<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-Q

  X      Quarterly report pursuant to section 13 or 15(d) of the Securities
 ---    
          Exchange Act of 1934 for the quarterly period ended 31 JULY 1998
         ("Q2", "Second Quarter" or "Quarter 2 of Fiscal 1999"), or

         Transition report pursuant to section 13 or 15(d) of the Securities
-----                                                             ----------
         Exchange Act of 1934 for the Transition period from __________ to
         --------------------
         __________.

         -----------------------------------------------------------------------
         Commission file number     0-18163     EDGAR Filing Number    000-18163
         -----------------------------------------------------------------------
          CUSIP number            738908102     SEDAR Project Number   00004997
         -----------------------------------------------------------------------


                            POWER PLUS CORPORATION

            (Exact Name of Registrant as Specified in its Charter)

  (the "REGISTRANT", or the "COMPANY", or the "CORPORATION", or "POWER PLUS")


         -----------------------------------------------------------------------
          PROVINCE OF ALBERTA, CANADA                                 52-1976897
          (State or other jurisdiction of incorporation)        (I.R.S. Employer
                                                          Identification Number)

          7850 WOODBINE AVENUE, SUITE 201,
          MARKHAM, ONTARIO, CANADA                                       L3R 0B9
          (Address of principal executive offices)                 (Postal Code)

          905-479-5683
          800-769-3733                                              905-479-8911
          (Telephone numbers)                                       (Fax number)

         -----------------------------------------------------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by (S).13 or (S).15(d) of the Securities Exchange Act of 1934 during
                                        -------------------------------
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No
                                       --- 

As of 26 February 1999, there were 16,913,389 common shares of the Registrant's
common stock (the "Common Shares" or "Common Stock") outstanding. (See ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
--------------------------------------------------------------------------
Operations.)
----------
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                          PAGE 2


                                   FORM 10-Q

                                     INDEX

PART I - FINANCIAL INFORMATION

Item 1.      Consolidated Interim Financial Statements                         3

                  Consolidated Statement of Operations
                           for the periods ended 31 July 1998 and 1997

                  Consolidated Balance Sheet as at 31 July 1998 and 31 January 
                           1998

                  Consolidated Statement of Changes in Financial Position
                           for the periods ended 31 July 1998 and 1997

                  Notes to Consolidated Financial Statements


Item 2.      Management's Discussion and Analysis of                           8

                  Financial Condition and Results of Operations



PART II - OTHER INFORMATION

Item 1.      Legal Proceedings                                                19

Item 2.      Changes in Securities                                            19

Item 3.      Defaults Upon Senior Securities                                  19

Item 4.      Submission of Matters to a Vote of Security Holders              19

Item 5.      Other Information                                                19

Item 6.      Exhibits and Reports on Form 8-K                                 19


Signature                                                                     20
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                          PAGE 3



                         PART I - FINANCIAL INFORMATION

The Company prepares its consolidated financial statements in Canadian Dollars.
In this report all references to "$" are to Canadian dollars, unless otherwise
noted.

                                 EXCHANGE RATES

Based on the noon buying rates for cable transfers in New York City, certified
for customs purposes by the Federal Reserve Bank of New York, the exchange rate
on 26 February 1999 was C$1.00 = US$0.6623

ITEM 1.  INTERIM FINANCIAL STATEMENTS

                                 SECOND QUARTER
                           (period ended 31 July 1998)

                                   FISCAL 1999
<TABLE> 
<CAPTION> 
CONSOLIDATED STATEMENT OF OPERATIONS  (UNAUDITED)
      (Amounts are expressed in Canadian Dollars)                                  SIX-MONTH AND YEAR-TO-DATE
                                                   THREE MONTHS ENDED 31 JULY         PERIOD ENDED 31 JULY
                                                  --------------------------------------------------------------
                                                         1998           1997             1998           1997
                                                  --------------------------------------------------------------
<S>                                               <C>               <C>              <C>             <C> 
Sales                                               $    98,046     $ 2,078,459      $   567,793     $ 4,817,977
Cost of sales                                           115,358       1,565,822          444,745       2,893,156
                                                    -----------     -----------      -----------     ----------- 
Gross profit                                            (17,312)        512,637          123,047       1,924,821
Expenses                                        
   Operating and administration                        (427,582)      4,078,778        1,623,752       7,794,044
   Asset write-down -- see Notes 2 & 8
   Financing charges payable in stock -- see Note 4
   Amortization
                                                        490,485               0          490,485               0
                                                        164,700               0          415,878               0
                                                         63,915         327,719          127,753         640,593
                                                    -----------     -----------      -----------     ----------- 
(LOSS) FROM OPERATIONS                                 (308,831)     (3,893,860)      (2,534,821)     (6,509,816)
                                                                    -----------                      ----------- 
Non-cash gain from abandonment of subsidiary --       2,899,033                        2,899,033
see Notes 2 &  8                                    -----------                      -----------

Profit (Loss) for period                              2,590,202      (3,893,860)         364,212      (6,509,816)
Deficit, beginning of period                         26,461,987       7,826,215       24,235,997       5,210,259
                                                    -----------     -----------      -----------     -----------
DEFICIT, END OF PERIOD                              $23,871,785     $11,720,075      $23,871,785     $11,720,075
                                                    ===========     ===========      ===========     ===========

EARNINGS PER SHARE                                  $      0.19     $     (0.51)     $      0.03     $     (1.10)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING           13,518,719       7,620,730       10,917,315       5,900,493
</TABLE> 
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 4 

<TABLE> 
<CAPTION> 
CONSOLIDATED BALANCE SHEET
                                                                           ------------------------------------------
     (Amounts are expressed in Canadian Dollars)                               31 JULY 1998           31 January 1998
                                                                           ------------------------------------------
                                                                                 (unaudited)            (audited)
<S>                                                                        <C>                        <C>    
                                                    ASSETS
     Current Assets
          Cash and cash equivalents                                        $        209,347           $       147,590
          Accounts receivable                                                        44,011                   342,842
          Inventory                                                                  34,529                   756,375
          Prepaid expenses                                                           25,810                    68,907
                                                                               ------------              ------------     
                                                                                    313,697                 1,315,714
     Capital assets, net                                                            261,125                 1,288,846
     Deferred charges, net                                                                0                   253,680
     Other assets, net                                                                    0                   546,328
                                                                               ------------              ------------     
                                                                           $        574,822           $     3,404,568
                                                                               ============              ============

                                                   LIABILITIES

     Current Liabilities
          Accounts payable and accrued liabilities                         $        569,075           $     4,972,867
                                                                               ------------              ------------     
     Long-term Liabilities
          Accrued interest payable on long-term debt on maturity --                 251,699                   762,944
          see Note 4 
          Special Notes -- see Note 7                                                     0                 5,020,000
          10% Bridge Loan Notes payable -- see Notes 4 & 5                                0                 4,081,250
          10% Promissory Notes -- see Notes 4 & 6                                 2,900,000                 1,900,000
                                                                               ------------              ------------     
                                                                                  3,151,699                11,764,194
                                                                               ------------              ------------     
                                                                                  3,720,774                16,737,060
                                                                               ------------              ------------     

