<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
For the quarterly period ended 31 JULY 1996, or
Transition report pursuant to section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
For the Transition period from __________ to __________.
COMMISSION FILE NUMBER 0-18163
POWER PLUS CORPORATION
(the "Registrant", or the "Company", or "Power Plus")
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FORMERLY BATTERY ONE, INC.
PROVINCE OF ALBERTA, CANADA
(STATE OR OTHER JURISDICTION OF INCORPORATION)
7850 WOODBINE AVENUE, SUITE 201,
MARKHAM, ONTARIO, CANADA L3R 0B9
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (POSTAL CODE)
905-479-5683
800-769-3733 905-479-8911
(TELEPHONE NUMBERS) (FAX NUMBER)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or Section 15(d) of the SECURITIES EXCHANGE ACT OF
1934 during the preceding 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 30 August 1996 there were 39,761,238 shares of the Registrant's Common
Stock outstanding. (Please refer to Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and Item 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS concerning the proposed reorganization and
consolidation of the Company's stock on the basis of 20 to 1.)
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FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Interim Financial Statements 3
Consolidated Statement of Changes in Financial
Position - 31 July 1996 and 31 July 1995
Consolidated Balance Sheet - 31 July 1996 and 31 January 1996
Consolidated Statement of Operations - 31 July 1996 and
31 July 1995
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signature 18
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PART I - FINANCIAL INFORMATION
The Company prepares its consolidated financial statements in Canadian dollars.
In this report all references to "$" are to Canadian dollars, unless otherwise
noted.
EXCHANGE RATES
Based on the noon buying rates for cable transfers in New York City, certified
for customs purposes by the Federal Reserve Bank of New York, the exchange rate
on 30 August 1996 was C$1.00 = US$0.73.
ITEM 1. INTERIM FINANCIAL STATEMENTS.
SECOND QUARTER
(period ended 31 July 1996)
FISCAL 1997
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION (UNAUDITED)
(AMOUNTS ARE EXPRESSED IN CANADIAN DOLLARS) Six month year to date
period ended 31 July
----------------------
1996 1995
---- ----
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
(Loss) for period $(1,309,464) $(1,777,176)
Items not affecting cash
Amortization 38,262 124,842
------ -------
(1,271,202) (1,652,334)
CHANGES IN NON CASH OPERATING ITEMS
Accounts receivable (143,889) 126,877
Inventory (112,321) 929,022
Prepaid expenses 0 21,517
Accounts payable and accrued liabilities 89,089 56,500
------ ------
(1,438,323) (518,418)
---------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Issue of common shares and warrants - SEE NOTE 3 2,506,000 244,100
Notes payable 200,000
Issue of Special Notes - SEE NOTE 4 3,050,000
---------
5,556,000 444,100
--------- -------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Purchase of capital assets (178,000) (46,267)
Increase in deferred charges (539,087) 0
Purchase of other assets (82,500) (641)
------- ----
(799,587) (46,908)
-------- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
DURING PERIOD 3,318,090 (121,226)
Cash and cash equivalents, beginning of period 1,288 330,254
----- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $3,319,378 $209,028
---------- --------
---------- --------
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CONSOLIDATED BALANCE SHEET, AS AT
(AMOUNTS ARE EXPRESSED IN CANADIAN DOLLARS) 31 JULY 1996 31 January 1996
------------ ---------------
(unaudited) (audited)
ASSETS
Current Assets
Cash and cash equivalents $3,319,378 $1,288
Accounts receivable 207,890 64,001
Inventory 112,321 0
Prepaid expenses 66,070 19,760
------ ------
3,705,659 85,049
Capital assets, net 178,000 0
Deferred charges, net 699,502 244,986
Other assets, net 82,500 0
------ -
$4,665,661 $330,035
---------- --------
---------- --------
LIABILITIES
Accounts payable and accrued liabilities $596,297 $507,208
Special Notes - SEE NOTE 4 3,050,000
---------
3,646,297 507,208
--------- -------
SHAREHOLDERS' EQUITY/(DEFICIENCY) - SEE NOTE 5
Share capital and warrants 1,851,660 26,016,484
Deficit 832,296 26,193,657
------- ----------
1,019,364 (177,173)
--------- --------
$4,665,661 $330,035
---------- --------
---------- --------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTH YEAR TO DATE
THREE MONTHS ENDED 31 JULY PERIOD ENDED 31 JULY
-------------------------- ----------------------
(AMOUNTS ARE EXPRESSED IN CANADIAN DOLLARS) 1996 1995 1996 1995
---- ---- ---- ---
<S> <C> <C> <C> <C>
SALES $42,113 $1,575,782 $56,895 $3,747,308
Cost of Sales 17,687 658,562 23,922 1,593,963
------ ------- ------ ---------
GROSS PROFIT 24,426 917,220 32,973 2,153,345
EXPENSES
Operating and administration 834,199 1,520,534 1,304,175 3,805,679
Amortization 22,523 58,163 38,262 124,842
------ ------ ------ -------
(LOSS) FOR PERIOD (832,296) (661,477) (1,309,464) (1,777,176)
DEFICIT, BEGINNING OF PERIOD 26,670,825 22,767,805 26,193,657 21,652,106
---------- ---------- ---------- ----------
DEFICIT, BEFORE ADJUSTMENT BELOW 27,503,121 - 27,503,121 -
Stated capital reduction - SEE NOTE 5 26,670,825 - 26,670,825 -
---------- ----------
DEFICIT, END OF PERIOD $832,296 $23,429,282 $832,296 $23,429,282
-------- ----------- -------- -----------
-------- ----------- -------- -----------
EARNINGS PER SHARE $(0.02) $(0.02) $(0.03) $(0.05)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 39,761,238 34,694,521 39,586,187 34,694,521
</TABLE>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1: During the fiscal year ended 31 January 1996, the Company's wholly-
owned subsidiaries, Battery One-Stop International Inc. ("BOSI") and
Batteries Etc., Inc. ("Etc.") (collectively, the "Subsidiaries"), were
assigned into bankruptcy (see Item 2. -- MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS herein).
