UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment 3 to
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 23, 2000
POWER KIOSKS, INC.
--------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 000-27769 65-0522144
---------------------------- ---------------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) Identification No.)
181 Whitehall Drive
Markham, Ontario, Canada L3R 9T1
---------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (905) 948-9600
N/A
----------------------------------------------------------------
(Former name or former address, if changes since last report)
Copy of Communications to:
Mintmire & Associates
265 Sunrise Avenue
Suite 204
Palm Beach, FL 33480
(561) 832-5696
<PAGE>
This Form 8-K/A amends the Form 8-K filed on March 9, 2000, the amended
Form 8-K filed on May 2, 2000 and the amended Form 8-K filed on May 8, 2000, by
Power Kiosks, Inc., a Florida corporation. The purpose of this third amendment
to Form 8-K is to provided 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.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
Pursuant to the requirements of Regulation S-X 210.3.05(b), the
following are audited financial statements of Power Photo Kiosks, Inc., a
Canadian corporation, for the period from inception (May 13, 1998) to January
31, 2000. The registrant acquired all of the outstanding capital stock of such
entity on February 23, 2000.
TABLE OF CONTENTS
Independent Auditors' Report
FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Comprehensive Loss F-4
Consolidated Statements of Shareholders' Deficiency F-5
Consolidated Statements of Cash Flows F-6
Notes to Financial Statements F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Power Photo Kiosks Inc.
We have audited the accompanying consolidated balance sheets of Power Photo
Kiosks Inc. (A Development Stage Enterprise) as at July 31, 1998 and 1999 and
the related statements of operations, comprehensive loss, shareholders'
deficiency and cash flows for the period from May 13, 1998 (date of inception)
to July 31, 1998 and the year ended July 31, 1999. 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, 1998 and 1999 and the results of its operations and its cash
flows for the period from May 13, 1998 (date of inception) to July 31, 1998 and
the year ended July 31, 1999 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
June 16, 2000
<PAGE>
<TABLE>
<CAPTION>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheets
(in U.S. dollars)
------------------------------------------------------------------------------------------------------------------------------------
July 31, 2000 July 31, 1999 January 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Investment tax credits receivable $ - $ 33,194 $ 34,588
Inventories (note 3) - 342,944 500,719
Miscellaneous receivable - 26,347 25,375
Prepaid expenses and deposits 66 13,450 4,151
Deferred financing costs - 58,753 -
------------------------------------------------------------------------------------------------------------------------------
Total current assets 66 74,688 564,833
Property and equipment (note 4) - 6,863 54,771
------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 66 $ 81,551 $ 619,604
------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Deficiency
Current liabilities:
Bank indebtedness $ - $ 20,451 $ 6,747
Accounts payable - 54,638 319,682
Accrued liabilities - 67,741 171,764
Loan payable (note 6) - 663,878 968,456
Due to shareholders (note 7) 28,092 166,218 232,170
Convertible notes (note 8) - - 41,507
------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 28,092 972,926 1,740,326
Shareholders' deficiency (note 8):
Capital stock:
Class A common shares:
Authorized:
Unlimited number of shares Issued and outstanding:
Nil shares at July 31, 1998;
1,000,000 shares at July 31, 1999
and January 31, 2000 - 793,215 793,215
Common shares:
Authorized:
Unlimited number of shares
Issued and outstanding:
878,150 shares at July 31, 1998;
nil shares at July 31, 1999 and
January 31, 2000 66 - -
Contributed surplus - - 194,849
Accumulated other comprehensive
income (losses) 880 (20,910) (52,026)
Deficit accumulated during the development stage (28,972) (1,263,680) (1,120,722)
------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' deficiency (28,026) (351,090) (1,004,208)
Subsequent event (note 10)
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' deficiency $ 66 $ 81,551 $ 619,604
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying
notes to consolidated financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Consolidated Statements of Operations
(in U.S. dollars)
------------------------------------------------------------------------------------------------------------------------------------
Period from
May 13, Period
1998 Six months Six months from
(inception) to Year ended ended ended inception to
July 31, July 31, January 31, January 31, January 31,
1998 1999 1999 2000 2000
------------------------------------------------------------------------------------------------------------------------------------
(Restated) (Unaudited) (Unaudited) (Unaudited)
(Restated) (Restated)
<S> <C> <C> <C> <C> <C>
Expenses:
Sales and marketing $ 3,436 $ 323,017 $ 45,701 $ 432,058 $ 758,511
Research and development 25,536 141,299 96,652 24,561 191,396
General and administrative - 479,601 - - 479,601
------------------------------------------------------------------------------------------------------------------------------------
Loss from operations (28,972) (943,917) (142,353) (456,619) (1,429,508)
Financing costs - - - 255,656 255,656
Interest expense - 290,791 - 80,588 371,596
------------------------------------------------------------------------------------------------------------------------------------
Loss before provision for income taxes (28,972) (1,234,708) (142,353) (793,080) (2,056,760)
Provision for income taxes - - - - -
------------------------------------------------------------------------------------------------------------------------------------
Loss for the period $ (28,972) $ (1,036,205) $ (142,353) $ (626,636) $ (1,691,813)