                                               SHAREHOLDERS' EQUITY

     Share capital -- see Notes 4, 5 &  7                                        20,725,833                 9,577,678
     Convertible component of Special Notes -- see Note 7                                 0                 1,400,000
     Deficit                                                                    (23,871,784)              (24,310,170)
                                                                               ------------              ------------    
                                                                                 (3,145,951)              (13,332,493)
                                                                               ------------              ------------     
                                                                           $        574,822           $     3,404,568
                                                                               ============              ============
</TABLE> 
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 5 


<TABLE> 
<CAPTION> 
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION  (UNAUDITED)

  (Amounts are expressed in Canadian Dollars)                                    
                                                                                   Six-month and year-to-date 
                                                                                      period ended 31 July
                                                                           -------------------------------------------
                                                                                   1998                 1997
                                                                           -------------------------------------------
<S>                                                                        <C>                      <C> 
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
     (LOSS) FROM OPERATIONS                                                $    (2,534,821)         $    (6,509,815)
     ITEMS NOT AFFECTING CASH
          Asset write-down -- see Notes 2 & 8                                      490,485                        0
          Financing charges payable in stock -- see Note 4                         415,878                        0
          Amortization                                                             127,753                  500,593
                                                                              ------------             ------------ 
                                                                                (1,500,705)              (6,009,222)
     Changes in non cash operating items                                          (190,538)                  45,605
                                                                              ------------             ------------ 
                                                                                (1,691,243)              (5,963,617)
                                                                              ------------             ------------ 
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                    
     Issue of common shares and warrants                                                 0                1,904,378
     10% Bridge Loan Notes payable -- see Notes 4 & 5                                    0                2,500,000
     10% Promissory Notes -- see Notes 4 & 6                                     1,000,000                        0
     Special Notes -- see Note 7                                                         0                  140,000
                                                                              ------------             ------------ 
                                                                                 1,000,000                4,544,378
                                                                              ------------             ------------ 
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
     (Purchase) of capital assets                                                        0               (2,117,997)
     Sale of assets -- see Notes 2 & 8                                             753,000                        0
                                                                              ------------             ------------ 
                                                                                   753,000               (2,117,997)
                                                                              ------------             ------------ 

INCREASE (DECREASE) IN CASH DURING PERIOD                                           61,757               (3,537,236)

CASH, BEGINNING OF PERIOD                                                          147,590                4,341,243
                                                                              ------------             ------------ 
CASH, END OF PERIOD                                                        $       209,347          $       804,007
                                                                              ============             ============
</TABLE> 
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                          PAGE 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


NOTE 1:       The Consolidated Financial Statements are for the three-month and
              year-to-date period ended 31 July 1998 pertaining to the current
              fiscal year ending 31 January 1999 ("Fiscal 1999"), and the three-
              month and year-to-date period ended 31 July 1997 pertaining to the
              fiscal year ended 31 January 1998 ("Fiscal 1998"), and include the
              results of operations of Power Plus Corporation and its wholly-
              owned subsidiaries Power Plus USA, Inc. ("PPUSA") and Power Plus
              Canada, Inc. ("PPCan"), (collectively, the "Company").

NOTE 2:       On 31 January 1998, PPUSA made a voluntary assignment under
              Chapter 11 of the US Bankruptcy code and, on 29 June 1998, certain
              assets of PPUSA were sold. On 8 May 1998, PPCan filed a Notice of
              Intention to Make a Proposal pursuant to ?50.4(1) of the
              Bankruptcy and Insolvency Act Canada. The insolvency of PPUSA and
              -----------------------------
              PPCan results from the Company's inability to continue funding
              start-up operations, pending attaining critical mass and
              profitability.

NOTE 3:       In the opinion of management, the Consolidated Balance Sheet as at
              31 July 1998 and the Consolidated Statements of Operations and
              Changes in Financial Position for the three-month and year-to-date
              periods ended 31 July 1998 and 1997, include all adjustments
              necessary for a fair presentation of such financial statements.
              Such adjustments consisted only of normal recurring items. The
              preparation of financial statements in conformity with generally
              accepted accounting principles requires management to make
              estimates and assumptions that affect the reported amounts of
              assets and liabilities at the date of the financial statements and
              the reported amounts of revenues and expenses during the reporting
              period. Actual results could differ from those estimated. Interim
              results are not necessarily indicative of results for a full year.
              
              The Consolidated Balance Sheet as at 31 July 1998 and the
              Consolidated Statements of Operations and Changes in Financial
              Position for the three-month and year-to-date periods ended 31
              July 1998 and 1997 are unaudited. The Consolidated Balance Sheet
              for Fiscal 1998 was audited and reported to shareholders. These
              interim quarterly Consolidated Financial Statements and notes do
              not contain certain information included in the Company's annual
              consolidated financial statements and the notes thereto.

NOTE 4:       Interest payable on the 10% Bridge Loan Notes, 10% Promissory
              Notes and 10% Special Notes is payable in arrears at the time of
              repayment or conversion by the issuance of common shares. The 10%
              Bridge Loan Notes and 10% Special Notes and the interest accrued
              and payable thereon were converted into common shares. (See Notes
              5 and 7 below.)

NOTE 5:       During Fiscal 1998, the Company executed and delivered certain
              promissory notes (the "Bridge Loan Notes") evidencing an aggregate
              principal amount of $4,081,500 in unsecured loans advanced to the
              Company and bearing interest at an annual rate of 10% pending
              implementation of a bona fide reorganization of the financial
              affairs of the Company. Effective 24 July 1998, the Bridge Loan
              Notes together with interest thereon and bonus were converted into
              3,771,858 common shares on the basis of a conversion price of
              $1.25 per common share.
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                          PAGE 7


NOTE 6:       The Company has executed promissory notes evidencing indebtedness
              in the aggregate principal amount of $2,900,000 of unsecured loans
              advanced to the Company and bearing interest payable on maturity
              at an annual rate of 10%. The holders of these promissory notes
              have agreed that these unsecured loans will be replaced by 10%
              first fixed and floating charge secured debentures maturing 31
              January 2001 with interest accruing and payable upon maturity.
              This replacement is expected to be completed during Q3 of Fiscal
              1999. The Company executed additional promissory notes on similar
              terms and conditions for $180,000 subsequent to the period ended
              31 July 1998.

NOTE 7:       The Company completed a $6 million 10% convertible fixed and
              floating charge Special Notes private placement debt financing
              during Fiscal 1997. Effective 4 March 1998, the Special Notes were
              converted into 5,080,767 common shares on the basis of a
              conversion price of $1.25 per common share.

NOTE 8:       On 29 June 1998, the Company realized on its security pertaining
              to PPUSA's indebtedness and foreclosed on the remaining assets of
              PPUSA. With the operations of PPUSA ceased, the Company sold
              certain of PPUSA's capital assets, including its list of pager
              customers, to an arm's length party for cash consideration of
              US$125,000 and the assumption of certain liabilities. The
              remaining capital assets of PPUSA, consisting primarily of store
              fixtures and leasehold improvements, were abandoned where situated
              at various locations to offset existing liabilities to landlords.
              Accordingly, PPUSA no longer carries on business in the United
              States.