All of the Company's operations, which consisted of the sale of
batteries and battery-related products to consumers via Company-owned
retail stores in Canada and the US, were conducted through the
Subsidiaries and all of its capital assets were owned by the
Subsidiaries. Accordingly, at 31 January 1996 and during a part of
the first quarter of Fiscal 1997, the Company had no ongoing
operations nor operating assets.
In response to the Company's circumstances, management developed a
reorganization plan, with the intent of re-commencing operations which
it is now implementing (the "Reorganization Plan"). Accordingly, the
results of operations are presented on the basis that the Company has
recommenced operations. During the first quarter of Fiscal 1997 (see
Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS herein), the Company acquired assets and
operated one store in Canada for part of the period. There were no
operations in the US in this quarter. During the current quarter, the
Company opened a location in the Pittsburgh Airport AirMall.
NOTE 2: For the second quarter of Fiscal 1997, the consolidated balance sheet
as at 31 July 1996 and the consolidated statements of operations and
changes in financial position for the three month period (the current
quarter) and year to date six month period ended 31 July 1996 and
1995, in the opinion of management, include all adjustments necessary
for a fair presentation of such financial statements. Such
adjustments consisted only of normal recurring items. Interim results
are not necessarily indicative of results for a full year.
The consolidated balance sheet as at 31 July 1996 and the consolidated
statements of operations and changes in financial position for the
three month and year to date period ended 31 July 1996 and 1995 are
unaudited. The consolidated balance sheet for the fiscal year ended
31 January 1996 was audited and reported in the Company's Annual
Report to Shareholders and Fiscal 1996 S.E.C. FORM 10-K filing.
The consolidated financial statements and notes are presented in
accordance with the S.E.C.'s FORM 10-Q filing statement requirements,
and do not contain certain information included in the Company's
annual consolidated financial statements and the notes thereto.
Loss per share is based on the weighted average common shares
outstanding for the period.
NOTE 3: On 1 March 1996, the Company completed a Special Warrant private
placement equity financing, comprised of up to 45 million Special
Warrants representing $4.5 million. Initially, 38.5 million Special
Warrants were subscribed for, representing gross proceeds of $3.85
million. Of this amount, $1.1 million had been previously received in
the third quarter of Fiscal 1996, and the balance of $2.75 million has
been received in cash. The remaining Special Warrants representing
6.5 million units and additional capital of $650,000 are required and
anticipated to be fully subscribed by the end of September 1996 (see
Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, herein).
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- continued
NOTE 4: Effective 31 July 1996, the Company completed a Special Notes 5-year
10% convertible fixed and floating charge debentures private placement
debt financing for $6 million. The initial closing represented $3.05
million. The Special Notes currently not subscribed, now representing
$2.95 million, are required and anticipated to be fully subscribed by
the end of September 1996. (See Item 2. -- MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,
herein).
NOTE 5: In accordance with shareholder approval received at the annual meeting
on 24 July 1996 and pursuant to the related court approval received
25 July 1996, the Company has reduced both the stated capital amount
for the common shares of the Company and the accumulated deficit in
earnings by $26,670,824. Management is of the opinion that, after
making the adjustment, the balance sheet better represents the
financial repositioning of the Company, resulting from the
reorganization and restructuring, and the appropriate current
financial condition of the Company as it proceeds to implement its
5-year business plan (see Item 2. -- MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, herein).
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
By the last quarter of Fiscal 1996 (the year ended 31 January 1996) it had
become apparent to management that on the basis of the Company's share
capitalization, and considering the continued unprofitability of Batteries Etc.,
Inc. ("Etc.") (the wholly-owned subsidiary of the Company which formerly
operated the business in the US), notwithstanding its best efforts, the Company
regrettably was not able to complete the financing of its turnaround program on
the basis contemplated. The poor performance of Etc. resulted from a number of
unproductive stores situated in secondary locations committed to by prior
management, which were subsidized by Battery One-Stop International Inc.
("BOSI") (the wholly-owned subsidiary of the Company which formerly operated the
business in Canada), to its serious detriment. (Etc. and BOSI are referred to
collectively as the "Subsidiaries".)
In December 1995 BOSI made a voluntary assignment into bankruptcy pursuant to
the CANADIAN BANKRUPTCY AND INSOLVENCY ACT. In December 1995, Etc. made a
voluntary petition seeking protection under Chapter 11 of the US BANKRUPTCY
CODE, which in January 1996 was converted to a Chapter 7 filing. The Company is
the largest creditor of the Subsidiaries. The Company is not directly nor
indirectly liable for any debt or liability of the Subsidiaries and has no
outstanding guarantees or undertakings with respect to any third party claim
against the Subsidiaries.
All of the Company's operations, which consisted of the sale of batteries and
battery-related products to consumers via Company-owned retail stores in Canada
and the US, were conducted through the Subsidiaries and all of its capital
assets were owned by the Subsidiaries. Accordingly, at 31 January 1996 the
Company had no ongoing operations nor operating assets.
The Consolidated Statements of Operations included with these materials reflect
that during the first two quarters of Fiscal 1997 the Company acquired assets,
operated one store in Canada for most of this six month period, and opened its
first US store in Pittsburgh Airport AirMall, in late-July 1996.
Accordingly, the historical financial statements for the prior period included
with these materials have little relevance to the Company's operations at
present.
On 1 February 1996, the Company announced its Reorganization Plan which, as
discussed in earlier filings, is subdivided into two parts: PLAN 2000, the
Company's 5-year business plan prescribing how the Company proposes to build its
business to in excess of 1000 stores by the end of the Year 2000; and, the
Financing Plan which sets out the manner in which the Company proposes to
finance PLAN 2000's requirements.
