SECURITIES AND EXCHANGE COMMISSION





WASHINGTON, D.C. 20549











FORM
10-KSB









ANNUAL REPORT PURSUANT TO SECTION 13
OR 15 (D)





OF THE SECURITIES AND EXCHANGE ACT OF
1934







For the
fiscal year ended:                                                              Commission File Number

March 31,
2003                                                                          
333-5278-NY





PowerhouseTechnologies Group, Inc.





(Name of small business issuer in its
charter)



Delaware                                                                                               
94-3334052

(State or
other jurisdiction
of                                                                   (I.R.S.
Employer

incorporation or organization)                                                                  
Identification No.)



2694 Bishop Drive, Suite 270, San Ramon, California  94583

(Address of Principal Executive Offices)     (Zip Code)









Issuer's telephone number: (925) 328-1100





Securities
registered under Section 12(b) of the Act: None





Securities
registered under Section 12(g) of the Act: None







Check whether
the issuer (1) has 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







Check if
there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. X



State issuer's revenues for the most recent fiscal year.  $81,253



The
aggregate market value of the voting common stock held by non-affiliates of the
Registrant as of March 31, 2003 was  $2,014,790.  The Company's common stock is traded on the
OTC Electronic Bulletin Board.

There were 108,400,000 shares of common stock $.0001 par value outstanding as of
March 31, 2003, which resulted in 888,525 after a 1-for-122 reverse split of
the Company's common stock on May 19, 2003.



Documents
incorporated by reference:   None



Transitional
Small Business Format (check one);   Yes   ;   No 
X



ADVISEMENT



This Annual Report on Form 10-KSB contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission in its rules, regulations and/or releases.. 
These forward-looking statements are based on the Company's current expectations
or beliefs , including but not limited to, statements concerning our operations,
economic performance, financial condition, growth and acquisition strategies,
investments and operational plans.  For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements.  Without limiting the generality of the
foregoing, words such as "believe," "anticipate," "expect," "intend," "plan,"
"will," "believe," "intend," "could," "might" or "continue" or the negative or
other variations thereof and other similar expressions identify forward-looking
statements.  In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances are
forward-looking statements.  These forward-looking statements by their
nature involve substantial risks and uncertainties, certain of which are beyond
our control, and  actual results may differ materially depending on a
variety of important facts, including but not limited to those risk factors
discussed herein below.



You are cautioned not to place undue reliance on these forward-looking
statements, which relate only to events as of the date on which the statements
are made.  We undertake no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof.  You should refer to and carefully review the information
in future documents we file with the Securities and Exchange Commission.





PART I







ITEM 1.
DESCRIPTION OF BUSINESS



Introduction



Powerhouse Technologies Group, Inc. (formerly Agate
Technologies, Inc.), a Delaware Corporation ("the Company"), is a  company engaged in the design, development and marketing
of software solutions, associated hardware , and services enabling cross PC
(personal computer ) platform connectivity, making it easier for data and device
sharing and reducing computer downtime.  The Company's business focus and
product offerings include plug and play software, components for hot swap
solutions, peripheral products for data back-up, instant data recovery and USB
digital storage devices and applications.







Since its
formation on January 1996, Agate Technologies (California), Inc , a California corporation
("Agate-California), was  engaged in the design, development and marketing
of software solutions, associated hardware, and services enabling cross PC
(personal computer) platform connectivity which made it easier for data and
device sharing and reduced computer downtime.







Agate-California pioneered the first real
application of "plug and play" software technology for swapping of storage
peripherals for IDE and ATAPI interfaces.  This technology eliminated the need
to restart and reconfigure the computer system whenever a peripheral device was
inserted or removed from the computer.  Since then, hot swapping to IDE
peripherals has become a standard in mobile devices and currently more than a
million notebook PCs use the Company's ProSwap software through royalty
licenses granted to various PC manufacturers, including IBM, Acer, NEC, Hewlett
Packard, Fujitsu and Siemens.











On June 29, 1999,
all former shareholders of Agate-California were issued shares in ARCA Corp., a New Jersey corporation
("ARCA") with no known assets or liabilities, in exchange for the contribution
of their Agate-California shares.  Each common shareholder received 1.5 ARCA
common shares for each Agate-California share exchanged.  Each Series A
Preferred shareholder received an equal number of ARCA Series A Preferred
Shares, which had substantially identical rights, preferences, privileges, and
restrictions, except each share is convertible into 1.5 ARCA common shares.  As
a result of this transaction, shareholders of Agate California owned in excess
of 90% of ARCA's outstanding shares and Agate-California became a wholly owned
subsidiary of ARCA.  Accordingly, the transaction between ARCA and
Agate-California is considered to be an acquisition of Agate-California by ARCA.











On June 30, 1999,
ARCA was merged into its other wholly owned subsidiary, Agate Technologies,
Inc., a Delaware corporation ("Agate-Delaware" or the "Company"), in order to re-incorporate ARCA
in Delaware.  Each ARCA shareholder received one share of Agate-Delaware in exchange
for one ARCA share.  As a result of this transaction, Agate Technologies Inc., a
Delaware corporation, became a publicly traded company on June 30, 1999.











Subsequently,
Agate-Delaware formed new subsidiaries and operated its business through these
subsidiaries which  included Agate-California , EI
Corporation, Agate International Cayman Limited, and Agate Singapore Pte
Ltd. In addition , Agate-California had a Malaysian subsidiary prior to its
transaction with Agate-Delaware called ATI Technologies (M) Sdn Bhd.  All of the subsidiaries except Agate-California
were inactive and the outstanding liabilities of the group far exceed their
assets.  The Company did not have the funds necessary to conduct its
operations which had temporarily ceased. The Company's principle office was located at  895 Dove
Street, 3rd Floor, Newport Beach, Ca 92660.







Commencing February 2002, the Company ceased its normal business operations and
focused on working with its financial advisors to restructure the Company's debt
and reduce its exposure through the conversion of debt to
shares so that the "public shell" could then be merged with an operating company with assets.  On July 25, 2002,
the Company signed a conditional Letter of Intent with Powerhouse Studios Inc in which the Company will acquire
100% of the issued and outstanding securities of PowerHouse Studios Inc ("Powerhouse") in a reverse takeover.  On
October 14 2002 , the Company  filed with the SEC an information statement outlining the terms and conditions of
proposed transaction with Powerhouse Studios Inc. This acquisition was approved by a majority of the outstanding
shares eligible to vote as at September 17, 2002 and there are no changes in the rights of any existing shareholders as
a result of this transaction.  The agreed-upon name change (to Powerhouse
Technologies Group, Inc.) and recapitalization (1-for-122 reverse) occurred on
May 19, 2003 and the Company is now in position to complete the acquisition.











Business Overview







The Company is
engaged in the design, development and marketing of data storage solutions and
data management across PC platforms.  The Company's business focus and product
offerings include plug and play software, components for hot-swap solutions,
peripheral products for data back-up, products allowing for instant data
recovery and USB digital storage devices and related applications.  The Company
derives revenues from software licensing and products sold through resellers, direct telephone and Internet sales.







During the first quarter of 2001, the Company located its sales, marketing and
technical support operations in St George, Utah and its corporate and accounting
operations were located in Cerritos, California.  During early 2001, the  Q USB hard drive
continued to achieve strong media coverage and attention  as a unique removable
storage device. However, by June 2001,  the Company was unsuccessful in raising
further funding due to overall tough market conditions and a slower economy.  As
a result of the financial strain, steps were taken to close its St George
operations and cut back on its staffing.  Without a new round of financing, the
Company was not able to meet its objective to expand product development,
marketing and meet the competitive demands on pricing. The Company was
not able to sustain its ongoing business operations in early 2002 without
additional capital. Commencing Feb 2002, the Company ceased its normal business
operations and focused on working with financial advisors to restructure the
Company's debt.



Patents,
Proprietary Technology and Other Intellectual Property







Because its
proprietary technology and information is important to the Company, it relies on
a combination of trade secret, copyright, trademark, and patent laws, together
with confidentiality procedures and nondisclosure agreements, to establish and
protect the proprietary rights and technology used in its products.











The Company also
relies on unpatented proprietary know-how in developing its products, and
employs various methods, including confidentiality agreements with employees,
consultants and others, to protect its trade secrets and know-how.











Irrespective of
the foregoing, the Company cannot be sure that these methods of protecting its
proprietary technology, information and know-how will afford complete
protection.  Patents may not be enforceable or provide the Company with
meaningful protection from competitors.  If a competitor were to infringe the
Company's patents, the costs of enforcing its patent rights might be substantial
or even prohibitive.  Likewise, the Company cannot be sure that others will not
independently develop its trade secrets and know-how or obtain access to them.











The Company expects that software product developers will increasingly be
subject to infringement claims as the number of products and competitors in the
Company's industry segment grows and the functionality of products in different
industry segments overlaps.  Any such claims, with or without merit, could
be time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements.  Such
royalty or licensing agreements, if required, may not be available on terms
acceptable to the Company or at all, which could have a material adverse effect
upon the Company's business, operation results and financial condition.







The Company has
two patent applications pending with the United States Patent and Trademark
Office.  These applications relate to the Company's "hotswap" technology and the
Web2Drive Internet portal.  In June 1999, the Company filed a continuation to its
November 1996 U.S. patent application covering certain aspects of its ProSwap
technology (and specifically as it applies to IDE devices).  Based on the lack
of funds, the Company has not been able to pursue the continuation of these
patents.







The Company owns
various trademarks and trade names relating to its products lines.



Principal
Suppliers







The Company's  Q
USB hard drive devices are solely sourced from one manufacturer.  Any termination
or significant disruption in the Company's relationship with the manufacturer or
any material adverse change to the financial condition of  the manufacturer
could prevent the Company from filling customer orders in a timely manner.



Research and
Development Spending



During the two most recent full-year fiscal periods ended March 31, 2003 and
March 31, 2002, the Company spent $0 and $256,758 respectively on research and development
activities.  See Item 6 in PART II of this document entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."



Employees





As of March 31, 2003, the Company had no employees.



Compliance With
Environmental Laws



Because of the
nature of the Company's business, it does not believe that the costs and effects
of compliance with environmental laws, whether federal, state or local, would be
significant or even material.





ITEM 2.
DESCRIPTION OF PROPERTY





The Company has initiated a lease on 2,186 square feet in San Ramon, California,
at the rate of $43,282.80 per year, for a period terminating December 31, 2004.



ITEM 3. LEGAL
PROCEEDINGS







The Company is not a party to any material pending legal
proceedings nor is any of its property subject to any such legal proceedings:





ITEM 4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS







On September 17, 2002, the shareholders approved the acquisition of Powerhouse
Studios, Inc. upon satisfaction of various conditions.  All conditions had
been completed on May 19, 2003 and the acquisition may now be finalized by
issuance of the shares of the Company in exchange for shares of Powerhouse
Studios, Inc.



