U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(MarkOne)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 2000
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission File No. 000-27769
Power Kiosks, Inc.
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(Name of small business registrant in its charter
Florida 65-0522144
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
181 Whitehall Drive
Markham, Ontario, Canada L3R 9T1
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (905) 948-9600
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange
on which registered
None
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0001 par value
(Title of class)
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Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 Fax: (561) 659-5371
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Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State registrant's revenues for its most recent fiscal year. $0
Of the 6,088,483 shares of voting stock of the registrant issued and
outstanding as of November 7, 2000, 2,755,491 shares are held by non-affiliates.
The aggregate market value of the voting stock held by non-affiliates as of
November 7, 2000 is $11,876,166.21.
PART I
Item 1. Description of Business
(a) Business Development
Power Kiosks, Inc. (the "Company" or "Power Kiosks") is incorporated in the
State of Florida. The Company was originally incorporated as Global Corporate
Quality, Inc. on September 9, 1994 ("GCQ"). The Company subsequently changed its
name to Alternate Achievements, Inc. on October 1, 1999. The Company's Common
Stock is currently quoted on the Over the Counter Bulletin Board under the
symbol "PWKK" and has been since July 2000. Its executive offices are presently
located at 181 Whitehall Drive, Markham, Ontario, Canada, L3R 9T1. Its telephone
number is (905) 948-9600 and its facsimile number is (905) 948-8377.
The Company is filing this Form 10-KSB in compliance with the effectiveness
of its filing on Form 10-SB. The Company will file periodic reports in the event
its obligation to file such reports is suspended under the Securities and
Exchange Act of 1934 (the "Exchange Act".)
Originally, the Company was formed to engage in the marketing and
distribution of training programs and seminars to corporate level executives on
various management issues. The Company failed in its attempt to implement its
initial business plan and during September 1995 abandoned its efforts. The
Company had no operations for the period prior to September 1995. The Company
was inactive and there were no transactions from September 1995 to February
2000, when the Company, Power Photo Enterprises, Inc. n/k/a Power Photo Kiosks,
a Canadian corporation ("PPK") and the individual holders of all of the
outstanding capital stock of PPK (the "Holders") consummated a reverse
acquisition pursuant to a share exchange agreement (the "Agreement"). Pursuant
to the Agreement, the Holders tendered to the Company all issued and outstanding
shares of PPK in exchange for 3,000,000 shares (only 2,995,539 shares were
actually issued due to rounding) of Common Stock of the Company.
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Of the 2,995,539 shares issued, Ronald Terry Cooke is the beneficial owner of
1,359,846 shares and Allan Turowetz is the beneficial owner of 1,103,146 shares.
The reorganization was accounted for as a reverse acquisition.
Power Kiosks, Inc. is incorporated in the State of Florida. The Company was
originally incorporated as Global Corporate Quality, Inc. on September 9, 1994.
The Company subsequently changed its name to Alternate Achievements, Inc. on
October 1, 1999. Originally, the Company was formed to engage in the marketing
and distribution of training programs and seminars to corporate level executives
on various management issues. The Company failed in its attempt to implement its
initial business plan and during September 1995 abandoned its efforts. The
Company had no operations for the period prior to September 1995. The Company
was inactive and there were no transactions from September 1995 to February
2000, when the Company, Power Photo Enterprises, Inc. n/k/a Power Photo Kiosks,
and the individual holders of all of the outstanding capital stock of PPK
consummated a reverse acquisition pursuant to a share exchange agreement.
Currently, the Company is a provider of a network-based, digital imaging
kiosk system that delivers a range of retail consumer products. The kiosk system
is enabled by leading-edge technology in the areas of digital imaging software,
delivery hardware and e-commerce network capabilities.
Each kiosk operates as a fully-functional, stand-alone business unit. When
linked electronically, the kiosks function as a broadcast network that delivers
national and site-specific advertising and marketing programs to any geographic
delivery area.
As part of the ongoing product improvement process, in December 1999, PPK
signed a teaming agreement with Sybase Canada Limited the Canadian subsidiary of
Sybase ("Sybase") to develop a retail kiosk delivery system in an attempt to
create an interactive "smart" digital kiosk network. The Company hopes that the
result will allow the Company to deliver a broader range of consumer-based kiosk
products and will form the basis of an electronic network capable of delivering
national and site-specific advertising marketing programs. Sybase is also
working with the Company to rewrite the operating software with a view to
enhancing the usability for the consumer while at the same time making the
connection between the kiosk operating system and the network software seamless.
It is the Company's intention to (i) to market its kiosks in the United
States and Canada; (ii) to research and further develop its new products; and
(iii) to continue to improve its kiosk system.
The Company relied upon Section 4(2) of the Securities Act of 1933, as
amended (the "Act") and Rule 506 of Regulation D promulgated thereunder ("Rule
506") for several transactions regarding the issuance of its unregistered
securities. In each instance, such reliance was based upon the fact that (i) the
issuance of the shares did not involve a public offering, (ii) there were no
more than thirty-five (35) investors (excluding "accredited investors"), (iii)
each investor who was not an accredited investor either alone or with his
purchaser representative(s) has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
prospective investment, or the issuer reasonably believes immediately prior to
making any sale that such purchaser comes within this description, (iv) the
offers and sales were made in compliance with Rules 501 and 502, (v) the
securities were subject to Rule 144 limitations on resale and (vi) each of the
parties was a sophisticated purchaser and had full access to the information on
the Company necessary to make an informed investment decision by virtue of the
due diligence conducted by the purchaser or available to the purchaser prior to
the transaction (the "506 Exemption").
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In June 1998, Team Power Enterprises, Inc., as tenant, signed a Lease
Agreement with Bruce N. Huntley Contracting Limited, as landlord. Team Power
Enterprises, Inc. is beneficially owned by Ronald Terry Cooke, the Company's
President and Chairman, and Allan Turowetz, the Company's Vice President and
Director. The lease is for the property located at 181 Whitehall Drive, Unit 1,
in Markham, Ontario, which serves as the Company's headquarters. The lease term
began July 1998 and is for a period of five (5) years. The rents to be paid are
as follows: From July 1, 1998 through June 30, 1999 the rental amount is
$9,235.41 monthly; from July 1, 1999 through June 30, 2000 the rental amount is
$10,075 monthly; and from July 1, 2001 through June 30, 2003 the rental amount
is $10,914.58 monthly. See Part 1, Item 2. "Description of Property" and Part
III, Item 12. "Certain Relationships and Related Transactions".
In September 1999, PPK prior to its acquisition by the Company, entered
into a Master Merchandising License Agreement with Universal Studios Licensing,
Inc. ("Universal"), whereby PPK was granted a non-exclusive license to use
certain characters and artwork owned by Universal. For the use of each set of
character and artwork, PPK must pay to Universal a royalty of five percent (5%)
of retail sales with a guaranteed royalty upon execution of the license and on
January 31, 2000 and must pay additional guaranteed royalties on December 31,
2001. The license expires December 31, 2002.
In November 1999, PPK, prior to its acquisition by the Company, entered
into a Teaming Agreement with Sybase, Advanced Kiosk Services, Inc. and
Integrated Kiosks, Inc. to provide a retail kiosk delivery system with fully
automated and centrally monitored and administered kiosk maintenance
functionality and image movement capability. The software is critical to the
remote management of the kiosks from a service and content standpoint, and also
provides connectivity over the complete kiosk network to facilitate advertising
initiatives, program "refresh", transaction monitoring and servicing.
In January 2000, PPK, prior to its acquisition by the Company, entered into
negotiations with Remington Financial Group, Inc., a Wyoming corporation
("Remington") regarding a share exchange, whereby PPK would be acquired in a
reverse acquisition by Remington in exchange for shares in Remington. Rhonda
Networks, Inc., an Alberta Business corporation ("Rhonda") brokered the deal,
which was never consummated. Since that time, Rhonda has made certain claims to
PPK regarding monies and time expended on PPK's behalf. In August 2000, the
Company agreed to pay Rhonda $25,000 and to issue Rhonda 225,000 shares of its
restricted Common Stock in exchange for a general release in favor of both PPK
and the Company. Although all parties have agreed to the terms of the
settlement, it has yet to be memorialized. The Company has issued the 225,000
shares, which are being held by the Company pending full and final settlement of
the matter. For such offering, the Company relied upon the 506 Exemption and no
state exemption, as Rhonda is located in Canada. See Part III, Item 12. "Certain
Relationships and Related Transactions".
In February 2000, the Company effected a forward split of its Common Stock
at a rate of 2.78 to 1, for holders of record on February 22, 2000, with
distribution effective March 1, 2000. See Part I, Item 5 "Market for Common
Equity and Related Stockholder Matters."
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In February 2000, the Company, PPK and the Holders consummated the
Agreement. Pursuant to the Agreement, the Holders tendered to the Company all
issued and outstanding shares of PPK in exchange for 3,000,000 shares (only
2,995,539 shares were actually issued due to rounding) of Common Stock of the
Company. Of the 2,995,539 shares issued, Ronald Terry Cooke is the beneficial
owner of 1,359,846 shares and Allan Turowetz is the beneficial owner of
1,103,146 shares. The reorganization was accounted for as a reverse acquisition.
For such offering, the Company relied upon the 506 Exemption, Section
451.802(19) of the Michigan Code and no state exemption for the shares issued to
Bahamian or Canadian residents.
Simultaneously with the closing of the Agreement, the then officer and
director of the Company tendered his resignation in accordance with the terms of
the Agreement and tendered his shares (13,900,000) for cancellation. 1,390,000
additional shares were also cancelled in connection with the Agreement. Ronald
Terry Cooke and Allan Turowetz were elected to serve on the Board of Directors
of the Company (the "Board"). The Board subsequently appointed Ronald Terry
Cooke as Chairman of the Board and President and Allan Turowetz as the
Vice-President of the Company. The Company also announced approval of an
amendment to its Articles of Incorporation changing the name of the Company from
Alternate Achievements, Inc. to Power Kiosks, Inc. See Part I, Item 1.
"Description of Business - (b) Business of Registrant - Employees and
Consultants"; Part I, Item 6. "Management's Discussion and Analysis or Plan of
Operation - Stockholder's Equity; Part III, Item 10. "Executive Compensation -
Employee Contracts and Agreements"; Part III, Item 11. "Security Ownership of
Certain Beneficial Owners and Management"; and Part III, Item 12. "Certain
Relationships and Related Transactions".
The facts upon which the Company relied for purposes of Section 451.802 of
the Michigan Code are: The transaction was incident to a class vote by
shareholders pursuant to the certificate of incorporation or the applicable
corporation statute, on a merger, consolidation, reclassification of securities,
or sale of corporate assets in consideration of the issuance of securities of
another corporation.
In February 2000, PPK entered into a licensing agreement with The Ohio
State University ("TOSU"), whereby TOSU granted PPK a non-exclusive right and
license to use designs, trade names, trademarks, and service marks, including
without limitation, the designations depicted on the camera ready sheets of
licensed marks and other designs, seals and symbols in connection with
advertising its products and services in the United States. For such right and
license, PPK agreed to pay a royalty to TOSU quarterly in the amount of eight
percent (8%) of the net sales price. The term is for a period of two (2) years
and is automatically renewable for successive one (1) year terms unless
terminated. A fee of five hundred dollars ($500) must also be paid annually by
PPK to TOSU.
In February 2000, the Company sold 350,000 shares of its Common Stock to
one (1) investor for $350,000. The Company actually received $300,000, as
$35,000 was deducted as an agent fee and $15,000 was deducted for legal fees.
The Company also issued warrants to purchase an additional 300,000 shares
exercisable at a price of $0.01 per share for a period of three (3) years in
connection with such sale. Both the shares and the shares underlying the
warrants carry mandatory registration rights.
Since February, both parties have verbally agreed to modify the agreement,
such that 390,000 shares will be sold rather than 350,000 shares for $390,000
rather than $350,000, with the warrants and the costs remaining the same.
Although the verbal agreement has yet to be memorialized, proceeds for the full
amount has been received by the Company. For such offering, the Company relied
upon the 506 Exemption. No state exemption was necessary because the investor is
a foreign entity located in Canada. See Part III, Item 11. "Security Ownership
of Certain Beneficial Owners and Management"; and Part III, Item 12. "Certain
Relationships and Related Transactions".
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Since April 2000, the Company sold 237,924 shares of its Common Stock to
twenty five (25) investors for a total of $594,862.27. For such offering, the
Company relied upon the 506 Exemption, Section 49:3-50(b)(9) of the New Jersey
Code and Section 211(b) of the Pennsylvania Code. No state exemption was
necessary for purchases by Canadian residents. See Part III, Item 12. "Certain
Relationships and Related Transactions".
The facts relied upon to make the New Jersey Exemption include the
following: (i) the sale was to not more than ten (10) persons during any period
of twelve (12) consecutive months; (ii) the Company reasonably believed that all
buyers purchased for investment; (iii) no commission or other remuneration was
paid for soliciting any prospective buyer; and (iv) the sale was not offered or
sold by general solicitation or any general advertisement.
The facts relied upon to make the Pennsylvania Exemption include the
following: (i) the Company filed a completed SEC Form D with the Pennsylvania
Securities Commission, Division of Corporate Finance; (ii) the Form was filed
not later than fifteen (15) days after the first sale; and (iii) the Company
paid an appropriate filing fee.
In May 2000, the Company filed a report on Form 8KA1 disclosing that the
Company had dismissed the firm of Dorra Shaw & Dugan and retained KPMG, LLP as
its auditors in connection with the Agreement. The Company also changed its
fiscal year to July 31, that of its subsidiary, PPK.
In June 2000, the Company executed a promissory note in favor of Thomson
Kernaghan & Co., Ltd. ("TK") in the principal amount of two hundred fifty
thousand dollars ($250,000). The loan had a maturity date of August 31, 2000. In
November 2000, both parties orally agreed to convert all outstanding principal
and interest into 250,000 shares of the restricted Common Stock of the Company,
although actual conversion has yet to take place and the agreement to convert
has yet to be memorialized. For such offering, the Company relied upon the 506
Exemption. No state exemption was necessary because the investor is a foreign
entity located in Canada. See Part I, Item 6. "Management's Discussion and
Analysis or Plan of Operation - Financial Condition, Liquidity and Capital
Resources"; Part III, Item 11. "Security Ownership of Certain Beneficial Owners
and Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
In July 2000, the Company entered into an employment agreement with Ronald
Terry Cooke, to employ him as President and CEO of the Company. The term of the
agreement is for a period of five (5) years, beginning July 1, 2000. Mr. Cooke's
initial basic compensation is One Hundred and Twenty Thousand dollars ($120,000)
per year. Such salary will be reviewed as appropriate by the Board of Directors
of the Company and may be increased in the Board's sole discretion based upon
performance. Mr. Cooke received a signing bonus of two hundred twenty five
thousand (225,000) restricted shares of the Company's Common Stock, as well as a
Seventy Five Thousand dollar ($75,000) bonus. Under the terms of the employment
agreement, Mr. Cooke has the option to purchase up to a total of one hundred
thousand (100,000) shares of the Company's restricted Common Stock annually,
which options are exercisable at a price of $1.00 per share. The stock options
will begin to vest at the end of the employment year commencing on July 1, 2000
and each employment year thereafter. Mr. Cooke will have five (5) years after
the shares are vested to exercise the options. See Part I, Item 1. "Description
of Business - (b) Business of Registrant - Employees and Consultants"; Part III,
Item 10. "Executive Compensation - Employee Contracts and Agreements"; Part III,
Item 11. "Security Ownership of Certain Beneficial Owners and Management"; and
Part III, Item 12. "Certain Relationships and Related Transactions".
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In July 2000, the Company entered into an employment agreement with Allan
Turowetz, to employ him as Vice President of the Company. The term of the
agreement is for a period of five (5) years, beginning July 2000. Mr. Turowetz's
initial basic compensation is One Hundred Thousand dollars ($100,000) per year.