The Reorganization Plan and the related Plan of Arrangement proposed by new
management were approved by shareholders at the annual and special meeting of
the Company's held on 24 July 1996.
Among other matters, shareholders approved as part of the Reorganization Plan,
the Company's proposal to: change its name; reduce its stated capital by all or
virtually all of the accumulated deficit; and, reorganize and consolidate its
capitalization on the basis of twenty (20) pre-consolidation shares for one (1)
post-consolidation share and an exchange right, that is to 1,988,062 post-
consolidation shares from the existing 39,761,238 pre-consolidation shares.
Final court approval to the Plan of Arrangement was obtained on 25 July 1996 and
final regulatory approval is being sought now. The implementation of the Plan of
Arrangement's common share reorganization and consolidation (20:1 reverse-split)
will occur as soon as practicable after receiving final regulatory approval.
The Company is now implementing its 5-year Business Plan -- PLAN 2000 --
designed to make POWERFUL STUFF a leader in its markets.
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POWER PLUS, by the implementation of its PLAN 2000, will sell through Company-
owned POWERFUL STUFF stores across North America, wireless communication
products and services (beepers/pagers, cellular phones, Personal Communication
Systems ("PCS") and related service contracts), together with batteries and
battery-powered products (portable electronics, watches, accessories, etc.), the
latter being the foundation of the business in the past. PLAN 2000 anticipates
growth to over 1000 stores and $500 million (US$360 million) in sales over a 5-
year period and provides the architecture for developing a branded distribution
and communications network. Approximately 85% of the stores will be in the US,
with head offices in both Florida (operating) and Toronto (corporate).
- - PLAN 2000 - Overview
POWERFUL STUFF is a new business opportunity being launched through the Company
- -- a restructuring, refinancing and repositioning of Battery One, Inc., renamed
POWER PLUS CORPORATION effective 31 July 1996.
POWERFUL STUFF is a branded retail marketing and distribution network for
wireless communications products and services, plus batteries and related
products and services -- portable energy -- the latest in hand-held electronic
communications, entertainment, business and lifestyle products with the
batteries to power them. POWERFUL STUFF is the specialty retail business of
Power Plus and its wholly-owned US and Canadian subsidiaries.
To launch this new business opportunity, the former Battery One, Inc., a
publicly traded Canadian company listed on The Alberta Stock Exchange (Symbol:
BTB) and on NASDAQ's OTC Bulletin Board (Symbol: BATT), has been reorganized
during 1996 as POWER PLUS CORPORATION. The Company's Reorganization Plan
incorporates the related $42 million Financing Plan over 3 years providing the
capital needed to rapidly increase the number of POWERFUL STUFF stores to a
critical mass to quickly surpass economies of scale and achieve operating
efficiencies.
An initial Special Warrants private placement equity offering, representing up
to a maximum of $4.5 million, raised $2.8 million in net new capital through its
first closings in March and April 1996. The remaining equity units representing
$650,000 are required and anticipated to be fully subscribed by the end of
September 1996, then completing this financing.
A Special Notes 5-year 10% convertible secured debentures private placement debt
offering, representing up to a maximum of $6.0 million, raised $3.05 million
through its initial closing in July 1996. The remaining Special Notes,
representing $2.95 million, are required and anticipated to be fully subscribed
by the end of September 1996, then completing this financing.
The comprehensive 3-year Financing Plan supporting PLAN 2000 has been structured
as follows:
- March to September 1996 - $4.5 million Special Warrants private
placement equity offering;
- July to September 1996 - $6.0 million Special Notes 5-year 10%
convertible secured debentures private placement debt offering;
- December 1996 - $5.0 million rights offering;
- March 1997 - $12.5 million rights offering; and,
- March 1998 - $14.2 million rights offering.
Having these phased capital resources from this Financing Plan positions POWER
PLUS to execute PLAN 2000.
On 1 February 1996, the Company announced its Reorganization Plan proposing:
- Changing the Company's name to POWER PLUS CORPORATION;
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- Reorganizing and consolidating the outstanding share capital on the
basis of every twenty (20) shares before consolidation being
reorganized and consolidated into one (1) consolidated share plus an
exchange right;
- Raising additional capital funds of up to $42 million in the
aggregate;
- Consolidating corporate headquarters into offices in Toronto, Canada;
- Establishing new divisional operations in the US and Canada;
- Putting in place new management; and,
- Launching the Company's retail efforts and distribution channels.
POWER PLUS has combined two merchandising segments -- wireless communication
products and services plus batteries and related products and services -- into a
single retail store - POWERFUL STUFF. The pagers (beepers) and accessories
generate higher average per transaction revenues, earn strong secondary margins
through air-time and activation sales and generate recurring revenues from
customer subscriber fees and renewals. The complementary battery segment of the
business supplies supplemental revenues and incremental margins necessary to
grow POWERFUL STUFF stores to the point where a customer base is built and
recurring sales are produced by paging and cellular services. In addition, the
battery business provides particularly high margins from specialty batteries and
installation services, plus strong positioning for the sale of innovative
battery-powered products.
POWER PLUS CANADA
On 8 March 1996, the Company closed a purchase transaction with the Trustee
responsible for the realization of the assets BOSI whereby for $200,000 it
acquired the inventory, furniture and equipment, kiosks, and certain lease
entitlements and proprietary interests of its former Canadian subsidiary.
The Canadian POWERFUL STUFF chain relaunched in July 1996 with a location in
Toronto's Square One Mall. New store openings are planned for this Fall and
additional locations are currently being negotiated with major landlords (i.e.,
Cadillac Fairview, Cambridge and Markborough). These stores are initially to be
concentrated primarily in Ontario, with 16 to 20 locations planned for 1996.
