U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended October 31, 2000
Commission File No.: 0-27769
Florida 65-0522144
------------------------------------ ----------------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
181 Whitehall Drive
Markham, Ontario, Canada L3R 9T1
------------------------------------------ ----------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (905) 948-9600
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
----------------------------------- -----------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value per share
--------------------------------------------------------
(Title of class)
Copies of Communications Sent to:
Donald F. Mintmire
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696
Fax: (561) 659-5371
<PAGE>
Indicate by Check whether the issuer (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
-- --
As of October 31, 2000, there were 5,668,483 shares of voting stock
of the registrant issued and outstanding.
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
<CAPTION>
Power Kiosks, Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheets
(Expressed in U.S. dollars)
------------------------------------------------------------------ -------------- --------------
July 31, October 31,
2000 2000
------------------------------------------------------------------ -------------- --------------
(Audited) (Unaudited)
<S> <C> <C>
Assets
Current assets:
Investment tax credits receivable $ 33,625 $ 32,648
Inventories 40,965 44,916
Miscellaneous receivable 1,528 980
Prepaid expenses 42,190 653
Deferred financing costs - 109,200
------------------------------------------------------------------ -------------- --------------
Total current assets 118,308 188,397
Property and equipment 479,019 558,544
------------------------------------------------------------------ -------------- --------------
Total assets $ 597,327 $ 746,941
------------------------------------------------------------------ -------------- --------------
Liabilities and Stockholders' Deficiency
Current liabilities:
Bank indebtedness $ 46,576 $ 125,724
Accounts payable 120,382 157,232
Accrued liabilities 351,097 498,628
Accrued salaries payable 148,890 144,563
Accrued financing costs payable 1,012,500 -
Loans payable 1,377,942 1,369,889
Due to stockholders 135,272 216,703
Convertible notes 40,350 39,177
------------------------------------------------------------------ -------------- --------------
Total current liabilities 3,233,009 2,551,916
Stockholders' deficiency:
Capital stock:
Authorized:
50,000,000 $0.0001 par value common shares
(July 31, 2000 - 50,000,000) 10,000,000
preferred shares (July 31, 2000 - 10,000,000)
Issued and outstanding:
6,128,684 common shares (July 31, 2000 - 5,375,084) 538 613
Contributed surplus 9,234,291 13,369,916
Warrants - 1,110,000
Deferred stock-based compensation (4,388,125) (5,244,167)
Accumulated other comprehensive income (loss) 12,090 52,905
Deficit accumulated during the development stage (7,494,476) (11,094,242)
------------------------------------------------------------------ --------------- ---------------
Total stockholders' deficiency (2,635,682) (1,804,975)
------------------------------------------------------------------ --------------- ---------------
Total liabilities and stockholders' deficiency $ 597,327 $ 746,941
------------------------------------------------------------------ --------------- ---------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
Power Kiosks, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Operations
(Expressed in U.S. dollars)
(Unaudited)
------------------------------------------------------ -----------------------------------------------------
Three months ended Period from
October 31, inception to
--------------------------------- October 31,
1999 2000 2000
------------------------------------------------------ ------------------ ---------------- -------------------
<S> <C> <C> <C>
Expenses:
Sales and marketing $ 20,196 $ 75,462 $ 997,358
Research and development 73,913 146,707 750,013
General and administrative 222,926 3,329,287 7,042,863
------------------------------------------------------ ------------------ ---------------- -------------------
Loss from operations (317,035) (3,551,456) (8,790,234)
Financing costs 110,054 - 1,793,165
Interest expense 47,597 48,310 510,843
------------------------------------------------------ ------------------ ---------------- -------------------
Loss before provision for income taxes (474,686) (3,599,766) (11,094,242)
Provision for income taxes - - -
------------------------------------------------------ ------------------ ---------------- -------------------
Loss for the period $ (474,686) $ (3,599,766) $ (11,094,242)
------------------------------------------------------ ------------------ ---------------- -------------------
Basic and diluted loss per common share $ 0.16 $ 0.65
============== ===============
Shares used in computing basic and
diluted loss per common share 2,995,000 5,549,500
------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Power Kiosks, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Comprehensive Loss
(Expressed in U.S. dollars)
(Unaudited)
--------------------------------------------------------------------------------------------------------------
Period from
Three months ended inception to
October 31, October 31,
----------------------------------
1999 2000 2000
------------------------------------------------------ ------------------ ---------------- ----------------
<S> <C> <C> <C>
Loss for the period $ (474,686) $ (3,599,766) $ (11,094,242)
Other comprehensive gain:
Currency translation adjustment 3,022 40,815 52,905
------------------------------------------------------ ------------------ ---------------- ----------------
Comprehensive loss $ (471,664) $ (3,558,951) $ (11,041,337)
------------------------------------------------------ ------------------ ---------------- ----------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Power Kiosks, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)