PART II





ITEM 5. MARKET FOR
REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS







The Company's common stock currently trades on the OTC
Bulletin Board under the symbol "PWHT."  The Company's common stock began
trading in the third quarter of 1999 under the symbol "AGTE".  No assurance can be given that the
present market for the Company's common stock will continue or will be
maintained.







The following
table sets forth the range of the high and low bid information for shares of the
Company's common stock during each of the calendar quarters identified below.





Quarter Ending



|                   | High  | Low  
|------------------ | ----- | -----
|September 30, 2000 | $2.50 | $1.25
|December 31, 2000  | 1.875 | 0.812
|March 31, 2001     | 1.65  | 0.30 
|June 30, 2001      | 1.24  | 0.35 
|September 30, 2001 | 0.45  | 0.14 
|December 31, 2001  | 0.25  | 0.02 
|March 31, 2002     | 0.10  | 0.027
|June 30, 2002      | 0.03  | 0.005
|September 30, 2002 | 0.07  | 0.007
|December 31, 2002  | 0.10  | 0.02 
|March 31, 2003     | 0.09  | 0.03 
|June 30, 2003 (1)  | 15.24 | 2.00 





(1) Stock prices in this quarter reflect the effect of the 1-for-122 reverse
split of the Company's common stock.





The last price of
the Company's common stock as reported on the OTC Electronic Bulletin Board on
June 30, 2003, was $10.00.  As of June 30, 2003, the Company had
approximately 534 holders of record
of the Company's common stock.







The Company has
not paid any dividends on its common stock and the Board of Directors presently
intends to continue a policy of retaining earnings, if any, for use in the
Company's operations and to finance expansion of its business.  This may
change as the Company's financial condition improves.







In 2000, the
Company sold 429,000 shares of Common Stock at $0.50 per share, raising
$214,500.  This offering was also made pursuant to an exemption granted by Rule
506 promulgated under the Securities Act of 1933.







In 2000, the
Company also sold 859,450 shares of its Common Stock, with attached warrants,
for $1.00 per unit.   This offering was made through Chicago Investment Group,
Inc.  This offering was made pursuant to an exemption granted by Rule 506
promulgated under the Securities Act of 1933.







In 2001, the
Company sold 285,714 shares of its Common Stock for 0.035 cents per share,
raising $10,000 . This offering was made pursuant to an exemption granted by
Rule 506 promulgated under the Securities Act of 1933







In
May 2002, the Company issued 3,121,644 shares of its restricted Common Stock to
a certain party who elected to convert to Common Stock pursuant to the terms of
the Convertible Note entered into on October 01, 2001.







In May 2002, the
Company issued 10,902,200 shares of its restricted Common Stock to certain
related parties who elected to convert to Common Stock pursuant to the terms of
the Convertible Note entered into on October 01, 2001.  The Convertible Note matures
on November 03, 2002 bearing an interest rate of 12% per annum and the
conversion was agreed to by
the Holders when the Company could not repay the Promissory Notes.







In June 2002, the
Company issued 2,737,500 shares of restricted Common Stock to convert 1,825,000
preferred shares to common shares pursuant to the terms of the Preferred Stock Agreement .



On
July 23 2002, the Board of Directors authorized the issue of 7,952,060 shares of
restricted common stock to ChinatrustUSA for settlement of the outstanding bank
debt.



On
July 23, 2002, the Company issued 1,000,000 shares of common stock under an S-8
filing to Dieterich and Associates for legal services provided to the Company.



On July 23, 2002, the Board of Directors authorized
the issuance of a total of 32,822,853 shares of restricted common stock

to: Agate Technologies, Inc.,
California for 25,620,775 shares of restricted common stock; ei Corp California for 877,180

shares of restricted common
stock, and CSF Partners, Inc. for 6,324,898 shares of restricted common stock; all issuances

pursuant to an
agreement signed with CSF Partners Inc. for the sale of the Company's subsidiaries.



On
August 20, 2002, the Company issued 21,937,890 shares of restricted common stock
to the Company's officers for deferred compensation owed.



On
September 13, 2002, the Company issued 5,691,260 shares of restricted common
stock to Gordon Pan in settlement of the shareholder loan. Of this, 800,000
shares of restricted common stock is held in escrow pursuant to the
debt-for-shares agreement, but is owned by Mr. Pan.



ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION



General









The Company's
fiscal year end is March 31, 2003.



Results Of
Operations



Fiscal Years Ended
March 31, 2003 And March 31, 2002.







Net sales for the year ended March 31, 2003 declinedto $81,253 compared
with net sales of $595,092 for the year ended March 31, 2002.  Net sales for
the year ended March 31, 2003 were derived from software licensing sales and
bundled products sale which consist mainly of the Q-USB drive, which is a USB
/flash memory digital hard drive, the size of a key. For the year ended March 31, 2003, bundled products and software
licensing accounted for 66% and 34%, respectively, of all net sales.  This
compares to 88% and 12%, respectively, for the fiscal year ended March 31, 2002.







Gross margins
increasedto 90% for the year ended March 31, 2003
compared to 36% for the year ended March 31, 2002,  due to sales of
existing inventory products and software licensing royalties with a lower cost
of sales.  Gross profit declined to $72,880 for the fiscal year ended
March 31, 2003 compared to $215,826 for the fiscal year ended March 31, 2002.







Operating expenses decreased in the year ended March 31, 2003 to $364,460 from $2,641,701 for the year ended March 31, 2002.  A
significant portion of the operating expense for the year ended March 31, 2003, 
represented non-cash operating expense and deferred compensation to the officers
of the Company. This non cash operating expense included an amount of $48,004 in services which was paid with the Company's
stock and $317,861  in deferred compensation to the officers of the
Company.   As at March 31, 2003, total accrued deferred compensation
owed to the officers of the Company was $107,411.  Research and development
expenses decreased to $0 for the year ended March 31, 2003, from $256,758 for
the year ended March 31, 2002, a decrease of 100%. 
Sales and marketing expenses decreased to $6,002 for the year ended March 31,
2003 compared to $590,136 for the year ended March 31, 2002.  General and administrative expenses
decreased to $358,458  for
the year ended March 31, 2003, from $1,794,807 for the year ended March 31, 2002.   All
other office and premise expenses were reduced as operations scaled down 
significantly by mid year and staff cutbacks were implemented.







Interest income and other income decreased to $191 for the year ended March
31, 2003, from $9,277 for the year ended March 31, 2002.  This reflects a reduction in cash
resources.







The Company's operating loss decreased to $291,580 for the year ended March
31, 2003, from $2,425,875 for the year ended March 31, 2002, an decrease in
operating losses of $2,134,295.  For the year ended March 31, 2003, 
the Company had a net loss of $13,086,865 compared to a net loss of $2,492,312
for the year ended March 31, 2002, an increase of $10,594,553.



During the quarter ended September 30, 2002, the Company negotiated for the
settlement of certain debts and loans and completed the sale of all of its
subsidiaries to CSF Partners Inc.("CSF"), a Nevada corporation. Pursuant to the
agreement with CSF on July 22 2002 (filed in the 8K dated September 16 2002) the
Company issued a total of 32,822,853 shares to Agate Technologies Inc.,
California, ei Corporation California and CSF in exchange for
cancellation of debt owed to the parent by the subsidiaries and the workout of
the creditor liabilities by CSF and or its appointed agent. Agate Cayman will
receive a non-exclusive sub-license from Agate Delaware for its intellectual
properties including the Q drive. Pursuant to an approved settlement on July 23,
2002, the Company issued shares of 7,952,060 to ChinatrustBank USA in addition
to payment of $15,000 and approximately $4,700 for past legal fees. On September
13 2002, the Board of Directors approved a settlement with a shareholder.
4,891,260 shares have been issued in settlement of the principal debt of
$244,563 while a further $40,000 interest has been converted into 800,000 shares
which are held in escrow.





Liquidity and
Capital Resources







Net cash
provided by
operating activities for the year ended March 31, 2003, was $741,234.  This
compares to net cash used in operating activities of $146,025 for the year ended
March 31, 2002.  Net cash provided by investing activities was $27,875 for
the year ended March 31, 2003.  This compares to net cash used  by
investing activities of $398,802 for the year ended March 31, 2002. 
Working capital (current assets minus current liabilities) was a deficit of
$280,426 at March 31,
2003 compared to the working capital deficit of $2,513,466 as at March 31, 2002. 
The increasein working capital deficit of $2,233,040  reflects the
Company's utilization of its working capital to fund its continuing losses from
operations.  At March 31, 2003, the Company had no cash and cash
equivalents on hand and no other current assets of.  Current liabilities at
March 31, 2003 were $280,426.







The Company's cash on hand as of March 31, 2003 would not be adequate to fund
the Company's operations for one month if the Company continued to use cash in
operating activities at the same rate as in fiscal 2002.





The Company
currently does not have any material commitments for capital expenditures.







The Company may be
exposed to risks associated with acquisitions, including integration risks and
risks associated with methods of financing and the impact of accounting
treatment.  In addition, the process of completing an acquisition may take
a long time, therefore putting further financial strain on the Company to
sustain current operations.  Furthermore, there is no guarantee that the
acquisition will enhance the business of the Company.  Other risks
encountered include the inaccuracy of financial data of the acquired company.



Limited Capital/Need for Additional Capital



The Company presently does not have sufficient operating capital to continue the
business and relies upon advances from Powerhouse Studios, Inc. to fund its
minimal overhead expenses.





Uncertain Market
Acceptance



The Company's business is based on a perceived need for portable or
transportable small-sized memory devices, suitable for linkage with all common
computer hardware utilized by individual personal computer operators.  The
Company has undertaken no independent market study to determine whether or not
the market will accept such products.  The Company's business will be subject to
all the risks associated with introducing and marketing a new product or
service.



Recent and Expected
Losses



From
inception, the Company has never been profitable and has sustained substantial
net losses from operations.  There can be no assurance that it ever will
generate positive revenues from its operating activities, or that it will
achieve and sustain a profit during any future period, particularly if
operations remain at current levels.  Failure to achieve significant
revenues or profitability would materially and adversely affect the Company's
business, financial condition, and results of operations.  During the
fiscal years ended, March 31, 2002 and year ended March 31, 2003,  the
Company incurred net pre-tax losses of  $2,491,512 and $13,086,065,  respectively.   The Company's

auditors, Kenny H. Lee CPA Group, issued a "going
concern" opinion for the Company's financials at March 31, 2003.  In that
opinion, the auditor noted that the Company has sustained recurring losses,
which raises substantial doubt about its ability to continue as a going concern.



Technological Change and Market Competition.



