elected and qualified, subject to earlier termination by his or her death, resignation or removal. Section 2 - Resignation: - ------------------------ Any officer may resign at any time by giving written or verbal notice of such resignation to the Corporation. Section 3 - Removal: - -------------------- Any officer elected by the Board of Directors may be removed, either with or without cause, and a successor elected by the Board at any time, and any officer or assistant officer, if appointed by another officer, may likewise be removed by such officer. Section 4 - Vacancies: - ---------------------- (a) A vacancy, however caused, occurring in the Board and any newly created Directorships resulting from an increase in the authorized number of Directors may be filled by the Board of Directors. Section 5 - Bonds: - ------------------ The Corporation may require any or all of its officers or Agents to post a bond, or otherwise, to the Corporation for the faithful performance of their positions or duties. Section 6 - Compensation: - ------------------------- The compensation of the officers of the Corporation shall be fixed from time to time by the Board of Directors. 7 ARTICLE V - SHARES OF STOCK --------------------------- Section 1 - Certificate of Stock: (Section 78.235) - --------------------------------- (a) The shares of the Corporation shall be represented by certificates or shall be uncertificated shares. (b) Certificated shares of the Corporation shall be signed, (either manually or by facsimile), by officers or agents designated by the Corporation for such purposes, and shall certify the number of shares owned by him in the Corporation. Whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and by a registrar, then a facsimile of the signatures of the officers or agents, the transfer agent or transfer clerk or the registrar of the Corporation may be printed or lithographed upon the certificate in lieu of the actual signatures. If the Corporation uses facsimile signatures of its officers and agents on its stock certificates, it cannot act as registrar of its own stock, but its transfer agent and registrar may be identical if the institution acting in those dual capacities countersigns or otherwise authenticates any stock certificates in both capacities. If any officer who has signed or whose facsimile signature has been placed upon such certificate, shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. (c) If the Corporation issues uncertificated shares as provided for in these Bylaws, within a reasonable time after the issuance or transfer of such uncertificated shares, and at least annually thereafter, the Corporation shall send the Stockholder a written statement certifying the number of shares owned by such Stockholder in the Corporation. (d) Except as otherwise provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical. Section 2 - Lost or Destroyed Certificates: (Section 104.8405) - ------------------------------------------- The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed if the owner: (a) so requests before the Corporation has notice that the shares have been acquired by a bona fide purchaser, (b) files with the Corporation a sufficient indemnity bond; and (c) satisfies such other requirements, including evidence of such loss, theft or destruction, as may be imposed by the Corporation. Section 3 - Transfers of Shares: (Section 104.8401, 104.8406 & 104.8416) - -------------------------------- (a) Transfers or registration of transfers of shares of the Corporation shall be made on the stock transfer books of the Corporation by the registered holder 8 thereof, or by his attorney duly authorized by a written power of attorney; and in the case of shares represented by certificates, only after the surrender to the Corporation of the certificates representing such shares with such shares properly endorsed, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require, and the payment of all stock transfer taxes due thereon. (b) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 4 - Record Date: (Section 78.215 & 78.350) - ------------------------ (a) The Board of Directors may fix, in advance, which shall not be more than sixty days before the meeting or action requiring a determination of Stockholders, as the record date for the determination of Stockholders entitled to receive notice of, or to vote at, any meeting of Stockholders, or to consent to any proposal without a meeting, or for the purpose of determining Stockholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for Stockholders entitled to notice of meeting shall be at the close of business on the day preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held, or if notice is waived, at the close of business on the day before the day on which the meeting is held. (b) The Board of Directors may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted for Stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights of Stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. (c) A determination of Stockholders entitled to notice of or to vote at a Stockholders' meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting. Section 5 - Fractions of Shares/Scrip: (Section 78.205) - -------------------------------------- The Board of Directors may authorize the issuance of certificates or payment of money for fractions of a share, either represented by a certificate or uncertificated, which shall entitle the holder to exercise voting rights, receive dividends and participate in any assets of the Corporation in the event of liquidation, in proportion to the fractional holdings; or it may authorize the payment in case of the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or it may authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the manual or facsimile signature of an officer or agent of the Corporation or its agent for that purpose, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of Stockholder, except as therein provided. The scrip may contain any provisions or conditions that the Corporation deems advisable. If a scrip ceases to be exchangeable for full share certificates, the shares that would otherwise have been issuable as provided on the scrip are deemed to be treasury shares unless the scrip contains other provisions for their disposition. 9 ARTICLE VI - DIVIDENDS ---------------------- (Section 78.215 & 78.288) (a) Dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine and shares may be issued pro rata and without consideration to the Corporation's Stockholders or to the Stockholders of one or more classes or series. (b) Shares of one class or series may not be issued as a share dividend to Stockholders of another class or series unless: (i) so authorized by the Articles of Incorporation; (ii) a majority of the Stockholders of the class or series to be issued approve the issue; or (iii) there are no outstanding shares of the class or series of shares that are authorized to be issued. ARTICLE VII - FISCAL YEAR ------------------------- The fiscal year of the Corporation shall be fixed, and shall be subject to change by the Board of Directors from time to time, subject to applicable law. ARTICLE VIII - CORPORATE SEAL ----------------------------- (Section 78.065) The corporate seal, if any, shall be in such form as shall be prescribed and altered, from time to time, by the Board of Directors. The use of a seal or stamp by the Corporation on corporate documents is not necessary and the lack thereof shall not in any way affect the legality of a corporate document. ARTICLE IX - AMENDMENTS ----------------------- Section 1 - By Stockholders: - ---------------------------- All Bylaws of the Corporation shall be subject to alteration or repeal, and new Bylaws may be made, by a majority vote of the Stockholders at the time entitled to vote in the election of Directors even though these Bylaws may also be altered, amended or repealed by the Board of Directors. Section 2 - By Directors: (Section 78.120) - ------------------------- The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, Bylaws of the Corporation. 10 ARTICLE X - WAIVER OF NOTICE: ----------------------------- (Section 78375) Whenever any notice is required to be given by law, the Articles of Incorporation or these Bylaws, a written waiver signed by the person or persons entitled to such notice, whether before or after the meeting by any person, shall constitute a waiver of notice of such meeting. ARTICLE XI - INTERESTED DIRECTORS: ---------------------------------- (Section 78.140) No contract or transaction shall be void or voidable if such contract or transaction is between the corporation and one or more of its Directors or Officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its Directors or Officers, are directors or officers, or have a financial interest, when such Director or Officer is present at or participates in the meeting of the Board, or the committee of the Stockholders which authorizes the contract or transaction or his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee and are noted in the minutes of such meeting, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (b) the material facts as to his, her or their relationship or relationships or interest or interests and as to the contract or transaction are disclosed or are known to the Stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the Stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the Stockholders; or (d) the fact of the common directorship, office or financial interest is not disclosed or known to the Director or Officer at the time the transaction is brought before the Board of Directors of the Corporation for such action. Such interested Directors may be counted when determining the presence of a quorum at the Board of Directors' or committee meeting authorizing the contract or transaction. ARTICLE XII - ANNUAL LIST OF OFFICERS, DIRECTORS ------------------------------------------------ AND REGISTERED AGENT: --------------------- (Section 78.150 & 78.165) The Corporation shall, within sixty days after the filing of its Articles of Incorporation with the Secretary of State, and annually thereafter on or before the last day of the month in which the anniversary date of incorporation occurs each year, file with the Secretary of State a list of its president, secretary and treasurer and all of its Directors, along with the post office box or street address, either residence or business, and a designation of its resident agent in the state of Nevada. Such list shall be certified by an officer of the corporation. 11 CERTIFICATE OF OFFICER ---------------------- This is to Certify that I am a duly elected, qualified and acting officer of: P--Ce Computers, Inc. --------------------- And that the attached and foregoing Bylaws, constituting a true original copy were duly accepted as the bylaws of said corporation, by the directors of said corporation. In witness whereof, I have hereunto set my hand. Dated July 24, 2002 /s/ Authorized Officer ------------------------------- Authorized Officer 12 EX-3.3 4 pceexh3_3.txt P--CE COMPUTERS SB-2, CERT OF AMEND TO ART OF INC EXHIBIT 3.3 - ----------- -------------------- | FILED #C29848-01 | | DEC 06 2001 | | IN THE OFFICE OF | | | DEAN HELLER Certificate of | DEAN HELLER | Secretary of State Amendment |SECRETARY OF STATE| 101 North Carson Street, Suite 3 (PURSUANT TO NRS 78.380) -------------------- Carson City, Nevada 89701-4786 (775) 684-5706 - -------------------------------------------------------------------------------- Important: Read attached Instructions before completing form. ------------------------------------------------------------- Certificate of Amendment to Articles of Incorporation ----------------------------------------------------- For Nevada Profit Corporations ------------------------------ (Pursuant to NRS 78.380 - Before Issuance of Stock) -Remit in Duplicates- 1. Name of corporation: Coleman Energy U.S., Inc. (File # C29848-2001) ------------------------- -------------------- 2. The articles have been amended as follows (provide article numbers, if available): Article I: The name of the Corporation is: World Energy Resource Group Inc. Article II: The corporation is authorized to issue the following shares: Two hundred million (200,000,000) shares of common stock at a par value of $0.0001 Two hundred million (200,000,000) shares of preferred stock at a par value of $0.0001 3. The undersigned declare that they constitute at least two-thirds of the -------------------- incorporators (check) ------------- Or of the board of directors (check) X -- ------------------ 4. The date upon which the original articles of incorporation were filed with the Secretary of State: November 8, 2001. ----------------- 5. The undersigned affirmatively declare that to the date of this certificate, no stock of the corporation has been issued. 6. Signatures: /s/ David Batrick, Director - ------------------------------------ ----------------------------------- Signature Signature IMPORTANT: Failure to include any of the above information and remit the proper fees may cause this filing to be rejected. Nevada Secretary of State Form 78.380 PROFIT AMEND1995.01 Revised on: 03/06/00 EX-3.4 5 pceexh3_4.txt P--CE COMPUTERS SB-2, CERT OF AMEND TO ART OF INC EXHIBIT 3.4 - ----------- DEAN HELLER Certificate of Amendment Secretary of State (PURSUANT TO NRS 78.380) 101 North Carson Street, Suite 3 FILED # C29848-01 Carson City, Nevada 89701-4786 JUL 09 2002 (775) 684-5708 - -------------------------------------------------------------------------------- Important: Read attached Instructions before completing form. ------------------------------------------------------------- Certificate of Amendment to Articles of Incorporation ----------------------------------------------------- For Nevada Profit Corporations ------------------------------ (Pursuant to NRS 78.380 - Before Issuance of Stock) -Remit In Duplicate- 1. Name of Corporation: World Energy Resource Group Inc. (C-29848-01) -------------------------------- ----------- 2. The articles have been amended as follows (provide article numbers, if available): Article 1: The name of the Corporation Is: P--CE Computers, Inc. - ---------------------------------------------------------------- 3. The undersigned declared that they constitute at least two-thirds of the -------------------- incorporators. -------------- 4. The date upon which the original articles of Incorporation were filed with the Secretary of State: November 8, 2001. ----------------- 5. The undersigned affirmatively declare that to the date of this certificate, no stock of the corporation has been issued. 6. Signatures: Nevada Corporation Services Ltd., Incorporator /s/ David Batrick - -------------------------------------- -------------------------------------- Signature By Authorized Officer Signature IMPORTANT: Failure to include any of the above information and remit the proper fees may cause this filing to be rejected. Nevada Secretary of State Form 78.380PROFIT AMEND1995.01 Revised on: 03/06/00 EX-5.1 6 pceexh5_1.txt P--CE COMPUTERS SB-2, LEGAL OPINION EXHIBIT 5.1 - ----------- OPINION OF THE LAW OFFICE OF REED & REED, P.C. The Law Office of Reed & Reed, P.C. 4450 Arapahoe Ave., Suite 100 Boulder, Colorado 80303 November 1, 2004 The Board of Directors P--CE Computers, Inc. 1066 West Hastings St., Suite 2300 Vancouver, BC Canada V6E 3X2 Re: Registration Statement on Form SB-2 as filed on or about Nov. 1, ----------------------------------------------------------------- 2004 ---- Gentlemen: We have acted as your United States counsel in connection with the registration under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"), and the sale by certain selling shareholders of P--CE Computers, Inc., a Nevada corporation (the "Company"), of an aggregate of 5,630,636 shares of the Company's common stock (the "Common Stock"). In connection with this opinion, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of (i) the Registration Statement on Form SB-2, relating to the Shares, filed with the Securities and Exchange Commission) the "Commission") under the Securities Act on or about November 1, 2004 (together with all exhibits thereto, the "Registration Statement"), (ii) the Articles of Incorporation of the Company in effect as of the date hereof, (iii) the Bylaws of the Company in effect as of the date hereof, (iv) resolutions of the Board of Directors of the Company relating to the issuance and sale of the Shares, and (v) copies of the certificates representing the Shares. We have also examined such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinion set forth below. In rendering this opinion, we have relied upon our review of documentation representing the transactions involving the issuance of the shares and certain other applicable documents pertaining to the status of the Company and its common stock that were furnished to us by the Company. We have also received oral representations made by certain officers and affiliates of the Company. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion which we did not independently verify, we have relied upon oral or written statements and representations of officers and other representatives of the Company and others. Based upon and subject to the foregoing, we are of the opinion that the Shares to be sold by the selling shareholders described in the Registration Statement, have been duly and validly authorized for issuance and are validly issued, fully paid and non-assessable. We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to form SB-2, and its incorporation by reference as an exhibit to the Registration Statement. This law firm expressly disclaims any obligation to advise you of facts, circumstances, events or developments which hereafter may be brought to our attention and which may alter, affect or modify this opinion. This opinion is expressly limited to the matters stated herein, and this law firm makes no opinion, express or implied, as to any other matters relating to the Company or the securities. Very Truly Yours, /s/ Law Office of Reed & Reed, P.C. LAW OFFICE OF REED & REED, P.C. EX-10.1 7 pceexh10_1.txt P--CE COMPUTERS SB-2, MANAGEMENT AGREEMENT EXHIBIT 10.1 - ------------ MANAGEMENT AGREEMENT -------------------- THIS AGREEMENT is made and dated for reference effective as of the 1st --------------- day of August, 2002 BETWEEN: - -------- P--CE COMPUTERS, INC., a company duly incorporated under the laws of the ---------------------- State of Nevada, and having an address for notice and delivery located at 2300 - 1066 W. Hastings St., Vancouver, British Columbia, Canada, V6E 3X2 (the "Company"); OF THE FIRST PART ----------------- AND: - ---- ALLAN QUATTRIN, an individual having an address for delivery located at -------------- 905 - 388 Drake St., Vancouver, British Columbia, Canada, V6B 6A8 (the "Consultant"); OF THE SECOND PART ------------------ (the Company, or the Consultant, being hereinafter singularly also referred to as a "Party" and collectively referred to as the "Parties" as the context so requires). WHEREAS: - -------- A. The Company is a non-reporting company duly incorporated in the State of Nevada and is in the business of producing and marketing innovative computing and entertainment environments; B. The Company wishes to employ the Consultant to provide services as President and CEO of the Company; C. The Consultant has determined to accept the engagement by the Company; NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the ----------------------------------------- mutual covenants and provisos herein contained, THE PARTIES HERETO AGREE AS ---------------------------- FOLLOWS: - -------- Article I --------- INTERPRETATION -------------- 1.1 Definitions. For all purposes of this Agreement, except as otherwise ----------- expressly provided or unless the context otherwise requires, the following words and phrases shall have the following meanings: -2- (a) "Agreement" means this Agreement as from time to time supplemented or amended; (b) "Base Fee" means that compensation set forth in section "4.1" below; (c) "Board of Directors" or "Board" means the Board of Directors of the Company, or any successors to the Company, as duly constituted from time to time; (d) "Effective Date" has the meaning ascribed to it in section "3.1" hereinbelow; (e) "Indemnified Party" has the meaning ascribed to it in section "6.1" hereinbelow; (f) "Non-Renewal Notice" has the meaning ascribed to it in section "3.2" hereinbelow; (g) "Term" has the meaning ascribed to it in section "3.1" hereinbelow; and (h) "Termination Fee" has the meaning ascribed to it in section "3.4 below. 1.2 Interpretation. For the purposes of this Agreement, except as otherwise -------------- expressly provided or unless the context otherwise requires,: (a) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, section or other subdivision of this Agreement; (b) the headings are for convenience only and do not form a part of this Agreement nor are they intended to interpret, define or limit the scope or extent of this or any provision of this Agreement; (c) any reference to an entity shall include and shall be deemed to be a reference to any entity that is a successor to such entity; and (d) words in the singular include the plural and words in the masculine gender include the feminine and neuter genders, and vice versa. Article II ---------- SERVICES AND DUTIES OF THE CONSULTANT ------------------------------------- 2.1 General Services. During the Term (as hereinafter defined) of this ----------------- Agreement the Consultant will provide the Company with such general corporate, administrative, technical and management services as is considered necessary or advisable by the Consultant for the due and proper management of the Company to achieve the goals and needs of the Company as determined by the policies and proceedings of management and the Board of Directors and is considered advisable and within the normal duties of a President and CEO (collectively, the "Services"). 2.2 Specific Services. Without limiting the generality of the Services to be ----------------- provided as set forth in section "2.1" hereinabove, it is hereby acknowledged and agreed that the Consultant will provide the following specific services: (a) supervision of the hiring of competent personnel as are required for the efficient operation of the Company's business; -3- (b) the management and supervision of the performance of personnel and of the operation of various business enterprises of the Company as approved by the Board; (c) the identification of business opportunities for the Company, the conduct of due diligence, and assistance in the negotiation and conclusion of contracts for such opportunities; (d) assistance in the coordination and administration of all development programs of the Company together with all capital funding projects and resources which are necessarily incidental thereto; (e) assistance in the coordination of the preparation and dissemination of business plans and reports for the Company; (f) assistance in the liaison with and the setting up of corporate alliances for the Company with major companies and customers, the Company's auditors, the Company's solicitors and the Company's affiliated companies and business partners; and (g) such other activities as are necessary or incidental from time to time. 2.3 Company Support. The Company shall reasonably make available all such ---------------- resources as shall be required for the Consultant to perform the Services and otherwise to fulfill the requirements of this Agreement. The Company warrants it shall provide the Consultant with all such reasonable resources, financial and otherwise, as the Consultant shall require to fulfill its reasonable goals as determined by the Board and this Agreement. Article III ----------- TERM, RENEWAL AND TERMINATION ----------------------------- 3.1 Term. The Term of this Agreement (the "Term") is for a period of five (5) ---- years commencing on August 1, 2002 (the "Effective Date") and terminating July 31, 2007. 