Such salary will be reviewed as appropriate by the Board and may be increased in
the Board's sole discretion based upon performance. Mr. Turowetz received a
signing bonus of one hundred and five thousand (105,000) shares of the Company's
Common Stock, which was registered pursuant to a Registration Statement filed on
Form S-8 in August 2000, as well as a Seventy Five Thousand dollar ($75,000)
bonus. Under the terms of the employment agreement, Mr. Turowetz has the option
to purchase up to a total of 100,000 shares of the Company's restricted Common
Stock annually, which options are exercisable at a price of $1.00 per share. The
stock options will begin to vest at the end of the employment year commencing on
July 1, 2000 and each employment year thereafter. Mr. Turowetz will have five
(5) years after the shares are vested to exercise the options. See Part I, Item
1. "Description of Business - (b) Business of Registrant - Employees and
Consultants"; Part III, Item 10. "Executive Compensation - Employee Contracts
and Agreements"; Part III, Item 11. "Security Ownership of Certain Beneficial
Owners and Management"; and Part III, Item 12. "Certain Relationships and
Related Transactions".
In August 2000, the Company filed a Registration Statement on Form S-8 for
the purpose of registering the Company's Year 2000 Consultant Stock Compensation
Plan. Pursuant to such plan, the Company issued 105,000 shares of its Common
Stock to Allan Turowetz, the Company's current Vice-President and Director. See
Part I, Item 1. "Description of Business - (b) Business of Registrant -
Employees and Consultants"; Part III, Item 10. "Executive Compensation -
Employee Contracts and Agreements"; Part III, Item 11. "Security Ownership of
Certain Beneficial Owners and Management"; and Part III, Item 12. "Certain
Relationships and Related Transactions".
In August 2000, the Company issued 120,000 shares of its restricted Common
Stock to Team Power Enterprises Incorporated ("TPE"), which is beneficially
owned by both Ronald Terry Cooke, the Company's current President and Chairman
and Allan Turowetz, the Company's current Vice-President and Director as full
and final repayment of a loan by TPE to PPK. For such offering, the Company
relied upon the 506 Exemption and no state exemption, as TPE is located in
Canada. See Part I, Item 1. "Description of Business - (b) Business of
Registrant - Employees and Consultants"; Part III, Item 10. "Executive
Compensation - Employee Contracts and Agreements"; Part III, Item 11. "Security
Ownership of Certain Beneficial Owners and Management"; and Part III, Item 12.
"Certain Relationships and Related Transactions".
In August 2000, the Company entered into an agreement with Discovery
Enterprises, Inc. d/b/a Discovery Financial, Inc. to provide financial
consulting and business advisory services including a complete investors
relations program for the Company. The term of the contract expires February 23,
2001. For such services, the Company issued 20,000 shares of its Common Stock
upon execution of the agreement. For such offering, the Company relied upon the
506 Exemption and Section 517.061(11) of the Florida code.
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The facts relied upon to make the Florida exemption available include the
following: (i) sales of the sharesof Common Stock were not made to more than 35
persons; (ii) neither the offer nor the sale of any of the shares was
accomplished by the publication of any advertisement; (iii) all purchasers
either had a preexisting personal or business relationship with one or more of
the executive officers of the Company or, by reason of their business or
financial experience, could be reasonably assumed to have the capacity to
protect their own interests in connection with the transaction; (iv) each
purchaser represented that he was purchasing for his own account and not with a
view to or for sale in connection with any distribution of the shares; and (v)
prior to sale, each purchaser had reasonable access to or was furnished all
material books and records of the Company, all material contracts and documents
relating to the proposed transaction, and had an opportunity to question the
executive officers of the Company. Pursuant to Rule 3E-500.005, in offerings
made under Section 517.061(11) of the Florida Statutes, an offering memorandum
is not required; however each purchaser (or his representative) must be provided
with or given reasonable access to full and fair disclosure of material
information. An issuer is deemed to be satisfied if such purchaser or his
representative has been given access to all material books and records of the
issuer; all material contracts and documents relating to the proposed
transaction; and an opportunity to question the appropriate executive officer.
In September 2000, PPK entered into a teaming agreement with Mattel Canada,
Inc. to design and market the Mattel Retail Delivery Kiosk, for the purpose of
distribution to Wal-Mart stores. Phase one (1) is projected to deploy fourteen
(14) kiosks for a pilot project, with ten (10) units for Wal-Mart store
locations located in Canada and four (4) units for promotional purposes located
in places such as Mattel's Head Office and Wal-Mart's Head Office. Phase two (2)
is projected to include a complete rollout to all Wal-Mart stores located in
Canada [approximately two hundred (200) stores]. Phase three (3) is projected to
include locations throughout the United States as determined by Wal-Mart U.S.
PPK must bear all costs including manufacturing, shipping, maintenance,
electrical and telephone charges, delivery and setup of the kiosk units. Mattel
is to provide all images and to contribute to advertising efforts.
In September 2000, the Company's Board of Directors increased the number of
director positions from two (2) to four (4) and appointed June Nichols-Sweeney
and Jean Beliveau to fill the vacancies created thereby until the next meeting
of the shareholders. The Company approved the issuance of 100,000 and 200,000
shares of its Common Stock to them respectively, although the shares were not
actually issued until November 2000. The Company also granted the new directors
warrants to purchase an additional 100,000 shares each, exercisable at a price
of $1.00 per share for a period of three (3) years. Ms. Sweeney may exercise the
right to purchase a maximum of 25,000 shares every quarter, whereas Mr. Beliveau
has the same right beginning May 1, 2001. For such offering, the Company relied
on the 506 Exemption and Section 10-5-9 of the Georgia Code. No state exemption
was required for the issuance to Jean Beliveau, as he is a Canadian resident.
See Part I, Item 1. "Description of Business - (b) Business of Registrant -
Employees and Consultants"; Part III, Item 10. "Executive Compensation -
Employee Contracts and Agreements"; Part III, Item 11. "Security Ownership of
Certain Beneficial Owners and Management"; and Part III, Item 12. "Certain
Relationships and Related Transactions".
The facts relied upon to make the Georgia Exemption available include the
following: (i) the aggregate number of persons purchasing the Company's stock
during the 12 month period ending on the date of issuance did not exceed fifteen
(15) persons; (ii) neither the offer nor the sale of any of the shares was
accomplished by a public solicitation or advertisement; (iii) each certificate
contains a legend stating "These securities have been issued or sold in reliance
of paragraph (13) of Code Section 10-5-9 of the Georgia Securities Act of 1973
and may not be sold
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or transferred except in a transaction which is exempt under such act or
pursuant to an effective registration under such act"; and (iv) each purchaser
executed a statement to the effect that the securities purchased have been
purchased for investment purposes. Offerings made pursuant to this section of
the Georgia Securities Act have no requirement for an offering memorandum or
disclosure document.
In October 2000, the Company executed a promissory note in favor of TK in
the principal amount of $110,000. The Company actually received $100,000, as
$10,000 was deducted as an agent fee. The note bears interest at a rate of ten
percent (10%) per annum and is for a term of one (1) year. For such offering,
the Company relied upon the 506 Exemption. No state exemption was necessary
because the investor is a foreign entity located in Canada. See Part I, Item 6.
"Management's Discussion and Analysis or Plan of Operation - Financial
Condition, Liquidity and Capital Resources"; Part III, Item 11. "Security
Ownership of Certain Beneficial Owners and Management"; and Part III, Item 12.
"Certain Relationships and Related Transactions".
In October 2000, the Company entered into a marketing agreement with PACEL
Corp. and Child Watch of North America to promote the ChildWatch(TM) software
and include it as part of the Company's advertising campaigns. The Company also
agreed to place the ChildWatch(TM) logo on its website with a link to the PC Sam
website. The ChildWatch(TM) software is a parent controlled security access
monitor software distribution program.
In October 2000, PPK entered into a letter of intent with Groome Capital.
Com, Inc. ("Groome") to provide equity financing for the Company. Groome agreed
to use its best efforts to initially raise four million dollars ($4,000,000)
through the sale of units consisting of one common share and a warrant to
purchase an additional common share. A second offering is also contemplated to
raise sixty million dollars ($60,000,000). Groome is to receive an agent fee in
the amount of ten percent (10%) of the gross proceeds raised in the first
offering. Additionally, the Company must pay to Groome a fee equal to ten
percent (10%) of the amount of any financing provided by any investor within six
(6) months of the introduction of the investor by Groome to PPK. Groome is also
entitled to options entitling Groome to purchase an amount equal to ten percent
(10%) of the number of securities issuable pursuant to the offerings, at a price
per share equal to the price per share under the relevant offering, exercisable
for a period of twenty four (24) months from the closing date of each relevant
offering. Should the Company enter into a merger, amalgamation, arrangement or
reorganization involving the sale or exchange of all or substantially all of the
assets of PPK or any material subsidiary or the issuance of securities of PPK in
excess of five percent (5%) of the total value or number of securities currently
outstanding, PPK must pay to Groome a fee equal to the greater of three percent
(3%) of the value of such transaction or $150,000. All shares held by officers,
directors and affiliates will be further restricted with a lockup agreement.
In October 2000, the Company filed a third amended Current Report on Form
8-K. The purpose of this third amendment to Form 8-K was to provide adjusted
financial statements and pro forma financial information for Power Photo Kiosks,
Inc., a Canadian corporation, as required by Item 7 of Form 8-K. It was filed at
the request of the Company's independent auditor, KPMG, LLP.
In November 2000, the Company filed a Registration Statement on Form S-8
for its Year 2000 Supplemental Employee/Consultant Stock Compensation Plan.
Since that time, 60,000 shares of the Company's Common Stock have been issued
each to Ronald Terry Cooke, the Company's current President and Chairman and to
Allan Turowetz, the Company's current Vice-President and Director. 580,000
shares registered pursuant to such
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Registration Statement have yet to be issued. See Part I, Item 1. "Description
of Business - (b) Business of Registrant - Employees and Consultants"; Part III,
Item 10. "Executive Compensation - Employee Contracts and Agreements"; Part III,
Item 11. "Security Ownership of Certain Beneficial Owners and Management"; and
Part III, Item 12. "Certain Relationships and Related Transactions".
See (b) "Business of Registrant" immediately below for a description of the
Company's business.
(b) Business of Registrant
Background of the Industry
Management's research has found that an intense interest in photo stickers
began in Japan in the mid-1990s, and that there are currently about 40,000 photo
kiosks in the Japanese market that generate sales in excess of approximately
US$2.4 billion per annum. During 1998, sticker machines started to appear in the
United States. Management also found that at the same time, consumers' desire
for a fun, fantasy-filled, ego-gratifying photo experience is increasing and the
volume of disposable income available for the right type of entertainment
experience is large.
Management's research had discovered that major corporations with expertise
in film technology, including Polaroid, Agfa (Bayer) and Kodak, are committing
resources to this market, and that the following statistics support the growth
of the photo kiosk industry:
* The total U.S. vending market had sales of US$31.5 billion in 1997. * The
total U.S. photography market has sales of US$37 billion in 1997 * Every
household in the U.S. spends an average of US$500 per annum on
photo-related products. * There are now over 40,000 sticker machines on
location in Japan, which account for 35% of all money spent in amusement
machines. * The U.S. photo sticker machine market is expected to have
25,000 to 40,000 units on location by 2003. According to 1998 data, there
are currently about 2,500 units on location throughout the United States.
* Over 90% of Americans use vending machines.
Kiosk Operational Management System
The Company's proprietary, recently developed Kiosk Management System
("KMS") provides Power Kiosks with the ability to remotely update and add and
remove data or images on individual or groups of kiosks. This means the Company
can easily remotely customize the kiosk for special events, advertising
specials, or seasonal holidays with no need for client or partner assistance.
Maintaining current images or data at the kiosk can be handled from one (1)
central control operation. The Kiosk units will be connected via the Intranet to
the central control website to attain up-to-the-minute information on kiosk
usage, royalty information and kiosk status. The remote diagnostic and the
health monitoring capability begin with each kiosk in its standalone
configuration,
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continually monitoring the health of individual components in the kiosk. Upon
recognizing a failure in or abnormal status of any of the components, the kiosk
itself initiates communication with the central control server and reports its
diagnosis. The central server is then programmed to respond appropriately,
sending e-mail, paging or phone communications to the specific technical service
individual who will respond and correct the situation, all of this without the
intervention of the Company or client. These application enhancements should
create the most flexible and dependable kiosk network available. The Kiosk
Management System should differentiate the Company from other kiosk providers
and through its inherent versatility, ensure market acceptance.
Power Kiosk Products
Stand Alone Interactive Power Entertainment Kiosk (NON-NETWORKED):
A fully functional, digital photo entertainment kiosk for use primarily at
promotional events such as NASCAR races, trade shows, corporate events and
individual business locations.
Features:
* Revenue generation occurs primarily from the
sale of digital photographs.
* Image packages can be customized to site
requirements.
* Kiosk shell graphics can be customized to site
requirements.
* Individual client advertising programs can be
developed based on site requirements.
Networked Interactive Power Kiosk System:
1. Power Entertainment Kiosk
A fully functional, digital photo entertainment kiosk for use by large
corporations with multi-location, national operations.
Features:
* Revenue generation occurs from the sale of
digital photographs and from the sale of advertising.
* Kiosks operate as a broadcast network that
delivers national and site-specific advertising and
marketing programs to any geographic delivery area.
* Image packages can be customized to national an
site requirements.
* In concert with corporate brand promotion
strategies, merchandise display space can be built into the kiosk
design to increase sales of specified products.
* Kiosk design and graphics can be completely
customized to meet corporate requirements.
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2. Power Multi-Functional Kiosk
A retail kiosk system that enables consumers to receive a range of Internet and
Intranet-based products including digital photographs, information, governmental
services etc., for use by large corporations and government agencies.
Features:
* Revenue generation occurs from the sale of
digital photographs, the sale of advertising and from
service fees.
* Kiosks operate as a broadcast network that
delivers national and site-specific advertising and
marketing programs to any geographic delivery area.
* Image packages can be customized to national an
site requirements.
* In concert with corporate brand promotion
strategies, merchandise display space can be built into the
kiosk design to increase sales of specified products.
* Kiosk design and graphics can be completely
customized to meet corporate requirements.
* Customization of the kiosk system allows the
consumer product manufacturer and the retailer to
directly interact with the consumer thereby driving traffic and
increasing brand awareness.
* Customization of the kiosk system allows the
product manufacturer and the retailer to gather consumer
demographic information.
3. Power Financial Services Kiosk
A retail ATM kiosk system that, in addition to offering standard banking
transactions, provides the opportunity for additional revenue generation through
loyalty-based sports themed products such as digital photographs and sports
memorabilia.
Features:
Kiosk provides current ATM banking capabilities
* Revenue generation occurs from the sale of
digital photographs, advertising and sports memorabilia
products.
* Kiosks operate as a broadcast network that
delivers national and site-specific advertising and
marketing programs to any geographic delivery area.
* Image packages can be customized to national an
site requirements.
* In concert with corporate brand promotion
strategies, merchandise display space can be built into the
kiosk design to increase sales of specified products.
* Kiosk design and graphics can be completely
customized to meet corporate requirements.
* Customization of the kiosk system allows the
bank to gather consumer demographic information.
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Connectivity
The kiosk is networked through a standard phone line and internal modem to
transmit sales data such as number of transactions per day, royalty fee
calculations, ratios of one (1) image versus another, etc. This data will help
the Company track what is sold in each market segment and location and should
optimize profits for both the Company and its clients. This networked
communication system should prove beneficial in determining when preventive
maintenance should be performed, in reducing potential down time and in
increasing disk efficiency by providing on-line diagnostic programming. This
feature should decrease the need for sending technicians to the customer's site
for routine, simple problems.
Content in the kiosk can be changed automatically by simply downloading new
CDs supplied by the Company or by utilizing the enhanced data management and
networking capabilities currently being developed. That network capability will
allow content transfer over phone lines and enable the kiosk to create a central
database that can be used for direct marketing activities, such as e-commerce
and mail order merchandise sales. In this way, the Company intends to create
unique photographic image programs that will attract specific types of consumers
and encourage repeat transactions via a continuous refresh program. The Power
Photo Entertainment Kiosk transcends the conventional photo kiosk market by
using the latest hardware, connective and software technological advances.