              On 8 May 1998, PPCan filed a Notice of Intention to Make a
              Proposal pursuant to (S).50.4(1) of the Bankruptcy and Insolvency
                                                     -------------------------
              Act Canada. The Company is the secured creditor of PPCan. The
              ---
              Proposal was approved at the meeting of creditors held on 11
              September 1998, and court approval of the Proposal is pending. The
              Proposal highlighted that:

              a)  PPCan continues to operate the business as a going concern;
                  and,
              b)  the Company and PPCan entered into a Letter of Intent with an
                  arm's length party concerning the proposed sale of PPCan. In
                  accordance with the Letter, the purchasing party proposes to
                  acquire all the issued and outstanding shares of PPCan (the
                  "PPCan Sale"). The PPCan Sale is subject to a definitive
                  agreement being finalized, satisfaction of ongoing due
                  diligence and court approval of the Proposal. The Company has
                  agreed to postpone up to $435,000 of PPCan's secured
                  indebtedness for the benefit of the creditors of the Proposal.
                  PPCan proposes to cause this amount to be paid into a fund to
                  be managed by its Trustee for the benefit of its creditors,
                  subject to the funds being available from the PPCan Sale.

              Accordingly, these interim financial statements reflect the write-
              down of assets in the amount of $490,485, the wind-up of PPUSA's
              operations, the reduction in PPCan's operations, and report other
              accounting adjustments that are required to conform to generally
              accepted accounting principles applicable in the circumstances. In
              so doing, a non-cash gain on the abandonment of PPUSA of
              $2,899,033 is reported, representing the effect of reversing its
              obligations to arm's length creditors. The implementation of the
              Proposal, including the payment of the dividend from the fund to
              the creditors of PPCan, would have the effect of substantially
              reducing the amount of accounts payable reported herein.
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                          PAGE 8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

A)   CORPORATE OVERVIEW

     Investing is the priority for Power Plus Corporation, a public company dual
     listed on The Alberta Stock Exchange in Canada and the Over-The-Counter
     ("OTC") Electronic Bulletin Board in the United States. The primary
     activities of the Company fall into two categories: investing in operating
     companies; and, carrying on business through subsidiary operating
     companies. Accordingly, Power Plus Corporation is the parent of
     subsidiaries that hire employees, procure merchandise for resale, purchase
     or build capital assets and carry on business. Since its inception, Power
     Plus Corporation has invested in specialty retail businesses operating in
     Canada and the US, primarily selling batteries and battery-related
     products, wireless telecommunications products and portable fashion
     electronics.

     The Company, commensurate with its role of an investment banker, proposed a
     reorganization plan1 to shareholders for their approval at a meeting of the
     members held on 24 July 1996 (the "1996 Reorganization Plan"). With
     shareholders' approval to the proposed reorganization, new management
     formulated its operating and financing plan, PLAN 2000.

     In July 1996, Power Plus USA, Inc. ("PPUSA"), a wholly owned subsidiary of
     the Company, commenced implementing its plan for launching the US Powerful
     Stuff chain. Effective 1 September 1996, PPUSA launched its wireless
     airtime rebilling business by purchasing more than 20,000 pager customers
     under existing contracts and the entitlement to the related future wireless
     (pager/beeper airtime) rebilling revenue from Consumer Electronics
     Specialty Stores, Inc. ("CESS"), located in Sarasota, Florida. The US
     retail chain grew to 44 stores and the airtime rebilling business grew by
     nearly 50% over the next 18 months. Despite these accomplishments, the lack
     of timely financing, in accordance with PLAN 2000, to support the ongoing
     operations and growth caused PPUSA to seek protection under Chapter 11 of
     the US Bankruptcy Code on 31 January 1998. The Company sold certain of
            ---------------
     PPUSA's capital assets, including its list of pager customers, to an arm's-
     length party and on 29 June 1998, and PPUSA ceased carrying on the
     business.

     In September 1996, the Company launched its Canadian Powerful Stuff chain
     through its wholly owned subsidiary Power Plus Canada, Inc., ("PPCan")2.
     The immediate expansion thrust was concentrated in Ontario, where the chain
     grew to 18 stores, although plans foresaw the addition of several store
     locations in British Columbia and Alberta. However, resulting from the same
     capital constraint, on 8 May 1998 PPCan sought protection by filing a
     Notice of Intention to File a Proposal to Creditors ("Proposal") under Part
     ---------------------------------------------------
     III Division I of the Bankruptcy and Insolvency Act Canada. PPCan remained
                           -----------------------------
     in possession of its assets. On 26 November 1998 the Company sold the
     shares of PPCan and certain intellectual properties to a third party that
     conducted a similar business in Canada.

     
------------------

/1/  The 1996 Reorganization Plan was conceived during Fiscal 1996 and flushed
     out during Q1 and Q2 of Fiscal 1997. It has two parts. The first was PLAN
     2000, the Company's 5-year business plan prescribing how the Company
     proposed to build its business to excess of 1000 stores. The second was the
     Financing Plan that set out the manner in which the Company proposed to
     fund for this growth by raising new capital over the first three years,
     until critical mass and financial self-sufficiency was achieved. The stores
     operated from leased premises that ranged from 150 to 700 square feet in
     major enclosed shopping malls in the U.S. and Canada. They sold portable
     energy, wireless communication products and services (beepers,, cellular
     phones, personal communication systems and related service contracts) and
     hand-held electronic communications, entertainment, business and lifestyle
     products.

/2/  Since its acquisition in December 1998, PPCan, formerly 385729 Alberta
     Inc., had been inactive and did not commence to carry on business until
     September 1996.
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                          PAGE 9


     All of the Company's retail operations in Canada and the US were conducted
     through PPCan and PPUSA, respectively, and these subsidiaries owned all of
     the capital assets employed in carrying on the retail businesses.
     Accordingly, at 31 October 1998 the Company had neither ongoing retail
     operations nor operating assets.

     The Company is currently undergoing a reorganization, implementing its 1999
     Reorganization Plan which management considers in the best interests of the
     Company (for more details see ITEM 4(2) -- Submission of Matters to a Vote
                                                -------------------------------
     of Security Holders in the FORM 10K - Fiscal 1998, representing the year
     -------------------
     ended 31 January 1998 as previously filed). In summary, the shareholders
     resolved as to the following matters:
     1. To change the name of the Company to PPC Capital Corp;
     2. To authorize the consolidation of the common shares of the Company on
        the basis of one (1) common share for each five (5) common shares
        heretofore outstanding;
     3. To authorize a reduction of the stated capital of the Company by
        $20,700.000;
     4. To authorize the conversion of secured debt of the Company in an amount
        of up to $5,000,000 into post-consolidation common shares of the Company
        at a conversion price of $0.10 per post-consolidation common share;
     5. To authorize the conversion of certain other debts of the Company in an
        amount of up to $340,000 into post-consolidation common shares at a
        conversion price of $0.10 per post-consolidation share; and,
     6. To approve the payment of a finder's fee in the amount of $121,230 by
        issuing up to 1,121,230 post-consolidation common shares at a conversion
        price of $0.10 per post-consolidation common share.

     Upon regulatory approval and implementation of the 1999 Reorganization
     Plan, the Company intends to aggressively pursue diversified investment
     opportunities targeted to maximize shareholder value.