Competition in the data storage
industry continues to be intense.  The industry is characterized by changing
technologies and customer demands for new products.  Third parties could develop
products and technologies, which could cause the Company's products and
technologies to become obsolete.  Many of these competitors have considerably
greater resources and abilities, greater marketing and sales capacity,
established distribution networks, significant good will and global name
recognition.  As a result, these competitors may be in a better position than
the Company to quickly respond to rapid technological change and consumer
demand.  Accordingly, there can be no assurance that the Company will be
successful in its ability to enhance current products and develop and introduce
future products that will achieve market acceptance.  The Company's future is
largely dependent on development of new products including, for example, its
USB hard drive device, its enhancements and applications.  These products and
services are in varying stages of development and there can be no assurance that
the development of these products and services will be successfully or timely
completed.  See the section entitled "Competition."



Unproven and Evolving
Business Model



While the Company launched the new
USB portable drive
in the quarter ended December 2000, it intends to extend this technology to
vertical applications to enhance product functionalities and usability to
consumers.  This is a novel and unproven business model, which may not be
successful and will ultimately depend on consumer demand for such a product. 
The Company is aware of similar products that are currently available, and
anticipates that any business model it develops will be subject to change.  At
this time it is impossible for management to predict the degree to which
consumers will demand such a product or whether any potential market will be
large enough to provide any meaningful revenue or profit for the Company. 
Successful implementation of this business model may also require the Company to
enter into partnerships with OEMs and software solutions providers.  There can
be no assurance that the Company will find OEMs or software solutions providers
willing to partner with it.



Supply Relationships
With and Dependence on Third Parties



The Company will be dependent upon
the hardware products of third parties for its products that are "bundled" with
other products for sale.  There can be no assurance that any relationship
between the Company and any such third party will continue to be beneficial to
the Company.  There can also be no assurance that the third parties will
continue to produce products in the future that retain their current level of
market acceptance, that the products will continue to be available in adequate
quantities at the times required by the Company or that such third party
products will not contain defects or errors.  The Company may experience lost
revenues due to the third party's delay in correcting defects in their products,
delay in getting an adequate supply of their products to the Company, or from
any resulting loss of market share.



Protection of
Intellectual Property



The Company relies primarily on a combination of
copyright, trademark and patent laws, trade secrets, confidentiality procedures
and contractual provisions to protect its proprietary technology.  In addition,
the Company seeks to avoid disclosure of its trade secrets, including requiring
those persons with access to the Company's proprietary information to execute
confidentiality agreements with the Company and restricting access to the
Company's source code.  The Company seeks to protect its software, documentation
and other written materials under trade secret and copyright laws, which afford
only limited protection.







Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary.  Policing unauthorized
use of the Company's products is difficult, and while the Company is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem.  In addition, the laws
of many countries do not protect the Company's proprietary rights to as great an
extent as do the laws of the United States.  There can be no assurance that
the Company's means of protecting its proprietary rights will be adequate or
that the Company's competitors will not independently develop similar
technology.



ITEM 7. 
FINANCIAL STATEMENTS



POWERHOUSE TECHNOLOGIES GROUP, INC.

CONTENTS

March 31, 2003





INDEPENDENT AUDITORS' REPORT



CONSOLIDATED FINANCIAL STATEMENTS

Consolidated
Balance
Sheet

Consolidated
Statements of Operations and Comprehensive Loss

Consolidated
Statements of Shareholders' Equity (Deficit)

Consolidated
Statements of Cash Flows

Notes to
Consolidated Financial Statements



---

INDEPENDENT AUDITORS' REPORT

























To the Board of Directors







Powerhouse Technologies Group, Inc. and Subsidiaries







San Ramon, California











































We have audited the accompanying consolidated balance sheet of Powerhouse Technologies Group,
Inc. and subsidiaries as of March 31, 2003, and the related consolidated statements of operations and
comprehensive loss, shareholders' equity (deficit), and cash flows for each of the two years in the
period ended March 31, 2003. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our
audits.





















We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.





















In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Powerhouse Technologies Group, Inc. and subsidiaries as of
March 31, 2003, and the consolidated results of their operations and their consolidated cash flows
for each of the two years in the period ended March 31, 2003 in conformity with accounting
principles generally accepted in the United States of America.















The accompanying financial statements have been prepared assuming that the Company will
continue as a going concern.  As discussed in Note 2 to the financial statements, however, for the
year ended March 31, 2003, the Company incurred a net loss of $13,086,865, and its net cash
provided by operating activities was $741,234.  In addition, the Company's accumulated deficit was
$13,146,379 as of March 31, 2003.  Furthermore, sales of the Company's products do not currently
generate enough revenue to sustain its operations and to date; the Company has not been able to
obtain adequate financing. The management believes that the outcome of these matters will have a
material adverse effect on the Company's financial position or results of operations.  Recovery of the
Company's assets is dependent upon future events, the outcome of which is indeterminable.  In
addition, successful completion of the Company's transition, ultimately, to the attainment of
profitable operations is dependent upon obtaining adequate financing to fulfill its development
activities and achieving a level of sales adequate to support the Company's cost structure.  These
factors, among others, as discussed in Note 2, raise substantial doubt about the ability to continue as
a going concern.  Management's plans in regards to this matter are also described in Note 2.  The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.





/s/ Kenny H. Lee CPA Group, Inc.

KENNY H. LEE CPA GROUP, INC.



























July 10, 2003

































---



POWERHOUSE TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheet

March 31, 2003



|                                                                  | March 31, 2003             
|----------------------------------------------------------------- | ---------------------------
|                                                                  |                            
|ASSETS                                                            |                            
|Current
    Assets                                                |                            
|Cash and cash equivalents                                         | $                    
    -
|Accounts receivable, net of allowance for doubtful accounts of $0 | -                          
|Inventories                                                       | -                          
|Prepayments and other assets                                      | -                          
|                                                                  |                            
|Total current assets                                              | -                          
|                                                                  |                            
|Restricted
    cash                                               | -                          
|Property
    and equipment                                        | -                          
|Software
    development costs                                    | -                          
|                                                                  |                            
|Total assets                                                      | $                    
    -
|                                                                  |                            
|LIABILITIES AND SHAREHOLDERS'
    DEFICIT                         |                            
|Current
    liabilities                                           |                            
|Line of credit (note 3)                                           | $                    
    -
|Notes payable (note 4)                                            | -                          
|Current portion of time-share payable                             | -                          
|Accounts payable                                                  | -                          
|Accrued compensation                                              | 107,411                    
|Accrued closure provision                                         | -                          
|Accrued expenses and other liabilities                            | 173,015                    
|Notes payable - related parties (note 5)                          | -                          
|                                                                  |                            
|Total current liabilities                                         | 280,426                    
|                                                                  |                            
|Time-share
    payable, net of current portion                    | -                          
|                                                                  |                            
|Total liabilities                                                 | 280,426                    
|                                                                  |                            
|Commitments and contingencies                                     | -                          
|                                                                  |                            
|Shareholders' deficit                                             |                            
|Common stock, $0.0001 par value.                                  |                            
|200,000,000 shares authorized;                                    |                            
|108,400,000 shares issued and outstanding (note 7)                | 10,840                     
|Additional paid-in capital                                        | 13,006,613                 
|Stock subscription                                                | (151,500)                  
|Accumulated other comprehensive loss                              | -                          
|Accumulated deficit                                               | (13,146,379)               
|                                                                  |                            
|Total shareholders' deficit                                       | (280,426)                  
|                                                                  |                            
|Total liabilities and shareholders' equity                        | $                    
    -
|                                                                  |                            



The accompanying notes are an integral part of these financial statements.

---

POWERHOUSE TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Loss

For the Years Ended March 31, 2003 and 2002



|                                             | 2003                   |  | 2002                 
|-------------------------------------------- | ---------------------- |  | ---------------------
|                                             |                        |  |                      
|Revenues                                     |                        |  |                      
|License revenue                              | $          
    27,585 |  | $         
    71,410
|Sales revenue                                | 53,668                 |  | 523,682              
|                                             |                        |  |                      
|Total revenue                                | 81,253                 |  | 595,092              
|                                             |                        |  |                      
|Costs of goods sold                          | 8,373                  |  | 379,266              
|                                             |                        |  |                      
|Gross profit                                 | 72,880                 |  | 215,826              
|                                             |                        |  |                      
|Expenses                                     |                        |  |                      
|Research and development                     | -                      |  | 256,758              
|Sales and marketing                          | 6,002                  |  | 590,136              
|General and administrative                   | 358,458                |  | 1,794,807            
|                                             |                        |  |                      
|Total expenses                               | 364,460                |  | 2,641,701            
|                                             |                        |  |                      
|Loss from operations                         | (291,580)              |  | (2,425,875)          
|                                             |                        |  |                      
|Other income (expense)                       |                        |  |                      
|Interest income and other income             | 191                    |  | 9,277                
|Loss from disposition of subsidiaries        | (12,789,689)           |  | -                    
|Interest expense and other expense           | (4,987)                |  | (74,914)             
|                                             |                        |  |                      
|Total other income (expense)                 | (12,794,485)           |  | (65,637)             
|                                             |                        |  |                      
|Loss before provision
    for income taxes   | (13,086,065)           |  | (2,491,512)          
|                                             |                        |  |                      
|Provision for income
    taxes               | 800                    |  | 800                  
|                                             |                        |  |                      
|Net loss                                     | (13,086,865)           |  | (2,492,312)          
|                                             |                        |  |                      
|Other comprehensive
    income (loss)        |                        |  |                      
|Foreign currency translation adjustment      | (8,000)                |  | 59,300               
|                                             |                        |  |                      
|Comprehensive loss                           | ($13,094,865)          |  | ($2,433,012)         
|                                             |                        |  |                      
|Basic and diluted loss
    per common share  | ($0.13)                |  | ($0.15)              
|                                             |                        |  |                      
|Weighted average number
    of common shares | 99,787,397             |  | 16,068,580           
|                                             |                        |  |                      



The accompanying notes are an integral part of these financial statements.