------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per
common share $ (0.03) $ (1.34) $ (0.16) $ (0.79)
============ ============ ============ ============
Shares used in computing basic and
diluted loss per common share 878,150 922,254 878,150 1,000,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying
notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Consolidated Statements of Comprehensive Loss
(in U.S. dollars)
------------------------------------------------------------------------------------------------------------------------------------
Period from
May 13, Period
1998 Six months Six months from
(inception) to Year ended ended ended inception to
July 31, July 31, January 31, January 31, January 31,
1998 1999 1999 2000 2000
------------------------------------------------------------------------------------------------------------------------------------
(Restated) (Unaudited) (Unaudited) (Unaudited)
(Restated) (Restated)
<S> <C> <C> <C> <C> <C>
Loss for the period $ (28,972) $ (1,234,708) $ (170,045) $ (626,636) $ (1,691,813)
Other comprehensive income (loss):
Currency translation adjustment 880 (18,592) (3,427) (26,482) (44,194)
------------------------------------------------------------------------------------------------------------------------------------
Comprehensive loss $ (28,092) $ (1,255,122) $ (145,780) $ (824,196) $ (2,108,786)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying
notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Consolidated Statements of Shareholders' Deficiency
(in U.S. dollars)
--------------------------------------------------------------------------------------------------------------------------------
Accumulated Deficit
other accumulated
Class A comprehensive during the Total
Common shares common shares Contributed income development shareholders'
Number Amount Number Amount surplus (losses) stage deficiency
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issued to founders,
May 13, 1998
(inception) 878,150 $ 66 - $ - - $ - $ - $ 66
Currency translation
adjustment - - - - - 880 - 880
Loss for the period - - - - - - (28,972) (28,972)
--------------------------------------------------------------------------------------------------------------------------------
Balances, July 31, 1998 878,150 66 - - - 880 (28,972) (28,026)
Issuance of Class A
common shares - - 121,850 791,149 - - - 793,149
Issuance of Class A
common shares on
conversion of
common shares (878,150) (66) 878,150 66 - - - -
Currency translation
adjustment - - - - - (20,414) - (20,414)
Loss for the year - - - - - - (1,234,708) (1,234,708)
--------------------------------------------------------------------------------------------------------------------------------
Balances, July 31, 1999 - - 1,000,000 793,215 - (19,534) (1,263,680) (489,999)
Contributed surplus
(unaudited)(restated) - - - - 194,849 - - 194,849
Currency translation
adjustment (unaudited) - - - - - (32,492) - (32,492)
Loss for the period
(unaudited) - - - - - - (793,080) (793,080)
--------------------------------------------------------------------------------------------------------------------------------
Balances, January 31,
2000 (unaudited) - $ - 1,000,000 $ 793,215 $194,849 $ (52,026) $ (2,056,760) $ (1,120,722)
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying
notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
(in U.S. dollars)
------------------------------------------------------------------------------------------------------------------------------------
Period from
May 13, Period
1998 Six months Six months from
(inception) to Year ended ended ended inception to
July 31, July 31, January 31, January 31, January 31,
1998 1999 1999 2000 2000
------------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash provided by (used in):
Operating activities:
Loss for the period $ (28,972) $ (1,234,708) $ (142,353) $ (793,080) $ (2,056,760)
Item not affecting cash:
Amortization - 308 - 4,899 5,143
Accretion of interest
on loan payable - 234,513 - - 237,199
Stock-based
compensation
expense - 479,601 - - 485,095
Finance charge - - - 255,656 252,135
Change in operating
assets and liabilities:
Investment tax
credits receivable - (33,105) - - (33,484)
Inventories - (342,020) (35,110) (140,739) (484,738)
Miscellaneous receivable - (26,276) (506) 2,040 (24,565)
Prepaid expenses (68) (13,347) 65 9,682 (4,018)
Accounts payable - 54,491 39,608 257,919 309,479
Accrued liabilities - 67,559 23,747 99,318 166,282
Due to shareholders 28,971 137,651 111,103 57,888 224,760
------------------------------------------------------------------------------------------------------------------------------------
Net cash flows used in
operating activities (69) (675,333) (3,446) (246,417) (923,472)
Financing activities:
Issuance of common
shares 69 - - - 69
Increase (decrease) in
bank indebtedness - 20,451 5,351 (13,704) 6,747
Loan proceeds - 678,426 - 270,856 949,282
Issuance of convertible notes - - - 40,742 40,742
------------------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing
activities 69 698,877 5,351 297,894 996,840
Investing activities:
Purchase of property
and equipment - (7,153) (1,826) (51,643) (58,166)
------------------------------------------------------------------------------------------------------------------------------------
Cash flows used in investing
activities - (7,153) (1,826) (51,643) (58,166)
Effect of currency translation
of cash balances - (16,391) (79) 166 (15,202)
------------------------------------------------------------------------------------------------------------------------------------
(Increase) decrease in cash - - - - -
Cash, beginning of period - - - - -
------------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $ - $ - $ - $ - $ -
Income taxes paid - - - - -
------------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of non-cash
financing and investing activiteids:
Shares issued in connection
with financing costs $ - $ - $ - $ 255,656 $ 255,656
</TABLE>
See accompanying
notes to consolidated financial statements.