3.2 Renewal. This Agreement shall renew automatically for subsequent two-year ------- periods if not specifically terminated in accordance with the following provisions. Renewal shall be on the same terms and conditions contained herein, unless modified and agreed to in writing by the Parties, and this Agreement shall remain in full force and effect (with any collateral written amendments) without the necessity to execute a new document. A Party hereto determining not to renew agrees to notify the other Parties hereto in writing at least 90 calendar days prior to the end of the Term of its intent not to renew this Agreement (the "Non-Renewal Notice") and such non-renewal shall be subject to the Termination Fee provisions of sec. 3.4. 3.3 Termination. Notwithstanding any other provision of this Agreement, this ----------- Agreement may be terminated by a Party upon written notice if: (a) the other Party fails to cure a material breach of any provision of this Agreement within 30 calendar days from its receipt of written notice from said Party (unless such breach cannot be reasonably cured within said 30 calendar days and the other Party is actively pursuing curing of said breach); or (b) the other Party commits fraud or serious neglect or misconduct or illegal act in the discharge of its respective duties hereunder or under the law; or -4- (c) the other Party becomes adjudged bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy, and where any such petition is not dismissed; but that the Consultant shall have the right to receive the Termination Fee (defined below) regardless of the reason for termination, without prejudice to any rights of counter-claim in the event of damages for fraud or misconduct and without prejudice to the right to recovery in the event of judgement. 3.4 Termination Fee. In the event that this Agreement is terminated (by act ---------------- or constructively), or fails to renew due to failure of agreement after the issuance of a Non-Renewal Notice, or otherwise at the termination of this Agreement, the Consultant shall receive a termination fee (the "Termination Fee") equal to the sum of: (a) buy-out of any outstanding stock options for a price equal to the fair market value of the Company's shares, determined for the 30 days preceding termination and as determined in accordance with accounting principles, multiplied by the number of shares under option and less the exercise price thereof or, at the optionee's election and subject to any required regulatory approval, extension of the option for a period of two (2) years after termination or, at the optionee's election, the immediate vesting and exercise of all granted options and the immediate right to employ `net exercise' privileges in accordance with the practice of U.S. companies or, if established in accordance with the Company's stock option plan, in accordance with such plan; plus (b) the greater of: (i) the aggregate remaining Base Fee for the unexpired remainder of the Term; or (ii) an annual Base Fee (Base Fee multiplied by twelve) plus one month of Base Fee for each year, or portion thereof, served after the Effective Date; but that such aggregate sum of this section 3.4(b) (therefore not including section 3.4(a) amounts) shall not exceed the Base Fee multiplied by 24. At the Company's election the Termination Fee may be paid in 12 equal monthly installments commencing with the first payment on the effective date of termination. In the event of any dispute as to quantum of the Termination Fee (or any claimed set-off or counter-claim), payment thereof shall not be delayed or deferred but shall commence immediately monthly, in 12 equal parts, of the aggregate sum of section 3.4(b) above which, if disputed, shall be determined by an accountant selected by the Consultant which shall be irrevocably deemed immediately due and payable monthly. The aggregate Termination Fee (and any counter-claim) shall then be determined by the Parties thereafter and adjustments, payments, or recoveries in accordance with judicial process or settlement. 3.5 Disability. If the Consultant is unable to continue an employment, ---------- whether through disability or otherwise, and the Consultant consequently be unable to provide the Services adequately, then the Company shall fund a disability plan which shall continue for a period of two (2) years of seventy five (75%) percent of the average Base Fee and Incentive Fee of the two years preceding termination ("Disability Fund Sum"). If physically capable, the Consultant shall be made available for consultation for up to ten (10) hours per week, non-cumulative, at no cost to the Company. For additional hours per week, the Consultant shall be paid at a per diem rate (any time spent in a day shall be deemed to be a full day) equal to the per annum Disability Fund Sum divided by 260. 3.6 Death. In the event that the Consultant is unable to provide the Services ----- due to the death of the Consultant, the Company may terminate this Agreement as a without fault termination and the Termination Fee shall be payable in accordance with section 3.4. -5- Article IV ---------- COMPENSATION OF THE CONSULTANT ------------------------------ 4.1 Base Fee. The Consultant shall be compensated on a monthly basis from the -------- Effective Date of this Agreement by a basic monthly fee of twelve thousand five hundred (US$12,500) dollars USD (the "Base Fee"). 4.2 Base Fee Adjustment. The Base Fee may be renegotiated annually at the -------------------- request of either Party. In the event that the Parties cannot agree then the Base Fee shall be increased by the greater of 5% or the amount of the cost of living index increase as published by the U.S. Federal government in its final annual publication of such reports. The Base Fee may be temporarily adjusted in the event that sales of the Company in any quarter are less than operating costs of the Company and then at the end of the subsequent quarter should negative cash flow be still occurring the Consultant's Base Fee shall, together with other management personnel subject to the same formula, be reduced pro rata to reduce costs to balance incoming revenue and outgoing expense but only up to a 50% reduction of the Base Fee. The reduction of Base Fee shall be ameliorated upon the Company's revenue increasing sufficiently to pay some or all deferred Base Fee (the Base Fee payment shall increase to its normal rate in direct proportion to positive cash flow). Any reduction of Base Fee shall be treated as a shareholder loan, without interest, and shall be paid from profit before dividends. 4.3 Incentive Fee. In addition to the Base Fee, the Consultant shall also -------------- receive an incentive fee (the "Incentive Fee") which shall be no less than that established by the Board for other management. For all management, incentive Fees shall not exceed 20% of before tax profit of the Company and shall have an aggregate maximum `cap' for all management of one million dollars ($1,000,000). 4.4 Discretionary Bonus. The Base Fee and Incentive Fee shall not exclude the ------------------- granting of discretionary bonuses to the Consultant by the Company from time-to-time. 4.5 Reimbursement of Expenses. The Consultant shall be funded for or --------------------------- reimbursed for all reasonable expenses incurred, or to be incurred, by the Consultant for the benefit of the Company within 15 days of submission of invoice and support therefor. 4.6 Vacation. The Consultant shall be entitled to up to four weeks paid -------- vacation per year. Article V --------- ADDITIONAL OBLIGATIONS OF THE CONSULTANT ---------------------------------------- 5.1 No Conflict. During this Agreement the Consultant will not engage in any ----------- business which reasonably may detract from, compete with or conflict with the Consultant's duties and obligations to the Company as set forth in this Agreement, without disclosure to the Board of Directors of the Company, and will not do so if the Board of Directors objects. 5.2 Confidentiality. The Consultant will not, except as authorized or --------------- required by the Consultant's duties hereunder, reveal or divulge to any person or companies any information concerning the organization, business, finances, transactions or other affairs of the Company, or of any of its subsidiaries, which may come to the Consultant's knowledge during the continuance of this Agreement, and the Consultant will keep in complete secrecy all confidential -6- information entrusted to the Consultant and will not use or attempt to use any such information in any manner which may injure or cause loss either directly or indirectly to the Company's business. This restriction will continue to apply after the termination of this Agreement without limit in point of time but will cease to apply to information or knowledge which may come into the public domain. 5.3 Compliance with Applicable Laws. The Consultant will comply with all --------------------------------- Canadian, U.S. and foreign laws, whether federal, provincial or state, applicable to the Consultant's duties hereunder and, in addition, hereby represents and warrants that any information which the Consultant may provide to any person or company hereunder will be accurate and complete in all material respects and not misleading, and will not omit to state any fact or information which would be material to such person or company. 5.4 Reporting. So often as may be required by the Board of Directors, the --------- Consultant will provide to the Board of Directors of the Company such information concerning the results of the Consultant's Services and activities hereunder as the Board of Directors of the Company may reasonably require. Article VI ---------- INDEMNIFICATION AND LEGAL PROCEEDINGS ------------------------------------- 6.1 Indemnification. The Consultant (the "Indemnified Party") shall be --------------- indemnified and funded on a current basis for all losses, damages, legal expenses, and any other expenses or costs of any nature which may be occasioned by its service with the Company. Inter alia, this indemnity shall apply to all manner of actions, proceedings, or prosecutions, whether civil, regulatory, or criminal, to which the Indemnified Party may be subject due in whole or in part to the Services provided herein or by virtue of any office held. This indemnity shall apply both during and after its Term for all matters arising during the Term, and any extension, until any limitation period has expired in respect to any action which might be contemplated. The Company shall not refuse coverage for any purpose or reason and a strict presumption of innocence shall be applied and the Company may only seek refund of any coverage in the case of finding of fraud or criminal culpability, after exhaustion of all appeals. The Company shall diligently seek and support any such court approvals for the within indemnity as the Indemnified Party may require. The Company shall pay all such retainers and trust requirements as counsel for the Indemnified Party may require and shall pay all accounts of counsel as they come due and such accounts shall be rendered in the name of the Company and, further, should the Company fail to pay any reasonable account, it shall attorn to all such actions, summary judgments, and garnishing orders as such counsel may consider fit to enforce and receive payment of its account. The Company shall not seek to settle or compromise any action without the approval of the Indemnified Party. The Company warrants it shall employ due diligence and good faith and seek the best interests of the Indemnified Party as defendants in any action or prosecution. The Indemnified Party shall permit the Company to consult with their counsel and to be informed of any matters thereof, subject only to any requirements for legal privilege purposes. The Company shall make the Consultant party to all liability insurance policies, to the full extent permitted by such policies, which may be acquired for the benefit of all or any of the Board or management. 6.2 Claim of Indemnification. The Parties hereto agree to waive any right ------------------------- they might have of first requiring the Indemnified Party to proceed against or enforce any other right, power, remedy, security or claim payment from any other person before claiming this indemnity. 6.3 Notice of Claim. In case any action is brought against an Indemnified --------------- Party in respect of which indemnity may be sought, the Indemnified Party will give the Company prompt written notice of any such action of which the Indemnified Party has knowledge. Failure by the Indemnified Party to so notify -7- shall not relieve the Company of its obligation of indemnification hereunder unless (and only to the extent that) such failure results in a forfeiture of substantive rights or defenses. Article VII ----------- FORCE MAJEURE ------------- 7.1 Events. If either Party hereto is at any time either during this ------ Agreement or thereafter prevented or delayed in complying with any provisions of this Agreement by reason of strikes, walk-outs, labour shortages, power shortages, fires, wars, acts of God, earthquakes, storms, floods, explosions, accidents, protests or demonstrations by environmental lobbyists or native rights groups, delays in transportation, breakdown of machinery, inability to obtain necessary materials in the open market, unavailability of equipment, governmental regulations restricting normal operations, shipping delays or any other reason or reasons beyond the control of that Party, then the time limited for the performance by that Party of its respective obligations hereunder shall be extended by a period of time equal in length to the period of each such prevention or delay. 7.2 Notice. A Party shall within seven calendar days give notice to the other ------ Party of each event of force majeure under section "7.1" hereinabove, and upon cessation of such event shall furnish the other Party with notice of that event together with particulars of the number of days by which the obligations of that Party hereunder have been extended by virtue of such event of force majeure and all preceding events of force majeure. Article VIII ------------ NOTICE ------ 8.1 Notice. Each notice, demand or other communication required or permitted ------ to be given under this Agreement shall be in writing and shall be sent by prepaid registered mail to the Party, or delivered to such Party, at the address for such Party specified on the front page of this Agreement. The date of receipt of such notice, demand or other communication shall be the date of delivery thereof if delivered, or, if given by registered mail as aforesaid, shall be deemed conclusively to be the third day after the same shall have been so mailed, except in the case of interruption of postal services for any reason whatsoever, in which case the date of receipt shall be the date on which the notice, demand or other communication is actually received by the addressee. 8.2 Change of Address. Either Party may at any time and from time to time ------------------- notify the other Party in writing of a change of address and the new address to which notice shall be given to it thereafter until further change. Article IX ---------- GENERAL PROVISIONS ------------------ 9.1 Entire Agreement. This Agreement constitutes the entire agreement to date ---------------- between the Parties hereto and supersedes every previous agreement, expectation, negotiation, representation or understanding, whether oral or written, express or implied, statutory or otherwise, between the Parties with respect to the subject matter of this Agreement. 9.2 No relationship of Employer-Employee. Nothing contained in this Agreement ------------------------------------ shall be construed as creating the relationship of employer and employee. -8- 9.3 No Assignment. This Agreement may not be assigned by either Party except ------------- with the prior written consent of the other Party. 9.4 Warranty of Good Faith. The Parties hereto warrant each to the other to ---------------------- conduct their duties and obligations hereof in good faith and with due diligence and to employ all reasonable endevours to fully comply with and conduct the terms and conditions of this Agreement. 9.5 Further Assurances. The Parties will from time to time after the ------------------- execution of this Agreement make, do, execute or cause or permit to be made, done or executed, all such further and other acts, deeds, things, devices and assurances in law whatsoever as may be required to carry out the true intention and to give full force and effect to this Agreement. 9.6 Representation and Costs. It is hereby acknowledged by each of the -------------------------- Parties hereto that, as between the Company and the Consultant herein, Devlin Jensen, Barristers and Solicitors, acts solely for the Company, and that the Consultant has been advised by Devlin Jensen to obtain independent legal advice with respect to this Agreement 9.7 Applicable Law. The situs of this Agreement is Vancouver, British --------------- Columbia, and for all purposes this Agreement will be governed exclusively by and construed and enforced in accordance with the laws prevailing in the Province of British Columbia. This Agreement shall be exclusively litigated in British Columbia unless the Parties voluntarily consent otherwise in writing. 9.8 Severability and Construction. Each Article, section, paragraph, term and ----------------------------- provision of this Agreement, and any portion thereof, shall be considered severable, and if, for any reason, any portion of this Agreement is determined to be invalid, contrary to or in conflict with any applicable present or future law, rule or regulation in a final unappealable ruling issued by any court, agency or tribunal with valid jurisdiction in a proceeding to which any Party hereto is a party, that ruling shall not impair the operation of, or have any other effect upon, such other portions of this Agreement as may remain otherwise intelligible (all of which shall remain binding on the Parties and continue to be given full force and effect as of the date upon which the ruling becomes final). 9.9 Consents and Waivers. No consent or waiver expressed or implied by either -------------------- Party in respect of any breach or default by the other in the performance by such other of its obligations hereunder shall: (a) be valid unless it is in writing and stated to be a consent or waiver pursuant to this section; (b) be relied upon as a consent to or waiver of any other breach or default of the same or any other obligation or constitute a general waiver under this Agreement; or [The rest of this page is intentionally left blank] -9- (c) eliminate or modify the need for a specific consent or waiver pursuant to this section in any other or subsequent instance. IN WITNESS WHEREOF the Parties hereto have hereunto set their respective ------------------ hands and seals in the presence of their duly authorized signatories effective as at the date first above written. The CORPORATE SEAL of ) P--CE COMPUTERS, INC. ) - --------------------- ) was hereunto affixed in the presence of: ) ) /s/ Ben Moglin ) (C/S) - --------------------------------------------) Authorized Signatory ) SIGNED, SEALED and DELIVERED by ) ALLAN QUATTRIN ) - -------------- ) in the presence of: ) ) /s/ Kim Underwood ) - --------------------------------------------) Witness Signature ) ) /s/ Allan Quattrin ) -------------------------- ) ALLAN QUATTRIN ) -------------- EX-10.2 8 pceexh10_2.txt P--CE COMPUTERS SB-2, CONSULTING AGREEMENT EXHIBIT 10.2 - ------------ P--CE COMPUTERS, INC. --------------------- 2300 - 1066 W. Hastings St. Vancouver, British Columbia Canada, V6E 3X2 Phone: (604) 687-4723 Fax: (604) 687-4723 November 1, 2003 VIA FAX 82-780-8233 Benjamin Moglin - --------------- C/o Personal PCE Asia Ltd. Buguk Securities Building, 10th Floor Youngdongpo-gu, Youido-dong Seoul, Korea 43-2 Attention: Mr. Benjamin Dear Sirs: Re: Consulting Agreement with P--CE Computers, Inc. (the "Company") - ---------------------------------------------------------------------- This correspondence will specify the consulting arrangement (the "Consulting Agreement") between the Company and Benjamin Moglin. The terms and conditions of the Consulting Agreement are as follows: 1. Services. During the Term (as hereinafter defined) of this Consulting -------- Agreement, Benjamin Moglin (the "Consultant") shall provide to the Company consulting services designed to assist the Company in the area of computer technology, ergonomics and biomechanics to help develop the business of the Company. 2. Term. The term of this Consulting Agreement (the "Term) is for a period ---- of three months commencing on November 1, 2003 (the "Effective Date"), with such term to be extended on a month to month basis at the sole discretion of the Board of Directors of the Company. 3. Payment for Services. It is hereby agreed that the Consultant shall ---------------------- provide the consulting services for a monthly fee of US$2,500 (the "Fee") with such Fee being due and payable by the Company to the Consultant on the first business day of the month in advance. In addition, it is agreed November 1, 2003 Page 2 - -------------------------------------------------------------------------------- that the Consultant shall be reimbursed for all expenses incurred by the Consultant for the benefit of the Company (collectively, the "Expenses") and which Expenses shall be payable by the Company within 30 days of delivery by the Consultant of written substantiation on account of each such reimbursable Expense. 4. Confidentiality by the Consultant. The Consultant will not, except as ----------------------------------- authorized or required by the Consultant's duties hereunder, reveal or divulge to any person or companies any information concerning the organization, business, finances, transactions or other affairs of the Company, or of any of its subsidiaries, which may come to the Consultant's knowledge during the Term and during the continuance of this Consulting Agreement, and the Consultant will keep in complete secrecy all confidential information entrusted to the Consultant and will not use or attempt to use any such information in any manner which may injure or cause loss either directly or indirectly to the Company's respective businesses. This restriction will continue to apply after the termination of this Consulting Agreement without limit in point of time but will cease to apply to information or knowledge which may come into the public domain. 5. Indemnification. The Company agrees to indemnify and hold Consultant (the --------------- "Indemnified Person") harmless from and against losses, claims, damages, liabilities, costs, or expenses including reasonable attorney's and accountant's fees joint and several arising out of the performance of this Consulting Agreement, whether or not Consultant is a party to such dispute. The Company agrees that it shall also reimburse the Indemnified Person for any attorney's and costs incurred in enforcing this Indemnification against the Company. 6. No Indemnification. This indemnity shall not apply, however, where a ------------------- court of competent jurisdiction has made a final determination that the Consultant engaged in gross recklessness and willful misconduct in the performance of its services hereunder which gave rise to loss, claim, damage, liability, cost or exposure sought to be recovered hereunder. (But pending any such final determination, the indemnification and reimbursement provision of this Consulting Agreement shall apply and the Company shall perform its obligations hereunder to reimburse Consultant for its attorney's fees and expenses). 7. Entire Agreement. This Consulting Agreement sets forth the entire ----------------- understanding of the parties relating to the subject matter hereof, and supersedes and cancels any prior communications, understandings, and agreements between the parties. This Consulting Agreement cannot be modified or changed, nor can any of its provision be waived, except by written agreement signed by all parties. November 1, 2003 Page 3 - -------------------------------------------------------------------------------- If the Consultant is in accord with the forgoing, please execute a copy of this letter and the same will be binding on the parties. Yours truly, P--CE COMPUTERS, INC. - --------------------- Per: /s/ Allan Quattrin - --------------------------- ALLAN QUATTRIN, Director The forgoing is hereby agreed to this 1st day of November, 2003 and Benjamin Moglin declares himself bound to the terms. /s/ Benjamin Moglin - --------------------------- Benjamin Moglin, Consultant EX-10.3 9 pceexh10_3new.txt P--CE COMPUTERS SB-2, PURCHASE/SALES AGREEMENT EXHIBIT 10.3 - ------------ THE PURCHASE AND SALES AGREEMENT -------------------------------- This Agreement, made this 17 th. Day of March. 