-----------------------------------------------------------------------------------------------------------
Three months ended Period from
October 31, inception to
-------------------------------- October 31,
1999 2000 2000
------------------------------------------------------ ----------------- ---------------- -----------------
<S> <C> <C> <C>
Cash provided by (used in):
Operating activities:
Loss for the period $ (474,686) $ (3,599,766) $ (11,094,242)
Items not affecting cash:
Amortization - 43,847 101,636
Accretion of interest on loan payable - - 234,513
Financing costs 110,054 - 192,934
Stock-based compensation expense - 3,006,891 6,874,499
Change in operating assets and liabilities:
Accounts receivable - - 26,961
Investment tax credits receivable - - (33,105)
Inventories (18,382) (5,275) (328,351)
Miscellaneous receivable 4,353 - (26,276)
Prepaid expenses - 41,352 (2,464)
Accounts payable 315,139 41,907 162,096
Accrued liabilities - 160,519 513,431
Accrued salaries payable - - 150,408
Accrued financing costs payable - - 1,022,817
Due to stockholders 57,234 87,566 236,661
------------------------------------------------------ ----------------- ---------------- -----------------
Net cash flows used in operating activities (6,288) (222,959) (1,968,482)
Financing activities:
Issuance of common shares, net of issue costs - 221,500 992,317
Increase in bank indebtedness 17,121 79,147 73,473
Proceeds from loans payable - 32,821 1,230,948
Issuance of convertible notes - - 40,761
------------------------------------------------------ ----------------- ---------------- -----------------
Net cash flows from financing activities 17,121 333,468 2,337,499
Investing activities:
Purchase of property and equipment - (139,707) (390,609)
------------------------------------------------------ ----------------- ---------------- -----------------
Net cash flows used in investing activities - (139,707) (390,609)
Effect of currency translation of cash balances (10,833) 29,198 21,592
------------------------------------------------------ ----------------- ---------------- -----------------
Increase in cash, being cash, end of period $ - $ - $ -
------------------------------------------------------ ----------------- ---------------- -----------------
Supplemental cash flow information:
Interest paid $ - $ - $ -
Income taxes paid - - -
------------------------------------------------------ ----------------- ---------------- -----------------
Supplemental disclosure of non-cash financing and
investing activities:
Deferred stock-based compensation $ - $ 4,012,200 $ 11,472,436
Shares issued for settlement of accrued liabilities - 1,012,500 1,012,500
Shares issued as settlement of loan payable - - 15,414
Inventories reclassified to property and equipment - - 290,608
------------------------------------------------------ ----------------- ---------------- -----------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
Power Kiosks, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
(Unaudited)
--------------------------------------------------------------------------------
1. Basis of presentation:
The unaudited consolidated financial statements have been prepared by
Power Kiosks, Inc. (the "Company") and reflect all adjustments (all of
which are normal and recurring in nature) that, in the opinion of
management, are necessary for a fair presentation of the interim
financial information. The results of operations for the interim periods
presented are not necessarily indicative of the results to be expected
for the entire year ending July 31, 2001. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted under the Securities and Exchange Commission's rules
and regulations. These unaudited consolidated financial statements and
notes included herein should be read in conjunction with the Company's
audited consolidated financial statements and notes for the year ended
July 31, 2000 included in Form 10-K.
2. 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
$11,094,242 as at October 31, 2000. The Company has not generated revenue
and management does not expect to commence generating revenue 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 unaudited
consolidated 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-6
<PAGE>
Power Kiosks, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
(Expressed in U.S. dollars)
(Unaudited)
--------------------------------------------------------------------------------
3. Stockholders' deficiency:
(a) During August 2000, the Company issued 20,000 common shares in
exchange for investor consulting services pursuant to a consulting
agreement expiring in February 2001. Deferred financing expenses of
$109,200 have been recorded, representing the difference between the
fair value of the common shares issued and the issue price. The
deferred financing expenses will be offset against funds raised in
the future or expensed on the expiry of the agreement during February
2001.
(b) During September 2000, the Company issued 300,000 common shares to
directors of the Company for no consideration and warrants to acquire
200,000 common shares of the Company with an exercise price of $1 per
share. The warrants vest on a quarterly basis commencing May 1, 2001
to May 1, 2002 and expire during September 2003.
The Company recorded stock-based compensation of $1,995,000,
representing the difference between the fair value of the common
shares and the issue price. The Company recorded deferred stock-based
compensation of $1,110,000 for the warrants granted, representing the
difference between the fair value of the common shares and the issue
price.
(c) During September 2000, two senior officers and shareholders of the
Company were awarded 120,000 common shares of the Company for
services provided in securing contracts for the Company. The Company
recorded stock-based compensation of $798,000, representing the
difference between the fair value of the common shares and the issue
price.