F-6
<PAGE>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(in U.S. dollars)
(Information as at January 31, 1999 and 2000 and for the six month periods ended
January 31, 1999 and 2000 is unaudited)
1. General:
(a) The Company:
The Company was incorporated on May 13, 1998 as "Power Photo Enterprises Inc."
On May 12, 1999, the Company was continued under Section 187 of the Canada
Business Corporations Act as "Power Photo Kiosks Inc." The Company develops and
markets a kiosk digital imaging system.
(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 $1,263,680 as at July 31,
1999 ($2,056,760 as at January 31, 2000). 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 substanial 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 revenues 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.
2. Significant accounting policies:
(a) Basis of presentation:
These financial statements are stated in U.S. dollars, except where otherwise
noted. They have been prepared in accordance with accounting principles
generally accepted in the United States. These consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary. All
material intercompany transactions and balances have been eliminated.
F-7
<PAGE>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(in U.S. dollars)
(Information as at January 31, 1999 and 2000 and for the six month periods ended
January 31, 1999 and 2000 is unaudited)
--------------------------------------------------------------------------------
POWER PHOTO KIOSKS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN U.S. DOLLARS)
(INFORMATION AS AT JANUARY 31, 1999 AND 2000 AND FOR THE SIX MONTH PERIODS ENDED
JANUARY 31, 1999 AND 2000 IS UNAUDITED)
2. Revision and restatement of 1999 consolidated financial statements:
On May 10, 1999, the Company entered into a loan agreement, as described in note
6 to the consolidated financial statements, and in connection with the loan, the
Company issued 40,000 Class A common shares to the lender. As a result, $240,300
of the loan proceeds, representing the fair value of the 40,000 Class A 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. The Company 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, the Company issued 10,000
Class A 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.
During the six months ended January 31, 2000, certain shareholders of the
Company transferred title to 45,000 of their shares to the lender in
consideration for an additional loan to the Company and for the extensions of
the maturity dates of the loans. The unaudited consolidated financial statements
for the six months ended January 31, 2000 have been restated to reflect the
transfer of shares as contributed surplus, based upon the fair value of the
shares, and deferred financing costs, which are amortized over each of the
extension periods.
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. The
impact of the restatement of the unaudited consolidated financial statements for
the six months ended January 31, 2000 is an increased loss of $166,444 and an
increase in total current liabilities of $116,514 for the six months ended
January 31, 2000 compared to the amount previously presented.
F-8
<PAGE>
POWER PHOTO KIOSKS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN U.S. DOLLARS)
(INFORMATION AS AT JANUARY 31, 1999 AND 2000 AND FOR THE SIX MONTH PERIODS ENDED
JANUARY 31, 1999 AND 2000 IS UNAUDITED)
3. Significant accounting policies:
(a) Basis of presentation:
These financial statements are stated in U.S. dollars, except where otherwise
noted. They have been prepared in accordance with accounting principles
generally accepted in the United States. These consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary. All
material intercompany transactions and balances have been eliminated.
(b) Inventories:
Inventories are valued at the lower of cost and replacement cost with cost being
determined on a first-in, first-out basis.
(c) Property and equipment:
Property and equipment are stated at cost, net of accumulated depreciation and
amortization and are amortized over their useful lives. Depreciation is computed
using the straight-line method as follows:
Computer equipment 20%
Other equipment 10%
Prototype 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
statement of operations.