---

POWERHOUSE TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity (Deficit)

For the Years Ended March 31,



|                                                                 | Convertible
    Series A Preferred
    Stock | Common Stock | Additional Paid-in Capital | Stock Subscription | Accumulated Other Comprehensive Income (Loss) | AccumulatedDeficit | Total Stockholders Equity (Deficit)
|---------------------------------------------------------------- | -------------------------------------------- | ------------ | -------------------------- | ------------------ | --------------------------------------------- | ------------------ | -----------------------------------
|                                                                 | Shares                                       | Amount       | Shares                     | Amount            
|                                                                 |                                              |              |                            |                    |                                               |                    |                                    
|Balance at
    March 31, 2001                                    | 1,825,000                                    | $      183   | 14,116,454                 | $      1,412       | $    9,948,085                                | $    (151,500)     | $     (79,036)                     
|                                                                 |                                              |              |                            |                    |                                               |                    |                                    
|Non-cash
    stock options exercised for services                |                                              |              | 27,329                     | 3                  | 13,935                                        |                    |                                    
|Stock
    options exercised for cash                             |                                              |              | 213,903                    | 21                 | 19,979                                        |                    |                                    
|Stock
    subscription for cash                                  |                                              |              | 285,714                    | 29                 | 9,971                                         |                    |                                    
|Stock
    issued for services                                    |                                              |              | 6,317,764                  | 631                | 643,240                                       |                    |                                    
|Stock
    issued for loan fees                                   |                                              |              | 100,000                    | 10                 | 55,990                                        |                    |                                    
|Stock
    issued for payment of debt                             |                                              |              | 446,429                    | 45                 | 111,562                                       |                    |                                    
|Stock
    issued for employee compensation                       |                                              |              | 60,000                     | 6                  | 14,994                                        |                    |                                    
|Stock
    options issued for services                            |                                              |              |                            |                    | 26,750                                        |                    |                                    
|Cumulative
    translation adjustment                            |                                              |              |                            |                    |                                               |                    | 59,300                             
|Net loss                                                         |                                              |              |                            |                    |                                               |                    |                                    
|                                                                 |                                              |              |                            |                    |                                               |                    |                                    
|Balance at
    March 31, 2002                                    | 1,825,000                                    | $      183   | 21,567,593                 | $      2,157       | $  10,844,506                                 | $    (151,500)     | $       (19,736)                   
|                                                                 |                                              |              |                            |                    |                                               |                    |                                    
|Stock
    issued for conversion of debt                          |                                              |              | 14,023,844                 | 1,402              | 138,836                                       |                    |                                    
|Stock
    issued for conversion of preferred stock               | (1,825,000)                                  | (183)        | 2,737,500                  | 274                | (91)                                          |                    |                                    
|Stock
    issued for employee compensation                       |                                              |              | 21,437,890                 | 2,144              | 641,597                                       |                    |                                    
|Stock
    issued for services                                    |                                              |              | 2,167,000                  | 217                | 47,787                                        |                    |                                    
|Stock
    issued for disposition for subsidiaries                |                                              |              | 32,822,853                 | 3,282              | 653,176                                       |                    |                                    
|Stock
    issued for payment of bank debt                        |                                              |              | 7,952,060                  | 795                | 396,808                                       |                    |                                    
|Stock
    issued for payment of shareholder loan                 |                                              |              | 5,691,260                  | 569                | 283,994                                       |                    |                                    
|Cumulative
    translation adjustment                            |                                              |              |                            |                    |                                               |                    | (8,000)                            
|Reversal of
    accumulated deficit of all subsidiaries combined |                                              |              |                            |                    |                                               |                    |                                    
|Reversal of
    accumulated comprehensive gain/loss of all       |                                              |              |                            |                    |                                               |                    |                                    
|subsidiaries combined                                            |                                              |              |                            |                    |                                               |                    | 27,736                             
|Net loss                                                         |                                              |              |                            |                    |                                               |                    |                                    
|                                                                 |                                              |              |                            |                    |                                               |                    |                                    
|Balance at
    March 31, 2003                                    | -                                            | $          - | 108,400,000                | $    10,840        | $ 13,006,613                                  | $    (151,500)     | $                
    -            
|                                                                 |                                              |              |                            |                    |                                               |                    |                                    



The accompanying notes are an integral part of these financial statements.

---

POWERHOUSE TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Years Ended March 31, 2003 and 2002



|                                                                    | 2003                        |  | 2002                       
|------------------------------------------------------------------- | --------------------------- |  | ---------------------------
|                                                                    |                             |  |                            
|Cash flows from
    operating activities:                           |                             |  |                            
|Net loss                                                            | $  (13,086,865)             |  | $  (2,492,312)             
|                                                                    |                             |  |                            
|Adjustments to reconcile net loss to net cash provided by (used in) |                             |  |                            
|operating activities:                                               |                             |  |                            
|Depreciation and amortization of property and equipment             | -                           |  | 22,770                     
|Amortization of software development costs                          | -                           |  | 40,681                     
|Provision for bad debts                                             | -                           |  | 43,154                     
|Issuance of stock for loan fees                                     | -                           |  | 56,000                     
|Issuance of stock for conversion of debts                           | 140,238                     |  | -                          
|Issuance of stock as employee compensation                          | 643,741                     |  | 28,938                     
|Issuance of stock for services and fees                             | 48,004                      |  | 643,871                    
|Issuance of stock options for services rendered                     | -                           |  | 26,750                     
|Issuance of stock for disposition of subsidiaries                   | 656,458                     |  | -                          
|Issuance of stock for payment of debt                               | -                           |  | 50,000                     
|Issuance of stock for payment of bank debt                          | 397,603                     |  | -                          
|Issuance of stock for collateral for payment of debt                | -                           |  | 61,607                     
|Issuance of stock for shareholder loan                              | 284,563                     |  | -                          
|Reversal of accumulated deficits of all subsidiaries combined       | 13,112,931                  |  | -                          
|Reversal of accumulated comprehensive gain (loss) of all            |                             |  |                            
|subsidiaries combined                                               | 27,736                      |  | -                          
|(Increase) decrease in:                                             |                             |  |                            
|Accounts receivable                                                 | 8,316                       |  | 262,616                    
|Inventories                                                         | 9,385                       |  | 164,877                    
|Prepayments and other current assets                                | 8,184                       |  | 6,033                      
|Increase (decrease) in:                                             |                             |  |                            
|Accounts payable                                                    | (715,464)                   |  | 429,223                    
|Accrued compensation                                                | (410,345)                   |  | 235,928                    
|Accrued closure provision                                           | (412,908)                   |  | 289,853                    
|Accrued interest on notes payable                                   | -                           |  | 21,682                     
|Accrued expenses and other liabilities                              | 29,657                      |  | (37,696)                   
|                                                                    |                             |  |                            
|Total adjustments                                                   | 13,828,099                  |  | 2,346,287                  
|                                                                    |                             |  |                            
|Net cash provided by (used in) operating activities                 | 741,234                     |  | (146,025)                  
|                                                                    |                             |  |                            
|Cash flow from
    investing activities:                            |                             |  |                            
|Restricted cash                                                     | 6,000                       |  | 398,802                    
|Retirement of property and equipment                                | 21,875                      |  | -                          
|                                                                    |                             |  |                            
|Net cash provided by (used in) investing activities                 | 27,875                      |  | 398,802                    
|                                                                    |                             |  |                            
|Cash flow from
    financing activities:                            |                             |  |                            
|Repayment of line of credit                                         | (397,603)                   |  | (401,882)                  
|Proceeds from notes payable                                         | -                           |  | 75,000                     
|Repayment of notes payable                                          | (274,182)                   |  | (50,000)                   
|Repayment of time-share payable                                     | (12,579)                    |  | (1,155)                    
|Net proceeds from note payable - related parties                    | -                           |  | 5,325                      
|Repayment of note payable - related parties                         | (103,009)                   |  | (5,000)                    
|Proceeds from the exercise of stock options                         | -                           |  | 20,000                     
|Proceeds from stock subscriptions                                   | -                           |  | 10,000                     
|                                                                    |                             |  |                            
|Net cash provided by (used in) financing activities                 | (787,373)                   |  | (347,712)                  
|                                                                    |                             |  |                            
|Cumulative translation
    adjustment                               | (8,000)                     |  | 59,300                     
|                                                                    |                             |  |                            
|Net decrease in cash and cash equivalents                           | (26,264)                    |  | (35,635)                   
|                                                                    |                             |  |                            
|Cash and cash
    equivalents at beginning of year                  | 26,264                      |  | 61,899                     
|                                                                    |                             |  |                            
|Cash and cash
    equivalents at end of year                        | $                    
    - |  | $            26,264        
|                                                                    |                             |  |                            
|Supplemental disclosure
    of cash flow information:               |                             |  |                            
|Cash paid during the year for:                                      |                             |  |                            
|                                                                    |                             |  |                            
|Interest                                                            | $                    
    - |  | $            60,978        
|                                                                    |                             |  |                            
|Income tax                                                          | $                    
    - |  | $                    
    -
|                                                                    |                             |  |                            

The accompanying notes are an integral part of these financial statements.

---

POWERHOUSE TECHNOLOGIES GROUP, INC. AND
SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2003





(1) Organization and Line of Business

Powerhouse Technologies Group, Inc. (formerly Agate
  Technologies, Inc.), a Delaware Corporation (the Company), is a company
  engaged in the design, development and marketing of software solutions,
  associated hardware, and services enabling cross PC (personal computer)
  platform connectivity, making it easier for data and device sharing and
  reducing computer downtime. The Company's business focus and product offerings
  include plug and play software, components for hot swap solutions, peripheral
  products for data back-up, instant data recovery and USB digital storage
  devices and applications.

Since its formation on January 1996, Agate technologies
  (California), Inc., a California corporation ("Agate-California"), was engaged
  in the design, development and marketing of software solutions, associated
  hardware, and services enabling cross PC (personal computer) platform
  connectivity which made it easier for data and device sharing and reduced
  computer downtime.

Agate-California pioneered the first real application of
  "plug and play" software technology for swapping of storage peripherals for
  IDE and ATAPI interfaces. This technology eliminated the need to restart and
  reconfigure the computer system whenever a peripheral device was inserted or
  removed from the computer. Since then, hot swapping to IDE peripherals has
  become a standard in mobile devices and currently more than a million notebook
  PCs use the Company's ProSwap software through royalty licenses granted to
  various PC manufacturers, including IBM, Acer, NEC, Hewlett Packard, Fujitsu
  and Siemens.

On June 29, 1999, all former shareholders of Agate-California
  were issued shares in ARCA, Corp., a New Jersey corporation ("ARCA"), a
  non-operating public shell with no known assets or liabilities, in exchange
  for their Agate-California shares. Each common shareholder received 1.5 ARCA
  common shares for each Agate-California share exchanged. Each Series A
  preferred shareholder received an equal number of ARCA Series A preferred
  shares, which had substantially identical rights, preferences, privileges, and
  restrictions, except each share is convertible into 1.5 ARCA common shares. As
  a result of this transaction, shareholders of Agate-California owned in excess
  of 90% of ARCA's outstanding shares and Agate-California became a wholly owned
  subsidiary of ARCA. The transaction between ARCA and Agate-California was
  accounted for as a recapitalization of Agate-California. All references to the
  number of shares and amounts per share herein have been adjusted to reflect
  the effect of this 1.5 adjustment for all periods presented.

On June 30, 1999, ARCA was merged into its other wholly
  owned subsidiary, Agate Technologies, Inc., a Delaware Corporation, ("Agate-Delaware")
  in order to re-incorporate ARCA in Delaware. Each ARCA shareholder received
  one share of Agate-Delaware in exchange for one ARCA share. As a result of
  this transaction, Agate Technologies, Inc., a Delaware corporation, became a
  publicly traded company on June 30, 1999.

Subsequently, Agate-Delaware formed new subsidiaries and
  operated its business through these subsidiaries which included
  Agate-California, EI Corporation, Agate International Cayman Limited, and
  Agate Singapore Pte Ltd. In addition, Agate-California had a Malaysian
  subsidiary prior to its transaction with Agate-Delaware called ATI
  Technologies (M) Sdn Bhd. All of the subsidiaries except Agate-California were
  inactive and outstanding liabilities of the group far exceed their assets. The
  Company did not have the funds necessary to conduct its operations which had
  temporarily ceased.