     While management cannot give any assurances as to the future outlook for
     the Company, formal application has been made to seek the conditional
     approval of The Alberta Stock Exchange for the 1999 Reorganization Plan as
     approved by the shareholders. The name change and share consolidation will
     not be implemented until the required regulatory approval is obtained,
     which is anticipated to be during the first quarter ending 30 April 1999,
     of Fiscal 2000 ending 31 January 2000. During this same period, the Company
     will be proceeding to prepare and finalize its audited financial statements
     for the fiscal year ended 31 January 1999 ("Fiscal 1999"), while at the
     same time seeking a professional opinion3 as to the extent and
     applicability of its substantial tax loss carry forwards. Only upon
     approval and implementation of the 1999 Reorganization Plan and the
     finalization of Fiscal 1999's financial statements and the tax loss
     opinion, will the Company be in a position to pursue investment
     opportunities. In management's opinion, the tax loss carry forwards are
     expected to represent a significant asset for the Company which is
     anticipated to be material in attracting a suitable candidate for purposes
     of restructuring its business affairs.

     In the circumstances of these reorganizational proceedings, The Alberta
     Stock Exchange is conducting a review of the financial affairs of the
     Company in order to ascertain as to whether the Company meets minimum
     listing requirements. In the event the Company is unable to satisfy The
     Alberta Stock Exchange as to compliance with minimum listing requirements
     on or before 30 April 1999, the Common Shares could face a suspension from
     trading. In the event of any such suspension, the Company is in no way
     impaired from continuing on with its day-to-day operations in seeking out
     new investment op-

-------------------
/3/  See Note 10 in the Notes to the audited Consolidated Financial Statements -
     Fiscal 1998, in the Form 10-K - Fiscal 1998.
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 10


     portunities. The trading in shares of Alberta issuers is typically halted
     on The Alberta Stock Exchange for extended periods pending closure of
     transactions by way of reverse take-over.

B)   RESULTS OF OPERATIONS
     
     1)  SIGNIFICANT CHANGES IN OPERATIONS DURING FISCAL 1999

         The Company's 1996 Reorganization Plan, transforming the remnants of
         the former Battery One, Inc. under new management into Power Plus
         Corporation, was reliant upon PLAN 2000. PLAN 2000, the Company's 5-
         year business plan prescribing how the Company proposed to roll out its
         Powerful Stuff specialty niche retail business throughout North
         America, incorporated a detailed financing plan setting out the
         framework for providing a total of $49.1 million over the initial 3-
         years of PLAN 2000. The timeliness and availability of this capital,
         required to be raised through the junior public capital markets in
         Canada, was critical to the success of PLAN 2000. This capital was
         vital to the Company's growth, but its availability was dependent upon
         macroeconomic factors outside the Company's control. The goal was
         critical mass, that point when adequate retail outlets were open,
         operational and achieving at least annualized breakeven cash flow - at
         which time the business could be financially self-sustaining. Beyond
         this, the projected cash flow from store profit could ultimately make
         the Company's growth internally funded.

         With the Company's biggest challenge being the availability of capital,
         management could not have foreseen the adversity represented by the
         devastation to the junior capital markets in Canada during 1997,
         afflicted with the BREX Resources mining scandal and infected by the
         Asian Flu factor. For the Company, whose capital was being raised in
         Canadian dollars, these debilitating market circumstances were
         exacerbated at the same time by the substantial devaluation of the
         Canadian currency against the US dollar, having regard to PLAN 2000's
         emphasis on US expansion and the burdensome appetite for US currency.

         Despite management's best efforts to act responsibly during this period
         of uncertainty, these times ultimately called for strong preservation
         measures. Consequently, on 31 January 1998, PPUSA sought protection
         under Chapter 11 of the US Bankruptcy Code. The Company was the largest
                                    ---------------
         and only secured creditor of PPUSA, which remained in possession of its
         assets. With 44 stores then open, down from a peak of 63 stores at the
         end of Q3 - Fiscal 1998, the continued prejudicial delays in completing
         planned financings prohibited further expansion.

         With no expectation of any short-term improvement in this crisis, the
         Company subsequently announced on 8 May 1998 that PPCan had also sought
         protection from creditors by filing a Proposal under the Bankruptcy and
                                                                  --------------
         Insolvency Act Canada. The Company was the largest and only secured
         --------------
         creditor of PPCan. PPCan remained in possession of its assets pending a
         determination as to whether the operations could be refinanced or sold
         as a going concern.

         Unabated, the Canadian junior capital markets only continued to
         deteriorate, so the prospects of refinancing became unrealistic. As a
         result, on 29 June 1998, the Company realized its security pertaining
         to the indebtedness of PPUSA and foreclosed on the remaining assets of
         PPUSA and sold them, including its list of pager customers, for cash
         consideration of US$125,000 and the assumption of certain liabilities
         in the aggregate amount of US$377,000. The remaining capital assets of
         PPUSA, consisting primarily of store fixtures and leasehold
         improvements, were abandoned where situated in various locations to
         offset existing liabilities to landlords and PPUSA, discharged from its
         Chapter 11 Petition, ceased carrying on business in the US.

         On 26 November 1998, the Company sold the shares of PPCan and certain
         related intellectual properties to an arm's-length third party that
         conducts a similar business in Canada. The sale was made pursuant to a
         share purchase agreement dated 30 October 1998, between the Company, as
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 11


         vendor, and Battery Plus Inc. ("BPI"), as purchaser. On 11 September
         1998, the creditors of PPCan accepted the offer made to them under the
         Proposal and the required court approval was subsequently obtained by
         order dated 7 October 1998, satisfying certain pre-conditions to the
         sale to BPI. As a result of the Proposal and the completion of the sale
         to BPI, all claims of the creditors of PPCan as compromised were fully
         satisfied. As a condition of the sale, BPI advanced PPCan approximately
         $637,000 to pay the Proposal Trustee and thus enable it to fund its
         obligations to the creditors in accordance with the terms of the
         Proposal, including payment of certain administrative and operating
         costs incurred post-Notice.

         In connection with the sale of PPCan, the Company sold, transferred and
         assigned PPCan's secured debt, in recognition of the repayment by PPCan
         of a portion of the indebtedness, and its right, title and interest to
         the proprietary names, marks and styles "Powerful Stuff" and "Powerful
         Connections" for cash consideration of $100,000.

         All of the Company's retail operations in Canada and the US were
         conducted through PPCan and PPUSA and all of the capital assets
         employed in carrying on the retail business were owned by them.
         Accordingly, and as reported herein, the Company as of the date hereof
         no longer has any retail operations nor operating assets.

         Therefore, the business results for both the quarter and year-to-date
         periods for Fiscal 1999 are anomalous to PLAN 2000 and not comparable
         to the past. Accordingly, comparisons, in-depth discussion and analysis
         are rendered meaningless and unwarranted. Notwithstanding, the
         following limited discussion and analysis should be read in conjunction
         with the audited Annual Consolidated Financial Statements and the Notes
         thereto contained in the SEC FORM 10K - Fiscal 1998 filing,
         representing the year ended 31 January 1998.