2004, by and between P--CE --------------------------- Computers, Inc., a Nevada corporation doing business as Personal Computing Environments, having offices at Palm Springs, California, U.S.A., (hereafter as "A"=purchaser), and PC Frame, Inc. having its principal office at Room No. 201, A Bldg. Guroyootongsangga 636-62 Guro-Dong, Guro-Gu, Seoul Korea (hereafter as "B"=seller). WITNESSETH - ---------- IN CONSIDERATION OF the mutual covenants contained herein, the parties hereto agree as follows. Article 1. Definitions - ---------- ----------- Except where the context otherwise requires, the following terms and expressions used in this Agreement shall have the meaning respectively defined as follows: 1.1 The object of this contract is the personal computer setting frame, totally 20 units. (1 unit has been already delivered to A from B) 1.2 "Products" shall mean the finished, packaged products of the personal computer setting frames. Article 2. Payment and Delivery - ---------- -------------------- 2.1 B agrees to deliver the 20 Products to A at the price of $18,000 USD, ($900/1 unit) 2.2 Payment for the Products by A is as follows. The first payment $15,520 shall be remitted within three (3) days after the date of this agreement. The upper $15,520 is consisted of the price of 10 units=$9,000, packing for 16 units & etc.=$2,000, transferring fee from Seoul to Busan for 16 units=$450, CFS charge for 16 units & etc.=$600, Insurance on 16 units=$40, Handling charge for 16 units=$1,000, shipping charge from Busan to L.A. for 16 units=$2,430. Three 1 (3) black units are to remain at the office of B and will be picked up on March ----- 27, 2004 by Benjamin Moglin of A. The second payment $9,000 shall be remitted when B has made the 5 modifications to the 19 units that have been discussed between Mr. Nam of B and Benjamin Moglin of A and shipped the products and A has received the evidence of shipping of 16 units. 2.3 Delivery shall be at the site of PCE's warehouse in Indio, California. U.S.A. 2.4 B shall ship 16 units of the Product within the 5th day of April 2004 at latest within the 15th day of April 2004. 2 Article 3. Assignment - ---------- ---------- This Agreement shall not be assigned by B except with the prior written consent of A. Article 4. Governing Law - ---------- ------------- This Agreement shall be interpreted and governed by the laws of the Republic of Korea. Article 5. Term - ---------- ---- This Agreement shall become effective as of the date first above written. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed - ------------------ by following officers. A: Purchaser - ------------ P--CE Computers, Inc.: Allan Quattrin, President March 18, 2004 Name and Title Date /s/ Allan Quattrin Signature B: Seller - --------- PC Frame, Inc.: Nam Ki Don, CEO March 19, 2004 Name and Title Date /s/ Nam Ki Don Signature 3 EX-10.4 10 pceexh10_4new.txt P--CE COMPUTERS SB-2, PURCHASE/SALES AGREEMENT EXHIBIT 10.4 - ------------ THE PURCHASE AND SALES AGREEMENT -------------------------------- This Agreement, made this 27th. Day of March. 2004, by and between P--CE -------------------------- Computers, Inc., a Nevada corporation doing business as Personal Computing Environments, having offices at Palm Springs, California, U.S.A., (hereafter as "A"=purchaser), and PC Frame, Inc. having its principal office at Room No. 201, A Bldg. Guroyootongsangga 636-62 Guro-Dong, Guro-Gu, Seoul Korea (hereafter as "B"=seller). WITNESSETH - ---------- IN CONSIDERATION OF the mutual covenants contained herein, the parties hereto agree as follows. Article 1. Definitions - ---------- ----------- Except where the context otherwise requires, the following terms and expressions used in this Agreement shall have the meaning respectively defined as follows: 1.1 The object of this contract is the personal computer setting frame, totally 25 units. 1.2 "Products" shall mean the finished, packaged products of the personal computer setting frames. Article 2. Payment and Delivery - ---------- -------------------- 2.1 B agrees to deliver the 25 Products to A at the price of $22,500 USD, ($900/1 unit) 2.2 Payment for the Products by A is as follows. The first payment $15,103 shall be remitted within three (3) days after the date of this agreement. The upper $15,103 is consisted of the price of 4/10 of total 25 units=$9,000, packing for 25 units & etc.=$2,610, transferring fee from Seoul to Inchon for 25 units=$300, CFS charge for 25 units & etc.=$550, Insurance on 25 units=$43, Handling charge for 25 units=$1,250, shipping charge from Inchon to Bangkok for 25 units=$1,350. The second payment $13,500 shall be remitted within five(5) days from the date B has shipped the products and A has received the evidence of shipping of 25 units. 1 2.3 Delivery shall be at the site of Bangkok Thailand.. 2.4 B shall ship 25 units of the Product within 25 days from the date that B has received the first payment . 2 Article 3. Assignment - ---------- ---------- This Agreement shall not be assigned by B except with the prior written consent of A. Article 4. Governing Law - ---------- ------------- This Agreement shall be interpreted and governed by the laws of the Republic of Korea. Article 5. Term - ---------- ---- This Agreement shall become effective as of the date first above written. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed - ------------------ by following officers. A: Purchaser - ------------ P--CE Computers, Inc.: Allan Quattrin, President March 29, 2004 Name and Title Date /s/ Allan Quattrin Signature B: Seller - --------- PC Frame, Inc.: Nam Ki Don, CEO March 29, 2004 Name and Title Date /s/ Nam Ki Don Signature 3 EX-10.5 11 pceexh10_3.txt P--CE COMPUTERS SB-2, ASSIGNMENT AGREEMENT EXHIBIT 10.5 - ------------ Attorney Docket No. 6337.1042 ASSIGNMENT ---------- WHEREAS Inventors: Benjamin Alexander Moglin Allan Quattrin Addresses: General Delivery #905-388 Drake Street Hazenmore, Saskatchewan Vancouver, British Columbia Canada S0N 1C0 Canada V6B 6A8 Inventors: Rick Stieler Addresses: #311-1515 West 2nd Avenue Vancouver, British Columbia Canada V6J 5C5 In consideration of the sum of one dollar ($1.00) and other good and valuable considerations, the receipt of which is hereby acknowledged by each of the undersigned, the undersigned agree(s) to assign, and hereby does assign, transfer and set over to Assignee: p--ce Computers Inc. Jurisdiction: British Columbia Address: Suite 2300-1066 West Hastings Street, Vancouver, British Columbia, Canada, V6E 4R5 all right, title and interest in the invention known as: PERIPHERAL SUPPORT APPARATUS AND METHOD --------------------------------------- for which an application has been filed in the United States Patent and Trademark Office as a provisional application on November 15, 2002 and assigned serial number 60/426,447, and replaced on November 14, 2003 and assigned serial number 10/712,395. 1. The undersigned agree to execute all papers necessary in connection with the application and any previously regularly filed applications on the basis of which a request for priority is made, any continuing or divisional applications thereof or corresponding applications for filing in countries other than the United States of America and also to execute separate assignments in connection with such applications as the Assignee may deem necessary or expedient. -2- 2. The undersigned agree to execute all papers necessary in connection with any interference, conflict or opposition which may be declared concerning this application or continuation or division or divisions thereof and to co-operate with the Assignee in every way possible in obtaining evidence and going forward with such interference, conflict or opposition. 3. The undersigned agree to execute all papers and documents and perform any act which may be necessary in connection with claims or provisions of the International Convention for Protection of Industrial Property or similar agreements. 4. The undersigned agree to perform all affirmative acts which may be necessary to obtain a grant of a valid United States patent to the Assignee. 5. The undersigned hereby authorize and request the Commissioner of Patents to issue any and all Letters Patent of the United States resulting from said application or continuation or division or divisions thereof to the said Assignee, as Assignee of the entire interest and hereby covenant that they have full right to convey the entire interest herein assigned and that they have not executed and will not execute, any agreement in conflict herewith. SIGNED at Bangkok, Thailand, -------------------- this 7th day of April , 2004. --- -------------- ---- /s/ Benjamin Moglin --------------------------- Benjamin Alexander Moglin WITNESS: /s/ Chanchina Chaiyadej - ---------------------------------------- (signature) Chanchina Chaiyadej - ---------------------------------------- (name - printed) Bangkok, Thailand - ---------------------------------------- (address) Concierge at the Sukhothai Bangkok - ---------------------------------------- (occupation) Continued on Page 3 -3- Continued From Page 2 SIGNED at Bangkok, Thailand, ------------------- this 7th day of April , 2004. --- -------------- ---- /s/ Allan Quattrin --------------------------- Allan Quattrin WITNESS: /s/ Chanchina Chaiyadej - ---------------------------------------- (signature) Chanchina Chaiyadej - ---------------------------------------- (name - printed) Bangkok, Thailand - ---------------------------------------- (address) Concierge at the Sukhothai Bangkok - ---------------------------------------- (occupation) SIGNED at Sayulita, Nayarit, Mexico, --------------------------- this 27th day of April , 2004. ---- ------------- ---- /s/ Rick Stieler --------------------------- Richard Nelson Stieler WITNESS: /s/ Damion Porter - ---------------------------------------- (signature) Damion Porter - ---------------------------------------- (name - printed) 825 Las Palmas Rd., Pasadena, CA 91105 - ---------------------------------------- (address) Real Estate Development - ---------------------------------------- (occupation) EX-10.6 12 pceexh10_4.txt P--CE COMPUTERS SB-2, SUPPLY CONTRACT EXHIBIT 10.6 - ------------ Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 1 - -------------------------------------------------------------------------------- This SUPPLY CONTRACT is made on this 16th day of August, 2004, by and between: TRUE CORPORATION PUBLIC COMPANY LIMITED, a company incorporated under the laws - --------------------------------------- of Thailand with its registered office at True Tower, 18 Ratchadaphisek Road, Khwaeng Huai Khwang, Khet Huai Khwang, Bangkok 10310, Thailand (hereinafter referred to as "TRUE"), and P--CE COMPUTERS, INC., a company incorporated under the laws of Nevada, with its - --------------------- principal office at 45630 Citrus Avenue, Suite E, Indio, California 92201-3401, USA (hereinafter referred to as "Contractor"). TRUE and Contractor have agreed as follows: 1. Interpretation - --------------------- (A) In this Contract these words, and their cognitive words, have the following meanings: "Acceptance" means acceptance of the Deliverable with the features as required ---------- by TRUE as stated in this Contract and the completion of the Acceptance tests per the procedures set forth in Appendix 8; "Acceptance Date" means 1st October, 2004, the date by which the Deliverable is --------------- required to be Delivered and achieved Acceptance; "Contract" means the written agreements concluded between TRUE and Contractor in -------- relation to the supply of the Deliverable, comprising this Contract and including its appendices and any related purchase orders; "Contract Price" means the total price payable by TRUE to Contractor for the --------------- performance by Contractor of its obligations under this Contract, which shall in no event exceed US Dollars One Hundred Five Thousand Eight Hundred Seventy Five (US$105,875), as evidenced by the Unit Prices and as further described in Clause 16 (Contract Price); "Delivery" or "Deliver" means the delivery by Contractor of the Deliverable, -------- ------- Cost, Insurance & Freight (CIF) Bangkok, Thailand, INCOTERMS 2000; "Deliverable" means the work to be performed and the matter to be provided by ----------- Contractor under this Contract, further described in the Specifications and/or listed in Appendix 4; "Frame" means the PCE computing and entertainment platform of the Deliverable, ----- excluding the seat, monitor, sound system and computer and computer accessories; "Letter of Credit" means the bank documentary irrevocable letter of credit to be ---------------- procured by TRUE for the benefit of Contractor which may be fully drawn against upon proper presentment of a bill of lading, a commercial invoice and a Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 2 - -------------------------------------------------------------------------------- certificate of origin with respect to the Frames for which TRUE has issued a purchase order to Contractor; "Proprietary Rights" means all existing and future rights to inventions, ------------------- patents, designs, trade marks, service marks, copyrights and other like rights, registered and unregistered, and any applications for any of the foregoing, together with all trade secrets, know how, rights to confidence and other intellectual or industrial property rights anywhere in the world; "Prototype Units" means the three (3) units of the PCE computing and ----------------- entertainment platform of the Deliverable which have been Delivered and Accepted prior to the date of this Contract; "Specifications" means the detailed technical specifications for the -------------- Deliverable, being those contained or referred to in Appendix 7, as the same may be amended from time to time in accordance with this Contract; and "Unit Prices" means the item prices for, as the case may be, the supply of the ------------ Deliverable as specified in Appendix 4 and as further described in Clause 16. (B) This document shall, unless expressly provided otherwise in writing, have priority over all other documents forming part of this Contract. 2. General Obligations of Contractor - ---------------------------------------- (A) Contractor shall supply the Deliverable, install the Deliverable at the specific location specified by TRUE, and provide on-site installation and assembly training in accordance with this Contract, in a timely manner to meet the Acceptance Date. Accordingly, all risks in relation to such supply, other than those that TRUE has in this Contract expressly agreed to bear, shall be borne by Contractor. For the avoidance of doubt, TRUE acknowledges that the Prototype Units have already been Delivered, assembled and installed according to schedule. (B) Intentionally omitted. (C) Contractor shall ensure that the Deliverable: (i) accords strictly and complies in all respects with all the provisions and requirements of this Contract; (ii) will in all respects be fit for the purposes described and will perform in accordance with the Specifications; (iii) to the extent any standard is not specified in this Contract or has not been agreed, it shall comply with internationally recognized standards of best practice/design; (iv) will be in compliance with all applicable laws and regulations; and Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 3 - -------------------------------------------------------------------------------- (v) shall proceed in accordance with the scope of works, responsibility matrix and implementation plan as set forth in Appendix 6. (D) Without prejudice to any other remedy available to TRUE by reason of a breach by Contractor under this Contract, Contractor shall indemnify TRUE against all losses, damages and expenses suffered by TRUE in respect of the Deliverable, or any claim that such a breach has occurred. Except as may be specifically provided herein, Contractor shall not be liable for indirect, incidental, special or consequential damages, including loss of profit, investment, goodwill or cost of capital. (E) Any other agreement notwithstanding, Contractor hereby guarantees that the Contract Price for the Deliverable shall include all costs and expenses arising from the supply of the Deliverable (CIF Bangkok), training and other costs and expenses incurred in complying with this Contract. TRUE shall not be obligated to pay more for the Deliverable than the Contract Price. (F) Intentionally omitted. 3. Purchase Order and e-Procurement - --------------------------------------- (A) Upon the later of (i) five (5) business days after the execution of this Contract and (ii) Contractor complying with Clause 23(A), TRUE shall issue a purchase order with respect to the Deliverable. (B) Contractor agrees, without any conditions, to follow a process of electronic procurement (e-procurement) instructed by TRUE without any additional charge to TRUE. Failure to follow the e-procurement process shall give TRUE the right, at its sole discretion, to deduct from any money owed to Contractor or to claim against any bond a sum equal to the e-procurement fee that would have been owing had the e-procurement process been followed as required, without any liability to TRUE or the e-procurement vendor for such money so deducted or claimed, or to cancel any issued purchase order without any compensation for any loss or damage, both direct and/or indirect, that may be incurred by Contractor. 4. Intentionally Omitted - ---------------------------- 5. Representations and Warranties - ------------------------------------- Contractor represents and warrants to TRUE that: (i) it has all requisite rights in respect of the Deliverable, such that it shall be transferred to TRUE free of any restriction or encumbrance; (ii) the standard of performance, skill and care used in the undertaking by it of the supply of the Deliverable shall be of a standard to be expected of an entity expert in the undertaking of projects comparable to the Deliverable; Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 4 - -------------------------------------------------------------------------------- (iii) only good quality materials and good, careful workmanship have been used in connection with the production of the Deliverable; and (iv) when Accepted, the Deliverable will be capable of operating in accordance with the operating instructions and performance criteria, without risk and danger to the general public or persons operating it and without any pollution or hazardous emission. 6. Indemnity - ---------------- (A) Contractor shall defend, indemnify and hold harmless TRUE (including its subsidiaries, affiliates and customers) against any and all claims, demands and actions (a "Claim") alleged upon Contractor's breach or tort ----- under any infringement of any Proprietary Right in connection with this Contract. (B) If, as a result of a Claim, TRUE becomes enjoined from using the Deliverable or any part thereof, Contractor shall, in order of the following (i) procure for TRUE full rights to use the Deliverable, (ii) provide a replacement Deliverable that is non-infringing and meets not less than the same functional specifications as the Deliverable, or (iii) if acceptable to TRUE, refund in full the Contract Price paid, without any deduction whatsoever. 7. Deliverable, Title and Care of the Deliverable - ----------------------------------------------------- (A) All items of the Deliverable shall be packed by Contractor bearing a label showing the quantity and description of its contents and referring to this Contract. (B) Title to the Deliverable shall be transferred upon Acceptance to TRUE free and clear of any charge, lien or other condition or encumbrance whatsoever. 8. Inspection and Acceptance - -------------------------------- (A) Any part of the Frame at any time found to be defective or inferior to or differing in form or material from the requirements of this Contract shall be replaced or rectified promptly at Contractor's expense. (B) If Contractor fails to remedy any rejected item of the Frame within such period of time as TRUE shall consider reasonable, TRUE may remedy the rejected item and recover from Contractor any cost incurred in so doing. (C) Failure to pass the Acceptance tests, which failure cannot be recovered and remedied by Contractor within forty-five (45) days, including any extension of time granted by TRUE, if any, shall entitle TRUE to require Contractor to reimburse TRUE for all payments made to Contractor, within fifteen (15) days from the date of TRUE's notice, in the full amount requested without any reduction or offset. Contractor shall remove any equipment and material at its own cost, within a reasonable period of Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 5 - -------------------------------------------------------------------------------- time from the date of TRUE's notice and Contractor shall have no claim against TRUE for any loss or damages related to the cancellation of the Deliverable. 9. Defects and Technical Support - ------------------------------------ (A) If at any time there shall be any defect in any Frame which Contractor cannot demonstrate to have been attributable to some cause other than its own failure to comply with this Contract, at its own cost Contractor shall promptly remedy the same. (B) In regard to Deliverables, other than the Frame, Contractor shall pass through to TRUE all rights and benefits of the warranties, if any, provided by the manufacturers and distributors of said Deliverables and provide TRUE with all reasonable assistance in making and substantiating any warranty claim there under with respect to said Deliverables. 10. Intentionally Omitted - ---------------------------- 11. Insurance - ---------------- (A) Contractor shall take out and maintain insurance in relation to the Deliverable as set forth below. Contractor shall provide to TRUE all certificates of insurance and, upon request by TRUE, copies of all insurance policies. (B) Contractor shall comply with all terms and conditions of the policies that it is required to maintain under this Contract and with all requirements of insurers in connection with the settlement of claims, the recovery of losses and the prevention of accidents. Contractor shall bear the cost of all excesses, deductibles, exclusions or limitations applying under such insurance. (C) If Contractor fails to maintain the insurance required, then TRUE may procure and maintain any such insurance, pay the requisite premiums and deduct the amount paid from any monies due Contractor, or recover the same as a debt from Contractor. (D) Contractor shall maintain the following insurance coverage for the period through Acceptance, except as stated otherwise: (i) public and product liability insurance, continuing for not less than five (5) years from the date of this Contract, with an available limit of not less than Thai Baht Forty Million (B40,000,000) per occurrence for bodily injury and property damage; and (ii) property all risks insurance which shall cover but not limited to all losses or damage regardless of cause covering loss of or damage (including during transit) to the Deliverable until Acceptance. 12. Intentionally Omitted - ---------------------------- 13. Intentionally Omitted - ---------------------------- Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 6 - -------------------------------------------------------------------------------- 14. Intentionally Omitted - ---------------------------- 15. Contract Price and Unit Prices - ------------------------------------- (A) Subject to Contractor having complied with its obligations under this Contract, TRUE shall pay the Contract Price.. (B) Intentionally omitted. (C) The amount actually payable to Contractor pursuant to sub-clause (A) shall be the amount found by multiplying the quantities of items of the Deliverable, which have been Delivered and Accepted by TRUE, evidenced by the Unit Prices of such items as shown in Appendix 4. 