Several store locations in British Columbia, Alberta, and Manitoba are being
negotiated to provide 1997's expansion base. Business options for further
expansion into Quebec, Saskatchewan and the Eastern Provinces will be considered
once the business has been firmly established in Ontario.
POWER PLUS USA
On 17 May 1996, POWER PLUS USA, INC., a wholly-owned subsidiary of the Company,
acquired for $93,000 the strategic Pittsburgh Airport AirMall location lease,
formerly held by Etc., upon approval of the Western District of New York
Bankruptcy Court. The US POWERFUL STUFF chain launched in July with more store
openings planned for this Fall, commencing in the Pittsburgh and Florida
markets, based upon two acquisitions:
- the acquisition of the former US operating subsidiary's Pittsburgh
Airport AirMall location; and,
- the anticipated acquisition of 10 stores in Florida in September.
THE PITTSBURGH MARKET
The US operations commenced with the opening of the Pittsburgh Airport AirMall
store, ideally situated in the largest airport shopping center in North America.
This provides POWERFUL STUFF with a flagship store in one of the premier US
transportation centers and the foundation for expansion in this market. An
additional 2 to 4 locations in the Pittsburgh area are planned for 1996.
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THE FLORIDA MARKET
The Florida expansion will be a blend of new POWERFUL STUFF stores to be opened
combined with existing locations proposed to be acquired.
On 17 June 1996, POWER PLUS USA, INC. agreed to purchase the assets and business
of PORTRONICS, a specialty US retailer, from CONSUMER ELECTRONICS SPECIALTY
STORES, INC. ("CESS"), located in Sarasota, Florida. Scheduled to close by the
end of September 1996, the acquisition includes 10 leased retail locations in
Florida, inventories, two rented warehouse facilities and pager repair
facilities, and CESS's proprietary interests. This strategic acquisition means
that the operations and assets of Portronics will become an integral part of the
Company. The purchase agreement is subject to final due diligence, financing,
and regulatory approval. These 10 Portronics retail stores operate at a level
that will generate more than US$3.5 million in annual revenues for the Company
from the sale of pagers -- or BEEPERS as they have more commonly become known --
cellular telephone plus related paging and cellular services, and other wireless
communication products. All will be converted to POWERFUL STUFF stores that
feature Portronics beepers and paging services, and 10 to 20 new stores are
planned for Florida this year. Ken Levin, founder and President of both
Portronics and CESS, will become POWER PLUS' President - Wireless Division. Mr
Levin will play a key management role in the rollout of PLAN 2000 and assist in
developing POWERFUL STUFF's pager and cellular reseller operations for wireless
services. This acquisition is one means by which POWER PLUS is capable of
quickly achieving its target penetration of 21 to 30 new stores in Florida in
1996.
In addition to the Portronics acquisition and the introduction of the Company's
wireless division, on 12 August 1996 the Company announced its agreement in
principle to enter into a joint venture with C-Con Acquisition Company Inc. of
Florida (the "Cell Connection JV"), to resell cellular telephone services
through POWER PLUS' POWERFUL STUFF retail stores. The cellular market is
expanding rapidly -- a 40% annual increase in revenues last year in the US. The
number of cell sites in the US increased by 2,918 in the last half of 1995 and
the new PCS digital services are just beginning to expand the market further.
The Cell Connection JV will increase store revenues and provide a competitive
advantage in the cellular arena. The arrangement complements the paging
reseller program being implemented, pending the purchase of Portronics. POWER
PLUS and C-Con, on an interim basis, will work together to offer cellular
services through Portronics' Florida stores where paging (beeping) and cellular
products are a synergistic fit, along with the specialty batteries and battery-
powered products offered in POWERFUL STUFF stores.
C-Con resells cellular services provided by the GTE network in the
Tampa/Sarasota area and its contract with GTE covers additional geographic areas
throughout the US where GTE offers cellular services. POWERFUL STUFF stores
will be the primary retail outlets in C-Con's markets, with POWER PLUS providing
the marketing for the Cell Connection JV, while C-Con provides back office
operations and customer billing. C-Con Chairman Bill Healey and President Peter
Lazzari will actively participate in the management of the Cell Connection JV.
Secured financing of up to $750,000 is to be provided by POWER PLUS to the Cell
Connection JV for customer marketing and working capital, as well as up to
$250,000 to C-Con directly to accelerate its internal expansion of service
capabilities and market coverage. POWER PLUS also has the option to purchase up
to 20% of the equity of C-Con for nominal consideration upon satisfaction of
certain defined conditions.
Subject to finalizing a definitive joint venture agreement, and due diligence,
financing, and regulatory approval, the Cell Connection JV is planned to begin
operations this Fall.
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- - PLAN 2000 - Management
POWER PLUS' management team has a strong marketing, operations and financial
background based on extensive experience in retailing, marketing, multiple
business unit management, real estate and development, start-ups, and corporate
finance.
- G. THOMAS ALISON, COO & President - The Company's operating divisions
are headed up by Mr. Tom Alison, the architect of the POWERFUL STUFF
PLAN 2000. Mr. Alison has entered into a long-term agreement as Power
Plus' COO & President, and a member of the Company's Board of
Directors and Management Committee, subject to the fulfillment of
certain conditions and regulatory approval. Mr. Alison, the former
Executive Vice President, Strategic Development of Home Shopping
Network and former President of HSN Telemarketing, is recognized in
the US as an innovative business development specialist and marketer.
He formerly worked for a New York based consulting firm retained to
advise the Company over the past 18 months on its marketing and
operations and potential turn-around alternatives.
Under Mr. Alison's direction, POWER PLUS continues to expand its senior
management team and base of operating personnel with demonstrated capability to
build and manage the business.
