UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment 2 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 both the Form 8-K filed on March 9, 2000 and the
amended Form 8-K filed on May 2, 2000 by Power Kiosks, Inc., a Florida
corporation. The purpose of this second amendment to Form 8-K is to provide
financial statements and the 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 Auditor's Report
FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statements of Comprehensive Loss 3
Consolidated Statements of Shareholders' Deficiency 4
Consolidated Statements of Cash Flows 5
Notes to Financial Statements 6
<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.
The Company is in its development stage and has incurred significant
expenditures on marketing, research and development. As explained in note 1(b),
the Company incurred a net loss of $1,036,205 for the year ended July 31, 1999
and as of that date, had a deficit accumulated during the development stage of
$1,065,177. 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.
/s/KPMG LLP
Chartered Accountants
Toronto, Canada
May 3, 2000
<PAGE>
<TABLE>
<CAPTION>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheets
(in U.S. dollars)
- ------------------------------------------------------------------------------------------------------------------------------------
July 31, 1998 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
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 66 415,935 564,833
Property and equipment (note 4) - 6,863 54,771
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 66 $ 422,798 $ 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 5) - 464,840 851,942
Due to shareholders (note 6) 28,092 166,218 232,170
Convertible notes (note 7) - - 41,507
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 28,092 773,888 1,623,812
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 - 731,799 731,799
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 - -
Accumulated other comprehensive
income (losses) 880 (17,712) (44,194)
Deficit accumulated during the development stage (28,972) (1,065,177) (1,691,813)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' deficiency (28,026) (351,090) (1,004,208)
Subsequent event (note 10)
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' deficiency $ 66 $ 422,798 $ 619,604
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying
notes to consolidated financial statements.
1
<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
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Expenses:
Sales and marketing $ 3,436 $ 323,017 $ 45,701 $ 327,487 $ 653,940
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) (352,048) (1,324,937)
Interest expense - 92,288 - 274,588 366,876
- ------------------------------------------------------------------------------------------------------------------------------------
Loss before provision for income taxes (28,972) (1,036,205) (142,353) (626,636) (1,691,813)
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) $ (1.12) $ (0.16) $ (0.63)
============ ============ ============ ============
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.
2
<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
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Loss for the period $ (28,972) $ (1,036,205) $ (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) $ (1,054,797) $ (173,472) $ (653,118) $ (1,736,007)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying
notes to consolidated financial statements.
3
<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 income development shareholders'
Number Amount Number Amount (losses) stage deficiency
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <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 - - 121,850 731,733 - - 731,733
Issuance of Class A
common shares on
conversion of
common shares (878,150) (66) 878,150 66 - - -
Currency translation
adjustment - - - - (18,592) - (18,592)
Loss for the year - - - - - (1,036,205) (1,036,205)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, July 31, 1999 - - 1,000,000 731,799 (17,712) (1,065,177) (351,090)
Currency translation
adjustment (unaudited) - - - - (26,482) - (26,482)
Loss for the period
(unaudited) - - - - - (626,636) (626,636)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, January 31,
2000 (unaudited) - $ - 1,000,000 $ 731,799 $ (44,194) $ (1,691,813) $ (1,004,208)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying
notes to consolidated financial statements.
4
<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) $ (1,036,205) $ (142,353) $ (626,636) $ (1,691,813)
Item not affecting cash:
Amortization - 308 - 4,899 5,143
Accretion of interest
on loan payable - 36,010 - 89,211 124,404
Stock-based
compensation
expense - 479,601 - - 485,095
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) (246,418) (923,455)
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) 167 (15,219)
- ------------------------------------------------------------------------------------------------------------------------------------
(Increase) decrease in cash - - - - -
Cash, beginning of period - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ - $ - $ - $ - $ -
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $ - $ - $ - $ - $ -
Income taxes paid - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying
notes to consolidated financial statements.
5
<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 $1,080,929 as at July 31, 1999 ($1,691,410 as at
January 31, 2000). The Company has not generated revenues and
management does not expect to commence generating revenues until
2000. 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 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.
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)
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(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) 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.
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)
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(e) Research and development expenses:
Costs related to research, design and development of products are
charged to research and development expense as incurred.
(f) 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.
(g) 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.
(h) 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.
8
<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)
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(i) 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.
(j) 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.
(k) 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.
(l) 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.
9
<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)
- --------------------------------------------------------------------------------
3. 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
- ----------------------------------------------------------------------------------------
4. Property and equipment:
- -----------------------------------------------------------------------------------------
July 31, January 31,
1998 1999 2000
- -----------------------------------------------------------------------------------------
(Unaudited)
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>
5. Loan payable:
The loan payable bears interest of 12% and is secured by the inventory
or any receivable from the sale of kiosks. The loan is due on demand.
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.
10
<PAGE>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(in U.S. dollars)
6. Due to shareholders:
The amounts due to shareholders bear no interest and are unsecured.
Terms of repayment have not been established.
7. 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.
8. Capital stock:
(a) The authorized share capital also includes the following classes of
shares, none of which have been issued:
Unlimited Class B common shares, voting, participating, each
having the right of exchange for a share of Class E preferred shares at fair
value at the time of exchange
Unlimited Class C preferred shares, voting, non-participating
Unlimited Class D preferred shares, voting, non-participating,
annual non-cumulative dividends, retractable at the option of the holder
Unlimited Class E preferred shares, non-voting, monthly
non-cumulative dividends, non-participating, retractable at the option of the
holder
Unlimited Class F preferred shares, non-voting, monthly
non-cumulative dividends, non-participating, retractable at the option of the
holder
Unlimited Class G preferred shares, non-voting, annual
non-cumulative dividends, non-participating, retractable at the option of the
holder
Unlimited Class H preferred shares, non-voting, annual
non-cumulative dividends, non-participating, retractable at the option of the
holder
11
<PAGE>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(in U.S. dollars)
8. Capital stock (continued):
Unlimited Class I preferred shares, non-voting, annual
non-cumulative dividends, non-participating, retractable at the option of the
holder
(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.
9. 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
- -------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Basic rate applied to
loss before provision
for income taxes $ (12,458) $ (452,342) $ (73,119) $ (269,453)
Adjustments resulting from:
Stock-based
compensation
not deducted for tax - 206,228 - -
Other - 15,485 - 38,361
Change in valuation
allowance 12,458 230,629 73,119 231,092
- -------------------------------------------------------------------------------------------------------
Provision for income taxes $ - $ - $ - $ -
- -------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Power Photo Kiosks Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(in U.S. dollars)
9. Provision for income taxes (continued):
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>
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 asses 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.
<PAGE>
10. 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
- -------------------------------------------------------------
13
<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 May 8, 2000
By: /s/ Terry Cooke By: /s/ Allan Turowetz
---------------------- -----------------------------
Terry Cooke, President Allan Turowetz, Vice-President
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<NAME> POWER KIOSKS, INC.
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