16. Payment Terms - -------------------- Subject to Contractor having complied with its obligations under this Contract and delivered invoices in respect of the purchase orders, TRUE shall: (i) on the issuance date of the purchase order, issue to Contractor a Letter of Credit equal to forty percent (40%) of the purchase order; (ii) within thirty (30) days after the date of Acceptance, pay Contractor fifty percent (50%) of the purchase order; and (iii) within thirty (30) days after twelve (12) months from the date of Acceptance, pay Contractor ten percent (10%) of the purchase order. Provided, however, that the foregoing notwithstanding, within fifteen (15) days of the date of issuance of the purchase order TRUE shall pay Contractor US Dollars Eleven Thousand Four Hundred Thirty-Four and 50/100 (US$11,434.50) with respect to three (3) Prototype Units that have already been Delivered to and Accepted by TRUE and that sub-clauses (i) and (ii) shall not be applicable to the price of and payment for the Prototype Units. The Contract Price as specified in sub-clause (ii) and (iii) shall be paid by TRUE by telegraphic transfer remittance to Contractor's account at a bank designated by Contractor, in US Dollars. 17. Intentionally Omitted - ---------------------------- 18. Assignment - ----------------- (A) TRUE may, at its absolute discretion, assign all or any part of its interest under this Contract or any agreement entered into in connection with this Contract to any person. (B) Contractor shall, if requested by TRUE, enter into an agreement or agreements with or for the benefit of such persons in which Contractor, without limitation, acknowledges receipt of notice of assignment of Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 7 - -------------------------------------------------------------------------------- TRUE's interest and agrees that it will continue to comply with its obligations hereunder, provided that all payments are made to Contractor as they fall due and payable. 19. Default - -------------- (A) The parties hereto agree that if any party hereto is in default with respect to any of the provisions of this Contract (herein called the "Defaulting Party"), the non-defaulting party (herein called the ------------------ "Non-Defaulting Party") shall give notice to the Defaulting Party --------------------- designating such default, and within ten (10) calendar days after its receipt of such notice, the Defaulting Party shall either: (i) cure such default; or (ii) give the Non-Defaulting Party notice that it denies that such default has occurred and that it is submitting the question to arbitration as herein provided. (B) If arbitration is sought, a party shall not be deemed in default until the matter shall have been determined finally by appropriate arbitration under the provisions of Clause 21 hereinbelow. (C) If: (i) the default is not so cured; or (ii) arbitration is not so sought; or (iii) the Defaulting Party is found in arbitration proceedings to be in default, the Non-Defaulting Party may, by written notice given to the Defaulting Party at any time while the default continues, terminate the interest of the Defaulting Party in and to this Contract. 20. Choice of Governing Law - ------------------------------ This Contract shall be governed by and construed in accordance with the laws of Thailand. The language of this Contract is the English language, which shall be the ruling language in which this Contract shall be interpreted. 21. Arbitration - ------------------ Any dispute arising under this Contract shall be arbitrated at the Singapore International Arbitration Centre, in accordance with the rules thereof enforced at the time of submitting the dispute, provided that the making of any reference under this sub-clause shall not entitle either party to cease to perform any obligations under this Contract which are unperformed at the time of the reference. 22. Notices - -------------- Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 8 - -------------------------------------------------------------------------------- (A) Any communication given or made under or in connection with the matters contemplated by this Contract shall be in writing addressed: (i) if to TRUE, to the registered office address of TRUE set forth in the preamble of this Contract, to the attention of "Khun Noppadol Dej-Udom, Director & General Manager Broadband & Internet", with a copy to the attention of "Associate General Counsel, Supplier Management Department"; and (ii) if to Contractor, to the principal office address of Contractor set forth in the preamble of this Contract, to the attention of "Allan J. Quattrin, President/CEO". (B) Any such communication shall be deemed to have been duly given: (i) if sent by personal delivery, upon delivery at the address of the relevant party; and (ii) if sent by post, fourteen (14) business days after posting. 23. Miscellaneous - -------------------- (A) Contractor undertakes to deliver to TRUE, within seven (7) business days from the date of this Contract, evidence satisfactory to TRUE of authorization for (i) the entering into this Contract, and (ii) the person signing this Contract to execute it on Contractor's behalf. (B) This Contract shall be effective and binding on TRUE and Contractor on the signing date and shall continue to be in effect until all the obligations of parties have been fully discharged. (C) This Contract may be executed in any number of counterparts, and by the parties on separate counterparts, each of which shall constitute an original, but all the counterparts shall together constitute only one and the same instrument. (D) This Contract shall constitute the whole and only agreement between the parties relating to the Deliverable and shall supersede and extinguish any prior drafts, agreements, undertakings, representations, warranties and arrangements of any nature whatsoever, whether or not in writing. This Contract may only be varied in writing signed by both parties. (E) Each party acknowledges that in entering into this Contract it is not relying upon any representation, warranty, promise or assurance made or given by any other party or any other person, whether or not in writing, at any time prior to the execution of this Contract, which is not expressly set out herein. (F) If, at any time, any provision of this Contract is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of any other provisions of this Contract nor the legality, validity or enforceability under the law of any other jurisdiction will in any way be affected or impaired. Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 9 - -------------------------------------------------------------------------------- (G) Intentionally omitted. (H) All information received by a party in connection with this Contract from or about the other party shall be strictly confidential and shall not be used or communicated to any person otherwise than is required in the performance of, or as may be otherwise permitted by, this Contract or required by a government authority. 24. Force Majeure - -------------------- Neither party shall be responsible or considered in breach of this Contract for any delay or failure in the performance of any of its obligations to the extent that such failure or delay is caused by the following events, so long as said event is of a catastrophic nature: acts of God, fires, explosions, labor disputes, accidents or civil disturbances beyond its reasonable control. The non-performing party shall, however, provide notice of such cause preventing or delaying performance, shall resume its performance as soon as practicable and shall use all reasonable efforts to avoid and to mitigate harm to the other party resulting from such failure or inability to perform. The other party may terminate this Contract upon notice if such non-performance continues for a period of thirty (30) days. 25. Intentionally Omitted - ---------------------------- Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 10 - -------------------------------------------------------------------------------- 26. Connected Transaction Warranty - ------------------------------------- Contractor warrants that the transaction of this Contract is not a "Connected Transaction" pursuant to the Regulations of the Stock Exchange of Thailand.1 The parties have caused this Contract to be executed on the date first written above. TRUE CORPORATION PUBLIC COMPANY LIMITED - --------------------------------------- By /s/ Athueck Asvanund By /s/ Vichaow Rakphongphairoj --------------------------------- -------------------------------- Athueck Asvanund Vichaow Rakphongphairoj Vice Chairman and Managing Director and Group General Counsel Chief Operating Officer Witness: /s/ Noppadol Dej-Udom --------------------------- Noppadol Dej-Udom Director & General Manager Broadband & Internet PERSONAL COMPUTING ENVIRONMENTS - ------------------------------- By /s/ Allan Quattrin - ---------------------------------- Allan J. Quattrin, CEO and President Witness: /s/ Mike Shannon -------------------------- Michael Shannon - ----------------------------------- 1 "Connected Transaction" means any transaction between TRUE or TRUE's subsidiaries and persons who may have a conflict. Persons who may have a conflict means the following persons: (a) management of TRUE, (b) a major shareholder of TRUE, (c) a person who has controlling power of TRUE, (d) a person related by blood, marriage or registration under laws to the persons under (a), (b) or (c), namely fathers, mothers, spouses or other close relatives, (e) any juristic person in which the persons under (a), (b) or (d) hold shares or have the power to control or any other material interest, either directly or indirectly, or (f) a person whose nomination as or attainment of (a) or (c), respectively, is imminent. Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 11 - -------------------------------------------------------------------------------- APPENDIX 1 ---------- INTENTIONALLY OMITTED --------------------- Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 12 - -------------------------------------------------------------------------------- APPENDIX 2 ---------- INTENTIONALLY OMITTED --------------------- Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 13 - -------------------------------------------------------------------------------- APPENDIX 3 ---------- INTENTIONALLY OMITTED --------------------- Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 14 - -------------------------------------------------------------------------------- APPENDIX 4 ---------- LIST OF THE DELIVERABLE, UNIT PRICES, LIST OF SPARE PARTS --------------------------------------------------------- AND PRICE SUMMARY ----------------- PC As specified Appendix 7 PRICE per PC $1,020.00 QUANTITY 25 PC Total $25,500.00 VDT 17" TFT-LCD VD PRICE $550.00 QUANTITY 50 VDT Total $27,500.00 SURROUND SOUND Micro labs D222 5.1 @ 60watts PRICE $105.00 QUANTITY 25 Total $2,625.00 PCE with Humanscale Freedom Chair- Red PRICE $2,010.00 QUANTITY 25 TOTAL: $50,250 ------- Total for fully configured PCE 25 @ $4,235 per PCE $105,875.00 Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 15 - -------------------------------------------------------------------------------- APPENDIX 5 ---------- INTENTIONALLY OMITTED --------------------- Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 16 - -------------------------------------------------------------------------------- APPENDIX 6 ---------- SCOPE OF WORKS, RESPONSIBILITY MATRIX AND ----------------------------------------- IMPLEMENTATION PLAN ------------------- Scope of Works: Reception and Assembly location - TRUE Reception Inventory Check -Contractor & TRUE Assembly of units - Contractor & TRUE Trainee's Integration of technologies - Contractor & TRUE Trainee's Local delivery of Units - TRUE & Contractor Reception and Assembly location is suggested to be an open space to allow for rapid assembly. This implementation plan shall be no longer than 10 days in length. Reception of the Deliverable - upon receiving the Deliverable in Bangkok, a check of inventory must be executed. Assembly of units - a central location to assemble 22 units of the Deliverable must be available. Contractor will provide a team of 1 individual to assemble 22 units and TRUE will supply 3 individuals to work with the Contractor's individual to assemble, install and test the Deliverable. Furthermore, TRUE will provide hotel accommodations to the Contractor's individual at no cost to the Contractor or the Contractor's individual. Local delivery of the Deliverable - To provide efficient and effective implementation of the Deliverable into TRUE's desired locations, a delivery vehicle must be arranged by TRUE. In North America, each unit of the Deliverable uses a 1 Ton box truck. This delivery vehicle must have a ramp access to the boxed cargo hold that is no less than 2'7 ft in width. The cargo hold must have a height no less than 5'10 ft. This will allow for the units to be wheeled into and from the delivery vehicle. The units can then be wheeled to their location providing that individual locations have access similar to wheel chair access. Local delivery of units is limited to number of locations and drive time in Bangkok. It is suggested that a team of 2 persons deliver the Deliverable units to locations. Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 17 - -------------------------------------------------------------------------------- APPENDIX 7 ---------- SPECIFICATIONS -------------- CPU Intel Celeron 2.4 GHz 533MHz CPU COOLER BALL TYPE MOTHERBOARD INTEL865G CHIPSET MEMORY 512MB DDR PC2700 DDR333MHz HARD DISK 40G HDD 7200RPM 2 MB Buffer ODD 48X COMBO DRIVER GRAPHIC CARD NVIDIA 5200 128 MB DDR LAN CARD REALTEK 8101L SOUND Onboard DSP 5.1 KEYBOARD wired black & extension MOUSE wired black & extension Web Camera D-Link C310 & extension CASE CHASSIS Shuttle POWER SUPPLY 300W PSU MANUAL MANUAL CD TITLE OS WINDOWS XP PRO Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 18 - -------------------------------------------------------------------------------- APPENDIX 8 ---------- PROCEDURES OF ACCEPTANCE TESTS ------------------------------ ACCEPTANCE PROGRAM i) Implementation Schedule Refer to Appendix 6. ii) Installation Plan Network configuration and interconnection diagram - - RJ 45 cable to rear panel of PC Equipment layout - - to True Corporation's specifications Bay-faced layout - - NA List of installation material - - PCE units will be completely installed with True Corporation applications in assembly process Detailed calculation of power consumption and heat dissipation - - Each PCE unit as configured will consume between 300watts and 700 watts depending on load Equipment relocation plan - - Equipment can be relocated by retracting stabilizers and wheeling units to desired location iii) Test Procedures (after the completion of installation) Test Configuration as an integrated system Each test shall include: a) Structural physical test. (Manually testing of every bolt, and mechanism) b) Connection test. (Manually inspecting all data and power connections) c) Boot Test d) VDT test (manually move windows between VDT's & adjust settings) e) 5.1 Channel audio test (adjusting settings) f) Network Management test g) System Feature Test - (all applicable applications & adjustment) h) Full load test - (minimum of 10 running applications) Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 19 - -------------------------------------------------------------------------------- iv) Monitoring Period which is to be conducted by TRUE and is not an acceptance test. Daily Maintenance and Monitoring equal to TRUE's existing procedures for PC equipment. Weekly Maintenance on structural portions of apparatus for first four weeks up to a maximum of 90 days in total. v) Failure Report Form Direct email to Failure Report rep. Boo@mypce.com ------------- Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 20 - -------------------------------------------------------------------------------- APPENDIX 9 ---------- INTENTIONALLY OMITTED --------------------- Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 21 - -------------------------------------------------------------------------------- APPENDIX 10 ----------- INTENTIONALLY OMITTED --------------------- Contract No. TA2004-009: Personal Computing Environment Supply Contract Page 22 - -------------------------------------------------------------------------------- APPENDIX 11 ----------- INTENTIONALLY OMITTED --------------------- EX-10.7 13 pceexh10_7.txt P--CE COMPUTERS SB-2, NON-ACCRUAL LETTER QUATTRIN ALLAN QUATTRIN -------------- c/o 45630 Citrus Street, Suite E Indio, California U.S.A. 92201 October 26, 2004 VIA FAX (604) 684-0916 - -------------------------- P--CE Computers, Inc. - --------------------- c/o 2550 - 555 W. Hastings St. Vancouver, B.C. V6B 4N5 Attention: The Board of Directors Dear Sirs: Re: P--CE Computers, Inc. (the "Company") ------------------------------------- Non-accrual of all outstanding salary owed to Allan Quattrin under the ---------------------------------------------------------------------- Management Agreement up to August 31, 2004 ------------------------------------------ Please be advised that I hereby agree and acknowledge that no compensation owing from the Company to myself under the Management Agreement between the Company and myself, dated August 1, 2002, will be accrued from August 1, 2002 to August 31, 2004. However, after August 31, 2004, any non-payment of salary owing from the Company to myself under the above mentioned Management Agreement shall accrue. If you have any questions or concerns, please contact me. Yours very truly, /s/ Allan Quattrin ALLAN QUATTRIN EX-23.1 14 pceexh23_1.txt P--CE COMPUTERS SB-2, AUDITORS CONSENT EXHIBIT 23.1 - ------------ CONSENT OF MENDOZA, BERGER & COMPANY, LLP INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Registration Statement of P--CE Computers, Inc. (the "Company") on Form SB-2 of our report dated January 26, 2004, except for the second and third paragraphs of Note 5 and Notes 6 and 8 which are dated October 7, 2004, and the interim financial statements for the nine months ended May 31, 2004, which appear in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the caption "Experts" in such Prospectus. Irvine, California [signed] "Mendoza, Berger & Company, LLP" November 1, 2004 Certified Public Accountants EX-99.1 15 pceexh99_1.txt P--CE COMPUTERS SB-2, SUMMONS EXHIBIT 99.1 - ------------ SUMMONS (CITACION JUDICIAL) FOR COURT USE ONLY (SOLO PARA USO DE LA CORTE) NOTICE TO DEFENDANT: (AVISO AL DEMANDADO): PERSONAL COMPUTING ENVIRONMENTS, INC. a.k.a. PCE, INC. a.k.a. P--CE COMPUTERS, INC.; BEN MOGLIN; ALLAN QUATTRAIN and DOES 1 through 1000, inclusive, YOU ARE BEING SUED BY PLAINTIFF: (LO ESTA DEMANDANDO EL DEMANDANTE): PERSONAL COMPUTING ENVIRONMENTS KOREA, INC. a.k.a. PCE KOREA, INC.; A THOUSAND STEPS, INC., BEN HYNES, JIMMY KIM - -------------------------------------------------------------------------------- You have 30 CALENDAR DAYS after this summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you. Your written response must be in proper legal form if you want the court to hear your case. There may be a court form that you can use for your response. You can find these court forms and more information at the California Courts Online Self-Help Center (www.courtinfo.ca.gov/selfhelp), your county law library, or the courthouse nearest you. If you cannot pay the filing fee, ask the court clerk for a fee waiver form. If you do not file your response on time, you may lose the case by default, and your wages, money, and property may be taken without further warning from the court. There are other legal requirements. You may want to call an attorney right away. If you do not know an attorney, you may want to call an attorney referral service. If you cannot afford an attorney, you may be eligible for free legal services from a nonprofit legal services program. You can locate these nonprofit groups at the California Legal Services Web site (www.lawhelpcalifornia.org), the California Courts Online Self-Help Center (www.courtinfo.ca.gov/selfhelp), or by contacting your local court or county bar association. Tiene 30 DIAS DE CALENDARIO despues de que le entreguen esta citacion y papeles levies para presentar una respuesta por escrito en esta corte y hacer que se entregue una copia al demandante. Una carta o una llamada telefanica no lo protegen. Su respuesta por escrito tiene que estar en formato legal correcto si desea que procesen su caso en la carte. Es posible que haya un formulario que usted pueda usar para su respuesta. Puede encontrar estos formularios de la corte y ma's informaciOn en el Centro de Ayuda de las Cartes de California (wvvw.courtinfo.ca.gov/selfhelplespanol/), en la biblioteca de leyes de su condado o en la corte que le quede mas cerca. Si no puede pagar la cuota de presentacion, pida al secretario de la corte que le de un formulario de exencion de pago de cuotas. Si no presenta su respuesta a tiempo, puede perder caso por incumplimiento y la carte le podra guitar su sueldo, dinero y bienes sin mas advertencia. Hay otros requisites legales. Es recomendable que llame a un abogado inmediatamente. Si no conoce a un abogado, puede Ilamar a un servicio de remision a abogados. Si no puede pagar a un abogado, es posible que cumpla con los requisitos para obtener servicios legales gratuitos de un programa de servicios levies sin fines de lucro. Puede encontrar estos grupos sin fines de lucro en el sitio web de California Legal Services, (www.lawhelpcalifornia.org), en el Centro de Ayuda de las Cartes de California, (www.courtinfo.ca.gov/selfhelp/espanol/) o poniendose en contacto con la torte o el colegio de abogados locales. The name and address of the court is: (El nombre y direccion de la corte es): CASE NUMBER: (Numero del Caso): Orange County Superior Court, Central Justice 0003335 Center 700 Civic Center Drive West, Santa Ana, California 92702 The name, address, and telephone number of plaintiff's attorney, or plaintiff without an attorney, is: (El nombre, la direccien y el nCimero de telefono del abogado del demandante, o del demandante que no tiene abogado, es): Reuben D. Nathan, Esq. 18500 Von Karman Ave., Suite 500, Irvine Calfornia 92612 Tel: (949) 486-1888; DATE: MAR 0 9 2004 Clerk, by_______________________ , Deputy (Fecha) (Secretario) (Adjunto) - -------------------------------------------------------------------------------- (For proof of service of this summons, use Proof of Service of Summons (form POS-010).) (Para prueba de entrega de esta citation use el formulario Proof of Service of Summons, (POS-010)). NOTICE TO THE PERSON SERVED: You are served [SEAL] 1. [_] as an individual defendant. 2. [_] as the person sued under the fictitious name of (specify): 3. [_] on behalf of (specify): under: [_] CCP 416.10 (corporation) [_] CCP 416.20 (defunct corporation) [_] CCP 416.40 (association or partnership) [_] CCP 416.60 (minor) [_] CCP 416.70 (conservatee) [_] CCP 416.90 (authorized person) [_] other (specify): 4. [_] by personal delivery on (date): Page 1 of 1 - -------------------------------------------------------------------------------- SUMMONS CM-010 FOR COURT USE ONLY FILED SUPERIOR COURT OF CALIFORNIA COUNTY OF ORANGE CENTRAL JUSTICE CENTER MAR 09 2004 ALAN SLATER, Clerk of the Court BY: L. IBAREZ, DEPUTY CASE NUMBER: 04CC03735 ATTORNEY OR PARTY WITHOUT ATTORNEY (Name, number, and address): Reuben D. Nathan, Esq. (SBN 2084 AZIMY & NATHAN, LLP 18500 Von Kaltman Ave., Suite 500, Irvine, California 92612 TELEPHONE NO.: (949) 486-1888 FAX NO.: (949) 486-1889 ATTORNEY FOR (Name): Plaintiffs, PCE Korea, Inc.; Ben Hynes and Jimmy Kim - -------------------------------------------------------------------------------- SUPERIOR COURT OF CALIFORNIA, COUNTY OF Orange STREET ADDRESS: 700 Civic Center Drive West MAILING ADDRESS: 700 Civic Center Drive West CITY AND ZIP CODE: Santa Ana, California 92702 BRANCH NAME: Central Justice Center - -------------------------------------------------------------------------------- CASE NAME: PCE Korea, Inc.; Ben Hynes; Jimmy Kim v. PCE, Inc., et aL, - -------------------------------------------------------------------------------- CIVIL CASE COVER SHEEET Complex Case Designation [X] Unlimited [_] Limited [_] Counter [_] Joinder (Amount (Amount Filed with first appearance by demanded demanded is defendant (Cal. Rules of Court, exceeds $25,000) $25,000 or less) rule 1811) All five (5) items below must be completed (see instructions on page 2).