(d) 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-9
<PAGE>
POWER PHOTO KIOSKS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN U.S. DOLLARS)
(INFORMATION AS AT JANUARY 31, 1999 AND 2000 AND FOR THE SIX MONTH PERIODS ENDED
JANUARY 31, 1999 AND 2000 IS UNAUDITED)
3. Significant accounting policies (continued):
(e) Currency translation:
Monetary assets and liabilities of the Company 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 shareholders' deficiency within other comprehensive
loss.
(f) Research and development expenses:
Costs related to research, design and development of products are charged to
research and development expense as incurred.
(g) 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.
F-10
<PAGE>
POWER PHOTO KIOSKS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN U.S. DOLLARS)
(INFORMATION AS AT JANUARY 31, 1999 AND 2000 AND FOR THE SIX MONTH PERIODS ENDED
JANUARY 31, 1999 AND 2000 IS UNAUDITED)
3. Significant accounting policies (continued):
(h) 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.
(i) 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 period.
(j) Fair values of financial assets and financial liabilities:
The carrying values of miscellaneous receivable, bank indebtedness, accounts
payable, accrued liabilities and loan 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.
(k) Comprehensive income:
SFAS No, 130, "Reporting Comprehensive Income", issued by the Financial
Accounting Standards Board ("FASB") 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.
F-11
<PAGE>
POWER PHOTO KIOSKS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN U.S. DOLLARS)
(INFORMATION AS AT JANUARY 31, 1999 AND 2000 AND FOR THE SIX MONTH PERIODS ENDED
JANUARY 31, 1999 AND 2000 IS UNAUDITED)
3. Significant accounting policies (continued):
(l) Unaudited interim financial statements:
The accompanying financial statements at January 31, 2000 and for the period
from May 13, 1998 (inception) to January 31, 1999 and for the six months ended
January 31, 2000 are unaudited but include all adjustments (consisting of normal
recurring adjustments) which, in the opinion of management, are necessary for a
fair statement of the financial position and the operating results and cash
flows for the interim date and periods presented. Results for the interim period
ended January 31, 2000 are not necessarily indicative of results of the entire
fiscal year or future periods.
(m) Recent accounting pronouncement:
In June 1998, the FASB 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 March 31, 2002. Management
believes the adoption of SFAS No, 133 will not have a material effect on the
Company's financial position or results of operations.
4. Inventories:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
July 31, January 31,
1998 1999 2000
---------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Finished kiosks and work in process $ - $ 283,991 $ 439,292
Paper - 58,953 61,427
--------------------------------------------------------------------------
$ - $ 342,944 $ 500,719
--------------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
POWER PHOTO KIOSKS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN U.S. DOLLARS)
(INFORMATION AS AT JANUARY 31, 1999 AND 2000 AND FOR THE SIX MONTH PERIODS ENDED
JANUARY 31, 1999 AND 2000 IS UNAUDITED)
5. Property and equipment:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
July 31, January 31,
1998 1999 2000
----------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Prototype $ - $ - $ 51,024
Computer equipment - 1,858 3,523
Other equipment - 5,314 5,536
--------------------------------------------------------------------
- 7,172 60,083
Less accumulated amortization - 309 5,312
--------------------------------------------------------------------
$ - $ 6,863 $ 54,771
--------------------------------------------------------------------
</TABLE>
6. Loan payable:
The loan payable bears interest at the following rates: May 10, 1999 to July 30,
1999 - 12% p.a.; July 30, 1999 to August 31, 1999 - $450 per day; subsequent to
September 14, 1999 - $700 per day. The loan is secured by the inventory or any
receivable from the sale of kiosks. The original maturity date of the loan was
July 30, 1999 and the maturity date has subsequently been extended as described
in note 9. In connection with the loan, the Company issued 40,000 Class A common
shares to the lender. As a result, $240,300 of the loan proceeds, representing
the fair value of the 40,000 Class A 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
statement of operations.
7. Due to shareholders:
The amounts due to shareholders bear no interest and are unsecured. Terms of
repayment have not been established.
F-13
<PAGE>
POWER PHOTO KIOSKS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN U.S. DOLLARS)
(INFORMATION AS AT JANUARY 31, 1999 AND 2000 AND FOR THE SIX MONTH PERIODS ENDED
JANUARY 31, 1999 AND 2000 IS UNAUDITED)
8. Convertible notes:
During January 2000, the Company 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 into 390 Class A common shares of the Company at the
due date.