     2)  CONSIDERATION OF BUSINESS RESULTS FOR Q2 AND YEAR TO DATE PERIODS IN
         FISCAL 1999 AND THE COMPARABLE PERIODS IN FISCAL 1998

         The following table sets forth certain items reflected in the Company's
         unaudited consolidated statement of operations expressed as percentages
         of sales:

<TABLE> 
<CAPTION>      
                                                                          Expressed as a
                                                                        Percentage of Sales
                                                                      (period ended 31 July)
                                                        ----------------------------------------------------
                                                              Three months         Six months year to date
                                                        ----------------------------------------------------
                                                            1998         1997         1998         1997
                                                        ----------------------------------------------------
             <S>                                        <C>              <C>          <C>          <C>  
             Cost of sales                                   117.7%        75.3%        78.3%        60.0%
             Operating, occupancy & administrative          
             expenses                                        297.3%       212.0%       468.1%       175.1%
             Net loss before non cash gain on windup         315.0%       187.3%       446.4%       135.1%
</TABLE> 
         
         The year to date cost of sales includes the impact of accounting
         reserves for cost of inventory adjustments and write-down of inventory
         carrying values pursuant to the closure of PPUSA and sale of PPCan, and
         the sell-off of merchandise previously written down. For both the
         quarter and year to date periods, the Company was unable to purchase
         merchandise inventory in suitable quantities to sustain normal sales
         levels. As the Company sold the merchandise inventory on hand, the
         average gross profit from those sales actually increased because of the
         change in the merchandise mix. However, the total sales and gross
         profit amounts decreased to become insignificant by comparison to the
         prior year. Declining sales meant store operating overhead became
         uneconomic because both the cost of direct labor (despite management's
         attention to minimize labor hours while still meeting the minimum lease
         requirements for store operating hours) and store rent, which are
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 12


         essentially fixed costs and incurred as long as a location is open,
         were uneconomic and too onerous, especially in light of the decreasing
         gross profit.

         The sought-after reduction in Operating and Administration Expenses was
         partially nullified by accounting adjustments for reserves made
         primarily to PPUSA's balance sheet in concert with its Chapter 11
         filing and also the professional fees, and termination and severance
         pays to employees incurred therewith, and PPCan in accordance with the
         terms of the sale. A significant decrease in operating and occupancy
         expenses resulted from the closure and abandon of most store locations.
         Commensurate with its Chapter 11 filing at the end of Fiscal 1998,
         PPUSA vacated all stores that were not located in Florida. During Q1
         and Q2 of Fiscal 1999, PPUSA abandoned capital assets, consisting
         primarily of store fixtures and leasehold improvements, where situated
         in various locations to offset existing liabilities to landlords.
         Similarly, PPCan closed three non-performing stores during Q1 and eight
         during Q2 of FY1999, the cost of which is included in this interim
         financial report, to operate six stores up to the time of its sale to
         BPI.

         During Q2, the Company's administrative overhead decreased
         significantly because there were virtually no employees. Included in
         Administration Expenses are extraordinary professional fees and
         termination and severance pays to non-management employees.

         In particular, these interim financial statements reflect the write-
         down of PPCan assets in the amount of $490,485, the wind-up of PPUSA's
         operations, the reduction in PPCan's operations, and report other
         accounting adjustments that are required to conform to generally
         accepted accounting principles applicable in the circumstances. In so
         doing, a non-cash gain on the abandonment of PPUSA of $2,899,033 is
         reported, representing the effect of reversing its indebtedness
         obligations to arm's length creditors. The implementation of the
         Proposal, including the payment of the dividend from the fund to the
         creditors of PPCan, would have the effect of substantially reducing the
         amount of accounts payable reported herein.

C)   LIQUIDITY AND CAPITAL RESOURCES

     See the Notes to the Consolidated Financial Statements (unaudited) included
             ----------------------------------------------
     with these materials.

     1)  FINANCING ACTIVITIES INSTIGATED AND CHANGES DURING FISCAL 1999
     
         a)  On 24 April 1998, the Company completed the conversion of the $6
             million, 10% fixed and floating charge secured special promissory
             notes debentures, converted at $1.25 per common share, resulting in
             the issuance of 5,080,767 common shares of the Company. (See
             (S)2(d) -- Special Notes convertible debt financing, below.)
                        ----------------------------------------

         b)  Effective 24 July 1998, the Company converted certain short-term
             debt notes it had executed and delivered (the "Bridge Loan Notes")
             during Fiscal 1998 evidencing an aggregate principal amount of
             $4,081,250 in unsecured loans bearing interest at an annual rate of
             10%. The conversion rate was $1.25 per Common Share. Accordingly,
             the Company issued 3,771,858 Common Shares as payment in full of
             all obligations, including accrued interest, under the Bridge Loan
             Notes.

         c)  As of the date hereof, there are now 16,913,389 Common Shares of
             the Company currently issued and outstanding. (See the table in
             (S)3 -- Summary of changes to shares and share capital and (S).5 --
                     ----------------------------------------------   
             Consolidation of Share Capital, below.)
             ------------------------------

         d)  The Company has neither any share purchase warrants, nor options to
             purchase shares granted to any officers, directors, employees,
             advisors or consultants to the Company, which remain or are
             outstanding as of the date hereof.
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 13

         e)   The Company has executed promissory notes evidencing indebtedness
              in the aggregate principal amount of $2,900,000 of unsecured loans
              advanced to the Company as at FYE 1998 and bearing interest
              payable on maturity at an annual rate of 10%. The holders of these
              promissory notes have agreed that these unsecured loans will be
              replaced by 10% first fixed and floating charge secured debentures
              maturing 31 January 2001 with interest accruing and payable upon
              maturity. The Company executed additional promissory notes on
              similar terms and conditions for $216,000 subsequent to the end of
              this quarter. The replacement of these unsecured loans totaling
              $3,191,000 was completed during Q4 of Fiscal 1999. (See (S).6 -
              Conversion of Secured Debt, below)
              --------------------------

         f)   Interest due on the 10% Bridge Loan Notes, 10% Promissory Notes
              and 10% Special Notes is payable in arrears at the time of
              repayment or conversion by the issuance of common shares. The 10%
              Bridge Loan Notes and 10% Special Notes plus the interest accrued
              and payable thereon were converted into Common Shares.

         g)   Commencing in Fiscal 1996, all securities, including the Special
              Notes that were converted into Common Shares, were sold by private
              placement to accredited investors in Canada. These securities were
              issued pursuant to the governing securities laws in the applicable
              governing jurisdictions in Canada but were not registered or sold
              principally in the US. Sales of the securities in the US were made
              in reliance upon the exemption from registration contained in
              (S)4(2) of the Securities Act of 1933, as amended.
                             ----------------------

2)   UPDATE CONCERNING FINANCINGS COMMENCED FROM 1996 FINANCING PLAN

     (Please also refer to the table in (S).3 -- Summary of changes to shares
                                                -----------------------------
     and share capital, below. In addition, please refer to the FORM 10-K - 
     -----------------
     Fiscal 1998 for a more detail discussion concerning changes to and arising
     from the 1996 Financing Plan.)

     a)  1996 SPECIAL WARRANT PRIVATE PLACEMENT FINANCING
              
         During Fiscal 1997, according to the 1996 Reorganization Plan, the
         Company completed the 1996 Special Warrant Private Placement Financing
         (the "1996 Special Warrants") of $4.5 million representing an aggregate
         of 2.25 million 1996 Special Warrants. 