- KENNETH C. MARINO, who consulted to the Company over the last year on
real estate matters, has entered into a long-term agreement to be the
Company's Senior Vice President, Real Estate, subject to the
fulfillment of certain conditions and regulatory approval. Mr. Marino
was formerly Director of Real Estate for Sunglass Hut International,
Inc. of Coral Gables, Florida, during a period of exceptional multiple
unit rollout. Responsible for the real estate activities, Mr. Marino
helped Sunglass Hut grow to over 1000 stores in shopping centers in
North America, in a business that has many common factors to that of
the Company.
- JOSEPH J. ADLER has joined POWER PLUS as Vice President, Construction,
responsible for the development of POWERFUL STUFF stores. Mr. Adler
was National Construction Manager of US retailer Merry-Go-Round from
1984 to 1995. He negotiated and contracted the construction of over
700 Merry-Go-Round and Chess King subsidiary stores. He personally
supervised as many as 200 conversions per year in shopping malls in 38
states. Since Merry-Go-Round, Mr. Adler has built stores for Pacific
Swimwear and Garden Batanika ranging from 1000 to 3000 square feet
with average budgets exceeding $200,000. Mr. Adler has the ability
and overall management skills to lead POWER PLUS' annual buildout of
180 to 280 new POWERFUL STUFF kiosks and in-line stores in the PLAN
2000 rollout.
- REBECCA L. HARVEY has agreed to join POWER PLUS as Vice President,
Human Resources, subject to the fulfillment of certain conditions.
Ms. Harvey was formerly Vice-President, Sales/Human Resources
Administrator of Champs Sports, a division of Woolworth Corporation.
In this role, Ms. Harvey was responsible for human resources
functions, including sales and customer service, and store operations
training programs, during the period which Champs grew from 40 to over
500 stores. Ms. Harvey has also worked in training and merchandising
for Joske's of Texas Department Stores (Allied Stores) and Maas
Brothers Department Stores. Most recently, Ms. Harvey was Director,
National Accounts, for AEI Music Network, responsible for creating
enhanced audio and media environments for major retail chains.
- KENNETH W. LEVIN, the founder and President of Portronics, has reached
an agreement in principle to join the POWER PLUS team as President -
Wireless Division. Subject to the completion of the Portronics
acquisition, Mr. Levin will manage the development and marketing of
pager and cellular wireless communications products and services. Mr.
Levin has a respected reputation in the wireless industry by becoming
one of the largest US retail resellers of pagers and related services
in only three years.
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Page 12
- STEPHEN H. DAVENPORT has agreed in principle to join POWER PLUS from
the Portronics acquisition, subject to its completion, to head daily
operations. Mr. Davenport has significant retail operations
experience with Circuit City, one of the leading US electronics
retailers.
- STEPHEN M. ROSENFIELD has joined the POWER PLUS team as Director of
Business Development, with initial responsibility for setting up the
Company's POS and business information systems.
- DANIEL J. ELLIOTT has joined from GCT Paging to set up and manage
wireless reselling and retailing in Canada. He is responsible for the
stores and operating staff in Canada.
The Company is in the process of recruiting a number of senior executives at the
Vice President level, specifically in the areas of Marketing & Merchandising,
Information Systems and Accounting and Administration.
The Company benefits from experienced and committed executive management at the
corporate level supporting the operating divisions. An effective executive
Management Committee, comprised of Mr. Alison, J. Douglas Elliott and R. Bruce
Freeman, has been established by the Board of Directors to lead the Company's
new direction. The Management Committee is responsible for corporate finance,
statutory compliance and reporting, and shareholder communications and investor
relations, as well as overseeing the activities of the Company's operating
divisions.
- J. DOUGLAS ELLIOTT, Chairman & CEO - Mr. Elliott, a lawyer by
background, has significant experience in providing consulting
services to the investment and financial services industries,
specializing in the structuring, financing and management of
investment opportunities and financial public relations. Mr. Elliott,
a director of the Company since September 1994 and a member of the
Management and Audit Committees, has been responsible for the
structuring and financing of POWER PLUS' reorganization.
- R. BRUCE FREEMAN, Vice Chairman, CFO & Treasurer - Mr. Freeman, a
director since 1989 and a member of the Audit and Management
Committees, is a Chartered Accountant with a degree in law. Mr.
Freeman has significant experience in providing consulting services to
corporations and individuals in the investment and financial services
industries, specializing in the structuring, financing and management
of special projects. Mr. Freeman was formerly Vice-President and
Chief Financial Officer of Magnasonic Canada Inc., an electronics
goods importing and distribution Company which held major interests in
Sanyo Canada Inc., and Lloyds Corporations Inc. Mr. Freeman has been
instrumental in POWER PLUS' restructuring.
Other directors and key advisors active in assisting the Company include:
- ERIC D. SIGURDSON, DIRECTOR - Mr. Sigurdson, a director since 1995
and a Chartered Accountant by background, is the principal of Keystone
International, involved in management consulting and business
development, emphasizing mergers & acquisitions and strategic
direction. Mr. Sigurdson was formerly employed by The Horsham
Corporation and its US subsidiary, Clark Refining & Marketing Inc., as
its Executive Vice-President and Chief Financial Officer. Prior to
his employment with Horsham, Mr. Sigurdson was President and a
Director of Toronto Dominion Real Estate Inc., a real estate
investment banking venture of Toronto Dominion Bank and Director of
Mergers & Acquisitions of Toronto Dominion Securities Inc. Mr.
Sigurdson also serves as a member of POWER PLUS' Audit and
Compensation Committees.