Hardware
The outer shell of each kiosk, which dimensions are 40" X 40" by 90", can
be customized with graphics that will draw more consumer attention. More
specifically, the kiosk represents additional revenue generation possibilities,
by utilizing the 20" TV monitor or side and rear graphic panels as advertising
tools. Software image banks can be customized to match any business, any market
segment and any special event. These software image banks will be constantly
updated to keep pace with changing market trends and fads.
Each Power Kiosk is equipped with the following:
o A proprietary software operating system that is user-friendly and
flexible, enabling the Company to change the image programs frequently
and easily.
o Multiple licensed image packages and a unique personal portrait image package.
o Fully digitized sound, for easy to follow voice prompts and/or music.
o 20-inch Sony TV monitor that can be used for advertising and cross
promotions and when the kiosk is not in use.
o Up to four (4) Sony Dye Sublimation printers, providing multiple papers
formats allowing an 800-sheet loading capacity (200 sheets per printer).
o A Sony digital camera.
o A Micro Touch Screen computer monitor.
o Choice of Mars bill, coin, token, debit or credit card acceptors. o Pentium II
based computer system. o Intel-Based computer system o All control electronics.
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The Future
In terms of future trends, kiosks tied to Intranet and Internet technology
is a burgeoning field in which photo kiosks are likely to make extensive use of
these bi-directional communications systems. Consumers are already sending
high-quality photo images over the Internet as a result of scanners, digital
cameras and camera centers that deliver photo images. This connective technology
is growing and photo kiosks are seen as just another extension of this trend. In
fact, this technology may actually increase the opportunities for kiosks as more
and more recipients of e-cards have the capability to receive them and have
familiarity with the technology. The photo kiosk, especially when combined with
sports, theatrical or vacation experience, can encourage sharing during such
spontaneous occasions.
Business Strategy
Any discussion of business strategy contained herein is contingent upon the
ability of the Company to continue as a going concern.
The preferred approach is for Power Kiosks to own the kiosks in the
marketplace and to work with revenue sharing programs on both picture income and
advertising income. Company ownership of the kiosks will facilitate enormously
the placement process and in particular, make the management of the advertising
component of the kiosk network simpler.
Power Kiosks' marketing focus is market segment-specific and directed at
non-conventional kiosk markets. The conventional kiosk markets, mainly malls and
movie theaters, are also important market segments that will also be targeted.
Each kiosk will be placed as a customized and turnkey system. The kiosk can be
custom-designed with graphics and licensed image packages that meet the needs of
individual markets.
Management has found that the kiosk industry is in a strong growth position
as the business is relatively new to the North American market. Vending and
photography sales are extremely large, and growing. The number of Internet
kiosks in the U.S. market, for example, is forecast to increase greatly in the
next five (5) years, while revenues are projected to increase by slightly less
(2.5 times) as the market becomes more competitive. This market had 5,100
Internet-based kiosks in 1993, management expects the market to have 445,000
different types of kiosk in 2003.
The overall market strategy has evolved significantly over the past few
years. The Company has determined that in order to control the technology, it is
imperative to own the software and the kiosk units and work with a revenue
sharing program on both the photo income as well as the advertising revenue.
Ownership of the units by the Company should allow the Company to facilitate the
placement process in large retail and restaurant chains and in particular, make
the managing of the advertising component of the kiosk network simpler. With the
appropriate financing in place, this economic model of combined picture and
advertising revenues can be in place in a relatively short time.
Power Kiosk is entering the industry at a time when converging technologies
may enable the Company to quickly establish a leadership position in the
marketplace:
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* Advances in digital, photographic technology now enable software
programs, such as that developed by the Company to create high quality
photo images without the use of film.
* Computer chips have increased the abilities of computer, printers and
cameras, and new software authorizing equipment such as Java and
WebMajic complement HTML in multimedia programming, thereby facilitating
connectivity in various ways.
* Kiosks can now be used for a broad range of interactive uses other
than just photography.
Power Kiosk will be placed as a customized and turnkey system. The kiosk
can be custom-designed with graphics and licensed image packages to meet the
needs of individual markets.
The Company intents to target what it believes is the primary markets for
the placement of the kiosks. These primary markets are corporate,
multiple-location businesses, such as fast food restaurants, colleges and
universities, consumer retail and merchandise companies, movie and sports-based
business, themed environments, bookstores, shopping malls and sporting venues.
These target locations for kiosk placement offer large opportunities for both
picture sales and the sale of advertising.
Status of Publicly Announced New Products and Services
The Stand Alone Interactive Power Entertainment Kiosk is a fully
functional, non-networked, digital photo entertainment kiosk that is used
primarily at promotional events such as NASCAR races, trade shows, corporate
events and individual business locations.
The Power Entertainment Kiosk, is a networked, fully functional, networked,
digital photo entertainment kiosk which is used primarily by large corporations
and multi-location, national operations.
The Power Multi-Functional Kiosk is a retail kiosk system that enables
consumers to receive a range of Internet and Intranet-based products including
digital photographs, information, governmental services, etc., and is used
primarily for large corporations and government agencies.
The Power Financial Services Kiosk is a retail ATM kiosk system that, in
addition to offering standard banking transactions, sells sports-based themed
products such as digital photographs and memorabilia.
Competition
The Company faces competition from large, well-established companies with
considerably greater financial, marketing, sales, technical resources as well as
greater name recognition than the Company. Additionally, many of the Company's
present and potential competitors have research and development capabilities
that may allow such competitors to develop new and improved products which may
compete with the Company's products. The Company's products could be rendered
obsolete or made uneconomical by the development of new products, technological
advances affecting the cost of production, or marketing or pricing actions by
one or more of the Company's competitors. The Company's business, financial
condition or results of operations could be materially adversely affected by one
or more of such developments. The Company expects that more competitors will
enter
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the photo kiosks market, resulting in even greater competition for the Company.
There can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competition will not have a
material adverse effect on the Company's business, financial condition or
results of operations.
The Company competes with many other companies which utilize photo kiosk
services. Competition is intense within the entertainment kiosk industry, and
the Company must compete with well established companies as well as independent
companies like itself. Some of these well established companies, such as Global
Media, which has the one of the largest virtual magazine entertainment kioks,
are therefore able to offer their customers an interactive, large network of
media, news and music on the internet, which the Company is unable to provide at
this time. Another well established competitor, Harvest Moon, is a full service
design and production studio for interactive kiosks, and websites for the themed
entertainment industry. These and other such competitors have a broader spectrum
of themed entertainment choices within their products and services, as well as
internet service for their customers. Kodak's Entertainment Imaging division,
Themed Entertainment, offers a self-serve photography kiosk consumers can use to
output sticker-backed images of themselves combined with themed content. These
competitors have a much larger name recognition than the Company, and have its
entertainment photo kiosk machines broadly distributed in malls, theme parks and
amusement parks.
Sources and Availability of Raw Materials
Power Kiosk's products are manufactured from readily available components
including electronics, digital cameras, computers and computer chips, modems and
telecommunications hardware, printers and ink, monitors, various size labels,
and bill, coin and debit and credit card acceptors. The Company believes that
all raw materials necessary to produce Power Kiosk's products are readily
available from numerous sources.
Dependence on Major Customers
Presently, the Company has few customers. The Company will depend heavily
upon its existing contracts, such as that with Universal Studios, Ohio State
University, Mattel Canada, Inc. and Sybase. The Company will rely heavily on its
quality of technology, products and services, in providing its customers with
turnkey service and being a full service provider to customers. Should Power
Kiosks obtain additional customers in the future, it is likely to depend heavily
on their business, as it is likely to represent all or significantly all of the
Company's source of income. If the Company is unable to attain this customer
base, this may have a material adverse effect on the Company.
Patents, Copyrights and Trademarks
The Company intends to protect its original intellectual property with
patents, copyrights and/or trademarks as appropriate. To date, the Company has
no registered patents, copyrights or trademarks.
Governmental Regulation
There are currently no governmental regulations in any country that the
Company must conform to.
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Effect of Probable Governmental Regulation on the Business
The Company may be subject to regulation if the Federal government enacts
controls in which case the Company will be required to comply with new and
emerging laws, the interpretation of which will be uncertain and unclear.
However, future enactment of governmental legislation which would impact the
Company's business is not expected.
However, in foreign countries, the Company's products may be impacted by
legislation that applies to photo kiosk products. The Company expects that its
products will meet or exceed any standard imposed upon it.
Currently there is no government regulation of the Company's business nor
of the Company's products. However, new laws are emerging which regulate
commerce over the internet and the way data and information may be transmitted
over the Internet. Should the Company engage in activities involving the
Internet in the future, it may be subject to these laws and/or regulations.
As the Company's products and services are available over the Internet in
multiple states and foreign countries, these jurisdictions may claim that the
Company is required to qualify to do business as a foreign corporation in each
such state and foreign country. New legislation or the application of laws and
regulations from jurisdictions in this area could have a detrimental effect upon
the Company's business.
A governmental body could impose sales and other taxes on the provision of
the Company's products and services, which could increase the costs of doing
business. A number of state and local government officials have asserted the
right or indicated a willingness to impose taxes on Internet-related services
and commerce, including sales, use and access taxes; however, no such laws have
become effective to date. The Company cannot accurately predict whether the
imposition of any such taxes would materially increase its costs of doing
business or limit the services which it provides, since it may be possible to
pass on some of these costs to the consumer and continue to remain competitive.
If, as the law in this area develops, the Company becomes liable for
information carried on, stored on, or disseminated through its website, it may
be necessary for the Company to take steps to reduce its exposure to this type
of liability through alterations in its equipment, insurance or other methods.
This may require the Company to spend significant amounts of money for new
equipment or premiums and may also require it to discontinue offering certain of
its products or services.
Due to the increasing popularity and use of the Internet, it is possible
that additional laws and regulations may be adopted with respect to the
Internet, covering issues such as content, privacy, access to adult content by
minors, pricing, bulk e-mail (spam), encryption standards, consumer protection,
electronic commerce, taxation, copyright infringement and other intellectual
property issues. L.L. Brown cannot predict the impact, if any, that future
regulatory changes or developments may have on the Company's business, financial
condition, or results of operation.
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Cost of Research and Development
For fiscal year 1999 the Company expended One Hundred Forty One Thousand
Two Hundred Ninety Nine dollars ($141,299) and for fiscal year 2000, the Company
expended Four Hundred Thirty Six Thousand Four Hundred Seventy One dollars
($436,471) on research and development efforts. At the current time, the costs
associates with research and development are bourne primarily by the Company,
and secondarily from additional debt financing. The costs associated with
research and development are currently not bourne directly by the customer,
however there is no guarantee that such costs will not be bourne by customers in
the future and, at the current time, the Company does not know the extent to
which such costs will be bourne by the customer, if at all.
Cost and Effects of Compliance with Environmental Laws
The Company's business is not subject to regulation under the state and
Federal laws regarding environmental protection and hazardous substances
control, including the Occupational Safety and Health Act, the Environmental
Protection Act, and Toxic Substance Control Act. The Company is unaware of any
bills currently pending in Congress which could change the application of such
laws so that they would affect the Company.
Employees and Consultants
At October 31, 2000, the Company employed eight (8) persons. None of these
employees are represented by a labor union for purposes of collective
bargaining. The Company considers its relations with its employees to be
excellent. The Company plans to employ additional personnel as needed upon
product rollout to accommodate its needs.
In February 2000, the Company, PPK and the Holders consummated the
Agreement. Pursuant to the Agreement, the Holders tendered to the Company all
issued and outstanding shares of PPK in exchange for 3,000,000 shares (only
2,995,539 shares were actually issued due to rounding) of Common Stock of the
Company. Of the 2,995,539 shares issued, Ronald Terry Cooke is the beneficial
owner of 1,359,846 shares and Allan Turowetz is the beneficial owner of
1,103,146 shares. The reorganization was accounted for as a reverse acquisition.
For such offering, the Company relied upon the 506 Exemption, Section
451.802(19) of the Michigan Code and no state exemption for the shares issued to
Bahamian or Canadian residents.
Simultaneously with the closing of the Agreement, the then officer and
director of the Company tendered his resignation in accordance with the terms of
the Agreement and tendered his shares (13,900,000) for cancellation. 1,390,000
additional shares were also cancelled in connection with the Agreement. Ronald
Terry Cooke and Allan Turowetz were elected to serve on the Board. The Board
subsequently appointed Ronald Terry Cooke as Chairman of the Board and President
and Allan Turowetz as the Vice-President of the Company. The Company also
announced approval of an amendment to its Articles of Incorporation changing the
name of the Company from Alternate Achievements, Inc. to Power Kiosks, Inc. See
Part I, Item 6. "Management's Discussion and Analysis or Plan of Operation -
Stockholder's Equity; Part III, Item 10. "Executive Compensation - Employee
Contracts and Agreements"; Part III, Item 11. "Security Ownership of Certain
Beneficial Owners and Management"; and Part III, Item 12. "Certain Relationships
and Related Transactions".
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In July 2000, the Company entered into an employment agreement with Ronald
Terry Cooke, to employ him as President and CEO of the Company. The term of the
agreement is for a period of five (5) years, beginning July 1, 2000. Mr. Cooke's
initial basic compensation is One Hundred and Twenty Thousand dollars ($120,000)
per year. Such salary will be reviewed as appropriate by the Board of Directors
of the Company and may be increased in the Board's sole discretion based upon
performance. Mr. Cooke received a signing bonus of two hundred twenty five
thousand (225,000) restricted shares of the Company's Common Stock, as well as a
Seventy Five Thousand dollar ($75,000) bonus. Under the terms of the employment
agreement, Mr. Cooke has the option to purchase up to a total of one hundred
thousand (100,000) shares of the Company's restricted Common Stock annually,
which options are exercisable at a price of $1.00 per share. The stock options
will begin to vest at the end of the employment year commencing on July 1, 2000
and each employment year thereafter. Mr. Cooke will have five (5) years after
the shares are vested to exercise the options. See Part III, Item 10. "Executive
Compensation - Employee Contracts and Agreements"; Part III, Item 11. "Security
Ownership of Certain Beneficial Owners and Management"; and Part III, Item 12.
"Certain Relationships and Related Transactions".
In July 2000, the Company entered into an employment agreement with Allan
Turowetz, to employ him as Vice President of the Company. The term of the
agreement is for a period of five (5) years, beginning July 2000. Mr. Turowetz's
initial basic compensation is One Hundred Thousand dollars ($100,000) per year.
Such salary will be reviewed as appropriate by the Board and may be increased in
the Board's sole discretion based upon performance. Mr. Turowetz received a
signing bonus of one hundred and five thousand (105,000) shares of the Company's
Common Stock, which was registered pursuant to a Registration Statement filed on
Form S-8 in August 2000, as well as a Seventy Five Thousand dollar ($75,000)
bonus. Under the terms of the employment agreement, Mr. Turowetz has the option
to purchase up to a total of 100,000 shares of the Company's restricted Common
Stock annually, which options are exercisable at a price of $1.00 per share. The
stock options will begin to vest at the end of the employment year commencing on
July 1, 2000 and each employment year thereafter. Mr. Turowetz will have five
(5) years after the shares are vested to exercise the options. See Part III,
Item 10. "Executive Compensation - Employee Contracts and Agreements"; Part III,
Item 11. "Security Ownership of Certain Beneficial Owners and Management"; and
Part III, Item 12. "Certain Relationships and Related Transactions".