         Each 1996 Special Warrant was converted at no additional consideration
         into one Common Share on 31 January 1997 plus one Class B Warrant. This
         warrant consisted of two entitlements: firstly, entitling holders to
         acquire up to an aggregate of 2.25 million Common Shares at an exercise
         of $2.00 per share on or before 30 September 1997, representing
         additional potential future capital to the Company in the aggregate of
         up to $4.5 million; and, secondly, and subject to the exercise of the
         Class B Warrant, a collateral Class BB Warrant, entitling holders to
         acquire up to an aggregate of a further 2.25 million Common Shares at
         an exercise purchase price of $2.50 per share on or before 1 March
         1998, representing additional potential future capital in the aggregate
         of up to $5.6 million. (See 2(c) -- Approval of Amendment to Certain
                                             --------------------------------
         Terms of Class A, Class AA, Class B and Class BB Warrants, below.)
         ---------------------------------------------------------
              
         The 1996 Special Warrant financing terms provided that the Company
         would incur a 10% penalty payable by the issuance of additional 1996
         Special Warrants to the holders of the 1996 Special Warrants, that is a
         further 225,000 1996 Special Warrants on a pre-consolidation basis in
         prescribed circumstances, representing dilution of 225,000 Common
         Shares. The Company was unable to meet such obligations and the penalty
         was therefore incurred. The entitlements attached to the penalty 1996
         Special Warrants are the same as the 1996 Special Warrants.
         
         Holders of the penalty 1996 Special Warrants were not required to pay
         receive the common shares included therein, but the Class B and BB
         Warrants attached thereto included the same exercise price, that is
         $2.00 per Common Share for the Class B Warrant and $2.50 per Com-
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 14


         mon for the Class BB Warrant. (See 2(c) -- Approval of Amendment to
                                                    ------------------------
         Certain Terms of Class A, Class AA, Class B and Class BB Warrants,
         -----------------------------------------------------------------
         below.)

     b)  FISCAL 1997 SHARE CAPITAL REORGANIZATION & CONSOLIDATION AND EXCHANGE
         RIGHTS ENTITLEMENTS

         The reorganization and consolidation of the Company's outstanding share
         capital, according to the 1996 Reorganization Plan, occurred pursuant
         to a Plan of Arrangement under (S).86 of the Business Corporations Act
         Alberta, which had received shareholder, court and regulatory approval.
         In general terms, the Company reorganized and consolidated all of its
         issued old shares (of which 44,765,613 pre-consolidation shares4 had
         been issued and outstanding as of 1 November 1996) on the basis of
         every 20 old shares before consolidation being reorganized and
         consolidated into one consolidated Common Share (that is 2,238,281 
         post-consolidated Common Shares) and one Exchange Right. Under the
         terms of this consolidation, each consolidated Common Share had
         attached to it one exchange entitlement (the "Exchange Rights") to
         purchase one unit of the Company's equity (the "Exchange Rights Units")
         on or by 31 January 1997.

         The Exchange Rights entitled holders to purchase up to an aggregate of
         2,238,281 Exchange Rights Units of the Company at an exercise price of
         $2.00 per unit on or before 31 January 1997, representing additional
         capital to the Company up to an aggregate of $4,476,562 in Fiscal 1997.
         (Please also refer to the table in (S)3 -- Summary of changes to shares
                                                    ----------------------------
         and share capital, below for more details concerning the exercise of 
         ----------------- 
         Rights Entitlements and capital raised.)

         Each Exchange Rights Unit consisted of one Common Share plus one
         purchase warrant, hereinafter referred to as the Class A Warrants. The
         Class A Warrants consisted of two entitlements: firstly, entitling
         holders to purchase 2,238,281 Common Shares of the Company at an
         exercise price of $2.00 per share, on or before 30 September 1997,
         representing additional potential future capital to the Company up to
         an aggregate of $4.5 million; and, secondly, conditional upon the
         exercise of the Class A Warrant, a collateral warrant, the Class AA
         Warrant, that entitled holders to purchase up to an aggregate of a
         further 2,238,281 Common Shares of the Company at an exercise price of
         $2.50 per share on or before 1 March 1998, representing additional
         potential future capital to the Company in the amount of up to an
         aggregate of $5.6 million. (See 2(c) -- Approval of Amendment to
                                                 ------------------------ 
         Certain Terms of Class A, Class AA, Class B and Class BB Warrants, 
         -----------------------------------------------------------------  
         below.)
     
         Effective 31 January 1997, all the Exchange Rights were converted into
         2,238,281 Common Shares and the Company received $4,476,562 in new
         capital. (Please also refer to the table in (S).3 -- Summary of 
                                                              ----------
         changes to shares and share capital, below.)
         ----------------------------------- 

     C)  APPROVAL OF AMENDMENT TO CERTAIN TERMS OF CLASS A, CLASS AA, CLASS B &
         CLASS BB WARRANTS

         The Company obtained shareholder approval on 30 January 1998 to amend
         the conversion price of all outstanding warrants to $1.25 per common
         share and to extend the period of time for exercise of such outstanding
         warrants as follows:

         i)   extend the Class A Warrant Exercise Date and Class B Warrant
              Exercise Date until 30 June 1998;

         ii)  reduce the exercise price of the Class A Warrants and the Class B
              Warrants from $2.00 per common share to $1.25 per common share;

         iii) extend the Class AA Warrant Exercise Date and the Class BB Warrant
              Exercise Date to 30 September 1998; and

-----------------------

/4/  All references in this FORM 10K are to Common Shares outstanding 
     post-consolidation
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 15

              iv)   reduce the exercise price of the Class AA Warrants and the
                    Class BB Warrants from $2.00 per common share to $1.25 per
                    common share.

              All other terms and conditions remained the same.
              
              However, despite these amendments and the best efforts of
              management, because of the ongoing degeneration of the junior
              capital markets no additional warrants were exercised and no
              additional capital was raised. Accordingly, all entitlements
              attributed to these warrants expired 30 September 1998.

         d)   SPECIAL NOTES CONVERTIBLE DEBT FINANCING

              In March 1996, according to the 1996 Reorganization Plan, the
              Company received approval for a $6 million 5-year 10% Special Note
              private placement offering which was subsequently increased by $5
              million in June 1997 to become $11 million 10% Special Notes.
              During Fiscal 1997, the Company completed $6 million placement in
              two closings. Each $1,000 principal amount of Special Notes was
              converted into an equivalent principal amount of 5-year 10%
              convertible fixed and floating secured debentures. Such debentures
              were fully secured by all the assets of Power Plus Corporation.