- HARLEY MINTZ, DIRECTOR - Mr. Mintz, a Chartered Accountant, has
agreed to join POWER PLUS' Board of Directors, subject to the
fulfillment of certain terms and conditions. The Board of Directors
has approved Mr. Mintz's appointment and the Company's shareholders
have approved his election. Mr. Mintz's appointment is expected to be
effective in September 1996. Mr. Mintz has been Managing Partner of
Mintz & Partners, Chartered Accountants, of Toronto, Canada, since
1982. Mintz & Partners is the 15th largest accounting firm in Canada.
<PAGE>
Page 13
As a member of NEXIA International, Mintz & Partners is also part of
the 15th largest accounting organization in the world, with affiliates
in 7 Canadian cities and more than 80 countries. Mr. Mintz serves as
a member of the Advisory Council and Compensation Committee of POWER
PLUS and has agreed to serve as a member of the Audit Committee.
- JOHN S. BRONSON, ADVISOR - Mr. Bronson, the Chairman of the Company's
Advisory Council and Compensation Committee since 1995, is the Senior
Vice-President of Human Resources of Pepsi-Cola North America. Mr.
Bronson brings a depth of multiple unit retail organizational
experience and marketing background with his commitment to the
Company. Amongst other responsibilities with PepsiCo, Mr. Bronson
headed up the Human Resources strategy and implementation for 6,000+
Kentucky Fried Chicken, Pizza Hut and Taco Bell units in over 80
countries. Mr. Bronson has agreed in principle to join the Board of
Directors of POWER PLUS, subject to the fulfillment of certain terms
and conditions, and the Board of Directors has approved Mr. Bronson's
appointment. Mr. Bronson's appointment is expected to be effective by
the final quarter of this year.
RESULTS OF OPERATIONS
As reported above, at 31 January 1996 the Company had no ongoing operations nor
operating assets.
The Consolidated Statements of Operations included in this material reflect that
during the first two quarters of Fiscal 1997 the Company acquired assets,
operated one store in Canada for most of the first six month period and opened
its first US store in late-July 1996, compared to a total of approximately 40
stores in Canada and the US last year at this time. For this reason, the
historical financial statements for the prior period included in this report
have little relevance to the Company's operations at present.
The following table sets forth certain items reflected in the Company's
consolidated statement of operations expressed as percentages of sales:
EXPRESSED AS A PERCENTAGE OF SALES
----------------------------------
(all periods ending 31 July)
THREE MONTHS SIX MONTHS
------------ ----------
1996 1995 1996 1995
---- ---- ---- ----
Cost of sales 42.0% 41.8% 42.0% 42.5%
Operating and administration N/A 96.5% N/A 101.6%
Amortization N/A 3.7% N/A 3.3%
Cost of sales as a percentage of total sales for Fiscal 1997 Quarter 2, ended 31
July 1996, was 42% reflecting that management was able to maintain a stable
costs of merchandise, as a percentage of total sales, compared to the same
period last year. It should be noted that the Company operated approximately 40
locations at this time last year and would have benefited accordingly from the
resulting buying economies.
Operating and administration expenses incurred this year are not comparable to
Fiscal 1996, principally because, pursuant to the bankruptcies of the
Subsidiaries, the Company was initially focused on reorganizing, restructuring
and planning for the future. Fiscal 1996 expenses were more in the normal
course of operating a retail chain. In the long-term, the Company's
administration will be structured so that a number of new stores can be added
without a significant increase in administrative overhead, thus trading on the
overhead leverage. This means profits from new locations can flow to the
bottom-line.
<PAGE>
Page 14
The amount of amortization for the period declined in comparison to the
corresponding periods ending in Fiscal 1996 because the Company had fewer
assets. It is noteworthy that for the six months to date in Fiscal 1997,
amortization mostly results from amounts amortized for capitalized deferred
charges and other assets.
LIQUIDITY AND CAPITAL RESOURCES
See Notes 4 & 5 of the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) included with these materials.
Subject to the successful implementation of the Company's Reorganization Plan
and the completion of the related Financing Plan, the Company's proposed re-
capitalization structure, exclusive of allowable management incentive options
reserves, would then be estimated as follows:
<TABLE>
<CAPTION>
POST-CONSOLIDATION
--------------------------------------
CAPITAL
SHARES RAISED EST. TIMING
------ ------- -----------
(millions)
<S> <C> <C> <C>
i CONSOLIDATING CURRENT SHARE CAPITALIZATION
(from 39,761,238 shares):
a.) 20:1 post-consolidation number of shares 1,988,062 0.0
b.) 20:1 consolidation of Exchange Right Units:
i) Exchange Rights Units shares at $2.00 1,988,062 4.0 Dec. 1996
ii) Class A Warrants to purchase shares at $2.50 1,988,062 5.0 Mar. 1997
iii) Class AA Warrants to purchase shares at $3.00 1,988,062 6.0 Mar. 1998
iv) Agent's Option shares at $2.00 225,000 1.0 Dec. 1996
v) Agent's Option Class A Warrants to purchase shares at $2.50 225,000 0.6 Mar. 1997
vi) Agent's Option Class B Warrants to purchase shares at $3.00 225,000 0.7 Mar. 1998
ii CONSOLIDATING SPECIAL WARRANT PRIVATE PLACEMENT FINANCING
(from 45 million pre-consolidation units and assuming maximum offering):
a.) 20:1 post-consolidation Special Warrant shares net new capital, at $2.00 2,250,000 3.4 (1) Mar. 1996
b.) 20:1 Class B Warrants to purchase shares at $2.50 2,250,000 6.3 Mar. 1997
c.) 20:1 Class BB Warrants to purchase shares at $3.00 2,250,000 6.8 Mar. 1998
d.) 20:1 Penalty Special Warrants to purchase shares at zero cost 225,000 0.0 Dec. 1996
e.) 20:1 Class B Penalty Warrants to purchase shares at $2.50 225,000 0.6 Mar. 1997
f.) 20:1 Class BB Penalty Warrants to purchase shares at $3.00 225,000 0.7 Mar. 1998
iii CONVERTIBLE SPECIAL NOTES:
$6 million Debentures convertible into post-consolidation shares at
$2.50 per share 2,400,000 6.0 1996/1999
----------------------
iv POST-CONSOLIDATION REORGANIZATION PLAN
Number of Shares, fully diluted (2) 18,452,248
----------
----------
v POST-CONSOLIDATION REORGANIZATION PLAN
Capital Availability assuming full dilution $41.1
-----
-----
</TABLE>
(1) This amount represents $4.5 million gross proceeds minus $1.1 million
received in Fiscal 1996.