In August 2000, the Company filed a Registration Statement on Form S-8 for
the purpose of registering the Company's Year 2000 Consultant Stock Compensation
Plan. Pursuant to such plan, the Company issued 105,000 shares of its Common
Stock to Allan Turowetz, the Company's current Vice-President and Director. See
Part III, Item 10. "Executive Compensation - Employee Contracts and Agreements";
Part III, Item 11. "Security Ownership of Certain Beneficial Owners and
Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
In August 2000, the Company issued 120,000 shares of its restricted Common
Stock to Team Power Enterprises Incorporated, which is beneficially owned by
both Ronald Terry Cooke, the Company's current President and Chairman and Allan
Turowetz, the Company's current Vice-President and Director as full and final
repayment of a loan by TPE to PPK. For such offering, the Company relied upon
the 506 Exemption and no state exemption, as TPE is located in Canada. See Part
III, Item 10. "Executive Compensation - Employee Contracts and Agreements"; Part
III, Item 11. "Security Ownership of Certain Beneficial Owners and Management";
and Part III, Item 12. "Certain Relationships and Related Transactions".
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In September 2000, the Company's Board of Directors increased the number of
director positions from two (2) to four (4) and appointed June Nichols-Sweeney
and Jean Beliveau to fill the vacancies created thereby until the next meeting
of the shareholders. The Company approved the issuance of 100,000 and 200,000
shares of its Common Stock to them respectively, although the shares were not
actually issued until November 2000. The Company also granted the new directors
warrants to purchase an additional 100,000 shares each, exercisable at a price
of $1.00 per share for a period of three (3) years. Ms. Sweeney may exercise the
right to purchase a maximum of 25,000 shares every quarter, whereas Mr. Beliveau
has the same right beginning May 1, 2001. For such offering, the Company relied
on the 506 Exemption and Section 10-5-9 of the Georgia Code. No state exemption
was required for the issuance to Jean Beliveau, as he is a Canadian resident.
See Part III, Item 10. "Executive Compensation - Employee Contracts and
Agreements"; Part III, Item 11. "Security Ownership of Certain Beneficial Owners
and Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
In November 2000, the Company filed a Registration Statement on Form S-8
for its Year 2000 Supplemental Employee/Consultant Stock Compensation Plan.
Since that time, 60,000 shares of the Company's Common Stock have been issued
each to Ronald Terry Cooke, the Company's current President and Chairman and to
Allan Turowetz, the Company's current Vice-President and Director. 580,000
shares registered pursuant to such Registration Statement have yet to be issued.
See Part III, Item 10. "Executive Compensation - Employee Contracts and
Agreements"; Part III, Item 11. "Security Ownership of Certain Beneficial Owners
and Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
Item 2. Description of Property
Its executive offices are presently located at 181 Whitehall Drive,
Markham, Ontario, Canada L3R 9T1. Its telephone number is (905) 948-9600 and its
facsimile number is (905) 948-8377.
In June 1998, Team Power Enterprises, Inc., as tenant, signed a Lease
Agreement with Bruce N. Huntley Contracting Limited, as landlord. Team Power
Enterprises, Inc. is beneficially owned by Ronald Terry Cooke, the Company's
President and Chairman, and Allan Turowetz, the Company's Vice President and
Director. The lease is for the property located at 181 Whitehall Drive, Unit 1,
in Markham, Ontario, which serves as the Company's headquarters. The lease term
began July 1998 and is for a period of five (5) years. The rents to be paid are
as follows: From July 1, 1998 through June 30, 1999 the rental amount is
$9,235.41 monthly; from July 1, 1999 through June 30, 2000 the rental amount is
$10,075 monthly; and from July 1, 2001 through June 30, 2003 the rental amount
is $10,914.58 monthly. See Part III, Item 12. "Certain Relationships and Related
Transactions".
The Company owns no real property and its personal property consists of
furniture, fixtures and equipment.
Item 3. Legal Proceedings
No legal proceedings have been initiated either by or against the Company
to date.
Item 4. Submission of Matters to a Vote of Security Holders
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No matter was submitted to a vote of the Company's shareholders, through
the solicitation of proxies or otherwise from the Company's inception to the
close of the 2000 fiscal year ended July 31, 2000, covered by this report.
Item 5. Market for Common Equity and Related Stockholder Matters.
a) Market Information.
The Common Stock of the Company currently is quoted on the Over the Counter
Bulletin Board and has been since the National Association of Securities Dealers
approved quotation of the Company's Common Stock on July 20, 2000. The Company
trades under the symbol "PWKK." The high and low bid information for each
quarter since July 20, 2000 to the present are as follows:
Quarter High Bid Low Bid
------------------------ ----------- -----------
July 1 - Sept. 30, 2000 7.37 5.45
Oct. 1 - Dec. 31, 2000 7.00 3.87
Please note that over-the-counter market quotations have been provided
herein. The quotations reflect inter- dealer prices, without retail markup,
mark-down or commission and may not represent actual transactions.
In February 2000, the Company effected a forward split of its Common Stock
at a rate of 2.78 to 1, for holders of record on February 22, 2000, with
distribution effective March 1, 2000.
(b) Holders.
As of November 7, 2000 the Company had sixty six (66) shareholders of
record of its 6,088,483 outstanding shares of Common Stock, 4,698,483 of which
are restricted Rule 144 shares and 1,390,000 of which are free- trading. Of the
Rule 144 shares, no shares have been held by affiliates of the Company for more
than one (1) year.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of Operation
The Company was originally incorporated as Global Corporate Quality, Inc.
on September 9, 1994. The Company subsequently changed its name to Alternate
Achievements, Inc. on October 1, 1999. Originally, the Company was formed to
engage in the marketing and distribution of training programs and seminars to
corporate level executives on various management issues. The Company failed in
its attempt to implement its initial business plan and during September 1995
abandoned its efforts. The Company had no operations for the period prior to
September 1995. The Company was inactive and there were no transactions from
September 1995 to February
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2000, when the Company, Power Photo Enterprises, Inc. n/k/a Power Photo Kiosks,
a Canadian corporation and the individual holders of all of the outstanding
capital stock of PPK consummated a reverse acquisition pursuant to a share
exchange agreement.
Currently, the Company is a provider of a network-based, digital imaging
kiosk system that delivers a range of retail consumer products. The kiosk system
is enabled by leading-edge technology in the areas of digital imaging software,
delivery hardware and e-commerce network capabilities.
It is the Company's intention to (i) to market its networked and standalone
kiosk products; (ii) to research and further develop its new products; and (iii)
to continue to improve Power Kiosk products and services.
The Company was still in the development stage until February 2000 when the
share exchange took place between Power Photo Enterprises and the Company and is
still emerging from that stage. During the year 2000, the Company generated
revenues in the amount of $0.00. Since inception (May 13, 1998) through July 31,
2000, the Company has generated cumulative losses of approximately $7,494,476.
Due to the Company's limited operating history and limited resources, among
other factors, there can be no assurance that profitability or significant
revenues on a quarterly or annual basis will occur in the future.
Since entering into negotiations and contracts with its first few
customers, the Company has begun to make preparations for a period of growth,
which may require it to significantly increase the scale of its operations. This
increase will include the hiring of additional personnel in all functional areas
and will result in significantly higher operating expenses. The increase in
operating expenses is expected to be matched by a concurrent increase in
revenues. However, the Company's net loss may continue even if revenues increase
and operating expenses may still continue to increase. Expansion of the
Company's operations may cause a significant strain on the Company's management,
financial and other resources. The Company's ability to manage recent and any
possible future growth, should it occur, will depend upon a significant
expansion of its accounting and other internal management systems and the
implementation and subsequent improvement of a variety of systems, procedures
and controls. There can be no assurance that significant problems in these areas
will not occur. Any failure to expand these areas and implement and improve such
systems, procedures and controls in an efficient manner at a pace consistent
with the Company's business could have a material adverse effect on the
Company's business, financial condition and results of operations. As a result
of such expected expansion and the anticipated increase in its operating
expenses, as well as the difficulty in forecasting revenue levels, the Company
expects to continue to experience significant fluctuations in its revenues,
costs and gross margins, and therefore its results of operations.
Results of Operations - Full Fiscal Years - July 31, 1999 and July 31, 2000
Revenues
Revenues for the twelve (12) month period ended July 31, 2000 were $0.00
and for the twelve month period ended July 31, 1999 were $0.00.
22
<PAGE>
Operating Expenses
Operating Expenses for the twelve (12) months period ended July 31, 2000
were $4,265,889 versus $943,917 for the twelve (12) months period ended July 31,
1999. Net loss was $6,230,796 and $1,234,708 respectively.
Assets and Liabilities
Total assets were $597,327 as of July 31, 2000, and $481,551 as of July 31,
1999. As of July 31, 1999, assets consisted primarily of inventories. As of July
31, 2000, assets consisted primarily of property and equipment. Liabilities were
$3,233,009 and $972,926 as of July 31, 2000 and July 31, 1999 respectively. As
of July 31, 2000, liabilities consisted primarily of a loan payable.
Stockholders' Equity
Stockholders' equity was ($2,635,682) as of July 31, 2000 and ($491,375) as
of July 31, 1999. The Company had 5,375,084 and 1,390,000 shares of Common Stock
issued and outstanding at July 31, 2000 and 1999, respectively.
In February 2000, the Company, PPK and the Holders consummated the
Agreement. Pursuant to the Agreement, the Holders tendered to the Company all
issued and outstanding shares of PPK in exchange for 3,000,000 shares (only
2,995,539 shares were actually issued due to rounding) of Common Stock of the
Company. Of the 2,995,539 shares issued, Ronald Terry Cooke is the beneficial
owner of 1,359,846 shares and Allan Turowetz is the beneficial owner of
1,103,146 shares. The reorganization was accounted for as a reverse acquisition.
For such offering, the Company relied upon the 506 Exemption, Section
451.802(19) of the Michigan Code and no state exemption for the shares issued to
Bahamian or Canadian residents.
Simultaneously with the closing of the Agreement, the then officer and
director of the Company tendered his resignation in accordance with the terms of
the Agreement and tendered his shares (13,900,000) for cancellation. 1,390,000
additional shares were also cancelled in connection with the Agreement. Ronald
Terry Cooke and Allan Turowetz were elected to serve on the Board. The Board
subsequently appointed Ronald Terry Cooke as Chairman of the Board and President
and Allan Turowetz as the Vice-President of the Company. The Company also
announced approval of an amendment to its Articles of Incorporation changing the
name of the Company from Alternate Achievements, Inc. to Power Kiosks, Inc. See
Part III, Item 10. "Executive Compensation - Employee Contracts and Agreements";
Part III, Item 11. "Security Ownership of Certain Beneficial Owners and
Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
Financial Condition, Liquidity and Capital Resources
At July 31, 2000 the Company had cash of $0.00 as compared to $0.00 at July
31, 1999.
In June 2000, the Company executed a promissory note in favor of TK in the
principal amount of two hundred fifty thousand dollars ($250,000). The loan had
a maturity date of August 31, 2000. In November 2000, both parties orally agreed
to convert all outstanding principal and interest into 250,000 shares of the
restricted Common Stock of the Company, although actual conversion has yet to
take place and the agreement to convert has yet to be
23
<PAGE>
memorialized. For such offering, the Company relied upon the 506 Exemption. No
state exemption was necessary because the investor is a foreign entity located
in Canada. See Part III, Item 11. "Security Ownership of Certain Beneficial
Owners and Management"; and Part III, Item 12. "Certain Relationships and
Related Transactions".
In October 2000, the Company executed a promissory note in favor of TK in
the principal amount of $110,000. The Company actually received $100,000, as
$10,000 was deducted as an agent fee. The note bears interest at a rate of ten
percent (10%) per annum and is for a term of one (1) year. For such offering,
the Company relied upon the 506 Exemption. No state exemption was necessary
because the investor is a foreign entity located in Canada. See Part III, Item
11. "Security Ownership of Certain Beneficial Owners and Management"; and Part
III, Item 12. "Certain Relationships and Related Transactions".
The Company may raise additional capital through private and/or public
sales of securities in the future but has no definite commitments at this time.
Forward-Looking Statements
This Form 10-KSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-KSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), demand
for the Company's products and services, expansion and growth of the Company's
business and operations, and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
or developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-KSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations.
Item 7. Financial Statements
The Company's financial statements have been examined to the extent
indicated in their reports by KPMG, LLP and have been prepared in accordance
with generally accepted accounting principles and pursuant to Regulation S-B as
promulgated by the Securities and Exchange Commission and are included herein,
on Page F-1 hereof in response to Part F/S of this Form 10-KSB.
24
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders of Power Kiosks, Inc.
We have audited the accompanying consolidated balance sheets of Power Kiosks,
Inc. (formerly Alternate Achievements, Inc.) (A Development Stage Enterprise) as
at July 31, 1999 and 2000 and the related statements of operations,
comprehensive loss, stockholders' deficiency and cash flows for the period from
May 13, 1998 (inception) to July 31, 1998 and years ended July 31, 1999 and
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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, these consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as at July 31, 1999 and 2000 and the results of its operations and its cash
flows for the period and years then ended in conformity with generally accepted
accounting principles in the United States.
Under date of May 3, 2000, we expressed an unqualified opinion on the Company's
consolidated financial statements as at July 31, 1999 and for the year then
ended. As discussed in note 2, subsequent to May 3, 2000, material adjustments
have been reflected in the attached revised consolidated financial statements as
at July 31, 1999 and for the year then ended. Because of the material effect of
these adjustments, we hereby withdraw our report dated May 3, 2000.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ KPMG LLP
Chartered Accountants
Toronto, Canada
September 29, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
Power Kiosks, Inc.
(FORMERLY ALTERNATE ACHIEVEMENTS, INC.)
(A Development Stage Enterprise)
Consolidated Balance Sheets
(in U.S. dollars)
July 31, 1999 and 2000
-------------------------------------------------------- -------------------- ----------------
1999 2000
-------------------------------------------------------- -------------------- ----------------
(Restated)
Assets
<S> <C> <C>
Current assets:
Investment tax credits receivable $ 33,194 $ 33,625
Inventories (note 5) 342,944 40,965
Miscellaneous receivable 26,347 1,528
Prepaid expenses 13,450 42,190
Deferred financing costs 58,753 -
-------------------------------------------------------- -------------------- ----------------
Total current assets 474,688 118,308
Property and equipment (note 6) 6,863 479,019
-------------------------------------------------------- -------------------- ----------------
Total assets $ 481,551 $ 597,327
-------------------------------------------------------- -------------------- ----------------
Liabilities and Stockholders' Deficiency
Current liabilities:
Bank indebtedness $ 20,451 $ 46,576
Accounts payable 54,638 120,382
Accrued liabilities 67,741 351,097
Accrued salaries payable - 148,890
Accrued financing costs payable - 1,012,500
Loans payable (note 7) 663,878 1,377,942
Due to shareholders (note 8) 166,218 135,272
Convertible notes (note 9) - 40,350
-------------------------------------------------------- -------------------- ----------------
Total current liabilities 972,926 3,233,009
Stockholders' deficiency:
Capital stock (note 10):
Authorized:
50,000,000 $0.0001 par value common shares
(1999 - 10,000,000)
10,000,000 preferred shares (1999 - nil)
Issued and outstanding:
5,375,084 common shares (1999 - 1,390,000) 139 538
Nil preferred shares (1999 - nil) - -
Contributed surplus 793,076 9,234,291
Additional paid-in capital -
Deferred stock-based compensation - (4,388,125)
Accumulated other comprehensive income (loss) (20,910) 12,090
Deficit accumulated during the development stage (1,263,680) (7,494,476)
-------------------------------------------------------- -------------------- ----------------
Total stockholders' deficiency (491,375) (2,635,682)
Going concern (note 1(b))
Commitments (note 16)
Subsequent events (note 17)
-------------------------------------------------------- -------------------- ----------------
Total liabilities and stockholders' deficiency $ 481,551 $ 597,327
-------------------------------------------------------- -------------------- ----------------
</TABLE>
See accompanying notes to consolidated
financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
Power Kiosks, Inc.
(FORMERLY ALTERNATE ACHIEVEMENTS, INC.)