(d) During October 2000, the Company issued 225,000 common shares as
settlement for amounts due of $1,012,500 to a former supplier.
(e) During the quarter ended October 31, 2000, the Company issued 88,600
common shares at $2.50 per share for proceeds of $221,500.
F-7
<PAGE>
Power Kiosks, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
(Expressed in U.S. dollars)
(Unaudited)
--------------------------------------------------------------------------------
3. Stockholders' deficiency (continued):
(f) Stock compensation plan:
During October 2000, the Company's stock compensation plan (the
"Plan") was established for the benefit of the employees and certain
consultants of the Company. The maximum number of common shares which
may be set aside for issuance under the Plan is 700,000 shares,
provided that the Board of Directors of the Company has the right,
from time to time, to increase such number subject to the approval of
the shareholders of the Company when required by law or regulatory
authority.
As at October 31, 2000, the Company issued 200,000 warrants (note
3(b)) and no options under this Plan.
4. Recent account pronouncements:
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, 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.
On December 3, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). 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 its financial
statements.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No 44 "Accounting for Certain Transactions Involving Stock
Compensation"("FIN No. 44").This interpretation clarifies the application
of Accounting Principles Board Opinion No 25 "Accounting for Stock Issued
to Employees," with respect to certain issues in accounting for employee
stock compensation and is generally effective as of July 1, 2000. The
Company does not expect FIN No. 44 to have a material effect on its
financial statements.
F-8
<PAGE>
Power Kiosks, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
(Expressed in U.S. dollars)
(Unaudited)
--------------------------------------------------------------------------------
5. Subsequent event:
On November 21, 2000, the Company issued 580,000 common shares to
consultants as consideration for legal and consulting services provided
to the Company.
F-9
<PAGE>
Item 2. Management's Discussion and Analysis
General
Power Kiosks, Inc. f/k/a Alternate Achievements, Inc. f/k/a Global
Corporate Quality, Inc., a Florida corporation of which Power Photo Kiosks,
Inc., a Canadian corporation ("PPK") is a wholly-owned subsidiary (collectively
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").
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 with piggy back registration
rights in exchange for a general release in favor of both PPK and the Company.
The Company issued the 225,000 shares in October 2000. For such offering, the
Company relied upon the 506 Exemption and no state exemption, since Rhonda is
located in Canada.
Since April 2000, the Company sold 278,344 shares of its Common Stock
to twenty nine (29) investors for a total of $655,362.27. For such offering, the
Company relied upon the 506 Exemption, Section 517.061(11) of the Florida Code,
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.
The facts relied upon to make the Florida exemption available include
the following: (i) sales of the shares of 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
<PAGE>
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.
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 June 2000, the Company executed a promissory note in favor of
Thomson Kernaghan & Co., Ltd., a Bermuda corporation ("TK") in the principal
amount of two hundred fifty thousand dollars ($250,000). The loan had a maturity
date of August 31, 2000. In December 2000, TK converted all outstanding
principal and interest into 250,000 shares of the restricted Common Stock of 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.
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, which
were actually issued in August 2000, 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. For such offering, the Company relied upon the 506 Exemption. No state
exemption was necessary, as Mr. Cooke is a Canadian resident.
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
<PAGE>
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 ("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.
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.
The facts relied upon to make the Florida exemption available include
the following: (i) sales of the shares of 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.
<PAGE>
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.
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 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.
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
<PAGE>
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. 290,000
shares were issued each to Donald F. Mintmire, legal counsel to the Company and
Noreen Wilson, a consultant to the Company.
In November 2000, the Company sold 100,000 shares of its restricted
Common Stock to EIG Capital Investments, Ltd., a Bermuda limited partnership,
for $200,000. Additionally, the Company issued warrants to purchase an
additional 125,000 shares of its restricted Common Stock at an exercise price of
$0.0001 per share, which are exercisable for a period of three (3) years. The
shares of stock sold as well as the warrant shares carry mandatory registration
rights. If the registration statement is not declared effective with 210 days of
execution of the original agreement, the Company must pay a cash penalty of
$4,000 per month until the registration is declared effective. For such
offering, the Company relied upon the 506 Exemption. No state exemption was
required, as the purchaser is a foreign entity.
Discussion and Analysis
The Company, Power Kiosks, Inc. is a Florida chartered corporation
which conducts business from its headquarters in Markham, Ontario, Canada. The
Company was incorporated in September1994, as Global Corporate Quality, Inc.,
changed its name to Alternate Achievements, Inc. in October 1999 and to Power
Kiosks, Inc. in February 2000 in connection with the Agreement. At such time, it
acquired 100% of the issued and outstanding shares of the Common Stock of PPK,
in a reverse merger.