9. Capital stock:
(a) The authorized share capital also includes the following classes of
shares, none of which have been issued:
(b) On May 10, 1999, the outstanding common shares of the Company were
exchanged for Class A common shares on a 1:1 basis. The Class A common
shares are voting and participating.
(c) In May 1999, the Company issued 81,850 Class A common shares to a
shareholder for nominal consideration. The Company recorded
stock-based compensation of $479,601 representing the difference
between the fair value of the Class A common shares and the issue
price.
(d) On July 27, 1999, the Company issued 10,000 Class A common shares to
its lender in consideration for the extension of the maturity date of
the loan described in note 6 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.
(e) On September 14, 1999, certain shareholders of the Company transferred
title to 30,000 Class A common shares to the lender of the Company in
consideration for the extension of the maturity date of the loan
described in note 6 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) On January 12, 2000, one of the shareholders of the Company
transferred title to 15,000 Class A common shares to the lender of the
Company in consideration for the indefinite extension of the maturity
date of the loan described in note 6. The fair value of the shares
transferred has been recorded as contributed surplus and a financing
cost.
F-14
<PAGE>
POWER PHOTO KIOSKS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN U.S. DOLLARS)
(INFORMATION AS AT JANUARY 31, 1999 AND 2000 AND FOR THE SIX MONTH PERIODS ENDED
JANUARY 31, 1999 AND 2000 IS UNAUDITED)
10. 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:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
Period from Six months Six months
May 13, 1998 Year ended ended ended
(inception) to July 31, January 31, January 31,
July 31, 1998 1999 1999 2000
----------------------------------------------------------------------------------------------
(Restated) (Unaudited) (Unaudited)
(Restated)
<S> <C> <C> <C> <C>
Basic rate applied to
loss before provision
for income taxes $ (12,458) $ (538,333) $ (73,119) $ (345,783)
Adjustments resulting from:
Stock-based
compensation
not deducted for tax - 206,228 - -
Non-deductible interest
and financing costs - 105,524 - 111,466
Other - 1,048 - 3,225
Change in valuation
allowance 12,458 230,629 73,119 231,092
----------------------------------------------------------------------------------------------
Provision for income taxes $ - $ - $ - $ -
----------------------------------------------------------------------------------------------
</TABLE>
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
July 31, July 31, January 31,
1998 1999 2000
-------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Benefit of net operating losses
carried forward $ 12,458 $ 243,087 $ 474,179
-------------------------------------------------------------------------------
Deferred tax asset $ 12,458 $ 243,087 $ 474,179
Less valuation allowance 12,458 243,087 474,179
-------------------------------------------------------------------------------
$ - $ - $ -
-------------------------------------------------------------------------------
</TABLE>
F-15
<PAGE>
POWER PHOTO KIOSKS INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN U.S. DOLLARS)
(INFORMATION AS AT JANUARY 31, 1999 AND 2000 AND FOR THE SIX MONTH PERIODS ENDED
JANUARY 31, 1999 AND 2000 IS UNAUDITED)
10. Provision for income taxes (continued):
In assessing the realizability of deferred tax asses, 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, 1999, the Company has net operating losses for Canadian income tax
purposes of approximately $550,000 which will expire in 2005 and 2006.
11. Subsequent event:
On February 23, 2000, the Company entered into an agreement for the exchange of
common stock with Alternate Achievements, Inc., now known as Power Kiosks, Inc.
("Power Kiosks"), a public shell corporation listed on NASDAQ Bulletin Board.
Under the terms of the agreement, Power Kiosks issued 3,000,000 common shares,
$0.0001 par value, in exchange for all of the issued and outstanding shares of
the Company. At the time of the transaction, Power Kiosks had net assets of
$14,000 (unaudited). As the former shareholders of the Company will control the
consolidated entity, the transaction will be accounted for as a reverse
acquisition whereby, notwithstanding the legal acquisition of the Company by
Power Kiosks, the transaction will be accounted for as an acquisition of Power
Kiosks by the Company. Upon consummation of the transaction on February 23,
2000, the share capital of Power Kiosks is as follows:
Authorized:
10,000,000 preferred shares, no par value
50,000,000 common shares, $0.0001 par value
Issued and outstanding:
4,390,000 common shares
F-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
POWER KIOSKS, INC.
(Registrant)
Date
By: /s/Terry Cooke By: /s/Allan Turowetz
----------------------------- -------------------------------
Terry Cooke, President Allan Turowetz, Vice-President
By:/s/ June Nichols-Sweeney
-------------------------------
June Nichols-Sweeney, Director