(A Development Stage Enterprise)
Consolidated Statements of Operations
(in U.S. dollars)
Period from May 13, 1998 (inception) to July 31, 1998 and years ended July 31,
1999 and 2000
--------------------------------------------------------- -------------------------------------------
Period from Period from
May 13, 1998 May 13, 1998
(inception) to Years ended July 31, (inception) to
July 31, 1998 1999 2000 July 31, 2000
----------------------------------------- --------------- ---------- ------------- ---------------
(Restated)
<S> <C> <C> <C> <C>
Expenses:
Sales and marketing $ 3,436 $ 323,017 $ 595,443 $ 921,896
Research and development 25,536 141,299 436,471 603,306
General and administrative - 479,601 3,233,975 3,713,576
----------------------------------------- --------------- ----------- ------------- ---------------
Loss from operations 28,972 943,917 4,265,889 5,238,778
Financing costs - - 1,793,165 1,793,165
Interest expense - 290,791 171,742 462,533
----------------------------------------- --------------- ----------- ------------- ---------------
Loss before provision for income taxes 28,972 1,234,708 6,230,796 7,494,476
Provision for income taxes - - - -
----------------------------------------- --------------- ----------- ------------- ---------------
Loss for the period $ 28,972 $1,234,708 $ 6,230,796 $ 7,494,476
----------------------------------------- --------------- ----------- ------------- ---------------
Basic and diluted loss
per common share $ - $ 0.41 $ 1.73
----------------------------------------- --------------- ----------- ------------- ---------------
Shares used in computing basic and
diluted loss per common share 2,995,000 2,995,000 3,595,000
----------------------------------------- --------------- ----------- ------------- ---------------
</TABLE>
See accompanying notes to consolidated
financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Power Kiosks, Inc.
(FORMERLY ALTERNATE ACHIEVEMENTS, INC.)
(A Development Stage Enterprise)
Consolidated Statements of Comprehensive Loss
(in U.S. dollars)
Period from May 13, 1998 (inception) to July 31, 1998 and years ended July 31,
1999 and 2000
--------------------------------------------------------------------------------- ---------------
Period from Period from
May 13, 1998 May 13, 1998
(inception) to Years ended July 31, (inception) to
July 31, 1998 1999 2000 July 31, 2000
------------------------------------- ------------- -------------------------- ---------------
(Restated)
<S> <C> <C> <C> <C>
Loss for the period $ (28,972) $ (1,234,708) $(6,230,796) $ (7,494,476)
Other comprehensive income (loss):
Currency translation adjustment 880 (21,790) 33,000 12,090
------------------------------------- ------------- --------------------------- ---------------
Comprehensive loss $ (28,092) $ (1,256,498) $(6,197,796) $ (7,482,386)
------------------------------------- ------------- --------------------------- ---------------
</TABLE>
See accompanying notes to consolidated
financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Power Kiosks, Inc.
(FORMERLY ALTERNATE ACHIEVEMENTS, INC.)
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Deficiency
(in U.S. dollars)
Period from May 13, 1998 (inception) to July 31, 1998 and years ended July 31,
1999 and 2000
-------------------------------------- --------------------------------------------------------------------------------------------
Accumulated Deficit
other accumulated
Deferred comprehensive during the Total
Common shares stock-based Contributed income development stockholders'
Number Amount compensation surplus (loss) stage deficiency
-------------------------------------- --------- ------- ------------ ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issued to founders,
May 13, 1998 (inception) 1,024,450 $ 102 $ - $ (36) $ - $ - $ 66
Currency translation - - - - 880 - 880
Loss for the period - - - - - (28,972) (28,972)
-------------------------------------- --------- ------- ------------ ------------ ----------- ----------- --------------
Balances, July 31, 1998 1,024,450 102 - (36) 880 (28,972) (28,026)
Deferred stock-based
compensation (note 10(b))
(restated) 245,550 25 (491,434) 491,409 - - -
Shares issued in exchange
for financing services (note 10(c))
(restated) 120,000 12 - 301,703 - - 301,715
Amortization of deferred
stock-based compensation
(restated) - - 491,434 - - - 491,434
Currency translation
adjustment (restated) - - - - (21,790) - (21,790)
Loss for the period (restated) - - - - - (1,234,708) (1,234,708)
-------------------------------------- --------- ------- ------------ ------------ ----------- ----------- -------------
Balances, July 31, 1999 (restated) 1,390,000 139 - 793,076 (20,910) (1,263,680) (491,375)
Shares issued pursuant to
reverse acquisition (note 3) 2,995,539 300 - (300) - - -
Contributed surplus
(note 10(d)) - - - 194,849 - - 194,849
Deferred stock-based
compensation
(note 10(f), (g) and (h)) 450,000 45 (7,460,236) 7,475,918 - - 15,727
Shares issued for cash,
net of issue costs 539,545 54 - 770,748 - - 770,802
Amortization of deferred
stock-based compensation - - 3,072,111 - - - 3,072,111
Currency translation adjustment - - - - 33,000 - 33,000
Loss for the period - - - - - (6,230,796) (6,230,796)
-------------------------------------- --------- ------- ------------ ------------ ----------- ------------ -------------
Balances, July 31, 2000 5,375,084 $ 538 $ (4,388,125) $ 9,234,291 $ 12,090 $(7,494,476) $ (2,635,682)
-------------------------------------- --------- ------- ------------ ------------ ----------- ------------ -------------
</TABLE>
See accompanying notes to consolidated
financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Power Kiosks, Inc.
(FORMERLY ALTERNATE ACHIEVEMENTS, INC.)
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
(in U.S. dollars)
Period from May 13, 1998 (inception) to July 31, 1998 and years ended July 31,
1999 and 2000
------------------------------------------- -----------------------------------------------------------------
Period from Period from
May 13, 1998 May 13, 1998
(inception) to Years ended July 31, (inception) to
July 31, 1998 1999 2000 July 31, 2000
------------------------------------------- -------------- ----------------------------- ------------------
(Restated)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Loss for the period $ (28,972) $ (1,234,708) $ (6,230,796) $ (7,494,476)
Items not affecting cash:
Amortization - 308 57,481 57,789
Accretion of interest on loan payable - 234,513 - 234,513
Stock-based compensation expense - 479,601 3,388,007 3,867,608
Accrued interest on loan payable - - 192,934 192,934
Change in operating assets and liabilities:
Accounts receivable - - 26,961 26,961
Investment tax credits receivable - (33,105) - (33,105)
Inventories - (342,020) 18,944 (323,076)
Miscellaneous receivable - (26,276) - (26,276)
Prepaid expenses (68) (13,347) (30,401) (43,816)
Accounts payable - 54,491 65,698 120,189
Accrued liabilities - 67,559 285,353 352,912
Accrued salaries - - 150,408 150,408
Accrued finance costs payable 1,022,817 1,022,817
Due to shareholders 28,971 137,651 (17,527) 149,095
---------------------------------------------- -------------- --------------- ------------- -----------------
Net cash flows used in operating activities (69) (675,333) (1,070,121) (1,745,523)
Cash flows from financing activities:
Issuance of common shares, net of issue costs 69 - 770,748 770,817
Increase (decrease) in bank indebtedness - 20,451 (26,125) (5,674)
Loan proceeds - 678,426 519,701 1,198,127
Issuance of convertible notes - - 40,761 40,761
---------------------------------------------- -------------- --------------- ------------- ---------------
Cash flows from financing activities 69 698,877 1,305,085 2,004,031
Cash flows from investing activities:
Purchase of property and equipment - (7,153) (243,749) (250,902)
---------------------------------------------- -------------- --------------- -------------- ---------------
Cash flows used in investing activities - (7,153) (243,749) (250,902)
Effect of currency translation of cash balances - (16,391) 8,785 (7,606)
---------------------------------------------- -------------- --------------- -------------- ---------------
Increase in cash - - - -
Cash, beginning of period - - - -
---------------------------------------------- -------------- --------------- -------------- --------------
Cash, end of period $ - $ - $ - $ -
---------------------------------------------- -------------- --------------- -------------- --------------
Supplemental cash flow information:
Interest paid $ - $ - $ - $ -
Income taxes paid - - - -
---------------------------------------------- -------------- --------------- -------------- --------------
</TABLE>
Supplemental cash flow disclosures (note 15):
See accompanying notes to consolidated
financial statements.
F-6
<PAGE>
Power Kiosks, Inc.
(FORMERLY ALTERNATE ACHIEVEMENTS, INC.)
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
(in U.S. dollars)
Period from May 13, 1998 (inception) to July 31, 1998 and years ended July 31,
1999 and 2000
1. General:
(a) The Company:
Power Kiosks, Inc. (formerly Alternate Achievements, Inc.) (the
"Company") is currently in the development stage. Its activities
primarily consist of the development and marketing of kiosk digital
imaging systems.
The Company's accounting principles are in accordance with accounting
principles generally accepted in the United States.
(b) Going concern:
The Company is in its development stage. Since its inception, the
Company has incurred significant expenditures on the research,
development and marketing of a kiosk digital imaging system and has a
deficit of $7,494,476 as at July 31, 2000 (1999 - $1,263,680). The
Company has not generated revenues and management does not expect to
commence generating revenues until 2001. These financial statements
have been prepared on the going concern basis which assumes the
realization of assets and liquidation of liabilities in the normal
course of business. The Company has suffered continuing losses from
operations and has a net capital deficiency that raise substantial
doubt about its ability to continue as a going concern. These
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
The continued application of the going concern concept is dependent
on the Company's ability to obtain adequate sources of financing and
to achieve a level of revenue sufficient to support the Company's
operations. The Company is currently attempting to obtain additional
financing from its existing shareholders and other strategic
investors to continue its operations. However, there can be no
assurance that the Company will obtain additional funds from these
sources.
F-7
<PAGE>
2. Revision and restatement of 1999 consolidated financial statements:
On May 10, 1999, Power Photo entered into a loan agreement, as described
in note 7 to the consolidated financial statements, and in connection
with the loan, Power Photo issued 245,550 common shares to the lender. As
a result, $240,300 of the loan proceeds, representing the fair value of
the 245,550 common shares, was allocated to share capital, with the
remainder of the proceeds reflected as loan payable. The calculation of
the accretion of interest on the loan payable was based on the
anticipated term of the loan, being August 1, 2000. Power Photo has
determined that the calculation of the accretion of interest should have
been based upon the contractual term of the loan which expired July 30,
1999. In addition, on July 27, 1999, Power Photo issued 30,000 common
shares to the lender in consideration for the extension of the maturity
date of the loan to August 31, 1999, which were not recorded in the
financial statements. The financial statements have been restated to
reflect the change in the calculation of interest expense and to reflect
the issuance of the shares as a deferred financing cost to be amortized
over the term of the extension.
The impact of the restatement of the 1999 consolidated financial
statements is an increased loss of $198,503, an increase in total current
assets and total assets of $58,753 and an increase in total current
liabilities of $199,038, for the year ended July 31, 1999, compared to
the amount previously presented.
3. Reverse acquisition:
On February 23, 2000, the Company entered into an agreement for the
exchange of common stock with Power Photo Kiosks Inc. ("Power Photo"), a
Canadian corporation. Under the terms of the agreement, the Company
issued 2,995,539 common shares in exchange for all of the issued and
outstanding shares (1,000,000 common shares) of Power Photo. At the time
of the transaction, the Company had nominal net assets.
F-8
<PAGE>
3. Reverse acquisition (continued):
As the former shareholders of Power Photo control the consolidated
entity, the transaction has been accounted for as a reverse acquisition,
whereby, notwithstanding the legal acquisition of Power Photo by the
Company, the transaction has been accounted for as an acquisition of the
Company by Power Photo on February 23, 2000. The consolidated financial
statements of the combined entity are issued under the name of the legal
parent but are considered the continuation of the financial statements of
the legal subsidiary, Power Photo. As Power Photo was deemed to be the
acquirer for accounting purposes, its assets and liabilities are included
in the consolidated financial statements at their historical carrying
values. The Company has adopted the fiscal year end of Power Photo, being
July 31. The comparative financial statements for the year ended July 31,
1999 and the period from May 13, 1998 (inception) to July 31, 1998 are
those of Power Photo.
4. Significant accounting policies:
(a) Principles of consolidation:
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, Power Photo. All significant
intercompany transactions and balances have been eliminated on
consolidation.
(b) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
expenses during the year. Actual results could differ from those
estimates.
(c) Inventories:
Inventories are valued at the lower of cost and replacement cost with
cost being determined on a first-in, first-out basis.
F-9
<PAGE>
4. Significant accounting policies (continued):
(d) Property and equipment:
Property and equipment are stated at cost, net of accumulated
amortization and are depreciated over their useful lives.
Amortization is computed using the straight-line method as follows:
Computer equipment............................. 20%
Other equipment ............................... 10%
Kiosk digital imaging systems.................. 33%
The Company regularly reviews the carrying values of its property and
equipment by comparing the carrying amount of the asset to the
expected future cash flows to be generated by the asset. If the
carrying value exceeds the amount recoverable, a write-down to fair
market value is charged to the consolidated statements of operations.
During the quarter ended July 31, 2000, the Company altered its
business model from the sale of kiosk digital imaging systems to
either rent or enter into profit-sharing arrangements for these
systems; accordingly, the kiosk digital imaging systems are recorded
as property and equipment and have been amortized commencing May 1,
2000, the beginning of the fourth quarter. Previously, these systems
were recorded as inventories.
(e) Deferred financing costs:
The costs of extending the maturity date of financing obtained are
deferred and amortized on a straight-line basis over the term of the
extension period.
F-10
<PAGE>
4. Significant accounting policies (continued):
(f) Stock-based compensation:
The Company has elected to follow Accounting Principles Board Opinion
No. 25 ("APB 25"), "Accounting for Stock Issued to Employees" and
related interpretations, in accounting for its employee stock options
because the alternative fair value accounting provided for under
Financial Accounting Standards Board, Statement No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation," requires use of option
valuation models that were not developed for use in valuing employee
stock options. Under APB 25, deferred stock-based compensation is
recorded at the option grant date in an amount equal to the
difference between fair market value of a common share and the
exercise price of the option. Deferred stock-based compensation
resulting from employee option grants is amortized over the vesting
period of the individual options, in accordance with Financial
Accounting Standards Board Interpretation No. 28.
(g) Currency translation:
Monetary assets and liabilities of the Company and of its wholly
owned subsidiary, which is an integrated foreign operation, that are
denominated in foreign currencies are translated into Canadian
dollars (which is considered to be the functional currency) at the
exchange rate prevailing at the balance sheet date. Non-monetary
assets and liabilities are translated at the historical exchange
rate. Transactions included in operations are translated at the
average rate for the period. Exchange gains and losses resulting from
the translation of these foreign-denominated amounts are reflected in
the consolidated statement of operations in the period in which they
occur. As the Company's reporting currency is the U.S. dollar, the
Company translates assets and liabilities denominated in Canadian
dollars into U.S. dollars at the exchange rate prevailing at the
balance sheet date, and the results of operations at the average rate
for the period. Cumulative translation adjustments are included as a
separate component of stockholders' deficiency within other
comprehensive loss.
F-11
<PAGE>
4. Significant accounting policies (continued):
(h) Research and development expenses:
Research costs, other than capital expenditures, are expensed as
incurred. Development costs are expensed as incurred unless they meet
the criteria under generally accepted accounting principles for
deferral and amortization. The Company has not deferred any such
development costs to date. Research and development costs are reduced
by related investment tax credits.
(i) Investment tax credits:
The Company is entitled to Canadian federal and provincial investment
tax credits which are earned as a percentage of eligible current and
capital research and development expenditures incurred in each
taxation year. Certain investment tax credits are fully refundable to
the Company until such time as the Company loses its status as a
Canadian-controlled private corporation, at which time, investment
tax credits are available to be applied against future income tax
liabilities, subject to a 10-year carryforward period. Investment tax
credits are accounted for as a reduction of the related expenditure
for items of a current nature and a reduction of the related asset
cost for items of long-term nature, provided that the Company has
reasonable assurance that the tax credits will be realized.
(j) Income taxes:
Under the asset and liability method of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the
statement of operations in the period that includes the enactment
date.