              On 24 April 1998, the Company converted the $6 million Special
              Notes, plus accrued and unpaid interest thereon, into 5,080,765
              Common Shares at $1.25 per Common Share. (See (S).3 -- Summary of
                                                                     ----------
              changes to shares and share capital, below.)
              --------------------------- 

         e)   1997 SPECIAL WARRANT PRIVATE PLACEMENT FINANCING

              The Company received regulatory approval for a 1997 Special
              Warrant Private Placement Financing of $3 million represented by
              1,714,286 - 1997 Special Warrants having a purchase price of $1.75
              per 1997 Special Warrant, representing additional potential future
              capital to the Company of $3 million, and which is expected to
              close in August 1997. Each 1997 Special Warrant was convertible
              into one Common Share plus one share purchase warrant entitling
              the holder to purchase, for up to one year after date of issue,
              one additional Common Share for $2.00, representing additional
              potential dilution of 1,714,286 Common Shares and future capital
              to the Company in the amount of up to $3.4 million. The 1997
              Special Warrants represent potential dilution of up to 3,428,570
              Common Shares and up to $6.4 million in additional capital on a
              fully diluted basis. As of the date hereof, as a result of market
              conditions this financing was aborted.

         f)   FUTURE POTENTIAL FUNDING FROM THE FINANCING PLAN

              All financing in accordance with the 1996 Reorganization Plan
              concluded on 30 September 1998, commensurate with the expiring of
              the entitlements formerly attached to Warrants. During Fiscal
              1999, the Company converted both the Bridge Loan Notes and Special
              Notes into Common Shares. No additional financing will be
              concluded in regard to the 1996 Reorganization Plan.
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 16


     3) SUMMARY OF CHANGES TO SHARES AND SHARE CAPITAL
     
        The table depicts the changes to share capital following from the 1996
        Reorganization Plan and to the date hereof.

<TABLE> 
<CAPTION> 
        --------------------------------------------------------------------------------------------------------------- 
                                                                                      SHARES      CAPITAL    TIMING
                                                                                      ------      -------    ------
        --------------------------------------------------------------------------------------------------------------- 
                  ($  amounts  are  expressed  in  Canadian  Dollars  in  millions;                   COMPLETED
                  assumes maximum dilution)                                                           --------- 
        --------------------------------------------------------------------------------------------------------------- 
        <S>                                                                           <C>         <C>        <C>  
           i  CONSOLIDATED, BEGINNING SHARE CAPITALIZATION (from 44,765,613
              shares on 20:1 basis):
        ---------------------------------------------------------------------------------------------------------------       
              a.) Post-consolidation number of Common Shares                          2,238,281     $0.0     FY 1997
        --------------------------------------------------------------------------------------------------------------- 
              b.) Capital raised from Exchange Right Units that included Class A &
                  AA  Warrants:
        --------------------------------------------------------------------------------------------------------------- 
                  i)   Exchange Rights Unit converted into 1 Common Share at $2.00 &  2,238,281     $4.5     FY 1997
                       1 Class A Warrant                                              
        --------------------------------------------------------------------------------------------------------------- 
                  ii)  Class A Warrants exercised to  purchase 1 Common Share @                                
                       $2.00 and receive 1 Class AA Warrant (Balance  of Class A        197,456     $0.4     FY 1998
                       Warrants expired unexercised.)                            
        --------------------------------------------------------------------------------------------------------------- 
                  iii) Class AA Warrants exercised to purchase 1 Common  Share @          4,246     $0.0     FY 1998
                       $2.50 (Balance of Class AA Warrants expired unexercised.)
        --------------------------------------------------------------------------------------------------------------- 
                  iv)  Agent's Option to purchase 225,000 Common Shares at $2.00        225,000     $0.5     FY 1997
                       and receive equal number of Agent's Option Class A Warrants 
        --------------------------------------------------------------------------------------------------------------- 
          ii   1996 SPECIAL WARRANT PRIVATE PLACEMENT FINANCING
        --------------------------------------------------------------------------------------------------------------- 
              a.) Special Warrants for $2.00 that were exchanged during  first                                  
                  quarter of Fiscal 1998 for Common Shares and an                     2,250,000     $4.5     FY 1997
                  equivalent number of Class B Warrants                          
        --------------------------------------------------------------------------------------------------------------- 
              b.) Class B Warrants exercised to purchase one Common Share at $2.00                                 
                  and receive one Class BB Warrant. (Balance of Class B Warrants        687,500     $1.3     FY 1998
                  and all Class BB Warrants issued expired unexercised.)
        --------------------------------------------------------------------------------------------------------------- 
              c.) Penalty Special Warrants to receive 225,000 Common Shares at no                                 
                  cost and 255,000 Class B Penalty  Warrants. (Exercised Class B        225,000     $0.0     FY 1997
                  Warrants included above.)
        --------------------------------------------------------------------------------------------------------------- 
         iii    CONVERSIONS OF DEBTS INTO COMMON SHARES at $1.25 per share
        --------------------------------------------------------------------------------------------------------------- 
              a.) $6 million - Special Notes (see(S)2(d) - Special Notes              5,080,767     $6.0     FY 1999
                  convertible debt financing, above)
        --------------------------------------------------------------------------------------------------------------- 
              b.) $4.1 million -- Bridge Loan Notes (see(S)1)(b) - Financing          3,771,858     $4.1     FY 1999
                                                                                      ---------     ----
                  activities instigated and changes during Fiscal 1999, above)
        --------------------------------------------------------------------------------------------------------------- 
           v   NUMBER OF SHARES, FULLY DILUTED/(1)/ / CASH CAPITAL RAISED            16,913,389     22.0
                                                                                     ==========     ====
        --------------------------------------------------------------------------------------------------------------- 
          vi   CONVERTIBLE INDEBTEDNESS - FUTURE POTENTIAL DILUTION
        --------------------------------------------------------------------------------------------------------------- 
              a.) $3 million - Secured Debt (See (S).6 - Conversion of Secured Debt, below)                  FY 2000
        --------------------------------------------------------------------------------------------------------------- 
         (1) At the meeting of shareholders of the Company held on 30 January 1998, the shareholders of the Company 
             approved the consolidation of the Company's issued and outstanding Common Shares on a ratio of 1 new 
             common share for up to each 5 common shares outstanding. Subject to the approval of The Alberta Stock 
             Exchange, it is the intention of the Company to complete this consolidation as soon as possible, 
             with the result that the 16,913,389 Common Shares outstanding as at the record date would become 
             3,382,677 common shares.
        --------------------------------------------------------------------------------------------------------------- 
</TABLE> 

     4) STATED CAPITAL REDUCTION
     
        As proposed in the 1999 Reorganization Plan, the Company's shareholders
        approved at the annual general and special shareholder meeting held on
        21 January 1999 a special resolution effective 31 January 1999
        authorizing the reduction in the stated capital of the Company pursuant
        to (S).36 of the Business Corporations Act Alberta, by reducing the
                         -------------------------
        stated capital of the Common Shares by an amount up to but not to exceed
        $20,700,000. This reduction of stated capital of the Common Shares would
        result in the reduction of the shareholders' deficiency by the same
        amount. It is management's opinion, after making the adjustment, that
        the balance sheet will more accu-
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 17
 
              rately represent the financial repositioning of the Company
              resulting from the reorganization and restructuring, and the
              appropriate current financial condition of the Company. In
              accordance with the Plan of Arrangement incorporated in the 1996
              Reorganization Plan, the Company reduced both the stated capital
              amount for the Common Shares and the accumulated deficit by
              $26,670,825, effective 31 July 1996.