Commencing February 2002, the Company ceased its normal
  business operations and focused on working with its financial advisors to
  restructure the Company's debt and reduce its exposure through the conversion
  of debt to shares so that the "public shell" could then be merged with an
  operating company with assets.

On July 25, 2002, the Company signed a conditional Letter
  of Intent with Powerhouse Studios Inc. in which the Company will acquire 100%
  of the issued and outstanding securities of Powerhouse Studios Inc.
  ("Powerhouse") in a reverse takeover. On October 14, 2002, the Company filed
  with the SEC an information statement outlining the terms and conditions of
  proposed transaction with Powerhouse Studios Inc. This acquisition was
  approved by a majority of the outstanding shares eligible to vote as at
  September 17, 2002 and there are no changes in the rights of existing
  shareholders as a result of this transaction. Pursuant to the 'Corporate
  Combination Agreement' made on November 15, 2002, the Company shall acquire
  all of the issued and outstanding shares of Powerhouse in exchange solely for
  the number of shares of Agate's authorized but unissued shares of restricted
  common stock, par value $0.0001. With the Powerhouse becoming a wholly-owned
  subsidiary of Agate, the combined entity would then change its name to
  "Powerhouse Studios, Inc., a Delaware Corporation".

(2)    Summary of Significant
  Accounting Policies

Affirmative Statement

The accompanying consolidated financial statements have
  been adjusted to include all adjustments which in the opinion of the
  management of the Company are necessary in order to make the consolidated
  financial statements not misleading.

Principles of Consolidation

The consolidated financial statements include the accounts
  of Agate-Delaware and its wholly owned subsidiaries, Agate Technologies
  (California), Inc., ei Corporation, Agate International (Cayman) Ltd., and
  Agate Technologies PTE Ltd. (collectively, the "Company"). All significant
  inter-company accounts and transactions are eliminated in consolidation.

Basis of Presentation - Going Concern

The accompanying financial statements have been prepared in
  conformity with generally accepted accounting principles, which contemplate
  continuation of the Company as a going concern. However, for the years ended
  March 31, 2003 and 2002, the Company incurred a net loss of $13,086,865 and
  $2,492,312, respectively, and its net cash provided by operating activities
  was $741,234 for the year ended March 31, 2003

Through successful debt restructurings made with the Bank
  and shareholders and disposition of subsidiaries, however, the Company plans
  to improve its financial conditions, and management believes that, through the
  'Corporate Combination' made in November 2002, the Company will generate
  additional resources and the eventual achievement of sustained profitable
  operations in the near future.

The financial statements do not include any adjustments
  that might be necessary if the Company is unable to continue as a going
  concern.

Revenue Recognition

Revenues on product sales are generally recognized when
  products are shipped, and license revenues are recognized when earned. The
  Company provides a guaranteed return policy for a thirty- (30) day period and
  a warranty for one (1) year for the product sales. No return policy is made
  for license revenues. The policy contains a requirement of the products to be
  packed and returned in original condition. When the products are returned, the
  Company normally exchanges the products or provides credits to the customers.
  The returned products are directly shipped out to the supplier and receive new
  products or credits from the supplier.

Comprehensive Income

For the year ended March 31, 2003, the Company adopted
  Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
  Comprehensive Income." This statement establishes standards for reporting
  comprehensive income and its components in a financial statement.
  Comprehensive income as defined includes all changes in equity (net assets)
  during a period from non-owner sources. Examples of items to be included in
  comprehensive income, which are excluded from net income, include foreign
  currency translation adjustments and unrealized gains and losses on
  available-for-sale securities.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company
  considers all highly liquid investments purchased with original maturity of
  three months or less to be cash equivalents.

Inventories

Inventory is stated at the lower of cost, which is
  calculated on a first-in, first-out basis or market.

Property and Equipment

Property and equipment are stated at cost. Depreciation for
  property and equipment is provided on a straight-line basis over an estimated
  useful life of generally three years. Amortization of leasehold improvements
  is provided on a straight-line basis over the shorter of the life of the
  related asset or the lease term.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities
  in accordance with generally accepted accounting principles. For certain of
  the Company's financial instruments, including cash and cash equivalents,
  accounts receivable, accounts payable, accrued compensation, and other accrued
  expenses, the carrying amounts approximate fair value due to their short
  maturities. The amounts shown for notes payable also approximate fair value
  because current interest rates offered the Company for debt of similar
  maturities is substantially the same.

Stock-Based Compensation

SFAS No. 123, "Accounting for Stock-Based Compensation,"
  establishes and encourages the use of the fair value based method of
  accounting for stock-based compensation arrangements under which compensation
  cost is determined using the fair value stock-based compensation determined as
  of the date of grant and is recognized over the periods in which the related
  services are rendered. The statement also permits companies to elect to
  continue using the current implicit value accounting method specified in
  Accounting Principles Bulletin ("APB") Opinion No. 25, "Accounting for Stock
  Issued to Employees," to account for stock-based compensation issued to
  employees. The Company has elected to use the intrinsic value based method and
  has disclosed the pro forma effect of using the fair value based method to
  account for its stock-based compensation.

Income Taxes

Deferred income taxes are recognized for the tax
  consequences in future years of differences between the tax basis of assets
  and liabilities and their financial report amounts at each period end, based
  on enacted tax laws and statutory tax rates applicable to the periods in which
  the differences are expected to affect taxable income. Valuation allowances
  are established, when necessary, to reduce deferred tax assets to the amount
  expected to be realized. The provision for income taxes represents the tax
  payable for the period, if any, and the change during the period in deferred
  tax assets and liabilities.

Loss per Share

The Company utilizes SFAS No. 128, "Earnings per Share."
  Basic loss per share is computed by dividing loss available to common
  shareholders by the weighted-average number of common shares outstanding.
  Diluted loss per share is computed similar to basic loss per share except that
  the denominator is increased to include the number of additional common shares
  that would have been outstanding if the potential common shares had been
  issued and if the additional common shares were dilutive. Because the Company
  has incurred net losses, basic and diluted loss per share are the same.

Foreign Currency Exchange Gains and Losses

The reporting currency for the Company is the United States
  dollar. The functional currency of the Company's foreign subsidiary is the
  Singapore dollar. Subsidiaries' assets and liabilities are translated into
  United States dollars at the exchange rate in effect at the balance sheet
  date. Revenue and expenses are translated at average rates of exchange
  prevailing during the period. The resulting cumulative translation adjustments
  are disclosed as a component of accumulative other comprehensive income (loss)
  in shareholders' equity. Foreign currency transaction gains and losses are
  recorded in the statements of operations and comprehensive loss as a component
  of general and administrative expense and have been immaterial for the periods
  presented.

Reclassifications

Certain amounts included in the prior year financial
  statements have been reclassified to conform with the current year
  presentation. Such reclassification had no effect on reported net loss.

Estimates

In preparing financial statements in conformity with
  generally accepted accounting principles, management makes estimates and
  assumptions that affect the reported amounts of assets and liabilities and
  disclosures of contingent assets and liabilities at the date of the financial
  statements, as well as the reported amounts of revenues and expenses during
  the reporting period. Actual results could differ from those estimates.

Certain Risks and Concentrations

Ongoing customer credit evaluations are performed by the
  Company, and collateral is not required. The Company maintains allowances for
  potential returns and credit losses. Management does not believe that any
  allowance should be provided at March 31, 2003.

The Company's products include components subject to rapid
  technological change. Significant technological change could adversely affect
  the Company's operating results and subject the Company to product returns and
  inventory losses. While the Company has ongoing programs to minimize the
  adverse effect of such changes and considers technological change in
  estimating its allowances, such estimates could change in the future.

One customer accounted for 34%
  of the Company's net revenues for the year ended March 31, 2003. Two customers
  accounted for 11% and 10% of the Company's net revenues for the year ended
  March 31, 2002.

The Company has one major supplier who represented 100%
  and 55% of total purchases during the years ended March 31, 2003 and 2002,
  respectively.

Recently Issued Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143, "Accounting for
  Asset Retirement Obligations." This statement applies to legal obligations
  associated with the retirement of long-lived assets that result from the
  acquisition, construction, development, and/or the normal operation of
  long-lived assets, except for certain obligations of lessees. This statement
  is not applicable to the Company.

In July 2001, the FASB issued SFAS No. 141, "Business
  Combinations." This statement addresses financial accounting and reporting for
  business combinations and supersedes Accounting Principles Bulletin ("APB")
  Opinion No. 16, "Business Combinations," and SFAS No. 38, "Accounting for
  Pre-Acquisition Contingencies of Purchased Enterprises." All business
  combinations in the scope of this statement are to be accounted for using one
  method, the purchase method. The provisions of this statement apply to all
  business combinations initiated after June 30, 2001. Use of the
  pooling-of-interests method for those business combinations is prohibited.
  This statement also applies to all business combination accounted for using
  the purchase method for which the date of acquisition is July 1, 2001 or
  later.

In July 2001, the FASB issued SFAS No. 142, "Goodwill and
  other Intangible Assets." This statement addresses financial accounting and
  reporting for acquired goodwill and other intangible assets and supersedes APB
  Opinion No. 17, "Intangible Assets." It addresses how intangible assets that
  are acquired individually or with a group of other assets (but not those
  acquired in a business combination) should be accounted for in financial
  statements upon their acquisition. This statement also addresses how goodwill
  and other intangible assets should be accounted for after they have been
  initially recognized in the financial statements. It is effective for fiscal
  years beginning after December 15, 2001. Early application is permitted that
  the entities with fiscal years beginning after March 15, 2001, provided that
  the first interim financial statements have not been issued previously.

In August 2001, the FASB issued SFAS No. 144, "Accounting
  for the Impairment or Disposal of Long-Lived Assets," which supersedes both FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
  and for Long-Lived Assets to Be Disposed of" and the accounting and reporting
  provisions of APB Opinion No. 30, 'Reporting the Results of Operations -Reporting the Effects of Disposal of a Segment of a Business and
  Extraordinary, Unusual and Infrequently Occurring Events and Transactions
  (Opinion 30)," for the disposal of a segment of a business (as previously
  defined in the Opinion). SFAS No. 144 retains the fundamental provisions in
  SFAS No. 121 for recognizing and measuring impairment losses on long-lived
  assets held for use and long-lived assets to be disclosed of by sale, which
  also resolving significant implementation issues associated with SFAS No. 121.
  SFAS No. 144 retains the basic provisions of Opinion 30 on how to present
  discontinued operations in the income statement but broadens that presentation
  to include a component of an entity (rather than a segment of a business).
  Unlike SFAS No. 121, an impairment assessment under SFAS No. 144 will never
  result in a write-down of goodwill. Rather, goodwill is evaluated for
  impairment under SFAS No. 142, "Goodwill and Other Intangible Assets." The
  Company believes the adoption of this statement will not have a material
  impact on the Company.