F-12
<PAGE>
4. Significant accounting policies (continued):
(k) Loss per common share:
Loss per common share has been calculated on the basis of earnings
divided by the weighted average number of common shares outstanding
during each year.
(l) Comprehensive income:
SFAS No. 130, "Reporting Comprehensive Income," issued by the
Financial Accounting Standards Board establishes standards for
reporting and presentation of comprehensive income. This standard
defines comprehensive income as the changes in equity of an
enterprise except those resulting from shareholder transactions.
(m) Fair values of financial assets and financial liabilities:
The carrying values of miscellaneous receivable, bank indebtedness,
accounts payable, accrued liabilities, accrued salaries payable,
accrued financing costs payable and loans payable approximate their
fair values due to the relatively short periods to maturity of the
instruments. The fair value of the due to shareholders cannot be
determined due to their related party nature and terms.
(n) Recently issued accounting pronouncements:
In June 1998, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133
establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an
asset or liability measured at its fair value. SFAS No. 133, as
recently amended, is effective for the fiscal year ending July 31,
2001. Management believes the adoption of SFAS No. 133 will not have a
material effect on the Company's financial position or results of
operations.
F-13
<PAGE>
4. Significant accounting policies (continued):
The Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"), in December 1999. SAB 101 provides additional guidance on the
application of existing generally accepted accounting principles to
revenue recognition in financial statements. The Company does not
expect the guidance of SAB 101 to have a material effect on the
consolidated financial statements.
5. Inventories:
--------------------------------------------------------------------------
1999 2000
--------------------------------------------------------------------------
(Restated)
Finished kiosks and work in process $ 283,991 $ -
Paper 58,953 40,965
--------------------------------------------------------------------------
$ 342,944 $ 40,965
--------------------------------------------------------------------------
6. Property and equipment:
-----------------------------------------------------------------
1999 2000
-----------------------------------------------------------------
(Restated)
Kiosk digital imaging systems $ - $ 527,115
Computer equipment 1,858 3,424
Other equipment 5,314 5,381
-----------------------------------------------------------------
7,172 535,920
Less accumulated amortization 309 56,901
-----------------------------------------------------------------
$ 6,863 $ 479,019
-----------------------------------------------------------------
Amortization of $57,491 was recorded during the year (1999 - $308).
The kiosk digital imaging systems are pledged as security for a loan
payable (note 7).
F-14
<PAGE>
7. Loans payable:
-------------------------------------------------------
1999 2000
-------------------------------------------------------
(Restated)
Loan payable $ 663,878 $ 941,492
Promissory note - 245,460
Accrued interest - 190,990
-------------------------------------------------------
$ 663,878 $ 1,377,942
-------------------------------------------------------
The loan payable bears interest at the following rates: May 10, 1999 to
July 30, 1999 - 12% per annum; July 30, 1999 to August 31, 1999 - $450
per day; subsequent to September 14, 1999 - $700 per day. The loan is
secured by the kiosk digital imaging systems or any receivable from the
sale of these systems. The original maturity date of the loan was July
30, 1999 and the maturity date was extended as described in note 10 and
presently has no repayment terms. In connection with the loan, the
Company issued 120,000 common shares of the Company to the lender. As a
result, $240,300 of the loan proceeds, representing the fair value of the
120,000 common shares has been allocated to share capital, with the
remainder of the proceeds reflected as loan payable. The loan payable is
accreted to the principal amount of the loan of $949,282 (Cdn. $1.4
million) and the accretion is reflected as interest expense in the
consolidated statements of operations for the year ended July 31, 1999.
The promissory note bears interest at the rate of 10% per annum, and was
due August 31, 2000.
8. Due to shareholders:
The amounts due to shareholders bear no interest and are unsecured. Terms
of repayment have not been established.
9. Convertible notes:
During January 2000, the subsidiary, Power Photo, issued eight units,
each consisting of a 12% convertible note due December 31, 2000 for total
cash proceeds of Cdn. $60,000. Each unit is convertible at the option of
the holder into 390 Class A common shares of Power Photo at the due date.
F-15
<PAGE>
10. Capital stock:
(a) On February 22, 2000, the Company's shareholders authorized a
2.78-for-one stock split and 15,290,000 common shares were cancelled
by the Company without consideration. As described in note 3, the
Company entered into a reverse acquisition and issued 3
post-stock-split shares of the Company for every outstanding common
share of Power Photo.
All references to common shares, common shares outstanding, stock
options and per share amounts in these financial statements have been
restated to reflect the above transactions on a retroactive basis.
(b) In May 1999, the Company issued 245,550 common shares of the Company
to an officer and shareholder for nominal consideration. The Company
recorded stock-based compensation of $491,434, representing the
difference between the fair value of the common shares and the issue
price.
(c) On July 27, 1999, the Company issued 30,000 common shares to its
lender in consideration for the extension of the maturity date of the
loan described in note 7 from July 30, 1999 to August 31, 1999. The
fair value of the shares issued has been recorded as a deferred
financing cost which is amortized over the term of the extension
period.
(d) On September 14, 1999, two senior officers and shareholders of the
Company transferred title to 90,000 common shares of the Company to
the lender of the Company in consideration for the extension of the
maturity date of the loan described in note 7 from August 31, 1999 to
December 17, 1999. The fair value of the shares transferred has been
recorded as contributed surplus and as a deferred financing cost
which is amortized over the term of the extension period.
F-16
<PAGE>
10. Capital stock (continued):
(e) On January 12, 2000, a senior officer and shareholder of the Company
transferred title to 45,000 common shares of the Company to the
lender of the Company in consideration for the indefinite extension
of the maturity date of the loan described in note 7. The fair value
of the shares transferred has been recorded as contributed surplus
and a financing cost.
(f) On February 24, 2000, the Company issued 350,000 common shares for
proceeds of $300,000, net of issue costs of $50,000. In connection
with the share issuance, warrants were issued to acquire 300,000
common shares exercisable at a price of $0.01 per share. The warrants
expire February 24, 2003. Deferred stock-based compensation of
$525,000 has been recorded, representing the difference between fair
value and the proceeds received.
(g) During July 2000, the Company issued 120,000 common shares to a
company controlled by two senior officers and shareholders of the
Company as repayment of a loan payable of $15,727. Accordingly, the
Company has recorded stock-based compensation of $639,955,
representing the difference between the fair value of the common
shares and that of the loan payable.
(h) During July 2000, two senior officers and shareholders of the Company
were awarded 330,000 shares of the Company upon signing of employment
contracts. The terms of the employment contracts expire in June 2005.
Accordingly, the Company has recorded stock-based compensation of
$1,832,781, representing the difference between the fair value of the
shares and the consideration received. In addition, during July 2000,
the Company granted options to these officers to acquire 1,000,000
common shares of the Company with an exercise price of $1.00 per
share vesting 20% per year. Deferred stock-based compensation of
$4,462,500 has been recorded, representing the difference between the
fair value of the shares and the exercise price of the options. There
were no other options issued during the year.
F-16
<PAGE>
10. Capital stock (continued):
The weighted average grant date fair value of options outstanding at
July 31, 2000 was $5.46 per share.
The following options were outstanding as at July 31, 2000:
--------------------------------------------------------------------------------
Options outstanding Options exercisable
Weighted
average
Weighted remaining Weighted
average contractual average
Number exercise life Exercisable exercise
outstanding price (year) options price
--------------------------------------------------------------------------------
Common shares 1,000,000 $ 1.00 8 $ - $ -
--------------------------------------------------------------------------------
For purposes of computing pro forma loss and loss per share that
would have resulted if the Company had accounted for its stock option
awards under the fair value recognition provision of SFAS 123,
"Accounting for Stock-Based Compensation," the fair value of each
option grant is estimated on the date of grant using the fair value
method with the following assumptions:
-------------------------------------------------------------
Volatility 150%
Risk-free interest rate 5.86%
Dividend yield -
Expected life (years) 8
-------------------------------------------------------------
F-17
<PAGE>
10. Capital stock (continued):
The table below sets out the pro forma amounts of loss and loss per
share that would have resulted if the Company had accounted for its
stock options under the fair value recognition provisions of SFAS No.
123.
--------------------------------------------------------------------------------
Period from
May 13, 1998
(inception) to Years ended July 31,
July 31, 1998 1999 2000
--------------------------------------------------------------------------------
(Restated)
Loss for the period:
As reported $ 28,972 $ 1,234,708 $ 6,230,796
Pro forma 28,972 1,234,708 6,244,796
--------------------------------------------------------------------------------
Basic loss per common share:
As reported $ - $ 0.41 $ 1.73
Pro forma - 0.41 1.74
--------------------------------------------------------------------------------
F-18
<PAGE>
11. Provision for income taxes:
The provision for income taxes differs from the amount computed by
applying the statutory income tax rate to loss before provision for
income taxes. The sources and tax effects of the differences are as
follows:
--------------------------------------------------------------------------------
1999 2000
--------------------------------------------------------------------------------
(Restated)
Basic rate applied to loss before provision
for income taxes $ (538,333) $(2,616,000)
Adjustments resulting from:
Stock-based compensation not deducted for tax 206,228 1,195,000
Non-deductible interest and financing costs 102,524 752,000
Other (1,048) (10,000)
Change in valuation allowance 230,629 679,000
--------------------------------------------------------------------------------
Provision for income taxes $ - $ -
--------------------------------------------------------------------------------
Significant components of the Company's deferred tax assets are as
follows:
--------------------------------------------------------------------------------
1999 2000
--------------------------------------------------------------------------------
(Restated)
Deferred tax asset:
Benefit of net operating losses
carried forward $ 243,087 $ 900,000
Amortization - 22,000
--------------------------------------------------------------------------------
Deferred tax asset $ 243,087 $ 922,000
Less valuation allowance 243,087 922,000
--------------------------------------------------------------------------------
$ - $ -
--------------------------------------------------------------------------------
F-19
<PAGE>
11. Provision for income taxes (continued):
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers projected future taxable income,
uncertainties related to the industry in which the Company operates, and
tax planning strategies in making this assessment. Due to the
uncertainties related to the industry in which the Company operates and
its history of losses, the tax benefit of the above carried forward loss
amounts has been completely offset by a valuation allowance.
At July 31, 2000, the Company has net operating losses for Canadian
income tax purposes of approximately $1,685,000, which will expire during
2005 to 2007.
12. Related party transactions:
During the year, the Company made payments of $26,000 (1999 - nil) to a
corporation owned by two senior officers of the Company for management
services.
13. Segmented information:
The Company currently operates in one operating segment being the
development and marketing of kiosk digital imaging systems. All of the
Company's long-lived assets are located in Canada. The Company does not
have any significant concentrations of credit risk.
F-20
<PAGE>
14. Supplemental cash flow disclosures:
--------------------------------------------------------------------------------
Period from
May 13, 1998
(inception) to
July 31, Years ended July 31,
1998 1999 2000
--------------------------------------------------------------------------------
(Restated)
Deferred stock-based compensation $ - $ 491,434 $7,460,236
Shares issued as settlement of
loan payable - - 15,414
Inventory reclassified to property
and equipment - - 290,608
--------------------------------------------------------------------------------
15. Loss per share:
Due to the loss for all the periods presented, all potential common
shares outstanding are considered anti-dilutive and are excluded from the
calculation of diluted loss per common share.
16. Commitments:
(a) The Company has entered into various licensing agreements that
provide for royalty payments of between 5% and 10% of net revenue,
and minimum royalty payments over the terms of the agreements as
follows:
--------------------------------------
2001 $ 219,000
2002 295,000
2003 20,000
2004 5,000
--------------------------------------
$ 539,000
--------------------------------------
F-21
<PAGE>
16. Commitments (continued):
(b) The Company is committed to the following payments for leased
premises:
--------------------------------------
2001 $ 82,000
2002 88,000
2003 81,000
--------------------------------------
$ 251,000
--------------------------------------
17. Subsequent events:
(a) Subsequent to year end, the Company issued 20,000 common shares in
exchange for investor consulting services pursuant to a consulting
agreement expiring in February 2001.
(b) Subsequent to year end, the Board of Directors approved the issuance
of 300,000 common shares of the Company to two directors of the
Company for no consideration and warrants to acquire 200,000 common
shares of the Company with an exercise price of $1.00 per share. The
warrants vest over a period of three years.
(c) Subsequent to year end, the Board of Directors approved the issuance
of 120,000 common shares of the Company to two senior officers and
directors of the Company for no consideration.
F-22
<PAGE>
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
The Company currently uses the accounting firm of KPMG, LLP. Their address
is Youge Corporate Centre, 4120 Yonge Street, Suite 500, North York, Ontario M2P
2B8. There have been no disagreements on accounting and financial disclosure
with KPMG, LLP to date.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
(a) Set forth below are the names, ages, positions, with the Company and
business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
Ronald Terry Cooke 54 President and Chairman
Allan Turowetz 52 Vice President and Director
Jean Arthur Beliveau 69 Director
June Nichols Sweeney 64 Director
All directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board of Directors. The officers and directors will
devote such time and effort to the business and affairs of the Company as may be
necessary to perform their responsibilities as executive officers and/or
directors of the Company.
Family Relationships
There are no family relationships between or among the executive officers
and directors of the Company.
Business Experience
Ronald Terry Cooke, age 54, is the President and Chairman of the Board. Mr.
Cooke has a Master of Business Administration degree from McMaster University
and two undergraduate degrees from the University of Waterloo. He is the
co-founder of The Nack Company Ltd., which recently introduced a revolutionary
and highly acclaimed new utility knife to the North American marketplace. From
1988 to 1997, Mr. Cooke was the Executive Vice- President of Sony of Canada
Ltd., responsible for maximizing revenues through effective fiscal and operation
management, planning and administration. He has also held senior positions with
Alexander Proudfoot and the Canadian Imperial Bank of Commerce. From 1967 to
1985, he worked with Shell Canada and Shell Canada Resources, holding
increasingly senior positions, including Senior Advisor, Business Development.
25
<PAGE>
Allan Turowetz, age 52, is the Executive Vice President and Director of the
Company. Mr. Turowetz is a corporate consulting specialist, sociologist, author
and former professor of The Sociology of Sports at Concordia University. He has
a Masters degree in Sociology from McGill University and an undergraduate degree
from Sir George Williams University. Over the past 15 years, Mr. Turowetz
provided corporate training and team building seminars to numerous Fortune 100
companies, including AT&T, Sony and Toshiba. From 1990 to 1997, he was President
of Team Building Associates. He has also had an academic career, including 21
years as Sessional Professor of Sociology at Condordia University and 14 years a
Professor of Sociology at Dawson College.
Jean Arthur Beliveau, age 69, is a Director of the Company. Mr. Beliveau
played centerman for the Montreal Canadiens for close to twenty (20) seasons,
achieving impressive statistical records that stood for many years. Mr. Beliveau
went on to a twenty two (22) year career as the Canadiens' Senior Vice President
of Corporate Affairs. Mr. Beliveau is also the author of "My Life in Hockey",
the story of his career and his philosophy of winning through teamwork.
June Nichols Sweeney, age 64, is a Director of the Company. Ms. Sweeney
currently sits on the board of American Enterprise.com Corp. and has sat on the
boards of Georgia Certified Development Corp., and TransMillenial Resource Corp.
From 1980-1992, Ms. Sweeney held positions with the US Small Business
Administration (SBA), rising from Special Assistant to the Regional
Administrator, to Regional Administrator for Region IV, and finally serving as
the Deputy Administrator during the Bush Administration. Ms. Sweeney's public
service includes serving as Advisory Committee Member to the Export-Import Bank
(1996), Advisory Council Member to the National Council of Women Advisors to
Congress (1995-1997) and Civic Leader Representative to the United States
Strategic Command (1995). Awards include the "Power of One" Award presented by
Senator Paul Coverdale (1998), Presidential Commendation and the Presidential
Quality and Management Improvement Award from President George Bush, and the
Small Business Administrations Administrator's Award, Performance Awards (10
years) and Achievement Award.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
No Director, Officer, Beneficial Owner of more than ten percent (10%) of
any class of equity securities of the Company failed to file on a timely basis
reports required by Section 16(a) of the Exchange Act during the most recent
fiscal year or prior fiscal years.