- ------------------------------------------------------------------------------------------------------------------------------------ 1. Check one box below for the case type that best describes this case: Auto Tort Contract Provisionally Complex Civil Litigation [_] Auto (22) [X] Breach of contract/warranty (06) (Cal. Rules of Court, rules 1800-1812) [_] Uninsured motorist (46) [_] Collections (09) [_] Antitrust/Trade regulation (03) Other PI/PD/WD (Personal Injury/Property [_] Insurance coverage (18) [_] Construction defect (10) Damage/Wrongful Death) Tort [_] Other contract (37) [_] Mass tort (40) [_] Asbestos (04) Real Property [_] Securities litigation (28) [_] Product liability (24) [_] Eminent domain/Inverse [_] Environmental /Toxic tort (30) [_] Medical malpractice (45) condemnation (14) [_] Insurance coverage claims arising from the above listed provisionally complex case [_] Other PI/PD/WD (23) [_] Wrongful eviction (33) types (41) Non-PI/PDIWD (Other) Tort [_] Other real property (26) Enforcement of Judgment Unlawful Detainer [_] Enforcement of judgment (20) [_] Business tort/unfair business practice (07) [_] Civil rights (08) [_] Commercial (31) Miscellaneous Civil Complaint [_] Defamation (13) [_] Residential (32) [_] RICO (27) [_] Fraud (16) [_] Drugs (38) [_] Other complaint (not specified above) (42) [_] Intellectual property (19) Judicial Review Miscellaneous Civil Petition [_] Professional negligence (25) [_] Asset forfeiture (05) [_] Partnership and corporate governance (21) [_] Other non-PI/PD/WD tort (35) [_] Petition re: arbitration award(11)[_] Other petition (not specified above)(43) Employment [_] Writ of mandate (02) [_] Wrongful termination (36) [_] Other judicial review (39) [_] Other employment (15) - ------------------------------------------------------------------------------------------------------------------------------------
2. This case [_] is [X] is not complex under rule 1800 of the California Rules of Court. if the case is complex, mark the factors requiring exceptional judicial management: a. [_] Large number of separately represented parties b. [_] Extensive motion practice raising difficult or issues that will be time-consuming to resolve c. [_] Substantial amount of documentary evidence d. [_] Large number of witnesses e. [_] Coordination with related actions pending in one or more novel courts in other counties, states or countries, or in a federal court f. [_] Substantial post-judgment judicial supervision 3. Type of remedies sought (check all that apply): a. [X] monetary b. [X] nonmonetary; declaratory or injunctive relief c. [X] punitive 4. Number of causes of action (specify): Six (6) 5. This case [_] is [X] is not a class action suit. Date: March 8, 2004 Reuben D. Nathan, Esq. /s/ - --------------------------------- ------------------------------------------ (TYPE OR PRINT NAME) (SIGNATURE OF PARTY OR ATTORNEY FOR PARTY) - -------------------------------------------------------------------------------- NOTICE o Plaintiff must file this cover sheet with the first paper filed in the action or proceeding (except small claims cases or cases filed under the Probate, Family, or Welfare and Institutions Code). (Cal. Rules of Court, rule 201.8.) Failure to file may result in sanctions. o File this cover sheet in addition to any cover sheet required by local court rule. o If this case is complex under rule 1800 et seq. of the California Rules of Court, you must serve a copy of this cover sheet on all other parties to the action or proceeding. o Unless this is a complex case, this cover sheet will be used for statistical purposes only. Page 1 of 2 - -------------------------------------------------------------------------------- CIVIL CASE COVER SHEET FILED SUPERIOR COURT OF CALIFORNIA COUNTRY OF ORANGE CENTRAL JUSTICE CENTER MAR 09 2004 ALAN SLATER, Clerk of the Court BY: L. IBAREZ, DEPUTY Attorneys of Record for Plaintiffs PERSONAL COMPUTING ENVIRONMENTS KOREA, INC. a.k.a. PCE KOREA, Inc., A THOUSAND STEPS, INC., BENJAMIN HYNES, and JIMMY KIM SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE, CENTRAL JUSTICE CENTER Case No: 04CC03735 Judge: Honorable Dept. PERSONAL COMPUTING ENVIRONMENTS KOREA, INC. a.k.a. PCE KOREA, INC.; A THOUSAND STEPS, INC., BEN HUNES, JIMMY KIM vs. COMPLAINT FOR DAMAGES, INCLUDING PUNITIVE DAMAGES, INJUNCTIVE RELIEF, DECLARATORY RELIEF, AND OTHER EQUITABLE RELIEF PERSONAL COMPUTING 1. FRAUD & CONCEALMENT ENVIRONMENTS, INC. a.k.a. PCE, INC. 2. NEGLIGENT MISREPRESENTATION a.k.a. P---CE COMPPUTERS, INC.; BEN 3. BREACH OF CONTRACT MOGLIN; ALLAN QUATTRAIN and 4. BREACH OF CONTRACT [UCC ss. 2306] dOES 1 THROUGH 1000, INCLUSIVE, 5. UNLAWFUL BUSINESS PRACTICES 6. FALSE ADVERTISING Defendants - -------------------------------------------------------------------------------- PLAINTIFFS COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF INTRODUCTION ------------ This is a Complaint seeking damages, injunctive relief, equitable relief, and punitive damages by Plaintiffs against PCE, INC., a Nevada Corporation doing business in Palm Springs, California, and its principals, Defendants BEN MOGLIN and ALLAN QUATTRAIN (collectively hereinafter "Defendants"). PARTIES ------- 1. The within action is brought by PERSONAL COMPUTING ENVIRONMENTS KOREA, INC. a.k.a. PCE KOREA (hereinafter "PCE KOREA"), a Korean company, A THOUSAND STEPS. INC. (hereinafter "A THOUSAND STEPS"), a Nevada Corporation, both registered and qualified to transact business as foreign corporations in California and its principals BENJAMIN HYNES and JIMMY KIM, residents of the State of California (hereinafter "Plaintiffs") 2. Defendant, PERSONAL COMPUTING ENVIRONMENTS, INC. a.k.a. PCE, INC. a.k.a. P--CE COMPUTERS, INC. (hereinafter referred to as "PCE") is being sued as a business, and is and at all times herein mentioned was a corporation organized and existing under the laws of the State of Nevada, with its principal place of business in Palm Springs. California. 3. Defendant, BEN MOGLIN (hereinafter "MOGLIN"), is being sued in his individual capacity. Plaintiff is informed and believes and thereon alleges that MOGLIN is and at all times mentioned herein was the agent, employee, and shareholder of Defendant PCE and in doing the things herein alleged was acting within the course and scope of such agency, employment, and authority and with the permission and consent of PCE. 4. Defendant, ALLAN QUATTRAIN (hereinafter "QUATTRAIN"), is being sued in his individual capacity and as a principal and agent of Defendant PCE. Plaintiff is informed and believes and thereon alleges that QUATTRAIN is and at all times mentioned herein was the President of PCE, INC., and was therefore an agent, employee, and shareholder of Defendant PCE and in doing the things herein alleged was acting within the course and scope of such agency, employment, and authority and with the permission and consent of PCE. 2 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF 5. Defendants, DOES 1 through 1000, are, and at all times herein mentioned have been, each considered a "person" pursuant to the Business and Professions Code Secsions 17201 & 17506. Plaintiff is ignorant of the true names and capacities of defendants sued herein as Defendant DOES 1 through 1000, inclusive. Upon ascertaining their true names and capacities, Plaintiff shall amend this Complaint and state them herein. Plaintiff is informed and believes and thereon alleges that each of the fictitiously named defendants is responsible in some manner for the occurrences herein alleged, and that Plaintiff's damages as herein alleged were proximately caused by their conduct. STATEMENT OF FACTS ------------------ 6. Plaintiffs, BEN HYNES and JIMMY KIM have substantial experience in marketing and distributing various technologies on the international market, including the Asian Market and Korea, and have reputable business contacts sufficient to effectively market and sell computer technologies throughout Asia. 7. Throughout the second quarter of the calendar year 2003, Defendant PCE, by and through its employees, agents and representatives Defendants MOGLIN and QUATTRAIN engaged in an ongoing negotiation with Plaintiffs HYNES and KIM regarding an invention purportedly owned by PCE, which was a 'personal computing environment' that integrated a balanced ergonomic simulator with a series of computer monitors and hand-operated controls (the "PRODUCT"). 8. Throughout the course of these negotiations, Defendants represented to Plaintiffs that Defendants had obtained U.S. and international patents for the PRODUCT and had secured a manufacturing facility in China that would produce the PRODUCT in mass. Defendants sought an overseas distributor, and began negotiations with Plaintiffs for that purpose. 9. Discussions between the parties, MOGLIN, QUATTRAIN, HYNES, and KIM lead to an oral agreement that was reached between Plaintiffs and Defendants in July 2003 in Newport Beach, California. The terms of the oral agreement were certain: PCE would supply PCE KOREA and A THOUSAND STEPS, by and through HYNES and KIM, 500 units of the PRODUCT, sales ready, in or about October 2003. PCE 3 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF KOREA, by and through HYNES and KIM, would have an exclusive distributorship of the PRODUCT in Asia for twelve months after having received the first PRODUCT contained within the 500 units from Defendants, and if Plaintiffs could sell four thousand (4,000) units within the 12 months of receipt of the sales-ready units, by October 2004, Plaintiffs would then be entitled to an exclusive distributorship of the PRODUCT in Asia for an indefinite period. 10. In or about July 2003, and concurrently with the oral agreement referenced above, the parties executed a written licensing agreement, memorializing the exclusive distributorship undertaken by Plaintiffs and summarizing briefly some of the terms orally agreed. 11. The written licensing agreement did not contain an integration or merger clause and was not intended to be the complete agreement or to supersede the parties' oral agreements. 12. Under the terms of the oral agreement and the written licensing agreement, and based on the oral representations made by PCE, QUATTRAIN and MOGLIN that PCE owned the U.S. and International Patents to the PRODUCT, HYNES and KIM were to pay a $30,000 (thirty thousand dollars) distributor licensing fee to PCE, QUATTRAIN and MOGLIN to consummate the deal. 13. PCE KOREA, A THOUSAND STEPS, HYNES and KIM thereafter researched the sales environment and potential marketability of the PRODUCT, making use of their Asian and other international business contacts to investigate possible sales channels, gathering resources, establishing and developing contacts and potential purchasers. 14. During this time period, PCE KOREA, A THOUSAND STEPS, HYNES and KIM learned that the COMDEX Korea show, an international technology tradeshow, was to be held in August 2003 in Korea. Based on the oral agreement and on the ongoing representations made by Defendants about the sales-readiness of the PRODUCT, and based on the wide scale marketing opportunity it was for Plaintiffs to market the PRODUCT on the Asian market. Plaintiffs secured a place in the COMDEX show and undertook over $200,000 in expenses preparing for and staffing the COMDEX show. 4 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF 15. At that time, Plaintiffs paid Defendants the agreed-upon sum of $30,000 for the distributor licensing fee, thereby purportedly securing protection against infringement from third parties claiming any right or ownership to the PRODUCT, and paid Defendants an additional $60,000 for twelve working units of the PRODUCT for use at the COMDEX Korea tradeshow, and to date has incurred approximately $50,000 in additional expenses as a result of PCE, MOGLIN, and QUATTRAIN's inability to perform under their oral agreement. 16. The units of the PRODUCT received by Plaintiffs from Defendants for the COMDEX Korea tradeshow were not in sales-ready condition. Six of the twelve did not work at all, for various design and manufacture reasons, and the other six worked only after significant on-site engineering and technical troubleshooting. 17. After the completion of the COMDEX Korea tradeshow, Defendants made continued and ongoing representations that the manufacture of the PRODUCT was in place, that the problems with the units at the COMDEX show was being resolved at the manufacture level, and that the U.S. and international patents were secure. 18. Immediately after the COMDEX show, in September 2003 at Huntington Beach, California, Defendants PCE, QUATTRAIN and MOGLIN presented Plaintiffs, PCE KOREA, HYNES, and KIM with two pre-drafted documents in the form of a Memorandum of Understanding (the "MOU") and a Distributor Agreement (the "Agreement"). True and correct copies of these two documents are attached hereto and have been filed and served concurrently herewith as Exhibits 1 and 2. 19. At that time, Plaintiffs and Defendants executed the two written instruments, intended to reflect many of the remaining aspects of their oral agreement: (1) the MOU, setting forth the basic terms of the prior oral agreement reached in July, 2003, and (2) the Agreement, memorializing the oral agreement regarding the exclusivity of Plaintiffs Asian market distributorship. 20. Neither the written MOU nor the distributor agreement contained an integration or merger clause and neither was intended to be the complete agreement or to supersede the parties' oral agreements. 5 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF 21. PCE, QUATTRAIN and MOGLIN have at all times thereafter failed and/or refused to deliver the PRODUCT to Plaintiffs. Despite the parties agreement that 500 units would be supplied in October, 2003, no such units were supplied. Plaintiffs have attempted to have meaningful dialogue with Defendants herein regarding the necessity of timely delivery of the PRODUCT but, after numerous conversations in which Defendants herein make additional promises and stall for more time to complete manufacture of the PRODUCT, no such delivery has been made to Plaintiffs, despite numerous demands by Plaintiffs. Plaintiffs have never received any units of the PRODUCT since the COMDEX Korea show, where they had received 12 non-sales ready units. 22. Plaintiffs have since learned, and are informed and believe and thereon allege that neither PCE, INC. nor MOGLIN, the purported patent holder, actually hold any patents to the PRODUCT at all. Rather, Defendants herein have merely filed patent applications and have intentionally and negligently misrepresented those patent applications as defensible patents and failed to disclose the status of the patent applications, instead continuously representing that U.S. and international patents existed that were sufficient to form the basis of a licensing agreement. 23. Plaintiff have also since learned, and are informed and believe and thereon allege, that despite oral and written representations to the contrary, Defendants have and remain at all times herein unable to manufacture the PRODUCT to meet Plaintiffs' sales requirements due to the lack of any viable manufacturing center having been established and/or due to the lack of funds to establish such a manufacturing facility. Defendants' representations regarding their ability to provide 500 units of the PRODUCT by October 2003 and to fill 4000 orders in year one under the MOU and Agreement was, were and are a sham intended to defraud Plaintiffs. 24. Furthermore, Plaintiffs herein allege that PCE, INC. is a defunct shell company without funds to manufacture, advertise or promote the PRODUCT or to enter into legitimate contracts with third parties, and without a patent-protected PRODUCT. 25. Furthermore, Plaintiffs herein allege that PCE is a Nevada corporation with its principal place of business in Palm Springs, California, but has failed or refused to register with the California Secretary of State as a foreign corporation doing business in California. 6 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF 26. Furthermore, Plaintiffs herein allege that the advertising materials produced and circulated by Defendants and received by Plaintiffs contain demonstrably false information and are and have at all times mentioned herein have been intended to misrepresent the status of the PRODUCT, of the Defendants' purported patents and Defendants' prospective earnings for the purpose of defrauding members of the general public and other potential sources of investment and distributorship. 27. As a result of the intentional and negligent misrepresentations of Defendants herein, and as a result of the unfair and unlawful business practices and breaches of contract as alleged herein, Plaintiffs PCE KOREA, A THOUSAND STEPS, HYNES and KIM have suffered pecuniary losses, injury to business contacts, loss of reputation, loss of income, and have been defrauded out of cash tendered to and received by Defendants herein. 28. Furthermore, Plaintiffs herein seek actual and punitive damages, declaratory relief and an injunctive order of the Court refraining Defendants, and each of them, from continuing to engage in the unlawful practices alleged herein. JURISDICTION AND VENUE ---------------------- 29. This Court has jurisdiction over this action pursuant to California Code of Civil Procedure Section 410.10 and California Business and Professions Code Sections 17203, and 17204, which allows enforcement in any court of competent jurisdiction. The California Supreme Court has jurisdiction over this action pursuant to California Constitution Article VI Section 10, which grants the Superior Court "original jurisdiction" in all cases except those given to other trial courts." 30. This Court has jurisdiction over the Defendants, and each of them, based on information and belief each is an natural person or a business entity that has sufficient minimum contacts in California, or is otherwise intentionally availing him/her/itself of the benefits of California, or is otherwise a citizen of the State of California. 31. Venue is proper in the Orange County Superior Court, Central Justice Center pursuant to California Civil Code of Procedure Sections 395. 395(b), and 395.5. because one of the defendants has contracted to perform an obligation wherein the contract was 'in fact' entered into in the County of Orange, or one 7 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF or more of the defendants are registered to do business in the State of California, one or more of the defendants principal place of business is located in the County of Orange, one or more of the defendants are doing business is the County of Orange, and/or one or more of the violations alleged in this complaint arise in the County of Orange. FIRST CAUSE OF ACTION --------------------- FRAUD and CONCEALMENT (By ALL PLAINTIFFS against ALL DEFENDANTS) 32. Plaintiffs hereby incorporate by reference, the allegations set forth in paragraphs 1 through 31 of this Complaint, as if fully set forth herein. 33. Throughout the second quarter of the calendar year 2003 until the present, Defendant PCE, by and through its duly authorized agents, employees, principals and/or shareholders MOGLIN and QUATTRAIN falsely and fraudulently represented to Plaintiffs that PCE owned U.S. and international patents to the PRODUCT sufficient for Plaintiffs to pay Defendants $30,000 as consideration for a licensing agreement. 34. Throughout the second quarter of the calendar year 2003 until the present, Defendant PCE, by and through its duly authorized agents, employees, principals and/or shareholders MOGLIN and QUATTRAIN falsely and fraudulently represented to Plaintiffs that PCE had established a manufacturing base sufficient to supply at least 4000 units of the PRODUCT for sale within 12 calendar months and that Plaintiffs could rely on PCE's ability to manufacture sufficient units of the PRODUCT to warrant the expenditure by Plaintiffs of over $300,000 marketing the PRODUCT at the COMDEX Korea 2003 tradeshow and establishing sales channels in Asia for the PRODUCT. 35. These representations made by Defendants as set forth above were false. The true facts at all relevant times herein are that Defendants, and each of them, had never secured patents to the PRODUCT and had only submitted patent applications, and had never established a manufacturing base, in China or otherwise, sufficient to meet Defendants obligations under the oral agreement and the various written agreements between Plaintiffs and Defendants. 36. Defendants herein, and each of them, at all times herein concealed and intentionally failed to disclose that the patent applications for the PRODUCT had not yet been perfected, and instead continued to represent that the PRODUCT had U.S. and international patents and continued to allow Plaintiffs to rely on 8 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF such representations, even while Defendants knew and intentionally concealed the falsity thereof for the purpose of inducing Plaintiffs' reliance thereon. 37. Defendants, and each of them, at all times herein concealed and intentionally failed to disclose that no manufacturing base for the PRODUCT had been established, and instead continued to represent that the PRODUCT was being manufactured and would be supplied to Plaintiffs as required for the purpose of inducing Plaintiffs' reliance thereon. 38. When Defendants, and each of them, made these representations, Defendants knew them to be false and made these representations with the intention to deceive and induce Plaintiff to act in reliance on these representations in the manner hereafter alleged, or with the expectation that plaintiff would so act. 39. Further, Defendants suppression of the fact that Defendants had not yet obtained patents for the PRODUCT and had not yet established a manufacturing center for the PRODUCT was likely to mislead Plaintiffs and did in fact mislead Plaintiffs, who acted in reliance on these representations in paying over $90,000 in licensing and product fees and expended over $250,000 additional dollars marketing the PRODUCT at the COMDEX show. 40. The representations and failure to disclose information and suppression of information herein alleged to have been made by Defendants concerned material facts and were made with the intent to induce the Plaintiffs to act in a manner herein alleged in reliance thereon. 41. Plaintiffs were, at the time these representations were made by Defendants, and each of them, and at the time Plaintiffs took the actions herein alleged, ignorant of the falsity of Defendant's representations and existence of the suppression of information by Defendants and Plaintiffs believed them to be true. Should Plaintiffs have known of the actual facts, and the existence of the facts suppressed by the Defendants, then Plaintiffs would not have taken such actions. 42. As a proximate result of the fraudulent conduct of Defendants as herein alleged, Plaintiffs suffered damages, including pecuniary losses, expectation losses, losses of profits, loss of reputation, injury to Plaintiffs' contacts, and other and additional damages as may be proved at the trial of this matter. 43. The aforementioned conduct of Defendants was an intentional misrepresentation, deceit, and suppression and/or concealment of a material fact known to the Defendants with the intention on the part of the Defendants of thereby depriving Plaintiff of property or legal rights or otherwise causing 9 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF injury and was despicable conduct that subjected Plaintiff to a cruel and unjust hardship in conscious disregard of Plaintiff's rights, so as to justify an award actual damages in excess of $400,000.00 and exemplary and punitive damages. SECOND CAUSE OF ACTION ---------------------- NEGLIGENT MISREPRESENTATION (By ALL PLAINTIFFS against ALL DEFENDANTS) 44. Plaintiff hereby incorporates by reference, the allegations set forth in paragraphs 1 through 43 of this Complaint, as if fully set forth herein. 45. Throughout the second quarter of the calendar year 2003 until the present, Defendant PCE, by and through its duly authorized agents, employees, principals and/or shareholders MOGLIN and QUATTRAIN falsely and fraudulently represented to Plaintiffs that PCE owned U.S. and international patents to the PRODUCT sufficient for Plaintiffs to pay Defendants $30,000 as consideration for a licensing agreement. 