In July 2002, the FASB issued SFAS No. 146, "Accounting for
  Costs Associated with Exit of Disposal Activities," which supersedes EITF No.
  94-3, "Liability Recognition for Certain Employment Termination Benefits and
  Other Costs to Exit an Activity." SFAS No. 146 requires companies to record
  liabilities for costs associated with exit or disposal activity. Adoption of
  this standard is effective for exit or disposal activities that are initiated
  after December 31, 2002. This statement is not applicable to the Company.

(3) Line of Credit

The Company maintains a credit agreement with a financial
  institution, which provides for a revolving line of credit up to a maximum of
  $800,000. Advances are limited to a borrowing base of cash for 50% of the loan
  amount, 70% of eligible accounts receivable, and 40% of inventory, capped at
  $300,000. The line of credit is collateralized by cash for 50% of the balance
  and substantially all of the assets of the Company. In addition, the Company
  is required to comply with certain financial covenants. The line of credit
  bears interest at prime (4.25% at March 31, 2003), plus 3.00%.

In July 2002, the Company issued 7,952,060 shares of
  restricted common stock to the Bank for settlement of the outstanding debt of
  $397,603.

(4) Notes Payable

The Company maintains notes payable, which bears interest
  at 10% per annum. Interests are payable monthly. The notes payable matured on
  March 2001 and December 2001, respectively.

In May 2002, the Company issued 3,121,644 shares of its
  restricted common stock for settlement of the outstanding note of $29,619 with
  interest of $1,597 pursuant to the terms of the Convertible Note entered into
  on October 1, 2001.

In September 2002, the Company issued 4,891,260 shares of
  restricted common stock to a certain shareholder in settlement of the
  principal debt of $244,563 and issued 800,000 shares of restricted common
  stock for $40,000 interest.

(5) Notes Payable -Related Parties

On October 1, 2001, notes payable to related parties were
  converted into Convertible Notes bearing interest at twelve (12) percent per
  annum.

In May 2002, the Company issued 10,902,200 shares of its
  restricted common stock for settlement of the notes payable to related parties
  (outstanding balances: $103,009, interest: $6,013) pursuant to the terms of
  the Convertible Note entered into on October 1, 2001. The Convertible Note
  matured on November 3, 2002 bearing an interest rate of 12% per annum and the
  conversion was agreed to by the Holders when the Company could not repay the
  Promissory Notes.



(6) Commitments and Contingencies

Leases

The Company leases a facility for its corporate office on a
  month-to-month basis from an unrelated party. Monthly payments of $1,750 are
  required on this lease. The Company also leases equipment and an automobile
  under non-cancelable operating leases, which expire through March 2005. Future
  minimum annual rental commitments under the non-cancelable operating leases at
  March 31, 2003 were as follows:

|Year Ending March 31, |         
|--------------------- | --------
|                      |         
|2004                  | 5,560   
|2005                  | 3,239   
|                      |         
|Total                 | $  8,799
|                      |         

Rent expense was $12,181 and $37,063 for the years ended
  March 31, 2003 and 2002, respectively.

In April 2003, the Company has initiated a non-cancelable
  operating sub-lease for its corporate office in San Ramon, California, at the
  rate of $43,283 per year, for a period commencing on May 1, 2003 and
  terminating December 31, 2004.

Litigation

Based upon advice from legal counsel, there are neither
  existing claims nor pending or threatened litigation, either asserted or
  unasserted, which would be material to the Company.

(7) Shareholders' Equity

Preferred Stock

Under the Company's Articles of Incorporation, preferred
  stock may be issued in series, and the Company's Board of Directors is
  authorized to determine the rights, preferences, and terms of each series.

Dividends



The holders of Series A preferred stock are entitled to
  receive dividends, out of any assets legally available, prior and in
  preference to, any declaration or payment of any dividend on the common stock
  of the Company at the rate of $0.175 per share per year, or if greater (as
  determined on a per-year basis and on an as-converted basis for the preferred
  stock) an amount equal to that paid on the common stock of the Company. Such
  dividends are payable when, as, and if declared by the Board of Directors and
  are not cumulative. As of March 31, 2001, no dividends have been declared.

Liquidation

In the event of any liquidation, dissolution, or winding up
  of the Company, either voluntary or involuntary, the holders of Series A
  preferred stock are entitled to receive, prior and in preference to, any
  distribution of any assets of the Company to the holders of common stock by
  reason of their ownership, an amount equal to the sum of $3.50 for each
  outstanding share of Series A preferred stock, as adjusted for any stock
  dividends, combination, or splits, plus any declared but unpaid dividends on
  such shares. Any remaining assets will be distributed ratably to the holders
  of common stock based on the number of shares held by each shareholder.

Voting

The holder of each share of Series A preferred stock does
  not have voting rights.

Conversion

At the option of the holder, each share of Series A
  preferred stock is convertible into the number of fully paid and
  non-assessable shares of common stock which results from dividing the
  conversion price per share in effect for the preferred stock at the time of
  conversion into the per share conversion value of such shares. The initial
  conversion price per share is $3.50, which is subject to adjustment from time
  to time. The number of shares into which a share of preferred stock is
  convertible is referred to as the conversion rate.

Conversion is automatic at its then effective conversion
  rate immediately upon the closing of a firm commitment underwritten public
  offering pursuant to an effective Registration Statement under the Securities
  Act of 1933, as amended, converting the offer and sale of common stock in
  which the aggregate proceeds raised equal, or exceed, $5,000,000, or when
  fewer than 150,000 shares of Series A preferred stock are outstanding. The
  Board of Directors has reserved 2,075,000 shares of common stock for future
  issuance to effect the conversion of the preferred stock into common stock.

Redemption

At the option of the Board of Directors, the Company may
  redeem in whole or in part, the Series A preferred stock by paying cash equal
  to the sum of $3.50 for each outstanding share of Series A preferred stock,
  plus any declared but unpaid dividends.

Common Stock

Each share of common stock is entitled to one vote. The
  holders of common stock are also entitled received dividends whenever funds
  are legally available and when declared by the Board of Directors, subject to
  the prior rights of holders of all classes of stock outstanding.

In May 2002, the Company issued 14,023,844 shares of common
  stock for conversion of debts totaling $140,238.

In June 2002, the Company issued 2,737,500 shares of common
  stock for conversion of 1,825,000 preferred shares to common shares pursuant
  to the terms of the Preferred Stock Agreement.

In July 2002, the Company issued 1,000,000 shares and
  667,000 shares of its common stock for legal services and other services,
  respectively, rendered to the Company. In August 2002, the Company also issued
  500,000 shares of common stock for services rendered to the Company.

In July 2002, for the sale of all of its subsidiaries to
  CSF Partners, Inc. ("CSF"), a Nevada Corporation, the Company issued
  32,822,853 shares of common stock to: Agate Technologies, Inc., California for
  25,620,775 shares of common stock; ei Corporation, California for 877,180
  shares of common stock; and CSF Partners, Inc. for 6,324,898 shares of common
  stock in exchange for cancellation of debt owed to the parent by the
  subsidiaries and the workout of the creditor liabilities by CSF and/or its
  appointed agent. Agate Cayman will receive a non-exclusive sub-license from Agate
  Delaware for its intellectual properties including the Q drive.

In July 2002, the Company issued 7,952,060 shares of its
  common stock for settlement of the outstanding bank debt totaling $397,603.

In August 2002, the Company issued 21,437,890 shares of
  common stock to the Company's officers for deferred compensation owed totaling
  $643,741.

In September 2002, the Company issued 5,691,260 shares of
  common stock to a certain shareholder in settlement of the shareholder loan.
  Of this, 800,000 shares of common stock is held in escrow pursuant to the
  debt-for-shares agreement, but is owned by the certain shareholder.

Stock Options

The Company had two incentive stock option plans under which shares of
  common stock are reserved for issuance to employees and consultants. In
  connection with the reorganization, the 1996 Stock Option Plan and the 1997
  Stock Option Plan were canceled, and the shares were transferred and adopted
  under the 1999 Dual Stock Option Plan (the "1999 Plan"). Under the 1999 Plan,
  shares of common stock are reserved for issuance to employees and consultants,
  and the Company may grant up to 4,500,000 incentive stock options or
  non-statutory options. On August 28, 2001, the Company amended the 1999 Dual
  Stock Option Plan and renamed it "Agate Technologies Inc., Equity Incentive
  Plan". Under the amended plan, the Company may issue awards of Options,
  Restricted Stock and Stock Bonuses up to 4,500,000 shares.

The Company has adopted only the disclosure provisions of
  SFAS No. 123. It applies Accounting Principles Bulletin ("APB") Option No. 25,
  "Accounting for Stock Issued to Employees," and related interpretations in
  accounting for its plans and does not recognize compensation expense for its
  stock-based compensation plans other than for restricted stock and options
  issued to outside third parties. If the Company had elected to recognize
  compensation expense based upon the fair value at the grant date for awards
  under this plan consistent with the methodology prescribed by SFAS No.123, the
  Company's net loss and loss per share would be reduced to the pro forma
  amounts indicated below for the years ended March 31, 2003 and March 31, 2002:

|                            | 2003                      |  | 2002                   
|--------------------------- | ------------------------- |  | -----------------------
|                            |                           |  |                        
|Net loss                    |                           |  |                        
|As reported                 | $ (13,086,865)            |  | $ (2,492,312)          
|Pro forma                   | $ (13,177,198)            |  | $ (2,519,062)          
|Basic loss per common share |                           |  |                        
|As reported                 | $           
      (0.13) |  | $         
      (0.16)
|Pro forma                   | $           
      (0.13) |  | $         
      (0.16)



The following summarizes all of the Company's stock option transactions:

|                            |  | Stock Options Outstanding |  | Weighted-Average Exercise Price |  | Stock Options Outstanding Outside of Plan |  | Weighted Average Exercise Price
|--------------------------- |  | ------------------------- |  | ------------------------------- |  | ----------------------------------------- |  | -------------------------------
|                            |  |                           |  |                                 |  |                                           |  |                                
|Outstanding, March 31, 2001 |  | 1,750,000                 |  | $ 0.58                          |  | 800,000                                   |  | $ 0.21                         
|Granted                     |  | 1,527,329                 |  | $ 0.14                          |  | -                                         |  | $      -                       
|Exercised                   |  | (241,232)                 |  | $ 0.10                          |  | -                                         |  | $      -                       
|Cancelled                   |  | (825,000)                 |  | $ 0.44                          |  | -                                         |  | $      -                       
|                            |  |                           |  |                                 |  |                                           |  |                                
|Outstanding, March 31, 2002 |  | 2,211,097                 |  | $ 0.48                          |  | 800,000                                   |  | $ 0.21                         
|Granted                     |  | -                         |  | $      -                        |  | -                                         |  | $      -                       
|Exercised                   |  | -                         |  | $      -                        |  | -                                         |  | $      -                       
|Cancelled                   |  | -                         |  | $      -                        |  | -                                         |  | $      -                       
|                            |  |                           |  |                                 |  |                                           |  |                                
|Outstanding, March 31, 2003 |  | 2,211,097                 |  | $ 0.48                          |  | 800,000                                   |  | $ 0.21                         
|Exercisable, March 31, 2003 |  | 2,211,097                 |  | $ 0.48                          |  | 800,000                                   |  | $ 0.21                         
|                            |  |                           |  |                                 |  |                                           |  |                                