26
<PAGE>
Item 10. Executive Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual LT
Annual Comp Annual Comp LT
Name and Comp Bonus Comp Rest Comp LTIP All Other
Post Year Salary ($) Other Stock Options Payouts
----------------- ------- -------------- ---------- --------- ------------ ---------- ---------- ------------
Ronald Terry 1998
Cooke (1) (2) 1999
(5) (7) 2000 $120,000 100,000
Allan 1998
Turowetz (1) 1999
(3) (4) (5) (7) 2000 $100,000 100,000
Jean Arthur 1998
Beliveau (6) 1999
2000 200,000 100,000
June Nichols 1998
Sweeney (6) 1999
2000 100,000 100,000
</TABLE>
(1) In February 2000, the Company, PPK and the Holders consummated the
Agreement. Pursuant to the Agreement, the Holders tendered to the Company all
issued and outstanding shares of PPK in exchange for 3,000,000 shares (only
2,995,539 shares were actually issued due to rounding) of Common Stock of the
Company. Of the 2,995,539 shares issued, Ronald Terry Cooke is the beneficial
owner of 1,359,846 shares and Allan Turowetz is the beneficial owner of
1,103,146 shares. The reorganization was accounted for as a reverse acquisition.
For such offering, the Company relied upon the 506 Exemption, Section
451.802(19) of the Michigan Code and no state exemption for the shares issued to
Bahamian or Canadian residents.
Simultaneously with the closing of the Agreement, the then officer and
director of the Company tendered his resignation in accordance with the terms of
the Agreement and tendered his shares (13,900,000) for cancellation. 1,390,000
additional shares were also cancelled in connection with the Agreement. Ronald
Terry Cooke and Allan Turowetz were elected to serve on the Board. The Board
subsequently appointed Ronald Terry Cooke as Chairman of the Board and President
and Allan Turowetz as the Vice-President of the Company. The Company also
announced approval of an amendment to its Articles of Incorporation changing the
name of the Company from Alternate Achievements, Inc. to Power Kiosks, Inc. See
Part III, Item 11. "Security Ownership of Certain Beneficial Owners and
Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
27
<PAGE>
(2) In July 2000, the Company entered into an employment agreement with Ronald
Terry Cooke, to employ him as President and CEO of the Company. The term of the
agreement is for a period of five (5) years, beginning July 1, 2000. Mr. Cooke's
initial basic compensation is One Hundred and Twenty Thousand dollars ($120,000)
per year. Such salary will be reviewed as appropriate by the Board of Directors
of the Company and may be increased in the Board's sole discretion based upon
performance. Mr. Cooke received a signing bonus of two hundred twenty five
thousand (225,000) restricted shares of the Company's Common Stock, as well as a
Seventy Five Thousand dollar ($75,000) bonus. Under the terms of the employment
agreement, Mr. Cooke has the option to purchase up to a total of one hundred
thousand (100,000) shares of the Company's restricted Common Stock annually,
which options are exercisable at a price of $1.00 per share. The stock options
will begin to vest at the end of the employment year commencing on July 1, 2000
and each employment year thereafter. Mr. Cooke will have five (5) years after
the shares are vested to exercise the options. See Part III, Item 11. "Security
Ownership of Certain Beneficial Owners and Management"; and Part III, Item 12.
"Certain Relationships and Related Transactions".
(3) In July 2000, the Company entered into an employment agreement with Allan
Turowetz, to employ him as Vice President of the Company. The term of the
agreement is for a period of five (5) years, beginning July 2000. Mr. Turowetz's
initial basic compensation is One Hundred Thousand dollars ($100,000) per year.
Such salary will be reviewed as appropriate by the Board and may be increased in
the Board's sole discretion based upon performance. Mr. Turowetz received a
signing bonus of one hundred and five thousand (105,000) shares of the Company's
Common Stock, which was registered pursuant to a Registration Statement filed on
Form S-8 in August 2000, as well as a Seventy Five Thousand dollar ($75,000)
bonus. Under the terms of the employment agreement, Mr. Turowetz has the option
to purchase up to a total of 100,000 shares of the Company's restricted Common
Stock annually, which options are exercisable at a price of $1.00 per share. The
stock options will begin to vest at the end of the employment year commencing on
July 1, 2000 and each employment year thereafter. Mr. Turowetz will have five
(5) years after the shares are vested to exercise the options. See Part III,
Item 11. "Security Ownership of Certain Beneficial Owners and Management"; and
Part III, Item 12. "Certain Relationships and Related Transactions".
(4) In August 2000, the Company filed a Registration Statement on Form S-8 for
the purpose of registering the Company's Year 2000 Consultant Stock Compensation
Plan. Pursuant to such plan, the Company issued 105,000 shares of its Common
Stock to Allan Turowetz, the Company's current Vice-President and Director. See
Part III, Item 11. "Security Ownership of Certain Beneficial Owners and
Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
(5) In August 2000, the Company issued 120,000 shares of its restricted Common
Stock to Team Power Enterprises Incorporated, which is beneficially owned by
both Ronald Terry Cooke, the Company's current President and Chairman and Allan
Turowetz, the Company's current Vice-President and Director as full and final
repayment of a loan by TPE to PPK. For such offering, the Company relied upon
the 506 Exemption and no state exemption, as TPE is located in Canada. See Part
III, Item 11. "Security Ownership of Certain Beneficial Owners and Management";
and Part III, Item 12. "Certain Relationships and Related Transactions".
(6) In September 2000, the Company's Board of Directors increased the number of
director positions from two (2) to four (4) and appointed June Nichols-Sweeney
and Jean Beliveau to fill the vacancies created thereby until
28
<PAGE>
the next meeting of the shareholders. The Company approved the issuance of
100,000 and 200,000 shares of its Common Stock to them respectively, although
the shares were not actually issued until November 2000. The Company also
granted the new directors warrants to purchase an additional 100,000 shares
each, exercisable at a price of $1.00 per share for a period of three (3) years.
Ms. Sweeney may exercise the right to purchase a maximum of 25,000 shares every
quarter, whereas Mr. Beliveau has the same right beginning May 1, 2001. For such
offering, the Company relied on the 506 Exemption and Section 10-5-9 of the
Georgia Code. No state exemption was required for the issuance to Jean Beliveau,
as he is a Canadian resident. See Part III, Item 11. "Security Ownership of
Certain Beneficial Owners and Management"; and Part III, Item 12. "Certain
Relationships and Related Transactions".
(7) In November 2000, the Company filed a Registration Statement on Form S-8 for
its Year 2000 Supplemental Employee/Consultant Stock Compensation Plan. Since
that time, 60,000 shares of the Company's Common Stock have been issued each to
Ronald Terry Cooke, the Company's current President and Chairman and to Allan
Turowetz, the Company's current Vice-President and Director. 580,000 shares
registered pursuant to such Registration Statement have yet to be issued. See
Part III, Item 11. "Security Ownership of Certain Beneficial Owners and
Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
Compensation of Directors
The Company has no standard arrangements for compensating the directors of
the Company for their attendance at meetings of the Board of Directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of November 7, 2000,
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five percent (5%) of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the share of Common Stock
beneficially owned.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name and Address of Title of Amount and Nature of Percent of
Beneficial Owner Class Beneficial Owner (1) Class
------------------------------ ----------- -------------------------- ----------
Ronald Terry Cooke (2) Common 541,700 (D) 28 %
(5) (8) (11) Common 1,103,146 (I)
60,000 (I)
Allan Turowetz (2) Common 165,000 (D) 21.8%
(6) (7) (8) (11) Common 1,103,146 (I)
60,000 (I)
Jean Arthur Beliveau (9) Common 200,000 (D) 3.3%
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
June Nichols Sweeney (9) Common 100,000 (D) 1.6%
Thomson Kernaghan & Co., Ltd (3) Common 350,000 5.7%
Thomson Kernaghan & Co. Ltd. (4) Promissory $250,000 -
Note
Thomson Kernaghan & Co. Ltd (10) Promissory $100,000 -
Note
All Executive Officers and
Directors as a Group
[four (4) persons] Common 3,332,992 54.7%
----------
</TABLE>
(1) The address for each of the above is c/o Power Kiosks, Inc., 181
Whitehall Drive, Markham, Ontario, Canada L3R 9T1, except for Thomas
Kernaghan & Co. Ltd, whose address is 365 Bay Street, 10th Floor,
Toronto, Ontario M5H 2V2.
(2) In February 2000, the Company, PPK and the Holders consummated the
Agreement. Pursuant to the Agreement, the Holders tendered to the Company all
issued and outstanding shares of PPK in exchange for 3,000,000 shares (only
2,995,539 shares were actually issued due to rounding) of Common Stock of the
Company. Of the 2,995,539 shares issued, Ronald Terry Cooke is the beneficial
owner of 1,359,846 shares and Allan Turowetz is the beneficial owner of
1,103,146 shares. The reorganization was accounted for as a reverse acquisition.
For such offering, the Company relied upon the 506 Exemption, Section
451.802(19) of the Michigan Code and no state exemption for the shares issued to
Bahamian or Canadian residents.
Simultaneously with the closing of the Agreement, the then officer and
director of the Company tendered his resignation in accordance with the terms of
the Agreement and tendered his shares (13,900,000) for cancellation. 1,390,000
additional shares were also cancelled in connection with the Agreement. Ronald
Terry Cooke and Allan Turowetz were elected to serve on the Board. The Board
subsequently appointed Ronald Terry Cooke as Chairman of the Board and President
and Allan Turowetz as the Vice-President of the Company. The Company also
announced approval of an amendment to its Articles of Incorporation changing the
name of the Company from Alternate Achievements, Inc. to Power Kiosks, Inc. See
Part III, Item 12. "Certain Relationships and Related Transactions".
(3) In February 2000, the Company sold 350,000 shares of its Common Stock to one
(1) investor for $350,000. The Company actually received $300,000, as $35,000
was deducted as an agent fee and $15,000 was deducted for legal fees. The
Company also issued warrants to purchase an additional 300,000 shares
exercisable at a price of $0.01 per share for a period of three (3) years in
connection with such sale. Both the shares and the shares underlying the
warrants carry mandatory registration rights.
Since February, both parties have verbally agreed to modify the agreement,
such that 390,000 shares will be sold rather than 350,000 shares for $390,000
rather than $350,000, with the warrants and the costs remaining
30
<PAGE>
the same. Although the verbal agreement has yet to be memorialized, proceeds for
the full amount has been received by the Company. For such offering, the Company
relied upon the 506 Exemption. No state exemption was necessary because the
investor is a foreign entity located in Canada. See Part III, Item 12. "Certain
Relationships and Related Transactions".
(4) In June 2000, the Company executed a promissory note in favor of TK in the
principal amount of two hundred fifty thousand dollars ($250,000). The loan had
a maturity date of August 31, 2000. In November 2000, both parties orally agreed
to convert all outstanding principal and interest into 250,000 shares of the
restricted Common Stock of the Company, although actual conversion has yet to
take place and the agreement to convert has yet to be memorialized. For such
offering, the Company relied upon the 506 Exemption. No state exemption was
necessary because the investor is a foreign entity located in Canada. See Part
III, Item 12. "Certain Relationships and Related Transactions".
(5) In July 2000, the Company entered into an employment agreement with Ronald
Terry Cooke, to employ him as President and CEO of the Company. The term of the
agreement is for a period of five (5) years, beginning July 1, 2000. Mr. Cooke's
initial basic compensation is One Hundred and Twenty Thousand dollars ($120,000)
per year. Such salary will be reviewed as appropriate by the Board of Directors
of the Company and may be increased in the Board's sole discretion based upon
performance. Mr. Cooke received a signing bonus of two hundred twenty five
thousand (225,000) restricted shares of the Company's Common Stock, as well as a
Seventy Five Thousand dollar ($75,000) bonus. Under the terms of the employment
agreement, Mr. Cooke has the option to purchase up to a total of one hundred
thousand (100,000) shares of the Company's restricted Common Stock annually,
which options are exercisable at a price of $1.00 per share. The stock options
will begin to vest at the end of the employment year commencing on July 1, 2000
and each employment year thereafter. Mr. Cooke will have five (5) years after
the shares are vested to exercise the options. See Part III, Item 12. "Certain
Relationships and Related Transactions".
(6) In July 2000, the Company entered into an employment agreement with Allan
Turowetz, to employ him as Vice President of the Company. The term of the
agreement is for a period of five (5) years, beginning July 2000. Mr. Turowetz's
initial basic compensation is One Hundred Thousand dollars ($100,000) per year.
Such salary will be reviewed as appropriate by the Board and may be increased in
the Board's sole discretion based upon performance. Mr. Turowetz received a
signing bonus of one hundred and five thousand (105,000) shares of the Company's
Common Stock, which was registered pursuant to a Registration Statement filed on
Form S-8 in August 2000, as well as a Seventy Five Thousand dollar ($75,000)
bonus. Under the terms of the employment agreement, Mr. Turowetz has the option
to purchase up to a total of 100,000 shares of the Company's restricted Common
Stock annually, which options are exercisable at a price of $1.00 per share. The
stock options will begin to vest at the end of the employment year commencing on
July 1, 2000 and each employment year thereafter. Mr. Turowetz will have five
(5) years after the shares are vested to exercise the options. See Part III,
Item 12. "Certain Relationships and Related Transactions".
(7) In August 2000, the Company filed a Registration Statement on Form S-8 for
the purpose of registering the Company's Year 2000 Consultant Stock Compensation
Plan. Pursuant to such plan, the Company issued 105,000 shares of its Common
Stock to Allan Turowetz, the Company's current Vice-President and Director. See
Part III, Item 12. "Certain Relationships and Related Transactions".
(8) In August 2000, the Company issued 120,000 shares of its restricted Common
Stock to Team Power Enterprises Incorporated, which is beneficially owned by
both Ronald Terry Cooke, the Company's current
31
<PAGE>
President and Chairman and Allan Turowetz, the Company's current Vice-President
and Director as full and final repayment of a loan by TPE to PPK. The shares are
allocated in the amount of 60,000 shares each as an indirect beneficial
ownership. For such offering, the Company relied upon the 506 Exemption and no
state exemption, as TPE is located in Canada. See Part III, Item 12. "Certain
Relationships and Related Transactions".
(9) In September 2000, the Company's Board of Directors increased the number of
director positions from two (2) to four (4) and appointed June Nichols-Sweeney
and Jean Beliveau to fill the vacancies created thereby until the next meeting
of the shareholders. The Company approved the issuance of 100,000 and 200,000
shares of its Common Stock to them respectively, although the shares were not
actually issued until November 2000. The Company also granted the new directors
warrants to purchase an additional 100,000 shares each, exercisable at a price
of $1.00 per share for a period of three (3) years. Ms. Sweeney may exercise the
right to purchase a maximum of 25,000 shares every quarter, whereas Mr. Beliveau
has the same right beginning May 1, 2001. For such offering, the Company relied
on the 506 Exemption and Section 10-5-9 of the Georgia Code. No state exemption
was required for the issuance to Jean Beliveau, as he is a Canadian resident.
See Part III, Item 12. "Certain Relationships and Related Transactions".
(10) In October 2000, the Company executed a promissory note in favor of TK in
the principal amount of $110,000. The Company actually received $100,000, as
$10,000 was deducted as an agent fee. The note bears interest at a rate of ten
percent (10%) per annum and is for a term of one (1) year. For such offering,
the Company relied upon the 506 Exemption. No state exemption was necessary
because the investor is a foreign entity located in Canada. See Part III, Item
12. "Certain Relationships and Related Transactions".
(11) In November 2000, the Company filed a Registration Statement on Form S-8
for its Year 2000 Supplemental Employee/Consultant Stock Compensation Plan.