46. Throughout the second quarter of the calendar year 2003 until the present, Defendant PCE, by and through its duly authorized agents, employees, principals and/or shareholders MOGLIN and QUATTRAIN falsely and fraudulently represented to Plaintiffs that PCE had established a manufacturing base sufficient to supply at least 4000 units of the PRODUCT for sale within 12 calendar months and that Plaintiffs could rely on PCE's ability to manufacture sufficient units of the PRODUCT to warrant the expenditure by Plaintiffs of over $300,000 marketing the PRODUCT at the COMDEX Korea 2003 tradeshow and establishing sales channels in Asia for the PRODUCT. 47. These representations made by Defendants as set forth above were false. The true facts at all relevant times herein are that Defendants, and each of them, had never secured patents to the PRODUCT and had only submitted patent applications, and had never established a manufacturing base, in China or otherwise, sufficient to meet Defendants obligations under the oral agreement and the various written agreements between Plaintiffs and Defendants. 48. Defendants herein, and each of them, at all times herein knew or should have, in the exercise of reasonable care and/or due diligence, known of the falsity of the statements made, i.e. that the patent applications for the PRODUCT had not yet been perfected and applications had merely been filed, no patents having issued, no manufacturing base having been established. Instead, Defendants continued to represent that the PRODUCT had U.S. and international 10 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF patents and continued to allow Plaintiffs to rely on such representations, while Defendants knew or should have known of the falsity thereof. 49. Defendants, and each of them, at all times herein knew or should have known that no manufacturing base for the PRODUCT had been established, and instead continued to represent that the PRODUCT was being manufactured and would be supplied to Plaintiffs as required, as a material inducement intended to bring about reliance on the part of the Plaintiffs and resulting in such reliance by Plaintiffs on these specific statements by Defendants. 50. When Defendants, and each of them, made these representations, Defendants knew or should have, in the exercise of ordinary care, known them to be false and made these representations with the intention to deceive and induce Plaintiff to act in reliance on these representations in the manner hereafter alleged, or with the expectation that plaintiff would so act. 51. Further, Defendants suppression of the fact that Defendants had not yet obtained patents for the PRODUCT and had not yet established a manufacturing center for the PRODUCT was likely to mislead Plaintiffs and did in fact mislead Plaintiffs, who acted in reliance on these representations in paying over $90,000 in licensing and product fees and expended over $250,000 additional dollars marketing the PRODUCT at the COMDEX show. 52. The representations and failure to disclose information and suppression of information herein alleged to have been made by Defendants concerned material facts and were made negligently with the intent to induce the Plaintiffs to act in a manner herein alleged in reliance thereon. 53. Plaintiffs were, at the time these representations were made by Defendants, and each of them, and at the time Plaintiffs took the actions herein alleged, ignorant of the falsity of Defendant's representations and existence of the suppression of information by Defendants and Plaintiffs believed them to be true. Should Plaintiffs have known of the actual facts, and the existence of the facts suppressed by the Defendants, then Plaintiffs would not have taken such actions. 54. As a proximate result of the negligent misrepresentations of Defendants as herein alleged, Plaintiffs suffered damages, including pecuniary losses, expectation losses, losses of profits, loss of reputation, injury to Plaintiffs' contacts, and other and additional damages as may be proved at the trial of this matter. 11 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF 55. The aforementioned conduct of Defendants was a misrepresentation, deceit, and suppression and/or concealment of a material fact known, or which should have been known in the exercise of ordinary care, to the Defendants with the intention on the part of the Defendants of thereby depriving Plaintiff of property or legal rights or otherwise causing injury and was despicable conduct that subjected Plaintiff to a cruel and unjust hardship in conscious disregard of Plaintiff's rights, so as to justify an award actual damages in excess of $400,000.00 and exemplary and punitive damages. THIRD CAUSE OF ACTION --------------------- BREACH OF CONTRACT (By ALL PLAINTIFFS against ALL DEFENDANTS) 56. Plaintiff hereby incorporates by reference, the allegations set forth in paragraphs 1 through 55 of this Complaint, as if fully set forth herein. 57. On or about July, 2003, Plaintiffs and Defendants entered into an oral agreement according to the terms set forth in paragraphs 6 through 12 of this Complaint. 58. On or about July, 2003, Plaintiffs and Defendants entered into a written licensing agreement under the terms discussed and referenced in paragraph 12 of this Complaint, memorializing some of the terms orally agreed. 59. On or about September 2003, Plaintiffs and Defendants entered into a written Memorandum of Understanding and Distributor Agreement, under the terms discussed and referenced in paragraphs 9 and 18 of this Complaint. 60. None of the written instruments at issue herein were intended to supersede the oral agreements reached between the parties, and were instead intended to memorialize some of the terms reached throughout the Parties' negotiation and oral agreement. 61. Defendants received over $90,000 in consideration from Plaintiffs in consummation of the agreements. 62. Defendants were obligated, under the various agreements, to supply 500 sales ready units of the PRODUCT to Plaintiffs not later than October 2003. 63. Defendants failed or refused to supply any of the units required under the agreement and have failed or refused to so perform to this day, thereby breaching their agreement. 12 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF 64. Defendants entered into a written licensing agreement with Plaintiffs but failed or refused to secure the patents required to license their PRODUCT, and thereby Defendants breached the licensing agreement. 65. The various breaches of Defendants have resulted in pecuniary losses, losses of opportunity, loss of business reputation, injury to contacts, loss of profits and Plaintiffs have been so damaged in an amount in excess of S400,000.00 as a result of Defendants' breaches. FOURTH CAUSE OF ACTION ---------------------- Breach of Contract UCC Section 2306 (By ALL PLAINTIFFS against ALL DEFENDANTS) 66. Plaintiff hereby reasserts and incorporates by reference the allegations set forth in paragraphs 1 through 65 of this Complaint, as if fully set forth herein. 67. The transactions and agreements at issue in this complaint all concerned transactions in goods as defined by the UCC. 68. Under the terms of the agreements between the parties, Defendants were obligated to manufacture and deliver 500 sales-ready units of the PRODUCT to Plaintiffs not later than October 2003. 69. This figure of 500 sales-ready units was a minimum that was agreed to by the parties as an appropriate starting figure for Plaintiffs to reach the target of 4,000 unit sales by October, 2004. 70. Defendants failed to deliver any of the PRODUCT to Plaintiffs as required under the agreement to be delivered in October and have continued to fail or refuse since that time up until the present. 71. Defendants' failure or refusal to perform their obligations under the agreements, has caused Plaintiffs to suffer pecuniary losses, lost profits in an amount exceeding S400,000.00, not including loss of reputation, and injury to business contacts in an amount to be determined at the trial of this matter. FIFTH CAUSE OF ACTION --------------------- UNLAWFUL BUSINESS PRACTICES (By ALL PLAINTIFFS against ALL DEFENDANTS) 72. Plaintiff hereby reasserts and incorporates by reference the allegations set forth in paragraphs 1 through 71 of this Complaint, as if fully set forth herein. 13 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF 73. Plaintiffs bring this action pursuant to California Business and Professions Code Section 17204, and California Code of Civil Procedure Sections 1021 and 1021.5 as private attorneys general on behalf of themselves, and for the benefit of the general public. 74. Plaintiffs are citizens of the State of California. Plaintiffs, are individuals and business entities duly organized under the laws of the State of California, and are "persons" pursuant to the Business and Professions Code Sections 17204. 75. Plaintiff is informed and believes that Defendant, PCE, INC. is, and at all times herein mentioned has been, a "person" pursuant to the Business and Professions Code Sections 17201 & 17506. PCE is, and at all times mentioned was, a corporation, incorporated and organized under existing laws of the State of Nevada with its principal place of business in Palm Springs, California. 76. Plaintiff is informed and believes that Defendant QUATTRAIN is, and at all times herein mentioned has been, a "person" pursuant to the Business and Professions Code Sections 17201 & 17506. Plaintiff, is informed and believes and thereon alleges that defendant QUATTRAIN was the agent, employee, and President of defendant, PCE. INC., and in doing the things herein alleged was acting within the course and scope of such agency, employment, and authority and with the permission and consent of his co-Defendant(s). QUATTRAIN is subject to personal liability for the practices at issue herein pursuant to Business and Professions Code Section 17095. 77. Plaintiff is informed and believes that Defendant MOGLIN is, and at all times herein mentioned has been, a "person" pursuant to the Business and Professions Code Sections 17201 & 17506. Plaintiff, is informed and believes and thereon alleges that defendant QUATTRAIN was the agent, employee, and President of defendant, PCE, INC., and in doing the things herein alleged was acting within the course and scope of such agency, employment, and authority and with the permission and consent of his co-Defendant(s). QUATTRAIN is subject to personal liability for the practices at issue herein pursuant to Business and Professions Code Section 17095. 78. At all times herein mentioned and continuing to the present time, Defendants have violated California Business and Professions Code Section 17200 et seq. by engaging in unlawful activities in violation of California statutory law in conjunction with and/or as a part of their business activities, as set forth below. 79. Defendant PCE, INC. is a Nevada Corporation doing business in California, with its principal place of business in Palm Springs, California. However, PCE, INC. has, at all times mentioned herein, failed and/or refused to comply with Corporation Code Section 2105 in failing to secure or obtain a 14 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF certificate of qualification to conduct business in the State of California. PCE, INC. is, therefore, not qualified to do business in the State of California. 80. Defendant PCE, INC. has also therefore violated Corporations Code Section 2258 by engaging in the unauthorized transaction of intrastate business within the State of California without being a duly registered foreign corporation in good standing. 81. Defendant PCE, INC. has also failed or refused to comply with the requirements of Corporation Code Section 1505 by designating a corporate agent for service of process that has not filed a statement required under Section 1505. 82. These unlawful business practices are illustrative of the kind of fraudulent, deceitful and illegal conduct and business activities engaged in by Defendants herein, which conduct will likely continue unless otherwise restrained by an injunctive order of this Court. 83. Unless restrained by a preliminary and permanent injunction of this Court, Plaintiffs' injury will continue to be immediate and irreparable. Plaintiffs have no other plain, speedy, and adequate remedy at law, and it will be impossible to determine the precise amount of damage that Plaintiffs will continue to suffer if Defendants' conduct is not restrained. 84. If Plaintiff, succeeds in enforcing the rights affecting the Plaintiff and public interest under California Civil Code of Procedure Section 1021.5, then attorneys' fees and costs may be awarded because: (a). A significant benefit has been conferred on a large class of persons within the general public; (b). The action has resulted in the enforcement and vindication of an important right affecting the public interest; (c). The necessity and financial burden of private enforcement are such as to make the award appropriate; and (d). The fees should not be paid out of any recovery. SIXTH CAUSE OF ACTION --------------------- FALSE ADVERTISING [Business and Professions Code Section 17500, et seq.] (By ALL PLAINTIFFS against ALL DEFENDANTS) 85. Plaintiff hereby reasserts and incorporates by reference the allegations set forth in paragraphs 1 through 84 of this Complaint, as if fully set forth herein. 15 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF 86. Beginning at an exact date unknown to Plaintiff but least since July, 2003, Defendants PCE, QUATTRAIN and MOGLIN have committed acts of untrue and misleading advertising, as defined by Business and Professions Code Section 17500, by engaging in the following acts or practices with the intent to induce potential investors/distributors to enter into contractual business relations with said Defendants, in furtherance of Defendants' business. 87. Publicly disseminating printed advertising and marketing materials that include false and unsubstantiated statements regarding projected earnings of the Defendants' business for the purpose of artificially inflating the value of the Defendants' business to mislead potential investors and strategic partners. 88. The acts of untrue and misleading advertising described herein present a continuing threat to members of the general public who have no other remedy at law or in equity. If this Court does not issue an injunctive order restraining Defendants from making such unlawful false and misleading advertising, irreparable harm will occur to members of the general public. 89. Plaintiff is informed and believes, based on information and belief, that the defendants, and each of them, engaged in issuing publicly disseminated material alleged herein with the intent to directly or indirectly dispose of the property and/or perform the services described herein and/or induce the general public to enter into an obligation relating to the property and/or the services described herein. 90. Defendants, and each of them, knew, or by exercise of reasonable care should have known, that failing to provide accurate and meaningful disclosures concerning specific financial statements regarding profits herein alleged were untrue or misleading, and in turn violated California Business and Professions Code Sections 17500 et seq.. 91. Defendants, and each of them, will continue to engage in untrue and misleading advertising, as alleged above, in violation of Sections 17500 et seq. of the Business and Professions Code, thus producing a multiplicity of judicial proceedings, unless this Court restrains defendants from continuing to harm the general public. 16 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF 92. Injunctive relief, restitution, and disgorgement of profits, is specifically authorized for violations of California Business and Professions Code Sections 17500 & 17535. 93. According to California Code of Civil Procedure Section 1021.5, attorney's fees may be awarded to Plaintiff, as the action will result in the enforcement of important rights affecting the public interest, because: (a) A significant benefit will be conferred on the general public or a large class of persons; (b) The necessity and financial burden of private enforcement are such as to make an award of attorneys' fees appropriate; and, (c) The attorneys' fees will not in the interest of justice be paid out of the recovery, if any. 17 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF PRAYER FOR RELIEF ----------------- WHEREFORE, Plaintiffs PCE KOREA, A THOUSAND STEPS, BENJAMIN HYNES and JIMMY KIM pray for relief as follows: 1. For actual damages; 2. For punitive damages; 3. For exemplary damages; 4. That this Court issue an affirmative injunctive orders as follows: a. Restraining Defendants, and each of them, from making false statements regarding, Defendants' purported ownership of U.S. and International patents to the PRODUCT to third parties: b. Restraining Defendants, and each of them, from making false statements regarding Defendants' purported ability to manufacture sales-ready units of the PRODUCT to third parties; c. Restraining Defendants from publicly disseminating advertising materials making false and misleading statements regarding unsubstantiated prospective earnings of Defendants: 5. For attorney's fees and costs of suit incurred by Plaintiffs herein; 6. For any such other and/or further relief the Court deems proper. Respectfully Submitted, Dated: March 8, 2004 AZIMY & NATHAN, LLP By: /s/ Reuben D. Nathan -------------------------------- Reuben D. Nathan, Esq., Attorneys for Plaintiffs, PERSONAL COMPUTING ENVIRONMENTS, INC. a.k.a. PCE KOREA, INC., A THOUSAND STEPS, BENJAMIN HYNES and JIMMY KIM 18 - -------------------------------------------------------------------------------- PLAINTIFF'S COMPLAINT FOR DAMAGES, INJUNCTIVE AND EQUITABLE RELIEF EX-99.2 16 pceexh99_2.txt P--CE COMPUTERS SB-2, ANSWER TO COMPLAINT EXHIBIT 99.2 - ------------ FILED SUPERIOR COURT OF CALIFORNIA COUNTY OF ORANGE CENTRAL JUSTICE CENTER JUN 01 2004 ALAN SLATER, Clerk of the Court EIZABETH GAMBOA, DEPUTY ATKINSON, ANDELSON, LOYA, RUUD & ROMO --------------- A Professional Corporation Mark T. Patin State Bar No. 135398 Edward C. Ho State Bar No. 176144 Scott K. Dauscher State Bar No. 204105 17871 Park Plaza Drive, Suite 200 Cerritos, California 90703-8597 Telephone: (562) 653-3200 o (714) 826-5480 Facsimile: (562) 653-3333 Attorneys for DEFENDANTS PERSONAL COMPUTING ENVIRONMENTS, INC. and ALLAN QUATTRIN SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE, CENTRAL JUSTICE CENTER CASE NO. 04CCO3735 PERSONAL COMPUTING PERSONAL COMPUTING ENVIRONMENTS KOREA, INC., a.k.a. PCE ENVIRONMENTS, INC. & ALLAN KOREA, INC.; A THOUSAND STEPS, INC., QUATTRIN'S ANSWER TO BEN HYNES, AND JIMMY KIM, COMPLAINT Plaintiff, JUDGE: Michael W. Hayes DEPT: C-24 v. COMPLAINT FILED: 03/09/04 PERSONAL COMPUTING TRIAL DATE: ENVIRONMENTS, INC., a.k.a. PCE, INC., a.k.a. P--CE COMPUTERS, INC.; BEN MOGLIN; ALLAN QUATTRIN and DOES 1 through 1000, inclusive, Defendants, Defendants PERSONAL COMPUTING ENVIRONMENTS, INC., a.k.a. PCE, INC., a.k.a. P--CE COMPUTERS, INC. and ALLAN QUATTRIN (erroneously sued herein as ALLAN QUATTRAIN) for themselves and no other defendants, answer Plaintiffs' Complaint as follows: GENERAL DENIAL -------------- 1. Pursuant to the provisions of California Code of Civil Procedure section 431.30(d), the answering defendants deny each and every, and all of the statements, allegations, matters or facts stated in the Complaint, and each and - -------------------------------------------------------------------------------- ANSWER TO COMPLAINT every part thereof, including the whole thereof. FOR THEIR AFFIRMATIVE DEFENSES, THE ANSWERING DEFENDANTS ALLEGE AS FOLLOWS: AFFIRMATIVE DEFENSES -------------------- Each of the following affirmative defenses apply to each Cause of Action unless otherwise specifically set forth to the contrary. FIRST AFFIRMATIVE DEFENSE ------------------------- 2. The answering Defendants allege that the Complaint, and each of its purported causes of action, fails to state facts sufficient to constitute a cause of action against the answering Defendants. SECOND AFFIRMATIVE DEFENSE -------------------------- 3. Plaintiffs have failed to mitigate damages, and to the extent of such failure to mitigate, any damages awarded to Plaintiffs should be reduced accordingly. THIRD AFFIRMATIVE DEFENSE ------------------------- 4. Plaintiffs' Complaint and each cause of action is barred by the statutes of limitation contained in California Code of Civil Procedure sections 337, 338, 339, 340; or any other applicable statute of limitation. FOURTH AFFIRMATIVE DEFENSE -------------------------- 5. By their conduct, Plaintiffs have waived and/or released any right to receive any relief by their Complaint, or any purported cause of action alleged therein. FIFTH AFFIRMATIVE DEFENSE ------------------------- 6. Any recovery on Plaintiffs' Complaint, or purported causes of action alleged therein, are barred because the answering Defendants' disputed conduct was privileged and/or justified. SIXTH AFFIRMATIVE DEFENSE ------------------------- 7. The answering Defendants allege that Plaintiffs, by reason of their acts, omissions, representations and courses of conduct by which Defendants were -2- - -------------------------------------------------------------------------------- ANSWER TO COMPLAINT led to rely to their detriment, are barred from any recovery herein by virtue of the doctrine of estoppel. SEVENTH AFFIRMATIVE DEFENSE --------------------------- 8. The answering Defendants allege that if any equitable relief is claimed to be owed to the Plaintiffs as a result of the Complaint on file herein, it is barred as a result of Plaintiffs' own unclean hands. EIGHTH AFFIRMATIVE DEFENSE -------------------------- 9. The answering Defendants allege that if any equitable relief is claimed to be owed to the Plaintiffs as a result of the Complaint on file herein, it is barred as a result of the doctrine of laches. NINTH AFFIRMATIVE DEFENSE ------------------------- 10. The answering Defendants allege that Plaintiffs materially breached the contract at issue excusing further performance by Defendants. TENTH AFFIRMATIVE DEFENSE ------------------------- 11. The answering Defendants allege the parties rescinded the contract by mutual assent. ELEVENTH AFFIRMATIVE DEFENSE ---------------------------- 12. The answering Defendants allege that Plaintiffs modified the contract by oral agreement. TWELFTH AFFIRMATIVE DEFENSE --------------------------- 13. The answering Defendants allege full completion of their obligations under the contract. THIRTEENTH AFFIRMATIVE DEFENSE ------------------------------ 14. The answering Defendants have suffered damage by reason of Plaintiffs' conduct and, therefore, the Defendant has the right to offset any amount of money which this Court determines is owed or due to Plaintiffs, if any, by way of said damages. FOURTEENTH AFFIRMATIVE DEFENSE ------------------------------ 15. The injuries and damages, if any, sustained by Plaintiffs as alleged in the Complaint herein, were proximately caused by the acts, errors, omissions, -3- - -------------------------------------------------------------------------------- ANSWER TO COMPLAINT negligence and/or breaches of obligation of individuals or entities other than the Defendants, including but not limited to Plaintiffs, and as such, the Defendants are not responsible for any such injuries or damages. FIFTEENTH AFFIRMATIVE DEFENSE ----------------------------- 16. Plaintiffs did not complete the conditions precedent to the Defendants' obligation to perform under the contract. Thus, Defendants are excused from the need to further perform under the contract. SIXTEENTH AFFIRMATIVE DEFENSE ----------------------------- 17. Defendants assert that Plaintiffs materially breached the written contract and damaged the Defendant by their delays. Therefore, these damages serve to set off any claim by Plaintiffs. SEVENTEENTH AFFIRMATIVE DEFENSE ------------------------------- 18. Plaintiffs materially failed to perform their obligations under the contract with Defendants. Thus, Defendants' duty to perform under the contract was discharged for failure of consideration, due to Plaintiffs' failure to perform. EIGHTEENTH AFFIRMATIVE DEFENSE ------------------------------ 19. The answering Defendants allege that the Complaint, and each and every cause of action alleged therein is barred on the grounds that as to each and every written, oral, implied or other