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.
<PAGE>
As part of the ongoing product improvement process, in December 1999,
PPK signed a teaming agreement with 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.
The ability of the Company to continue as a going concern is
dependent upon increasing sales and obtaining additional capital and financing.
The Company is currently seeking financing to allow it to continue its planned
operations.
The 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 unaudited condensed consolidated 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.
Results of Operations -For the Three Months Ending October 31, 1999
and October 31, 2000
Financial Condition, Capital Resources and Liquidity
For the 1st quarter ended October 31, 1999 and 2000 the Company
recorded no revenues. For the first quarter ended October 31, 1999 and 2000 the
Company had general and administrative expenses of $222,926 and $3,329,287. This
increase of $3,106,361 was due to primarily to stock- based compensation
expense.
For the 1st quarter ended October 31, 1999 and 2000, the Company had
on a consolidated unaudited basis total operating expenses of $317,035 and
$3,551,456.
Net Losses
For the 1st quarter ended October 31, 1999, 2000, the Company
reported a net loss from operations of $317,035 and $3,551,456 respectively.
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 $11,094,242 as
of October 31, 2000. The Company has not generated revenues and management does
not expect to commence generating revenues until 2001. 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.
<PAGE>
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.
Employees
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.
Research and Development Plans
The Company believes that research and development is an important
factor in its future growth. The kiosk industry is closely linked to
technological advances, which produce a broader range of kiosk products, enhance
the usability and experience for the consumer and also enable the provider to
monitor use patterns and data through a more sophisticated network of
information. Therefore, the Company must continually invest in ongoing research
to appeal to the public and to effectively compete with other companies in the
industry. No assurance can be made that the Company will have sufficient funds
to compete. Additionally, due to the rapid advance rate at which technology
advances, the Company's equipment and inventory may be outdated quickly,
preventing or impeding the Company from realizing its full potential profits.
Forward-Looking Statements
This Form 10-QSB 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-QSB 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),
finding suitable merger or acquisition candidates, 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-QSB 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.
<PAGE>
PART II
Item 1. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or
to which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 2.Changes in Securities and Use of Proceeds
None
Item 3.Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending October 31, 2000,
covered by this report to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
Item 5. Other Information
None
Item 6. 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:
<PAGE>
<TABLE>
<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 [9] Promissory Note by the Company in favor of Thomson Kernaghan & Co., Ltd.
dated June 5, 2000.
4.7 [9] Promissory Note by the Company in favor of Thomson Kernaghan & Co., Ltd.
dated October 26, 2000.
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.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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 [9] Lease Agreement between Team Power Enterprises, Inc. and Bruce N. Huntley
Contracting Limted, dated July 1, 1998.
10.10 [9] Financial Consulting and Services Agreement between the Company and
Discovery Enterprises, Inc. d/b/a Discovery Financial, Inc. dated August 23, 2000.
10.11 [9] Teaming Agreement between Power Photo Kiosks, Inc. and Mattel Canada, Inc.
dated September 18, 2000.
10.12 [9] Co-Marketing and Sponsorship Agreement between the Company, PACEL Corp.
and Child Watch of North America dated October 11, 2000.
10.13 [9] Letter of Intent between Power Photo Kiosks, Inc. and Groome Capital. Com, Inc.
dated October 12, 2000.
10.14 [9] Employment Agreement between Power Kiosks, Inc. and Ronald Terry Cooke,
dated July 2000.
10.15 [9] Employment Agreement between Power Kiosks, Inc. and Allan Turowetz, dated
July 2000.
10.16 * Common Stock Purchase Agreement between the Company and EIG Capital
Investments, Ltd. dated November 9, 2000.
10.17 * Registration Rights Agreement between the Company and EIG Capital
Investments, Ltd. dated November 9, 2000.
10.18 * Purchaser's Warrant in the name of EIG Capital Investments, Ltd. dated November
9, 2000.
10.19 * Agent's Warrant in the name of EIG Capital Management, Ltd. dated November 9,
2000.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.20 * Conversion of Note by the Company in favor of Thomson Kernaghan & Co., Ltd.
in the principal amount of $250,000 dated June 5, 2000.
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.
[9] Previously filed with the Company's Annual Report on Form 10KSB filed
November 14, 2000.
* Filed herewith
<PAGE>
(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.
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.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Power Kiosks, Inc.
(Registrant)
December 6, 2000 /s/ Ronald Terry Cooke
---------------------------------
Ronald Terry Cooke
Chairman and President
/s/ Allan Turowetz
---------------------------------
Allan Turowetz
Vice President and Director
/s/ Jean Arthur Beliveau
---------------------------------
Jean Arthur Beliveau
Director
/s/ June Nichols Sweeney
---------------------------------
June Nichols Sweeney
Director