Information relating to these options is as follows:

|Exercise Price |  | Stock Options Outstanding |  | Stock Options Exercisable |  | Weighted-Average Remaining Contractual Life |  | Weighted-Average Exercise Price of Options Outstanding |  | Weighted Average Exercise Price of Options Exercisable
|-------------- |  | ------------------------- |  | ------------------------- |  | ------------------------------------------- |  | ------------------------------------------------------ |  | ------------------------------------------------------
|$ 0.08         |  | 750,000                   |  | 750,000                   |  | 4.0 years                                   |  | $ 0.08                                                 |  | $ 0.08                                                
|$ 0.44         |  | 925,000                   |  | 925,000                   |  | 8.0 years                                   |  | $ 0.44                                                 |  | $ 0.44                                                
|$ 2.13         |  | 50,000                    |  | 50,000                    |  | 3.0 years                                   |  | $ 2.13                                                 |  | $ 2.13                                                
|$ 0.09         |  | 286,097                   |  | 286,097                   |  | 8.8 years                                   |  | $ 0.10                                                 |  | $ 0.10                                                
|$ 0.17         |  | 500,000                   |  | 500,000                   |  | 8.8 years                                   |  | $ 0.17                                                 |  | $ 0.17                                                
|$ 0.17         |  | 500,000                   |  | 500,000                   |  | 8.8 years                                   |  | $ 0.17                                                 |  | $ 0.17                                                
|               |  | 3,011,097                 |  | 3,011,097                 |  |                                             |  |                                                        |  |                                                       
|               |  |                           |  |                           |  |                                             |  |                                                        |  |                                                       

For purposes of computing the pro forma disclosures
  required by SFAS No. 123, the fair value of each option granted to employees
  and directors is estimated using the Black Scholes option-pricing model with
  the following weighted-average assumptions for the years ended March 31, 2003
  and 2002: dividend yields of 0% and 0%, respectively; expected volatility of 35%
  and 33%, respectively; risk-free interest rates of 1.2% and 4.0%,
  respectively; and expected lives of ten (10) years.

The Black-Scholes option valuation model was developed for
  use in estimating the fair value of traded options which have no vesting
  restrictions and are fully transferable. In addition, option valuation models
  require the input of highly subjective assumptions including the expected
  stock price volatility. Because the Company's employee stock options have
  characteristics significantly different from those of traded options, and
  because changes in the subjective input assumptions can materially affect the
  fair value estimate, in management's opinion, the existing models do not
  necessarily provide a reliable single measure of the fair value of its
  employee stock options.

(8) Income Taxes

The following table presents the current and deferred
  income tax provision for federal and state income taxes for the years ended
  March 31, 2003 and 2002:

|                           | 2003                |  | 2002             
|-------------------------- | ------------------- |  | -----------------
|Current                    |                     |  |                  
|Federal                    | $          
      - |  | $        
      -
|State                      | 800                 |  | 800              
|                           | 800                 |  | 800              
|Deferred                   |                     |  |                  
|Federal                    | -                   |  | -                
|State                      | -                   |  | -                
|                           | -                   |  | -                
|Provision for income taxes | $     
      800    |  | $   
      800   
|                           |                     |  |                  









As of March 31, 2003, the Company had net operating loss
  carryforwards for federal and state income tax purposes of approximately
  $24,098,000 and $22,002,000, respectively. The net operating loss
  carryforwards begin expiring in 2005. The utilization of net operating loss
  carryforwards may be limited due to the ownership change under the provisions
  of Internal Revenue Code Section 382 and similar state provisions.

(9) Segment Information

The Company operates and tracks its results in one
  operating segment. The Company manages revenues by geographic region, but does
  not manage operations by region.

Net revenue for locations outside of the United States are
  substantially the result of export sales from the United States. Net revenue
  by geographic region based on customer locations was as follows:

|                        | 2003            |  | 2002            
|----------------------- | --------------- |  | ----------------
|Net Revenue             |                 |  |                 
|United States           | $  77,951       |  | $  580,302      
|Pacific Rim             | -               |  | -               
|Europe                  | -               |  | 3,248           
|Other                   | 3,302           |  | 11,542          
|                        | 81,253          |  | 595,092         
|                        |                 |  |                 
|Elimination adjustments | -               |  | -               
|Total                   | $ 
      81,253 |  | $ 
      595,092
|                        |                 |  |                 



(10)Subsequent Event

On May 19, 2003, the agreed-upon name change (to Powerhouse
  Technologies Group, Inc.) and recapitalization (1-for-122 reverse) occurred
  and the Company is now in position to complete the acquisition.







ITEM 8. CHANGES IN
AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE







None.



PART III





ITEM 9. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT

The members of the Board of Directors of PowerHouse
have been appointed to the Board of Directors of the Registrant, and will serve
until the next annual meeting of the stockholders or until their successors have
been elected. The officers serve at the pleasure of the Board of Directors. The
following are the directors and executive officers of PowerHouse and of Agate
Technologies, Inc.  Francis Khoo has resigned as a Director and Officer of
the Company, as had Shirley Ooi earlier, also effective December 30, 2002, and
noted in the Form 8-K filed January 9, 2003.

|NAME               | POSITION      | HELD POSITION SINCE
|------------------ | ------------- | -------------------
|James Palmer       | Director      | March 14, 2003     
|Gregory A. Duffell | CFO/Secretary | December 30, 2002  
|Jay Elliot         | CEO           | December 30, 2002  



Jay Elliot, Chief Executive Officer and Chairman.  Mr. Elliot has over
thirty years operating experience with such corporate giants as IBM, Intel and
Apple Computers.  Mr. Elliot served in numerous roles at Apple, including
executive vice-president reporting to founder Steven Jobs, and Chief Operating
Officer of the Macintosh division.  Later, Mr. Elliot also served as a
director of Intel, and was the creator of the Intel Foundation.  Mr. Elliot
also has extensive experience in both the entertainment and healthcare
industries.  He is also currently the Chief Executive Officer of The Bridge
Group, Inc.



Gregory Duffell, Chief Financial Officer and Director.  In addition to
being the CFO and Director of Powerhouse, Mr. Duffell is the Chief Operating
Officer of MayFair Capital Group Limited and a Director of HealthCare Direct,
Inc.  Mr. Duffell is a senior executive with sixteen years of Asia Pacific
franchise and brand management expertise.  After two years as a pilot in
the Royal Australian Air Force, Mr. Duffell embarked on an extensive business
career in the Asia Pacific region initially with Budget Rent-A-Car
International.  Mr. Duffell was the General Manager for the Thomas Cook
Group - Worldwide Network, based in London.



James Palmer, Director.  Mr. Palmer has over 15 years of experience in the
telecommunications industry and is currently the Chief Executive Officer of Key
Partners, Inc. Mr. Palmer was involved in the management of Mobile
Communications of America, which later became Skytel Communications, Inc. 
Mr. Palmer sits on numerous boards, including Omni Bank, and a number of
non-profit organizations.





ITEM 10. EXECUTIVE
COMPENSATION



Summary
Compensation Table



The following
table shows all cash compensation paid or to be paid by the Company during the
fiscal years indicated to the Chief Executive Officer and the highest paid
executive officers of the Company as of the end of the Company's last fiscal
year whose salary and bonus for such period in all capacities in which the
executive officer served exceeded $100,000.





LONG TERM COMPENSATION





ANNUAL
COMPENSATION             AWARDS/PAYOUTS



Name and
        Principal Position
      Year
      Salary
      ($)
      Bonus
      ($)
      Other
      Annual
      Compen-sation
      
      ($)
      Securities
        Underlying Options/
        
        SARs
        (1)
      All Other
      Compen-sation
      
      ($)James Palmer
      2002
      0
      0
      0
      0
      0Director
      2001
      0
      0
      0
      0
      02000
      0
      0
      0
      0
      0Stewart Bell
      2002
      0
      0
      0
      0
      0Director
      2001
      0
      0
      0
      0
      02000
      0
      0
      0
      0
      0Greg Duffell
      2002
      0
      0
      0
      0
      0CFO/Secretary
      2001
      0
      0
      0
      0
      02000
      0
      0
      0
      0
      0Jay Elliot
      2002
      0
      0
      0
      0
      0CEO
      2001
      0
      0
      0
      0
      02000
      0
      0
      0
      0
      0Francis Khoo
      2002
      10,863,870 (shares)
      0
      0
      0
      0Former Director and CEO
      2001
      $129,600
      ---
      21,600(3)
      200,000(2)
      ---2000
      $129,600
      ---
      22,440(3)
      0
      ---Shirley Ooi
      2002
      10,574,020 shares
      0
      0
      0
      0Former Director and CFO
      2001
      $108,000
      0
      15,600(3)
      200,000 (2)
      02000
      $108,000
      0
      14,940(3)
      0
      0










(1) The
options vest at the rate of 2-1/12% per month over four years from their date of
grant on September 30, 1998.  As at June 29, 1999, upon the consummation of the
merger transaction with Arca , each Agate shareholder received 1.5X Agate
stock.  Accordingly, the stock options split to 1.5X .







(2) The
options were granted immediate vesting.





(3) 
Represents housing and automobile allowance pursuant to the terms of the
employment agreement.









Option Grants











The following
table sets forth information with respect to the named executive officers
concerning the grants of options during the fiscal year ended March 31, 2003.







OPTION GRANTS IN LAST FISCAL YEAR











None.







Option Exercises
and Fiscal Year End Option Values







The following
table sets forth information with respect to the named executive officers
concerning the exercise of options during the last fiscal year and unexercised
options held as of the end of the March 31, 2003 fiscal year.  The Company has
never granted any stock appreciation rights.







AGGREGATED OPTIONS EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTIONS VALUES:









|Name         | Shares Acquired on
    Exercise | Value Realized | Number of Securities
    Underlying Unexercised Options at FY End
    Exercisable/Unexercisable | Value of Unexercised in the Money Options at FY End
    Exercisable/Unexercisable
|------------ | ------------------------------- | -------------- | ----------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------
|             |                                 |                |                                                                                                 |                                                                                  
|Francis Khoo | 0                               | 0              | 1,346,875/28,125                                                                                | 0                                                                                
|Shirley Ooi  | 0                               | 0              | 1,131,250/18,750                                                                                | 0                                                                                
|             |                                 |                |                                                                                                 |                                                                                  









(1) In
accordance with SEC rules, values are calculated by subtracting the exercised
price from the fair market value of the underlying common stock.  For purposes
of this table, fair market value is deemed to be the closing bid price of  the common
stock on March 28, 2003, which was $0.027 per share.