contract alleged herein, there was a failure and/or lack of consideration. NINETEENTH AFFIRMATIVE DEFENSE ------------------------------ 20. The answering Defendants allege Plaintiffs have no standing to assert any of the claims in the Complaint. TWENTIETH AFFIRMATIVE DEFENSE ----------------------------- 21. If it is determined that any Defendant has failed to perform one or more of its obligations under any contract or agreement described in the Complaint, performance of each obligation was excused due to impossibility or impracticability in each instance. TWENTY-FIRST AFFIRMATIVE DEFENSE -------------------------------- 22. The answering Defendants presently have insufficient knowledge or -4- - -------------------------------------------------------------------------------- ANSWER TO COMPLAINT information on which to form a belief as to whether it may have additional, as yet unstated, defenses available. Defendants reserve herein the right to assert additional defenses in the event discovery indicates that they would be appropriate. WHEREFORE, Defendants pray for judgment as follows: 1. That Plaintiffs take nothing by their complaint, 2. That Defendants recover their costs of suit herein; 3. That Defendants recover reasonable attorney's fees incurred herein; and 4. The Court award such other and/or further relief as it deems just and proper. DATED: June 1, 2004 ATKINSON, ANDELSON, LOYA, RUUD & ROMO By: /s/ Scott K. Dauscher ----------------------------------- Scott K. Dauscher Attorneys for DEFENDANTS PERSONAL COMPUTING ENVIROMENTS, INC. and ALLAN QUATTRIN -5- - -------------------------------------------------------------------------------- ANSWER TO COMPLAINT PROOF OF SERVICE ---------------- (Code Civ. Proc. Section 1013a(3)) STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I am employed in the County of Los Angeles, State of California. I am over the age of 18 years and am not a party to the within action; my business address is 17871 Park Plaza Drive, Suite 200, Cerritos, CA 90703-8597. On June 1, 2004, I served the following document(s) described as ANSWER TO COMPLAINT on the interested parties in this action as follows: by placing a true copy thereof enclosed in sealed envelopes addressed as follows: Reuben D. Nathan, Esq. Attorneys For Plaintiffs AZIMY & NATHAN, LLP 18500 Von Karman Avenue, Suite 500 Irvine, CA 92612 [X] BY MAIL: I deposited such envelope in the mail at Cerritos, California. The envelope(s) was mailed with postage thereon fully prepaid. I am readily familiar with the firm's practice of collection and processing correspondence for mailing. It is deposited with U.S. postal service on that same day in the ordinary course of business. I am aware that on motion of party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. [_] BY OVERNIGHT COURIER: I sent such document(s) on June 1, 2004, by with postage thereon fully prepaid at Cerritos, California. [_] BY FAX: I sent such document by use of facsimile machine telephone number (562) 653-3333. Facsimile cover sheet and confirmation is attached hereto indicating the recipients' facsimile number and time of transmission pursuant to California Rules of Court Rule 2008(e). The facsimile machine I used complied with California Rules of Court Rule 2003(3) and no error was reported by the machine. [_] BY PERSONAL SERVICE: I delivered such envelope by hand to the offices of the addressee(s). I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on June 1, 2004, at Cerritos, California. /s/ Michele S. Minasian -------------------------------- MICHELE S. MINASIAN -6- - -------------------------------------------------------------------------------- ANSWER TO COMPLAINT EX-99.3 17 pceexh99_3.txt P--CE COMPUTERS SB-2, CROSS COMPLAINT EXHIBIT 99.3 - ------------ FILE COPY ATKINSON, ANDELSON, LOYA, RUUD & ROMO A Professional Corporation Mark T. Palin, State Bar No. 135398 Edward C. Ho, State Bar No. 176144 Scott K. Dauscher, State Bar No. 204105 17871 Park Plaza Drive, Suite 200 Cerritos, California 90703-8597 Telephone: (562) 653-3200 o (714) 826-5480 Facsimile: (562) 653-3333 Attorneys for DEFENDANTS PERSONAL COMPUTING ENVIRONMENTS, INC. and ALLAN QUATTRIN SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE, CENTRAL JUSTICE CENTER PERSONAL COMPUTING CASE NO. 04CC03735 ENVIRONMENTS KOREA, INC., a.k.a. PCE KOREA, INC.; A THOUSAND STEPS, INC., FIRST AMENDED BEN HYNES, AND JIMMY KIM, CROSS-COMPLAINT FOR: Plaintiff, 1. Breach of Contract; 2. Fraud-Intentional Misrepresentation v. 3. Negligent Misrepresentation; 4. Intentional Interference with PERSONAL COMPUTING Business and Contractual Relations; ENVIRONMENTS, INC., a.k.a. PCE, INC., 5. Intentional Interference with a.k.a. P--CE COMPUTERS, INC.; BEN Prospective Economic Advantage; MOGLIN; ALLAN QUATTRIN and DOES 1 6. Defamation through 1000, inclusive, JUDGE: Michael W. Hayes Defendants. DEPT: C-24 PERSONAL COMPUTING ORIGINAL COMPLAINT FILED: 03/09/04 ENVIRONMENTS, INC. a.k.a. PCE, INC., TRIAL DATE: None a.k.a. P--CE COMPUTERS, INC., Cross-Complainants v. PERSONAL COMPUTING ENVIRONMENTS KOREA, INC., a.k.a. PCE KOREA, INC.; BEN HINES, AND JIMMY KIM; ROES 1-100, INCLUSIVE, Cross-Defendants. - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT Defendant PERSONAL COMPUTING ENVIRONMENTS, INC. ("Cross-Complainant") hereby alleges as follows: GENERAL ALLEGATIONS ------------------- 1. Cross-Complainant PERSONAL COMPUTING ENVIRONMENTS, INC. (herinafter "PCE" or "Cross-Complainant") is a Nevada corporation registered to do business as a foreign corporation in California. 2. Cross-Complainant, is informed and believes and based thereon alleges, that Cross-Defendant PERSONAL COMPUTING ENVIRONMENTS KOREA, INC. a.k.a. PCE KOREA (hereinafter "PCE KOREA"), is a Korean company registered to do business as a foreign corporation in California. 3. Cross-Complainant, is informed and believes and based thereon alleges, that Cross-Defendant BENJAMIN HYNES ("HYNES") is an individual and a resident of California. 4. Cross-Complainant, is informed and believes and based thereon alleges, that Cross-Defendant JIMMY KIM ("KIM") is an individual and a resident of California. 5. Cross-Complainant is ignorant of the true names or capacities, whether individual, corporate, partnership, or otherwise, of Cross-Defendants sued herein as ROES 1 through 100, inclusive, and therefore Cross-Complainant sues said Cross-Defendants by such fictitious names. Cross-Complainant is informed and believes and based thereon alleges that each of the cross-defendants designated herein as a ROE was/is responsible for the acts, errors and/or omissions hereinafter alleged which proximately caused/will cause injury and damages to Cross-Complainant. 6. PCE KOREA, HYNES, KIM and ROES 1 through 100 are collectively referred to herein as "Cross-Defendants." -2- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT 7. Cross-Complainant is further informed and believes, and alleges based upon such information and belief, that at all times herein mentioned, Cross-Defendants in committing the acts and omissions hereinafter alleged, were acting within the course and scope of said agency, employment and joint venture with each other, with the advance knowledge, acquiescence or subsequent ratification. FIRST CAUSE OF ACTION --------------------- (Breach of Contract- Against All Cross-Defendants) 8. Cross-Complainant realleges paragraphs 1 through 7, inclusive, and incorporate them herein as though fully set forth. 9. On or about September 18, 2003, Cross-Complainant and Cross-Defendants entered into an agreement consisting of two documents entitled "Memorandum of Understanding" and "Personal Computing Environments International Distributor Agreement" (hereinafter collectively referred to as the "Agreement") a true and correct copy of which is attached hereto as Exhibit A and incorporated herein by this reference. Pursuant to the Agreement, Cross-Defendants were to pay $30,000 to Cross-Complainant for exclusive distributorship rights to specified PCE products in specified territories as defined in Exhibit B to the Agreement, namely South and North Korea. As additional consideration for the exclusive distributorship rights, Cross-Defendants promised and agreed to purchase not less than the 1,000 units of product from PCE per quarter in each of the two years of the term of the Agreement for a total of 4,000 units of product each year. As additional consideration, Cross-Defendants promised to actively promote PCE's products within the specified territory, which was to include advertising, direct sales, public relations, participating in local trade shows, conducting regular clinics on the use of the products, including the product in local catalogues, and using their best efforts to develop the product market in the territory. -3- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT 10. Cross-Defendants have breached the written Agreement by failing to purchase the minimum number of units of product from PCE as required by the terms of the Agreement, failing to actively promote PCE's products within the specified territory (which was to include advertising, direct sales, public relations, participating in local trade shows), conducting regular clinics on the use of the products (including the product in local catalogues), and by failing to use their best efforts to develop the product market in the territory. 11. Cross-Complainant has performed all covenants, conditions and promises required of it to be performed in accordance with the terms of the written agreement and to the extent Cross-Complainant has not performed all covenants, conditions and promises, such performance was and is excused by Cross-Defendants' actions and omissions. 12. As a proximate result of the actions of Cross-Defendants, Cross-Complainant has incurred damages in an amount not yet ascertained but to be proven at trial. SECOND CAUSE OF ACTION ---------------------- (Fraud-Intentional Misrepresentation- Against All Defendants) 13. Cross-Complainant realleges paragraphs 1 through 12, inclusive, and incorporates them herein as though fully set forth. 14. On or about September 18, 2003, PCE entered into negotiations with PCE KOREA for an agreement whereby PCE KOREA would obtain exclusive distributorship rights to PCE's products within a specified territory. As part of these negotiations Cross-Defendants YNES and KIM, acting in their capacities as agents of PCE KOREA, falsely and fraudulently represented to Allan Quattrin ("QUATTRIN"), acting in his capacity as an agent of PCE, that PCE KOREA would not purchase less than the 1,000 units of product from PCE per quarter in each of the two years of the term of the Agreement for a total of 4,000 units of product each year, represented that PCE KOREA would actively promote PCE's products within the specified territory (which was to include advertising, direct sales, public relations, participating in local trade shows, conducting regular clinics on the use of the products, including the product in local -4- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT catalogues), and further represented that they would use their best efforts to develop the product market in the territory. 15. PCE is informed and believes and based thereon alleges that Cross-Defendants, and each of them, made the above representations with the intent of fraudulently inducing PCE to rely on those representations and enter into an agreement whereby PCE KOREA would obtain the exclusive distributorship rights to PCE's products within the specified territory. 16. Cross-Complainant is informed and believes and based thereon alleges that Cross-Defendants, and each of them, at the time the above representations were made knew them to be false and or materially misleading. 17. Cross-Complainant is informed and believes and based thereon alleges that the true facts are that Cross-Defendants actually had no intention of purchasing not less than the 1,000 units of product from PCE per quarter in each of the two years of the term of the Agreement for a total of 4,000 units of product each year and represented, had no intention of actively promoting PCE's products within the specified territory, which was to include advertising, direct sales, public relations, participating in local trade shows, conducting regular clinics on the use of the products, including the product in local catalogues, and further had no intention of using their best efforts to develop the product market in the territory. 18. PCE was unaware of the falsity of the above representations at the time that Cross-Defendants, and each of them, made those representations, and Cross-Complainant reasonably acted in reliance on those representations by entering into the Agreement and granting PCE KOREA exclusive distributorship rights to PCE's products in the specified territories. 19. As a direct and proximate result of the fraudulent conduct on the part of Cross-Defendants, and each of them, as alleged herein, Cross-Complainant has been damaged in an amount of which is not yet ascertainable but which will be proven at trial. 20. Cross-Complainant is informed and believes and based thereon alleges that by doing the things mentioned hereinabove, Cross-Defendants, and each of them, acted with malice, fraud, and oppression and in conscious disregard of Cross-Complainant's rights so as to entitle Cross-Complainant to the recovery of punitive damages. -5- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT THIRD CAUSE OF ACTION --------------------- (Negligent Misrepresentation- Against All Defendants) 21. Cross-Complainant realleges paragraphs 1 through 20, inclusive, and incorporates them herein as though fully set forth. 22. On or about September 18, 2003, Cross-Complainant entered into negotiations with Cross-Defendants for an agreement whereby Cross-Defendants would obtain exclusive distributorship rights to PCE's products within a specified territory. As part of these negotiations Cross-Defendants HYNES and KIM, acting in their capacities as agents of PCE KOREA, represented to QUATTRIN that PCE KOREA would purchase not less than the 1,000 units of product from PCE per quarter in each of the two years of the term of the Agreement for a total of 4,000 units of product each year, represented that PCE KOREA would actively promote PCE's products within the specified territory (which was to include advertising, direct sales, public relations, participating in local trade shows, conducting regular clinics on the use of the products, including the product in local catalogues), and further represented that PCE KOREA would use its best efforts to develop the product market in the territory. 23. Cross-Complainant is informed and believes and based thereon alleges that Cross-Defendants HYNES and KIM, and each of them, at the time said representations were made, had no reasonable basis for making said representations but they knew Cross-Complainant would rely on those representations and enter into the Agreement and grant Cross-Defendants exclusive distributorship rights to PCE's products in the specified territories. 24. Cross-Complainant is informed and believes and based thereon alleges that the true facts are that Cross-Defendants actually had no ability to purchase not less than the 1,000 units of product from PCE per quarter in each of the two years of the term of the Agreement for a total of 4,000 units of product each year and represented, had no ability to actively promote PCE's products within the specified territory, which was to include advertising, direct sales, public relations, participating in local trade shows, conducting regular clinics on the use of the products, including the product in local catalogues, and further had no ability to develop the product market in the territory. -6- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT 25. Cross-Complainant was unaware of the falsity of the above representations at the time that Cross-Defendants, and each of them, made those representations, and Cross-Complainant reasonably acted in reliance on those representations by entering into the Agreement and granting PCE KOREA exclusive distributorship rights to PCE's products in the specified territories. 26. As a direct and proximate result of the fraudulent conduct on the part of Cross-Defendants, and each of them, as alleged herein, Cross-Complainant has been damaged in an amount of which is not yet ascertainable but which will be proven at trial. FOURTH CAUSE OF ACTION ---------------------- (Intentional Interference with Business and Contractual Relations- Against All Defendants) 27. Cross-Complainant realleges paragraphs 1 through 26, inclusive, and incorporates them herein as though fully set forth. 28. Cross-Complainant had existing, valid contracts and ongoing business relations with various customers in order to provide PCE's products and services. Cross-Defendants and each of them had knowledge of these contracts and business relationships. 29. Cross-Complainant is informed and believes and based thereon alleges that Cross-Defendants, and each of them, intentionally interfered with these contracts and ongoing business relationships and the ability of Cross-Complainant to provide quality products and services to its customers in that: Cross-Defendants have misrepresented the ability of PCE to provide products and services to customers. 30. Cross-Complainant is informed and believes, and based thereon alleges, that Cross-Defendants engaged in the aforementioned actions, which interfered with Cross-Complainant's ongoing contractual and business relationships. 31. Cross-Complainant is informed and believes and based thereon alleges, that the above mentioned actions by Cross-Defendants, and each of them, were performed with the intent to interfere with Cross-Complainant's contracts and business relationships with its customers. -7- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT 32. Cross-Complainant is informed and believes, and based thereon alleges, that customers of Cross-Complainant have breached or will breach their contracts with Cross-Complainant, or have ended or will end their business relationship with Cross-Complainant or severely diminish their business relationship with Cross-Complainant as a result of the actions of Cross-Defendants. 33. As a proximate result of the intentional interference with Cross-Complainant's contractual and ongoing business relationships with its customers, Cross-Complainant has suffered damages from the resultant decrease in business in a sum subject to proof at trial. 34. Cross-Complainant further alleges that, in intentionally interfering with the contractual and ongoing business relationships between Cross-Complainant and its customers, Cross-Defendants and each of them, acted with malice, fraud and oppression with conscience disregard of Cross-Complainant's rights so as to entitle Cross-Complainant to the recovery of punitive damages. 35. Cross-Complainant is informed and believes, and based thereon alleges, that unless restrained, Cross-Defendants will continue to disrupt the contractual and business relationship between Cross-Complainants and its customers, all to Cross-Complainant's great and irreparable injury, for which damages would not afford adequate remedy as damages would not completely compensate for the injury to Cross-Complainant's business reputation and good will. FIFTH CAUSE OF ACTION --------------------- (Intentional Interference with Prospective Economic Advantage - Against all Defendants) 36. Cross-Complainant realleges paragraphs 1 through 35, inclusive, and incorporates them herein as though fully set forth. 37. Through the existing contracts between Cross-Complainant and its customers, Cross-Complainant had an ongoing business relationship with its -8- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT customers, which provided Cross-Complainant with a significant probable future economic benefit in the purchase by Cross-Complainant's customers of additional products and services from Cross-Complainant and the continued service of those products purchased by Cross-Complainant's customers. 38. Cross-Defendants intentionally engaged in wrongful conduct to interfere with the contractual and on-going business relationships that existed between Cross-Complainant and its customers as alleged above and to interfere with Cross-Complainant's potential economic advantage, particularly by representing to Cross-Complainant's customers that Cross-Complainant could not fulfill its obligations to provide goods and services. 39. Cross-Complainant is informed and believes, and based thereon alleges, that at all times herein mentioned, Cross-Defendants had knowledge of the economic relationships between Cross-Complainant and its existing customers regarding existing contracts and prospective purchases of products and services in the future and therefore the probability of future economic benefits to be derived from those existing contracts between Cross-Complainant and its customers. 40. Cross-Complainant is informed and believes and based thereon alleges that at all times mentioned, the Cross-Defendants willfully, intentionally and maliciously, in concert with all other Cross-Defendants, interfered with these relationships between Cross-Complainant and its customers and entered into a course of conduct designed to subvert the economic relationship between Cross-Complainants and its customers and prospective customers. This conduct was wrongful because Cross-Complainants had a contractual duty to promote PCE's business rather than try to undermine it by making disparaging and false remarks to PCE's customers that PCE could not fulfill its obligations to provide goods and services. 41. Cross-Complainant is informed and believes and based thereon alleges that Cross-Defendants knew that their intentionally malicious conduct would result in interference with Cross-Complainant's probability of future economic benefit with its customers and that Cross-Complainant's would be denied the economic benefits of their contractual relationship with existing and prospective customers, and consciously disregarded those consequences. -9- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT 42. As a direct and foreseeable result of the aforementioned intentional wrongful acts, Cross-Complainant's existing contracts, and, therefore, its future business have been_disrupted, and have been made more burdensome and expensive due to the unlawful conduct of the Cross-Defendants. 43. Cross-Complainant is informed and believes, and based on such information and belief alleges that Cross-Defendants caused actual disruption to the relationship between Cross-Complainant and its third party customers, which has caused damage to Cross-Complainant in the form of a decrease in business revenue in a sum subject to proof at trial. 44. Cross-Complainant is informed and believes, and based on such information and belief allege that Cross-Defendants acted with oppression, fraud and malice and Cross-Complainant is therefore entitled to punitive and exemplarily damages in a sum subject to proof at trial. SIXTH CAUSE OF ACTION --------------------- (Defamation - Against All Defendants) 45. Cross-Complainant realleges paragraphs 1 through 44, inclusive, and incorporates them herein as though fully set forth. 46. Cross-Complainant is informed and believes and based thereon alleges that Cross-Defendants as individuals and on behalf of the other Cross-Defendants, have made false, negative, derogatory and disparaging remarks about Cross-Complainant's business performance and economic stability to its customers and to numerous other persons unknown to Cross-Complainant but known to Cross-Defendants. These remarks included, but were not limited to, statements that Cross-Complainant was losing its ability to perform contracts for its customers and, therefore, was not going to be able to perform its future contracts. 47. Cross-Complainant is informed and believes and based thereon alleges that at the time that Cross-Defendants made those comments, they knew that the comments were false and/or should have known the comments to be false. 48. Cross-Complainant is informed and believes and based thereon alleges -10- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT that customers and other individuals hearing these comments regarding the business performance and economic conditions of Cross-Complainant understood these comments to relate to the business performance and economic condition of Cross-Complainant. 