(2) This amount does not include allowable management incentive options
reserves.
<PAGE>
Page 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Plan of Arrangement. (See Part I, Item 2. -- MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, herein)
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual and special meeting of the Company's shareholders was held
24 July 1996. In total, 10,030,120 common shares were represented
either in person or by proxy, representing over 25% of the total
number of 39,761,238 common shares eligible to vote.
1.) The shareholders of the Company elected to receive the annual
report of the board of directors and the consolidated audited
financial statements of the Company for the fiscal year ended
31 January 1996, voting as follows:
Number of Number of Number of
common shares common shares common shares
voted for voted against voted withheld
--------- ------------- --------------
9,971,674 45,000 13,446
ii.) The shareholders of the Company also elected to fix a board of
five directors, voting as follows:
Number of Number of Number of
common shares common shares common shares
voted for voted against voted withheld
--------- ------------- --------------
9,917,474 100,500 12,146
iii.) The shareholders of the Company approved and adopted, with or
without modification, the special resolution to amend the
Articles of the Company to provide for the election and
retirement of directors in rotation and provisions governing
the removal of directors at a special meeting of the
shareholders of the Company, as more particularly set forth
and described in the management information circular, voting
as follows:
Number of Number of Number of Number of
common shares common shares common shares common shares
voted for voted against voted withheld not voted
--------- ------------- -------------- ---------
1,155,852 146,600 15,746 8,711,922
iv.) Following the approval and adoption of resolution (iii.), the
shareholders approved and adopted, without modification, the
resolution to repeal PARA4.04 - ELECTION AND TERM, PARA4.05 -
REMOVAL OF DIRECTORS and PARA4.07 - VACANCIES of By-Law
Number 2 of the By-Laws of the Company, as more particularly
set forth and described in the management information circular
accompanying this instrument of proxy, voting as follows:
Number of Number of Number of Number of
common shares common shares common shares common shares
voted for voted against voted withheld not voted
--------- ------------- -------------- ---------
1,278,453 119,846 42,999 8,588,822
<PAGE>
Page 16
v.) Following the approval and adoption of resolutions (iii.) and
(iv.) above, the shareholders approved and adopted, without
modification, the resolution to confirm the adoption of By-Law
Number 3 of the By-Laws of the Company providing for the
election and retirement of directors in rotation and
provisions governing the removal of directors at a special
meeting of shareholders of the Company, as more particularly
set forth and described in the management information circular
accompanying this instrument of proxy, voting as follows:
Number of Number of Number of Number of
common shares common shares common shares common shares
voted for voted against voted withheld not voted
--------- ------------- -------------- ---------
1,308,053 115,368 17,875 8,588,824
vi.) The election of G. Thomas Alison, J. Douglas Elliott, R. Bruce
Freeman and Eric D. Sigurdson as directors, and to designate
the term each such director is to hold office in accordance
with the management information circular, voting as follows:
Number of Number of Number of
common shares common shares common shares
voted for voted against voted withheld
--------- ------------- --------------
9,858,499 58,400 113,221
vii.) The appointment of BDO Dunwoody, Chartered Accountants,
Toronto, Ontario, as auditor of the Company for the ensuing
year at a remuneration to be fixed by the directors, voting as
follows:
Number of Number of Number of
common shares common shares common shares
voted for voted against voted withheld
--------- ------------- --------------
9,967,899 0 62,221
viii.) The shareholders of the Company also approved and adopted,
with or without modification, the special resolution to amend
the Articles of the Company to change the name of the Company,
voting as follows:
Number of Number of Number of
common shares common shares common shares
voted for voted against voted withheld
--------- ------------- --------------
9,980,750 9,846 39,524
ix.) The shareholders of the Company also approved and adopted,
with or without modification, of the special resolution
authorizing the reduction of the stated capital account for
the common shares of the Company by an amount of $26,670,824,
voting as follows:
Number of Number of Number of
common shares common shares common shares
voted for voted against voted withheld
--------- ------------- --------------
9,898,200 84,500 47,420
x.) The shareholders of the Company also approved and adopted,
with or without modification, the special resolution to
approve and adopt the plan of arrangement under Section 186 of
the BUSINESS CORPORATIONS ACT ALBERTA, as more particularly
set forth and described in the management information circular
accompanying the instrument of proxy, voting as follows:
Number of Number of Number of Number of
common shares common shares common shares common shares
voted for voted against voted withheld not voted
--------- ------------- -------------- ---------
1,317,352 56,846 67,100 8,588,822
<PAGE>
Page 17
xi.) The approval and adoption, with or without modification, of
the resolution authorizing the Company to enter into an
executive employment agreement, between the Company and G.