The Employment
Agreements for Mr. Khoo and Ms. Ooi have both been terminated as both Mr. Khoo
and Ms. ooi have resigned their respective positions with the Company and no
further compensation is due to them.



ITEM 11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT











The following table sets forth information concerning the beneficial ownership
of the Company's common stock as of June 30, 2003 for (a) each person known to the
Company to be a five percent beneficial owner of the common stock; (b) each
director; (c) each executive officer designated in the section captioned
"MANAGEMENT-Executive Compensation;" and (d) all directors and executive
officers as a group.  Except as otherwise noted, each person named below had
sole voting and investment power with respect to such securities.









|Title of Class                        | Name and Address                                                                                                                                      | Amount and
      Nature of Beneficial Ownership | Percent of
    
    Class
|------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | -------------------------
|Common Stock                          | Francis Khoo- former Chief Executive Officer and Chairman
    
    895 Dove Street, 3rd
    Floor
    
    Newport Beach Ca 92660                     | 17,114,270                                      | 15.79%                   
|Common Stock                          | Shirley Ooi- former Chief Financial Officer and Director
    
    895 dove Street, 3rd Floor
    
    Newport Beach Ca 92660                          | 11,547,083                                      | 10.65%                   
|Common Stock                          | Pacific Rim Trading Ltd.(1)
    
    c/o Acceptor Corporation Ltd.
    
    12th Floor, Ruttonjee House
    
    11 Duddell Street
    
    Hong Kong | 6,620,000(4)                                    | 6.11%                    
|Common Stock                          | ChinatrustUSA                                                                                                                                         | 7,952,060                                       | 7.34%                    
|Common Stock                          | Agate Technologies, Inc. - California                                                                                                                 | 25,620,775                                      | 23.64%                   
|Common Stock                          | CSF Partnership                                                                                                                                       | 6,324,898                                       | 5.84%                    
|Common Stock                          | Gordon Pan                                                                                                                                            | 5,691,260                                       | 5.25%                    
|Common Stock                          | James Palmer - Director
    2694 Bishop Drive,
    Suite 270
    San Ramon,
    California 94583                                                      | 0                                               | 0.00%                    
|Common Stock                          | Jay Elliot - CEO and Director2694 Bishop Drive, Suite 270
    San Ramon,
    California 94583                                                         | 500,000                                         | 0.46%                    
|Common Stock                          | Greg Duffell - CFO/Secretary2694 Bishop Drive, Suite 270
    San Ramon,
    California 94583                                                          | 500,000                                         | 0.46%                    
|All officers and directors as a group |                                                                                                                                                       | 1,000,000                                       | 0.92%                    









All
holdings were calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of 1934. 
Unless otherwise stated below, each such person has sole voting and investment
power with respect to all such shares.  Under Rule 13d-3(d), shares not
outstanding which are subject to options, warrants, rights or conversion
privileges exercisable within 60 days are deemed outstanding for the purpose of
calculating the number and percentage owned by such person, but are not deemed
outstanding for the purpose of calculating the percentage owned by each other
person listed.











(1)  Pacific
Rim Trading Co., Ltd., a BVI corporation, is a single asset holding company that
owns 6,620,000 shares of the Company's common stock.  Mr. Francis Khoo and Ms.
Shirley Ooi are the sole directors of Pacific Rim Trading Co., Ltd.  Their
holdings exclude
any attribution of Company shares due to ownership of Pacific Rim Trading Co.,
Ltd.  The shareholders of Pacific Rim Trading Co., Ltd. include Francis Khoo
(21.6%), Shirley Ooi (21.6%), Vincent Ooi (7.3%), and Just Gems, Inc. and/or its
shareholder (20%).



ITEM 12. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS





During the quarter ended September 30, 2002, the Company negotiated for the
settlement of certain debts and loans and completed the sale of all of its
subsidiaries to CSF Partners Inc.("CSF"), a Nevada corporation. Pursuant to the
agreement with CSF on July 22 2002 (filed in the 8K dated September 16 2002) the
Company issued a total of 32,822,853 shares to Agate Technologies Inc.,
California, ei Corporation California and CSF in exchange for
cancellation of debt owed to the parent by the subsidiaries and the workout of
the creditor liabilities by CSF and or its appointed agent. Agate Cayman will
receive a non-exclusive sub-license from Agate Delaware for its intellectual
properties including the Q drive. Pursuant to an approved settlement on July 23,
2002, the Company issued 7,952,060 shares to ChinatrustBank USA in addition to
payment of $15,000 and approximately $4,700 for past legal fees. On September 13
2002, the Board of Directors approved a settlement with a shareholder. 4,891,260
shares have been issued in settlement of the principal debt of $244,563 while a
further $40,000 interest will be converted into 800,000 shares which are held in
escrow.





ITEM 13. EXHIBITS
AND REPORTS ON FORM 8-K



(a)       
Exhibits



The
following exhibits are filed with or incorporated by reference into this Annual
Report on Form 10KSB



2.01    Reorganization Agreement by and between Agate
Technologies, Inc., a Delaware corporation ("Agate

Delaware"); Agate Technologies, Ltd, a Cayman Islands Corporation ("Agate
Cayman"); Agate Technologies

(California), Incorporated, a California corporation ("Agate California"); ei, a
California corporation ("ei"); and

CSF Holdings , Inc., a Nevada corporation ("CSF") effective July 22, 2002 (the
"Effective Date"), as filed with

Form 8K in September 17, 2002, is hereby incorporated by reference.



2.02    Corporate Combination Agreement with Powerhouse Studios,
Inc., dated November 15, 2002, as filed with Form

8K on November 25, 2002, is hereby incorporated by reference.



3.01    
Articles of Incorporation: Exhibit O to Exhibit 10.19 to Registrant's (then ARCA
Corp.) Current

Report on Form 8-K filed on June 10, 1999, is hereby incorporated by reference.



3.02     Bylaws: Exhibit O to Exhibit 10.19 to Registrant's (then ARCA Corp.)
Current Report on Form 8-K

filed
on June 10, 1999, is hereby incorporated by reference.





99.1     Certifications pursuant to 
Section 906 of the Sarbanes-Oxley Act of 2002







SIGNATURES



In accordance with
Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.



POWERHOUSE TECHNOLOGIES GROUP, INC.



Date: July 15, 2003



By:  /s/ Jay Elliot

Jay Elliot, CEO/Director



By: /s/ Greg Duffell

Greg Duffell, CFO/Director



By: /s/ James Palmer

James Palmer, Director





In accordance with
the Exchange Act, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.



By:  /s/ Jay Elliot

Jay Elliot, CEO/Director



By: /s/ Greg Duffell

Greg Duffell, CFO/Director



By: /s/ James Palmer

James Palmer, Director

---

Exhibit 99.1



Exhibit 99.1 - Certifications in Accordance with Section 906 of the
Sarbanes-Oxley Act of 2002







|Pursuant to the
    requirements of Rule 13a-14 of the Securities Exchange Act of 1934, as
    amended, Jay Elliot provides the following certification.
         I, Jay Elliot, Director and Chief Executive Officer of Powerhouse Technologies
    Group, Inc. ("Company"), certify that:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.                                                                                                                                                                                                                                                                                         
|2.                                                                                                                                                                                                                                                                                         
|3.                                                                                                                                                                                                                                                                                         
|4.                                                                                                                                                                                                                                                                                         
|5.                                                                                                                                                                                                                                                                                         

|a.     | All significant
    deficiencies in the design or operation of internal controls which could
    adversely affect the Company's ability to record, process, summarize and
    report financial data and have identified for the Company's auditors any
    material weaknesses in internal controls, and                                                  
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|b.     | Any fraud, whether or
    not material, that involves management or other employees who have a
    significant role in the Company's internal controls; and                                                                                                                                                                                               
|      
|**6.** | I have indicated in this
    annual report whether or not there were
    significant changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of my most
    recent evaluation, including any corrective actions with regard to
    significant deficiencies and material weaknesses.
|       |                                                                                                                                                                                                                                                                                                                                                           

|Date: July 15 ,
    2003 | /s/ Jay Elliot               
|------------------------ | -----------------------------
|                         | Jay Elliot,  Director and CEO
|                         |                              



---

Exhibit 99.1



|Pursuant to the
    requirements of Rule 13a-14 of the Securities Exchange Act of 1934, as
    amended, Greg Duffell provides the following certification.
         I, Greg Duffell, Director and Chief Financial
    Officer of
    Powerhouse Technologies Group, Inc. ("Company"), certify that:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.                                                                                                                                                                                                                                                                                                 
|2.                                                                                                                                                                                                                                                                                                 
|3.                                                                                                                                                                                                                                                                                                 
|4.                                                                                                                                                                                                                                                                                                 
|5.                                                                                                                                                                                                                                                                                                 

|a.     | All significant
    deficiencies in the design or operation of internal controls which could
    adversely affect the Company's ability to record, process, summarize and
    report financial data and have identified for the Company's auditors any
    material weaknesses in internal controls, and                                                  
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|b.     | Any fraud, whether or
    not material, that involves management or other employees who have a
    significant role in the Company's internal controls; and                                                                                                                                                                                               
|      
|**6.** | I have indicated in this
    annual report whether or not there were
    significant changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of my most
    recent evaluation, including any corrective actions with regard to
    significant deficiencies and material weaknesses.
|       |                                                                                                                                                                                                                                                                                                                                                           

|Date: July 15,
    2003 | /s/ Greg Duffell               
|----------------------- | -------------------------------
|                        | Greg Duffell,  Director and CFO
|                        |                                

---

Exhibit 99.1



|Pursuant to the
    requirements of Rule 13a-14 of the Securities Exchange Act of 1934, as
    amended, Greg Duffell provides the following certification.
         I, James Palmer, Director of Powerhouse Technologies
    Group, Inc. ("Company"), certify that:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.                                                                                                                                                                                                                                                                 
|2.                                                                                                                                                                                                                                                                 
|3.                                                                                                                                                                                                                                                                 
|4.                                                                                                                                                                                                                                                                 
|5.                                                                                                                                                                                                                                                                 

|a.     | All significant
    deficiencies in the design or operation of internal controls which could
    adversely affect the Company's ability to record, process, summarize and
    report financial data and have identified for the Company's auditors any
    material weaknesses in internal controls, and                                                  
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|b.     | Any fraud, whether or
    not material, that involves management or other employees who have a
    significant role in the Company's internal controls; and                                                                                                                                                                                               
|      
|**6.** | I have indicated in this
    annual report whether or not there were
    significant changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of my most
    recent evaluation, including any corrective actions with regard to
    significant deficiencies and material weaknesses.
|       |                                                                                                                                                                                                                                                                                                                                                           

|Date: July 15,
    2003 | /s/ James Palmer       
|----------------------- | -----------------------
|                        | James Palmer,  Director
|                        |