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