Thomas Alison, upon the general terms and conditions as more
particularly set forth and described in the management
information circular accompanying this instrument of proxy,
voting as follows:
Number of Number of Number of Number of
common shares common shares common shares common shares
voted for voted against voted withheld not voted
--------- ------------- -------------- ---------
1,278,152 103,200 59,946 8,588,822
xii.) The shareholders of the Company also approved and adopted,
with or without modification, of the resolution authorizing
the Company to enter into an executive employment agreement,
between the Company and Kenneth C. Marino, upon the general
terms and conditions as more particularly described in the
management information circular accompanying this instrument
of proxy, voting as follows:
Number of Number of Number of Number of
common shares common shares common shares common shares
voted for voted against voted withheld not voted
--------- ------------- -------------- ---------
1,203,328 172,324 65,646 8,588,822
xiii.) The shareholders of the Company also approved and adopted,
with or without modification, of the resolution authorizing
the Company to amend the terms of the management services
agreement between the Company and a private management company
beneficially owned by Elliott & Associates Inc., which
provides the services of J. Douglas Elliott, a director and
officer of the Company, and R. Bruce Freeman, a director of
the Company, upon the general terms and conditions as more
particularly set forth and described in the management
information circular accompanying this instrument of proxy,
voting as follows:
Number of Number of Number of Number of
common shares common shares common shares common shares
voted for voted against voted withheld not voted
--------- ------------- -------------- ---------
1,279,452 99,046 63,546 8,588,076
xiv.) The shareholders of the Company also approved and adopted,
with or without modification, of the resolution to approve,
ratify and confirm the adoption of a new stock option plan for
the Company, voting as follows:
Number of Number of Number of Number of
common shares common shares common shares common shares
voted for voted against voted withheld not voted
--------- ------------- -------------- ---------
1,272,328 131,946 39,124 8,586,722
xv.) The shareholders of the Company also approved and adopted,
with or without modification, of the resolution authorizing
the board of directors to grant stock options to purchase up
to and including 500,000 post-consolidation common shares of
the Company at an exercise price of $2.00 per common share
($0.10 per common share on a pre-consolidation basis) to such
officers, directors, advisors and consultants of the Company
as the board of directors in their sole discretion deem
advisable, voting as follows:
Number of Number of Number of Number of
common shares common shares common shares common shares
voted for voted against voted withheld not voted
--------- ------------- -------------- ---------
1,150,877 255,421 35,000 8,588,822
<PAGE>
Page 18
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
i.) Exhibits
Exhibit 27 -- Financial data schedule
ii.) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the SECURITIES EXCHANGE ACT OF 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POWER PLUS CORPORATION
Date: 1 September 1996
------------------------------------------
R. Bruce Freeman
Vice Chairman and Chief Financial Officer
(Duly authorized officer of the Registrant
and its chief financial officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM POWER PLUS
CORPORATION INTERIM FINANCIAL STATEMENTS -- FYE 1997 (UNAUDITED) FOR THE PERIOD
ENDING 31 JULY 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> CANADIAN $
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 0.73
<CASH> 3,319,378<F1><F2>
<SECURITIES> 0
<RECEIVABLES> 207,890
<ALLOWANCES> 0
<INVENTORY> 112,321
<CURRENT-ASSETS> 3,705,659
<PP&E> 178,000
<DEPRECIATION> 38,262
<TOTAL-ASSETS> 4,665,661
<CURRENT-LIABILITIES> 596,297
<BONDS> 3,050,000<F3>
0
0
<COMMON> 1,851,660<F4><F5>
<OTHER-SE> (832,296)<F5>
<TOTAL-LIABILITY-AND-EQUITY> 4,665,661
<SALES> 56,895
<TOTAL-REVENUES> 56,895
<CGS> 23,922
<TOTAL-COSTS> 23,922
<OTHER-EXPENSES> 1,304,175
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,309,464)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,309,464)<F6>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,309,464)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
<FN>
<F1>During the fiscal year ended 31 January 1996, the Company's wholly-owned
subsidiaries, Battery One-Stop International Inc. and Batteries Etc., Inc.
(collectively, the "Subsidiaries"), were assigned into bankruptcy. All of the
Company's operations, which consisted of the sale of batteries and battery-related
products to consumers via Company-owned retail stores in Canada and the US, were
conducted through the Subsidiaries and all of its capital assets were owned by the
Subsidiaries. Accordingly, at 31 January 1996 and during a part of the first
quarter of Fiscal 1997, the Company had no ongoing operations nor operating assets.
The Company has begun building the business Complete information concerning the
expansion plan, called PLAN 2000, is detailed in the FORM 10-Q.
<F2>The Company is not directly nor indirectly liable for any debt or liability
of the Subsidiaries.
<F3>Bonds includes amounts received by the Company effective 31 July 1996 from a
Special Notes 5-year 10% convertible fixed and floating charge debentures
private placement debt financing for $6 million. The initial closing represented
$3.05 million. The Special Notes currently not subscribed, now representing
$2.95 million, are required and anticipated to be fully subscribed by the end
of September 1996. Complete information concerning the capital reorganization
is included in the FORM 10-Q.
<F4>Common Stock includes amounts received by the Company from a Special
Warrant private placement equity financing, comprised of up to 45 million
Special Warrants representing $4.5 million. Initially, 38.5 million Special
Warrants were subscribed for, representing gross proceeds of $3.85 million.
Of this amount, $1.1 million had been previously received in the third
quarter of Fiscal 1996, and the balance of $2.75 million has been received
in cash. The remaining Special Warrants representing 6.5 million units and
additional capital of $650,000 are required and anticipated to be fully
subscribed by the end of September 1996. Complete information concerning
the capital reorganization is included in the FORM 10-Q.
<F5>Common stock and Other Stockholders' Equity reflect the stated
capital reduction implemented in accordance with shareholder approval
received at the annual meeting on 24 July 1996 and pursuant to the related
court approval received 25 July 1996. The Company reduced both the stated
capital amount for the common stock of the Company and the accumulated
deficit in earnings by $26,670,824. Management is of the opinion that,
after making the adjustment, the balance sheet better represents the
financial repositioning of the Company, resulting from the reorganization
and restructuring, and the appropriate current financial condition of the
Company as it proceeds to implement its 5-year business plan. Complete
information concerning the capital reorganization is included in the FORM
10-Q.
<F6>The Company has incurred losses of approximately $15 million for
Canadian income tax purposes. These losses have not been recognized for
accounting purposes. The loss carry-forwards expire from 1996 to 2003.
Losses from subsidiaries are excluded from the foregoing.
</FN>
</TABLE>