49. Cross-Complainant is informed and believes and based thereon alleges, that as a result of the aforementioned false comments made about Cross-Complainant, Cross-Complainant's customers and other individuals believed that Cross-Complainant was a mismanaged and failing company and would not be able to perform under its contracts. 50. As a proximate result of the aforementioned false comments about Cross-Complainant to its customers, Cross-Complainant has suffered damages in an amount subject to proof at trial. 51. Cross-Complainant further alleges that the aforementioned false statements were made with malice, fraud, or oppression, with conscience disregard of Cross-Complainant's rights. Cross-Defendants' statements were made with evil motive and malice, willfully and wrongfully, and with intent to injure, disgrace and defame Cross-Complainant and to damage its lawful business with wanton and reckless disregard for the truth or falsity of the statements made. As such, Cross-Complainant is entitled to the recovery of punitive and exemplary damages in a sum subject to proof at trial. GROUNDS FOR PRELIMINARY AND PERMANENT INJUNCTION AGAINST -------------------------------------------------------- ALL DEFENDANTS -------------- 52. Cross-Complainants reallege paragraphs 1 through 51, inclusive, and incorporate them herein as though fully set forth. 53. Cross-Complainant is informed and believe and based thereon alleges that Cross-Defendants will continue to hold themselves out to the public as being the exclusive owners of the distribution rights to PCE's products and services in Asia when in fact this is false as a result of the Cross-Defendants' breaches herein described, all to the detriment and harm to Cross-Complainant and its business reputation. -11- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT 54. Cross-Complainant alleges, therefore, that they are entitled to a Temporary Restraining Order and Preliminary Injunction that Cross-Defendants and each of them, and each of their respective agents, servants, employees and representatives, and all persons acting by or under their authority, or in privity, concert or participation with them, be enjoined and restrained during the pendency of this action from doing or causing to be done, directly or indirectly, any or all of the following acts or things: (1) Holding themselves out, or otherwise communicating to members of the general public, that they are the exclusive owners of the distribution rights to PCE's products and services in Asia; (2) Holding themselves out, or otherwise communicating to members of the general public, that they are in any way or manner associated with PCE's; and, (3) From contacting any customer or potential customer of PCE and telling that customer or potential customer that PCE cannot or may not be able to perform under any contract for goods or services. 55. Cross-Complainant has no plain, speedy or adequate remedy at law for the injuries currently being suffered in that the Cross-Defendants continue to hold themselves out and otherwise communicated to members of the general public that they are the exclusive owners of the distribution rights to PCE's products and services in Asia; hold themselves out and otherwise communicate to members of the general public that they are associated with PCE's; and contact customers and potential customers of PCE and tell that customer or potential customer that PCE cannot or may not be able to perform under any contract for goods or services. 56. Unless restrained and enjoined from doing the acts herein allege, Cross-Complainant will continue to suffer irreparable harm and damage to its business and reputation. GROUNDS FOR RESCISSION OF AGREEMENT ----------------------------------- (Fraud and Lack of and Failure of Consideration) 57. Cross-Complainant realleges paragraphs 1 through 56, inclusive, and incorporates them herein as though fully set forth. -12- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT 58. As set forth in Cross-Complainant's causes of action for Fraud - Intentional Misrepresentation and Negligent Misrepresentation stated herein, Cross-Defendants have committed fraud upon the Cross-Complainant. 59. Additionally, pursuant to the Agreement, Cross-Defendants were to pay $30,000 to PCE for exclusive distributorship rights to specified PCE products in specified territories as defined in Exhibit B to the Agreement, namely South and North Korea. As additional consideration for the exclusive distributorship rights, Cross-Defendants promised and agreed to purchase not less than the 1,000 units of product from PCE per quarter in each of the two years of the term of the Agreement for a total of 4,000 units of product each year and promised to actively promote PCE's products within the specified territory, which was to include advertising, direct sales, public relations, participating in local trade shows, conducting regular clinics on the use of the products, including the product in local catalogues, and using their best efforts to PCE's products within the specified territory. 60. Cross-Defendants have failed to purchase the minimum number of units of product from PCE as required by the terms of the Agreement and have failed to actively promote PCE's products within the specified territory. Consequently there has been a complete failure of consideration under the Agreement which entitles PCE to rescind the contract. 61. Further, Cross-Complainant is informed and believes and based thereon alleges that the breaches of the Agreement described herein above were and are so dominant and/or pervasive such that there has been a failure of consideration and/or frustration of purpose of the undertaking. 62. Based on the foregoing, Cross-Complainant is entitled to a rescission of the Agreement and return of all consideration paid to Cross-Defendants. -13- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT 63. Cross-Complainant intends for service of this cross-complaint to constitute notice to Cross-Defendants of the rescission of the Agreement, its offer to restore any consideration received by it thereunder, and its demand that Cross-Defendants restore to it any and all consideration its had received under the Agreement. WHEREFORE, Cross-Complainant prays judgment against the Cross-Defendants and each of them as follows: 1. Temporary Restraining Order, Preliminary Injunction and permanent Injunction that Cross-Defendants and each of them, and each of their respective agents, servants, employees and representatives, and all persons acting by or under their authority, or in privity, concert or participation with them, be enjoined and restrained during the pendency of this action from doing or causing to be done, directly or indirectly, any or all of the following acts or things: (a) Holding themselves out, or otherwise communicating to members of the general public, that they are the exclusive owners of the distribution rights to PCE's products and services in Asia; (b) Holding themselves out, or otherwise communicating to members of the general public, that they are in any way or manner associated with PCE's; and (c) From contacting any customer or potential customer of PCE and telling that customer or potential customer that PCE cannot or may not be able to perform under any contract for goods or services. 2. For rescission of the "Memorandum of Understanding" and "Personal Computing Environments International Distributor Agreement" ("Agreement"). 3. For special damages in an amount to be proven at trial; 4. For general damages in an amount to be proven at trial; 5. For punitive and exemplary damages in an amount to be proven at arbitration; 6. For prejudgment interest; -14- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT 7. For attorneys' fees and costs of suit; and 8. For such other relief which the Court deems just and proper. DATED: August 5, 2004 ATKINSON, ANDELSON, LOYA, RUUD & ROMO /s/ Scott K. Dauscher ---------------------------------------- Scott K. Dauscher Attorneys for DEFENDANTS PERSONAL COMPUTING ENVIROMENTS, INC. and ALLAN QUATTRIN -15- - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT MEMORANDUM OF UNDERSTAINDING ---------------------------- This Binding Agreement is made as of September 17, 2003 between Personal Computing Environments Inc. a Nevada company having offices at Palm Springs, CA, ("PCE") and Personal Computing Environments Korea Inc. (PCE Korea) a Korean Company having offices at Yoi-Do, Seoul Korea. 1. 4000 Units sold through PCE Korea initiates new agreement for exclusive distribution rights to Asia. 2. If Korea can produce units chosen for sale more cost effectively than its parent PCE and all its Distributors will purchase unit from PCE Korea as they would have been chosen for best quality and lowest price. 3. PCE Korea will have optioned the exclusive rights for the Asian market for a period of 12 months from the completion of a sellable product in a box. 4. PCE will receive a royalty of $200 USD on the sale of PCE Korea's first 4000 sales. PCE Korea will always be priced below PCE's lowest wholesale selling price. 5. Upon signing of this MOU, PCE Asia is allowed upon written consent or verbal from a Director of PCE Parent to sell anywhere in the World until 4000 unit sales are reached. 6. Benjamen Hynes and Jimmy Kim are recognized for creating the relationships with Hyunju Computers, AMD, Pavonine and Xenos and will continue mediate these relations. 7. PCE will retain controls by keeping an open book policy on all private enties and distributors in the group. 8. The new Entity PCE Asia will have exclusive distribution rights of the all PCE products and services in the Asian region. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above indicated. Personal Computing Environments: Allan Quattrin Sept 18/03 - --------------------------------------- ------------------------ Name and Title Date /s/ Allan Quattrin - --------------------------------------- Signature Personal Computing Environments Korea: Benjamen Hynes President 9-19-2003 - --------------------------------------- ------------------------ Name and Title Date /s/ Benjamen Hynes - --------------------------------------- Signature Jimmy H. Kim 9-18-2003 /s/ Jimmy H. Kim - --------------------------------------- Ben Moglin 9-18-2003 /s/ Ben Moglin - --------------------------------------- PERSONAL COMPUTING ENVIRONMENTS INTERNATIONAL DISTRIBUTOR AGREEMENT This Distribution Agreement (the "Agreement") is made as of September 18, 2003 between Personal Computing Environments, Inc, a Nevada company registered as P--CE Computers, Inc., having offices at Palm Springs, CA, ("PCE") and PCE Korea a Korean Company, a [country / state entity], having offices at Seoul, Korea ("DISTRIBUTOR"). WHEREAS, PCE is in the business of marketing, producing and selling certain goods under a distinctive trademark (the "PRODUCTS") described in Exhibit A; WHEREAS, DISTRIBUTOR desires to purchase PRODUCTS from PCE or PCE approved vendors to sell in the geographic area described in Exhibit B (the "TERRITORY") and to advance PCE's interest in the TERRITORY; and, WHEREAS, PCE and DISTRIBUTOR believe it is in their mutual best interests to establish DISTRIBUTOR as PCE's primary DISTRIBUTOR in the TERRITORY. NOW THEREFORE, the parties hereto agree, in consideration of the foregoing premises and the conditions and covenants and representations contained herein as follows: 1. APPOINTMENT AND AUTHORITY OF DISTRIBUTOR ---------------------------------------- 1.1 Appointment and Territory: Subject to the terms of this Agreement, PCE appoints DISTRIBUTOR, and DISTRIBUTOR accepts appointment, as the exclusive distributor of the PRODUCTS with responsibility for sales of the PRODUCTS in the TERRITORY. DISTRIBUTOR is authorized to sell the PRODUCTS, at prices and on terms determined by the DISTRIBUTOR, only to DEALERS (as described below) in the TERRITORY. 1.2 Consideration: In exchange for being appointed as the exclusive distributor in the TERRITORY, and in addition to all other monies due and payable to PCE under this agreement, DISTRIBUTOR shall remit $30,000.00 [U.S. Dollars] upon execution of this Agreement. Exhibit D; 1.3 Exclusivity: PCE hereby grants DISTRIBUTOR the right to use the entity name "PCE Korea" in its dealings with third parties. DISTRIBUTOR'S right to use the name "PCE Korea" shall be concurrent with its rights under this Agreement, and shall be continued if DISTRIBUTOR continues to meet minimum purchase requirements described under Exhibit D. DISTRIBUTOR shall provide PCE with a fully executed package of all of the documents required under Korean law to either cancel or transfer the ownership of the name "PCE Korea" to PCE upon the termination of this Agreement. PCE shall maintain possession of the transfer package and is authorized to file such documents in Korea any time after this Agreement is terminated. 1.4 Indemnification: DISTRIBUTOR will indemnify, defend and hold PCE and its directors, officers, agents and employees harmless from any and all liabilities, claims, obligations, suits, judgments and expenses whatsoever, including court costs and attorneys' fees, which PCE may incur or which may be asserted against PCE, and which arise or occur with respect to the operation of business as it relates to this Agreement. Such indemnity shall extend to all Licensed Products, notwithstanding the approval of samples thereof by PCE, and to any and all liabilities and claims incurred after the termination of this Agreement but which are based on acts of DISTRIBUTOR or events of which proximate cause arose during this Agreement. PCE shall have the right to defend any such action or proceeding with attorneys of its own selection. Visa Versa for the Distributer ie. Patent infringement. 1.5 Territorial Limitation: DISTRIBUTOR shall not advertise, sell, lease or ship the PRODUCTS outside the TERRITORY without the prior written consent of PCE, which consent may be given or withheld at the discretion of PCE. Any unauthorized sale shall be a material breach of this Agreement. 1.6 No Competition a. In the event DISTRIBUTOR directly or indirectly owns or acts as an officer, director, employee or paid consultant to any company, firm, business or other entity in direct competition with PCE, PCE shall have the option to terminate this agreement and all DISTRIBUTOR's rights hereunder to use the marks and Licensed Products after first providing DISTRIBUTOR thirty days written notice. Such termination does not constitute the default of DISTRIBUTOR or PCE under this agreement. b. So long as DISTRIBUTOR uses the trade name "PCE Korea," DISTRIBUTOR agrees not to sell within the Territory goods competing with Licensed Products without prior consultation and written approval from PCE. 1.7 Promotion Efforts: DISTRIBUTOR will actively promote the PRODUCTS within the TERRITORY, which activities shall include without limitation the follwing: a. Advertising; b. Direct sales; c. Public relations; d. Participating in appropriate local trade shows; e. Conducting regular clinics on the use of the PRODUCTS; f. Including the PRODUCTS in DISTRIBUTOR'S local catalogues; and g. Using its best efforts to develop the PRODUCT market in the TERRITORY, including, but not limited to catering to specific markets targeted by PCE, informing customers and potential customers of the availability and desirability of the PRODUCTS, and promptly responding to all inquiries, questions, correspondence and orders. h. All advertising, merchandising and promotional materials used by DISTRIBUTOR (or portions thereof relating to the PRODUCTS) to distribute the PRODUCTS must be approved by PCE prior to the final production or placement of such materials. This includes but is not limited to copy, scripts, comps, proofs, press releases, and advertising materials. i. DISTRIBUTOR shall make available to PCE all marketing, promotion, advertising, and merchandising materials and assets for use by PCE in the United States and other regions and countries to promote PCE products and accessories. Any out-of-pocket expenses for copy, transfer or shipping of those assets will be the responsibility of PCE. j. DISTRIBUTOR is required to submit a marketing and business plan to PCE upon contract agreement, and quarterly marketing activity reports thereafter. k. PCE shall provide DISTRIBUTOR with reasonable quantities of marketing and merchandising information and materials as well as reasonable quantities of brochures, catalogues, photographs, instructional 2 material, advertising literature and other PRODUCT data, with all such materials printed in the English language. Any modification or translation of the material provided by PCE shall be subject to PCE's prior written approval. 2. TERM AND TERMINATION -------------------- 2.1 Term: The term of this Agreement is two (2) years beginning July 22, 2003 and ending July 21, 2004 or when the 4000 units sold is reached. Then PCE Asia is commenced. 2.2 Minimum Purchase: DISTRIBUTOR shall purchase not less than the minimum net value of PRODUCTS as set forth in Exhibit C from PCE through a quarterly purchase order. If DISTRIBUTOR fails to purchase the minimum amount set forth for any period, PCE may, at its discretion and without penalty, immediately terminate this Agreement by written notice to DISTRIBUTOR; provided, however, that in the case of PCE's termination of this Agreent for DISTRIBUTOR's failure to meet minimum purchase requirements, DISTRIBUTOR's shall be discharged from any financial obligations to PCE relating or pertaining to minimum purchase requirements. 2.3 Termination by Notice: This Agreement may be terminated without penalty by either party by providing 60 days prior written notice to the other party. 2.4 Termination for Cause: Either party may, without, penalty, terminate this Agreement upon written notice to the other party in either one of the following events: a. The other party breaches this Agreement and such breach remains uncured for 15 days following written notice of breach by the non-breaching party, unless such breach is incurable in which event termination shall be immediately upon receipt of written notice; or b. A petition for relief under any bankruptcy law is filed by or against the other party, or the other party makes an assignment for the benefit of creditors, or a receiver is appointed for all of a substantial part of the other party's assets, and such petition, assignment or appointment is not dismissed or vacated within 60 days. 2.5 Ownership Transfer: PCE shall have the right to terminate this Agreement, without penalty, by written notice to DISTRIBUTOR in the event of a transfer of ownership of DISTRIBUTOR, whether by sale of stock, sale of assets, merger, operation of law or otherwise. For the purpose of this section, a transfer of ownership shall include (a) the sale or transfer of twenty percent (20%) or more of the voting securities or assets of DISTRIBUTOR; (b) the admission or removal of a partner of DISTRIBUTOR; (c) a change in the management of DISTRIBUTOR; 2.6 Effect of Termination: Termination of this Agreement shall not relieve or release either party from making payments that may be owed to the other party under the terms of this Agreement. In addition, upon termination, DISTRIBUTOR shall, at PCE's request, return all advertising, promotional and other materials in its possession relating to the PRODUCT. 3. EXHIBITS: All exhibits attached hereto are hereby incorporated by reference. 3 4. PCE'S REPRESENTATIONS WARRANTIES TO DISTRIBUTOR. 4.1 PCE hereby represents and warrants to DISTRIBUTOR that the PRODUCTS and the use, manufacture, importation, or sale thereof as permitted hereunder will not infringe upon or violate any copyright or trade secret of any third party. 4.2 Indemnity: PCE will defend, at its expense, and will indemnify DISTRIBUTOR against any loss, cost, expense or liability arising out of any claim by a third party against DISTRIBUTOR asserting or involving a breach of the representation and warranty made in Section 4.1 above. PCE's obligations under this Section shall be contingent on DISTRIBUTOR's providing to PCE (i) prompt written notice of such claim, (ii) sole control and authority over the defense and settlement thereof, and (iii) reasonable information and assistance to settle and/or defend any such claim or action. 4.3 If an injunction or order is obtained against DISTRIBUTOR's use or distribution of any PRODUCTS, or if PCE determines that any PRODUCT is likely to become the subject of a claim of infringement or violation of a patent, copyright or trade secret of a third party, PCE may (but need not), in its sole discretion, (a) procure for DISTRIBUTOR the right to continue using such PRODUCT, or (b) replace or modify the same so that it becomes noainfringing provided such modification or replacement does not materially and adversely affect the specifications for or the use or operation of the PRODUCT, or (c) accept the return of inventory and refund the purchase price, manufacturing cost and/or any royalties paid hereunder with respect thereto. 5. ADDITIONAL CONTRACT TERMS: Following the launch of PCE Korea in August, PCE will furnish additional contractual terms to be executed with DISTRIBUTOR. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above indicated. DISTRIBUTOR: - ------------ Jimmy H. Kim /s/ Jimmy H. Kim 18 Sept 2003 - ------------------------------- --------------- [name and title] Date Ben Hynes President Sept -18 -03 - ------------------------------- --------------- [name and title] Date /s/ Ben Hynes PERSONAL COMPUTING ENVIRONMENTS: - -------------------------------- 45-630 Citrus Street, Suite E Indio, CA 92201 /s/ Ben Moglin Sept 18/03 - ------------------------------- --------------- [name and title] Date Ben Moglin 4 Allan Quattrin Pres/CEO Sept 18/03 - ------------------------------- --------------- [name and title] Date /s/ Allan Quattrin 5 EXHIBITS: A. Products: All authorized PCE products and accessories B. Territory: Exclusive rights to South and North Korea. Can distribute in following countries, but without exclusive rights ownership; including but not limited to Australia, China, Japan, India, Malaysia, Philippines, Thailand. C. Minimum Purchase Requirements: 1,000 units per quarter for contract years one and two Contract Year. Total Minimum Amount -------------- -------------------- First 4,000 Second 4,000 D. $30,000 has been paid to PCE from PCE Korea. 6 PROOF OF SERVICE (Code Civ. Proc. Section 1013a(3)) STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I am employed in the County of Los Angeles, State of California. I am over the age of 18 years and am not a party to the within action; my business address is 17871 Park Plaza Drive, Suite 200, Cerritos, CA 90703-8597. On August 9, 2004, I served the following document(s) described as FIRST AMENDED COMPLAINT on the interested parties in this action as follows: by placing a true copy thereof enclosed in sealed envelopes addressed as follows: Reuben D. Nathan, Esq. Attorneys For Plaintiffs and Cross- AZIMY & NATHAN, LLP Defendants 18500 Von Kaman Avenue, Suite 500 Irvine, CA 92612 [X] BY MAIL: I deposited such envelope in the mail at Cerritos, California. The envelope(s) was mailed with postage thereon fully prepaid. I am readily familiar with the firm's practice of collection and processing correspondence for mailing. It is deposited with U.S. postal service on that same day in the ordinary course of business. I am aware that on motion of party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. [_] BY OVERNIGHT COURIER: I sent such document(s) on August 9, 2004, by with postage thereon fully prepaid at Cerritos, California. [_] BY FAX: I sent such document by use of facsimile machine telephone number (562) 653-3333. Facsimile cover sheet and confirmation is attached hereto indicating the recipients' facsimile number and time of transmission pursuant to California Rules of Court Rule 2008(e). The facsimile machine I used complied with California Rules of Court Rule 2003(3) and no error was reported by the machine. [_] BY PERSONAL SERVICE: I delivered such envelope by hand to the offices of the addressee(s). I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on August 9, 2004, at Cerritos, California. /s/ Susan Jaragosky -------------------------------- Susan Jaragosky - -------------------------------------------------------------------------------- FIRST AMENDED CROSS-COMPLAINT -----END PRIVACY-ENHANCED MESSAGE-----