Since that time, 60,000 shares of the Company's Common Stock have been issued
each to Ronald Terry Cooke, the Company's current President and Chairman and to
Allan Turowetz, the Company's current Vice-President and Director. 580,000
shares registered pursuant to such Registration Statement have yet to be issued.
See Part III, Item 12. "Certain Relationships and Related Transactions".
There are no arrangements which may result in the change of control of the
Company.
Item 12. Certain Relationships and Related Transactions
In June 1998, Team Power Enterprises, Inc., as tenant, signed a Lease
Agreement with Bruce N. Huntley Contracting Limited, as landlord. Team Power
Enterprises, Inc. is beneficially owned by Ronald Terry Cooke, the Company's
President and Chairman, and Allan Turowetz, the Company's Vice President and
Director. The lease is for the property located at 181 Whitehall Drive, Unit 1,
in Markham, Ontario, which serves as the Company's headquarters. The lease term
began July 1998 and is for a period of five (5) years. The rents to be paid are
as follows: From July 1, 1998 through June 30, 1999 the rental amount is
$9,235.41 monthly; from July 1, 1999 through June 30, 2000 the rental amount is
$10,075 monthly; and from July 1, 2001 through June 30, 2003 the rental amount
is $10,914.58 monthly.
In January 2000, PPK, prior to its acquisition by the Company, entered into
negotiations with Remington regarding a share exchange, whereby PPK would be
acquired in a reverse acquisition by Remington in exchange for shares in
Remington. Rhonda brokered the deal, which was never consummated. Since that
time, Rhonda
32
<PAGE>
has made certain claims to PPK regarding monies and time expended on PPK's
behalf. In August 2000, the Company agreed to pay Rhonda $25,000 and to issue
Rhonda 225,000 shares of its restricted Common Stock in exchange for a general
release in favor of both PPK and the Company. Although all parties have agreed
to the terms of the settlement, it has yet to be memorialized. The Company has
issued the 225,000 shares, which are being held by the Company pending full and
final settlement of the matter. For such offering, the Company relied upon the
506 Exemption and no state exemption, as Rhonda is located in Canada.
In February 2000, the Company, PPK and the Holders consummated the
Agreement. Pursuant to the Agreement, the Holders tendered to the Company all
issued and outstanding shares of PPK in exchange for 3,000,000 shares (only
2,995,539 shares were actually issued due to rounding) of Common Stock of the
Company. Of the 2,995,539 shares issued, Ronald Terry Cooke is the beneficial
owner of 1,359,846 shares and Allan Turowetz is the beneficial owner of
1,103,146 shares. The reorganization was accounted for as a reverse acquisition.
For such offering, the Company relied upon the 506 Exemption, Section
451.802(19) of the Michigan Code and no state exemption for the shares issued to
Bahamian or Canadian residents.
Simultaneously with the closing of the Agreement, the then officer and
director of the Company tendered his resignation in accordance with the terms of
the Agreement and tendered his shares (13,900,000) for cancellation. 1,390,000
additional shares were also cancelled in connection with the Agreement. Ronald
Terry Cooke and Allan Turowetz were elected to serve on the Board. The Board
subsequently appointed Ronald Terry Cooke as Chairman of the Board and President
and Allan Turowetz as the Vice-President of the Company. The Company also
announced approval of an amendment to its Articles of Incorporation changing the
name of the Company from Alternate Achievements, Inc. to Power Kiosks, Inc.
In February 2000, the Company sold 350,000 shares of its Common Stock to
one (1) investor for $350,000. The Company actually received $300,000, as
$35,000 was deducted as an agent fee and $15,000 was deducted for legal fees.
The Company also issued warrants to purchase an additional 300,000 shares
exercisable at a price of $0.01 per share for a period of three (3) years in
connection with such sale. Both the shares and the shares underlying the
warrants carry mandatory registration rights.
Since February, both parties have verbally agreed to modify the agreement,
such that 390,000 shares will be sold rather than 350,000 shares for $390,000
rather than $350,000, with the warrants and the costs remaining the same.
Although the verbal agreement has yet to be memorialized, proceeds for the full
amount has been received by the Company. For such offering, the Company relied
upon the 506 Exemption. No state exemption was necessary because the investor is
a foreign entity located in Canada.
Since April 2000, the Company sold 237,924 shares of its Common Stock to
twenty five (25) investors for a total of $594,862.27. For such offering, the
Company relied upon the 506 Exemption, Section 49:3-50(b)(9) of the New Jersey
Code and Section 211(b) of the Pennsylvania Code. No state exemption was
necessary for purchases by Canadian residents.
In June 2000, the Company executed a promissory note in favor of TK in the
principal amount of two hundred fifty thousand dollars ($250,000). The loan had
a maturity date of August 31, 2000. In November 2000, both parties orally agreed
to convert all outstanding principal and interest into 250,000 shares of the
restricted Common Stock of the Company, although actual conversion has yet to
take place and the agreement to convert has yet to be memorialized. For such
offering, the Company relied upon the 506 Exemption. No state exemption was
necessary because the investor is a foreign entity located in Canada.
33
<PAGE>
In July 2000, the Company entered into an employment agreement with Ronald
Terry Cooke, to employ him as President and CEO of the Company. The term of the
agreement is for a period of five (5) years, beginning July 1, 2000. Mr. Cooke's
initial basic compensation is One Hundred and Twenty Thousand dollars ($120,000)
per year. Such salary will be reviewed as appropriate by the Board of Directors
of the Company and may be increased in the Board's sole discretion based upon
performance. Mr. Cooke received a signing bonus of two hundred twenty five
thousand (225,000) restricted shares of the Company's Common Stock, as well as a
Seventy Five Thousand dollar ($75,000) bonus. Under the terms of the employment
agreement, Mr. Cooke has the option to purchase up to a total of one hundred
thousand (100,000) shares of the Company's restricted Common Stock annually,
which options are exercisable at a price of $1.00 per share. The stock options
will begin to vest at the end of the employment year commencing on July 1, 2000
and each employment year thereafter. Mr. Cooke will have five (5) years after
the shares are vested to exercise the options.
In July 2000, the Company entered into an employment agreement with Allan
Turowetz, to employ him as Vice President of the Company. The term of the
agreement is for a period of five (5) years, beginning July 2000. Mr. Turowetz's
initial basic compensation is One Hundred Thousand dollars ($100,000) per year.
Such salary will be reviewed as appropriate by the Board and may be increased in
the Board's sole discretion based upon performance. Mr. Turowetz received a
signing bonus of one hundred and five thousand (105,000) shares of the Company's
Common Stock, which was registered pursuant to a Registration Statement filed on
Form S-8 in August 2000, as well as a Seventy Five Thousand dollar ($75,000)
bonus. Under the terms of the employment agreement, Mr. Turowetz has the option
to purchase up to a total of 100,000 shares of the Company's restricted Common
Stock annually, which options are exercisable at a price of $1.00 per share. The
stock options will begin to vest at the end of the employment year commencing on
July 1, 2000 and each employment year thereafter. Mr. Turowetz will have five
(5) years after the shares are vested to exercise the options.
In August 2000, the Company filed a Registration Statement on Form S-8 for
the purpose of registering the Company's Year 2000 Consultant Stock Compensation
Plan. Pursuant to such plan, the Company issued 105,000 shares of its Common
Stock to Allan Turowetz, the Company's current Vice-President and Director.
In August 2000, the Company issued 120,000 shares of its restricted Common
Stock to Team Power Enterprises Incorporated, which is beneficially owned by
both Ronald Terry Cooke, the Company's current President and Chairman and Allan
Turowetz, the Company's current Vice-President and Director as full and final
repayment of a loan by TPE to PPK. For such offering, the Company relied upon
the 506 Exemption and no state exemption, as TPE is located in Canada.
In September 2000, the Company's Board of Directors increased the number of
director positions from two (2) to four (4) and appointed June Nichols-Sweeney
and Jean Beliveau to fill the vacancies created thereby until the next meeting
of the shareholders. The Company approved the issuance of 100,000 and 200,000
shares of its Common Stock to them respectively, although the shares were not
actually issued until November 2000. The Company also granted the new directors
warrants to purchase an additional 100,000 shares each, exercisable at a price
of $1.00 per share for a period of three (3) years. Ms. Sweeney may exercise the
right to purchase a maximum of 25,000 shares every quarter, whereas Mr. Beliveau
has the same right beginning May 1, 2001. For such offering, the Company relied
on the 506 Exemption and Section 10-5-9 of the Georgia Code. No state exemption
was required for the issuance to Jean Beliveau, as he is a Canadian resident.
34
<PAGE>
In October 2000, the Company executed a promissory note in favor of TK in
the principal amount of $110,000. The Company actually received $100,000, as
$10,000 was deducted as an agent fee. The note bears interest at a rate of ten
percent (10%) per annum and is for a term of one (1) year. For such offering,
the Company relied upon the 506 Exemption. No state exemption was necessary
because the investor is a foreign entity located in Canada.
In November 2000, the Company filed a Registration Statement on Form S-8
for its Year 2000 Supplemental Employee/Consultant Stock Compensation Plan.
Since that time, 60,000 shares of the Company's Common Stock have been issued
each to Ronald Terry Cooke, the Company's current President and Chairman and to
Allan Turowetz, the Company's current Vice-President and Director. 580,000
shares registered pursuant to such Registration Statement have yet to be issued.
Item 13. Exhibits and Reports on Form 8-K.
(a) The exhibits required to be filed herewith by Item 601 of Regulation S-B, as
described in the following index of exhibits, are incorporated herein by
reference, as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Exhibit Name
-------------- ---------------------
3(i).1 [1] Articles of Incorporation filed September 9, 1994.
3(i).2 [1] Articles of Amendment filed October 1, 1999.
3(i).3 [3] Articles of Amendment filed March 2, 2000.
3(ii).1 [1] By-laws.
4.1 [2] Share Exchange Agreement between the Company, Power Photo Kiosks, Inc. and the
shareholders of Power Photo Kiosks, Inc. dated February 23, 2000.
4.2 [5] Loan Agreement between Power Photo Kiosks, Inc. and MLIC Holdings, Inc. dated May 1999.
4.3 [5] Loan Extension between Power Photo Kiosks, Inc. and MLIC Holdings, Inc. dated July 1999.
4.4 [5] Loan Extension between Power Photo Kiosks, Inc. and MLIC Holdings, Inc. dated September
1999.
4.5 [5] Common Stock Purchase Agreement with Thomson Kernaghan & Co., Ltd., as Agent dated
February 2000.
4.6 * Promissory Note by the Company in favor of Thomson Kernaghan & Co., Ltd. dated June 5,
2000.
4.7 * Promissory Note by the Company in favor of Thomson Kernaghan & Co., Ltd. dated October
26, 2000.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
5.1 [6] Opinion of Mintmire & Associates.
5.2 [8] Opinion of Mintmire & Associates.
10.1 [5] Revised Licensing Agreement between Power Photo Enterprises, Inc. and Licensing Resource
Group, Inc. dated October 1998.
10.2 [5] Licensing Agreement between Power Photo Enterprises, Inc. and Titan Sports, Inc. dated
October 1998.
10.3 [5] Master Merchandising License Agreement between Power Photo Kiosks, Inc. and Universal
Studios Licensing, Inc. dated September 1999.
10.4 [5] Teaming Agreement between Power Photo Kiosks, Inc., Sybase Canada Limited, Advanced
Kiosk Services, Inc. and Integrated Kiosks, Inc. dated November 1999.
10.5 [5] License Agreement between Power Photo Kiosks, Inc. and The Ohio State University dated
February 2000.
10.6 [5] Manufacturing Agreement between Power Photo Kiosks, Inc. and Integrated Kiosk, Inc. dated
May 1999.
10.7 [6] Power Kiosks, Inc. Year 2000 Consultant Stock Compensation Plan
10.8 [8] Power Kiosks, Inc. Year 2000 Supplemental Employee/Consultant Stock Compensation Plan.
10.9 * Lease Agreement between Team Power Enterprises, Inc. and Bruce N. Huntley Contracting
Limted, dated July 1, 1998.
10.10 * Financial Consulting and Services Agreement between the Company and Discovery Enterprises,
Inc. d/b/a Discovery Financial, Inc. dated August 23, 2000.
10.11 * Teaming Agreement between Power Photo Kiosks, Inc. and Mattel Canada, Inc. dated
September 18, 2000.
10.12 * Co-Marketing and Sponsorship Agreement between the Company, PACEL Corp. and Child
Watch of North America dated October 11, 2000.
10.13 * Letter of Intent between Power Photo Kiosks, Inc. and Groome Capital. Com, Inc. dated October
12, 2000.
10.14 * Employment Agreement between Power Kiosks, Inc. and Ronald Terry Cooke, dated July 2000.
10.15 * Employment Agreement between Power Kiosks, Inc. and Allan Turowetz, dated July 2000.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
16.1 [4] Letter on change of certifying accountant.
16.2 [4] Letter dated May 1, 2000 from Dorra Shaw & Dugan.
23.1 [6] Consent of KPMG, LLP.
23.2 [6] Consent of Mintmire & Associates (contained in the opinion filed as Exhibit 5.1)
23.3 [8] Consent of KPMG, LLP.
23.4 [8] Consent of Mintmire & Associates (contained in the opinion filed as Exhibit 5.2).
27.1 * Financial Data Schedule.
99.1 [4] Board Resolution dated May 1, 2000 authorizing change in fiscal year of the Company to July 31.
99.2 [7] The accountant's statement required by Rule 12b-25(c)
------------------------------------------------
</TABLE>
[1] Previously filed with the Company's registration on Form 10SB.
[2] Previously filed with the Company's report on Form 8K filed March 9, 2000.
[3] Previously filed with the Company's report on Form 10QSB for the period
ending February 29, 2000.
[4] Previously filed with the Company's report on Form 8KA1 filed May 2, 2000.
[5] Previously filed with the Company's report on Form 10QSB for the period
ending April 30, 2000.
[6] Previously filed with the Company's Registration Statement on Form S-8 filed
August 2, 2000.
[7] Previously filed with the Company's 12b-25 NT filed on October 30, 2000.
[8] Previously filed with the Company's Registration Statement on Form S-8 filed
November 1, 2000.
* Filed herewith
(b) The Company filed a report on Form 8K on March 9, 2000 in connection with
the Company's acquisition of Power Photo Kiosks, Inc., a Canadian corporation.
The Company filed a report on Form 8KA1 on May 2, 2000 dismissing Dorra Shaw &
Dugan and retaining KPMG, LLP as its auditors. Additionally, the Company changed
its fiscal year to July 31.
The Company filed a report on Form 8KA2 on May 8, 2000 with the required
financial statements pursuant to its first report on Form 8K dated March 9,
2000.
37
<PAGE>
The Company filed a report on Form 8KA3 on October 31, 2000 for the purpose of
providing adjusted financial statements and pro forma financial information for
Power Photo Kiosks, Inc., a Canadian corporation, as required by Item 7 of Form
8-K.
38
<PAGE>
SIGNATURES
In accordance with Section 13 and 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Power Kiosks, Inc.
(Registrant)
Date: Nov. 10, 2000 By: /s/ Ronald Terry Cooke
------------------------------------------------
Ronald Terry Cooke, President and Chairman
By: /s/ Allan Turowetz
------------------------------------------------
Allan Turowetz, Vice President and Director
By: /s/ Jean Arthur Beliveau
-------------------------------------------------
Jean Arthur Beliveau, Director
By: /s/ June Nichols Sweeney
-------------------------------------------------
June Nichols Sweeney, Director
Pursuant to the requirements of the Exchange Act, this report has been
signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Ronald Terry Cooke President and Chairman Nov. 10, 2000
-----------------------
Ronald Terry Cooke
/s/ Allan Turowetz Vice President and Director Nov. 10, 2000
-----------------------
Allan Turowetz
/s/ Jean Arthur Beliveau Director Nov. 10, 2000
------------------------
Jean Arthur Beliveau
/s/ June Nichols Sweeney Director Nov. 10, 2000
------------------------
June Nichols Sweeney
39