              A reduction of the stated capital will have no immediate tax
              consequences to a holder of Common Shares. The reduction of stated
              capital might have an effect, in certain circumstances, if the
              Company is wound up or makes a distribution to its shareholders,
              or when the Company redeems, cancels or acquires its Common
              Shares. As a general rule, upon such transactions, the holder of
              Common Shares will be deemed to have received a dividend to the
              extent that the amount paid or distributed exceeds these stated
              capital of its Common Shares.

          5)  CONSOLIDATION OF SHARE CAPITAL

              At the special meeting of shareholders of the Company held on 30
              January 1998, the shareholders of the Company approved a
              resolution approving the consolidation of the Company's issued and
              outstanding common shares on a ratio of one new common share for
              up to each five common shares outstanding. In accordance with the
              1999 Reorganization Plan, as approved at the 21 January 1999
              meeting of the shareholders, and the approval of The Alberta Stock
              Exchange, it is the intention of the Company to complete this
              consolidation from the 16,913,389 common shares outstanding to
              3,382,677 post-consolidation common shares during the first
              quarter ending 30 April 1999 of Fiscal 2000 ending 31 January
              2000.

         6)   CONVERSION OF SECURED DEBT

              i)   At the special meeting of shareholders held on 30 January
                   1998, the Company's shareholders approved, subject to
                   regulatory approval, the private placement of a series of
                   first secured and fixed and floating charge 10% convertible
                   debentures ("1998 Debentures") in the maximum principal
                   amount of up to $5,000,000. The 1998 Debentures were proposed
                   to mature on 31 January 2000, bearing interest at a rate of
                   10% per annum, payable semi-annually in common shares having
                   a deemed price of $0.85 each, and secured by way of a first
                   fixed and floating charge against all the assets of the
                   Company. The 1998 Debentures were proposed to be convertible,
                   in whole or in part, at the option of the holder, into units
                   of the Company at a conversion price of $0.85 per unit, each
                   unit to consist of one common share and one share purchase
                   warrant. Pending proceeding with the 1998 Debentures, the
                   Company, in the interim, executed promissory notes evidencing
                   indebtedness in the aggregate principal amount of $3,191,000
                   of unsecured loans advanced to the Company and bearing
                   interest on maturity at an annual rate of 10% (the "Unsecured
                   Loan Notes"). As a result of market conditions, the Company
                   abandoned the 1998 Debentures. Subsequently, the Company
                   created a debenture trust indenture (the "Debenture Trust
                   Indenture") dated 30 September 1998 with Elliott &
                   Associates, Inc., providing for the issuance of a series of
                   10% fixed and floating charge secured debentures in the
                   principal sum not to exceed $5,000,000, due 31 January 2000
                   (the "Debentures"), and pledged all present and future debts,
                   liabilities and obligations of the Company under the
                   Debenture Trust Indenture. The Unsecured Loan Notes, by
                   agreement with their holders, were replaced by the Debentures
                   during Q4 -- Fiscal 1999. Management considered it desirable
                   to provide for the convertibility of the Debentures,
                   including all principal amounts advanced thereunder and
                   interest accruing thereon, into Common Shares of the Company
                   on the basis that the Debentures will be convertible, in
                   whole or in part, on or before maturity, at the option of the
                   holders, into common shares of the Company at a conversion
                   price equal to $0.10 per post-consolidation common share (see
                   (S)5 -- Consolidation of Share Capital, above). In view of
                           ------------------------------
                   the fact that the possible aggregate issuance of Common
                   Shares issuable upon conversion of the
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 18


              Debentures represents over 25% of the Company's Common Shares
              currently issued and outstanding, shareholder approval was
              obtained at the 21 January 1999 meeting of the shareholders and
              the required approval of The Alberta Stock Exchange is pending as
              of the date hereof.

         ii)  At the special meeting of shareholders held on 30 January 1998,
              the Company's shareholders approved, subject to regulatory
              approval, the implementation of a four-tiered revised corporate
              finance plan, including reasonable fiscal advisory and finder's
              fees and commissions. The Company and Roxborough Holdings Limited
              (the "Finder") agreed to a finder's fee arrangement (the "Finder's
              Fee Agreement") in respect of funds raised through the efforts of
              the Finder, pursuant to which the Company is obligated to pay the
              Finder a fee equal to 10% of the first $300,000 of funds raised,
              and thereafter 7.5% of funds raised between $300,000 and
              $1,000,000, and 5% of funds raised over $1,000,000. To date the
              Finder arranged funds of $3,191,000, pursuant to which the Company
              is obligated to pay the Finder a fee of $121,230 (the "Finder's
              Fee"). Management obtained the approval of the shareholders at the
              meeting of shareholders held on 21 January 1999, subject to
              regulatory approval, to pay the Finder's Fee in full by converting
              it into post-consolidation common shares of the Company on the
              basis of a conversion price of $0.10 per post-consolidation share,
              or 1,121,230 post-consolidation common (see(S)5-- Consolidation of
                                                                ----------------
              Share Capital, above).
              -------------
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 19


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         The following summarizes, to the best of management's knowledge,
         potential, pending or known legal proceedings and litigation, arising
         primarily from transactions between third parties and one or both of
         PPUSA and PPCan, in all considered ordinary routine litigation
         incidental to the business. 
         
         a)   CDA Industries Inc., a Canadian company and manufacturer and
              supplier of store fixtures, commenced an action in the Ontario
              Court against the Company for the payment of alleged unpaid
              amounts due from either or both PPCan and PPUSA. The Company has
              disputed this claim considering it without merit and will
              vigorously defend it as required and advised.

         b)   PageMart Canada Limited, a Canadian company and former supplier of
              airtime to PPCan was sued by PPCan in the Ontario Court for
              non-performance. PageMart countersued the Company in response,
              alleging it was owed certain amounts for services rendered by it
              to PPCan and for breach of contract. The Company has disputed
              PageMart's claim considering it without merit, and will vigorously
              defend it as required and advised.

         c)   Management is informed of claims that may have been made against
              PPUSA in the United States, after PPUSA ceased carrying on
              business, by landlords pertaining to store premises leased by
              PPUSA. The details of these claims are undetermined as of the date
              hereof, and there is the possibility that collateral claims may
              have been made against the Company. The Company has retained US
              counsel to advise management and will take all steps necessary and
              required.
 
         In management's opinion, and to the best of its knowledge, none of
         these potential, pending or known routine legal proceedings are
         expected to have any material impact on future operating results or the
         financial condition of the Company.

ITEM 2.  CHANGES IN SECURITIES.

         (See PART I, Item 2. -- Management's Discussion and Analysis of
                                 ---------------------------------------
         Financial Condition and Results of Operations, herein).
         ---------------------------------------------

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

                  Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
                  Not applicable.

ITEM 5.  OTHER INFORMATION.
                  Not applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         a.)      Exhibits
                           Exhibit 27  --  Financial data schedule

         b.)      Reports on Form 8-K
                           None
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                   SECOND QUARTER OF FISCAL 1999
                                                                         PAGE 20


                                    SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
                                    -------------------------------
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       POWER PLUS CORPORATION

 
Date:`    26 February 1999             /s/ R. BRUCE FREEMAN
                                       --------------------------------
                                       R. Bruce Freeman
                                       Vice Chairman and Chief Financial Officer

                                       (Duly authorized officer of the 
                                       Registrant and its chief financial
                                       officer)