<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 OCTOBER 1998
     --------------------
     ("Q3", "Third Quarter" or "Quarter 3 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             (I.R.S. Employer Identification
      incorporation)                              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

<TABLE> 
                                   FORM 10-Q

                                     INDEX
      
PART I -  FINANCIAL INFORMATION
<S>          <C>                                                                                        <C>   
Item 1.  Consolidated Interim Financial Statements                                                       3

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

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

           Consolidated Statement of Changes in Financial Position
                  for the periods ended 31 October 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                                                                                             21
</TABLE> 
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                    THIRD 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 plan/1/ 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 in 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 US 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 1988, 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
                                                    THIRD 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 opinion/3/ 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
                                                    THIRD 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 
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                    THIRD QUARTER OF FISCAL 1999
                                                                         PAGE 11


         made pursuant to a share purchase agreement dated 30 October 1998,
         between the Company, as 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 Q3 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 October)                             
                                                                 ---------------------------------------------------                
                                                                       Three months        Nine months year to date                 
                                                                 ---------------------------------------------------                
                                                                       1998         1997        1998          1997                  
              <S>                                                <C>                <C>         <C>           <C>   
              Cost of sales                                            56.5%         77.6%       77.3%         63.0%
              Operating, occupancy & administrative expenses         1356.4%        272.4%       29.0%        198.4%
              Net loss including windup and sale                     1313.0%        250.0%        6.1%        162.7%
</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
         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.
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                    THIRD QUARTER OF FISCAL 1999
                                                                         PAGE 12


         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 and Q3, 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 ss.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.

       e) The Company has executed promissory notes evidencing indebtedness in
          the aggregate principal amount of $3,155,000 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 pay-
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                    THIRD QUARTER OF FISCAL 1999
                                                                         PAGE 13


          able upon maturity. The Company executed additional promissory notes
          on similar terms and conditions for $36,000 subsequent to the period
          end. This 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
          to 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 Common
          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 
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                    THIRD QUARTER OF FISCAL 1999
                                                                         PAGE 14

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

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


          additional capital was raised. Accordingly, all entitlements
          attributed to these warrants expired 30 September 1998. d)

       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>
 
                                                                      FORM 10-Q
POWER PLUS CORPORATION                             THIRD 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 equivalent                    2,250,000     $4.5   FY 1997  
                  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
-------------------------------------------------------------------------------------------------------------------------------- 
</TABLE> 

         (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.
         -----------------------------------------------------------------------

  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 ss.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>
 
                                                                      FORM 10-Q
POWER PLUS CORPORATION                             THIRD 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>
 
                                                                      FORM 10-Q
POWER PLUS CORPORATION                             THIRD 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>
 
                                                                      FORM 10-Q
POWER PLUS CORPORATION                             THIRD 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.

         On November 27, 1998, the Company announced the completion of the sale
         of the Company's wholly-owned Canadian operating subsidiary, Power Plus
         Canada, Inc., for an undisclosed sum to Battery Plus Inc. of
         Mississauga, Ontario. The Company previously announced on May 8, 1998,
         that Power Plus Canada, Inc. had sought protection, filing a Notice of
         Intention to make a proposal to creditors under Part III Division I of
         the Bankruptcy and Insolvency Act. On September 11, 1998, the creditors
         of Power Plus Canada, Inc. accepted the proposal made and the required
         court approval was subsequently obtained by order dated October 7,
         1998, satisfying certain pre-conditions to the Company's sale of Power
         Plus Canada, Inc. completed November 27, 1998. As a result, all claims
         of the creditors of Power Plus Canada, Inc. as compromised will now be
         fully satisfied.
<PAGE>
 
                                                                      FORM 10-Q
POWER PLUS CORPORATION                             THIRD QUARTER OF FISCAL 1999
                                                                        PAGE 20


         The Company also previously announced on February 4, 1998, that its
         wholly-owned US operating subsidiary, Power Plus USA, Inc., had sought
         protection, filing a Chapter 11 Voluntary Petition under the United
                                                                      ------
         States Bankruptcy Code. Pursuant to these proceedings, the Company has
         ----------------------
         sold the assets of Power Plus USA, Inc. for an undisclosed sum.

         The Company has set a meeting of shareholders to be held on January 21,
         1999, to consider, amongst other matters, reorganizational proceedings
         which management considers in the best interests of the Company,
         including a name change to "PPC Capital Corp." Upon approval and
         implementation of reorganizational proceedings, the Company will
         aggressively pursue diversified investment opportunities targeted to
         maximize shareholder value.

         As part of its reorganizational proceedings, the Company, effective
         July 24, 1998, completed the conversion of certain promissory notes it
         had executed and delivered (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%, the
         conversion being at $1.25 per common share. The Company, therefore,
         issued 3,771,858 common shares as payment in full of all obligations
         under the Bridge Loan Notes. The Company also previously announced on
         April 24, 1998, that it had completed the conversion of its $6 million,
         10% fixed and floating charge secured special promissory notes
         debentures, converted at $1.25 per common share, resulting in the
         issuance of 5,080,765 common shares of the Corporation. As a result,
         16,913,395 common shares of the Company are issued and outstanding as
         of November 27, 1998. The Company has no classes of share purchase
         warrants remaining outstanding and there are no options to purchase
         shares granted to any officers, directors, employees, advisors or
         consultants to the Corporation.

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

         a.)   Exhibits
                   Exhibit 27  --  Financial data schedule

         b.)   Reports on Form 8-K

                   None
<PAGE>
 
                                                                      FORM 10-Q
POWER PLUS CORPORATION                             THIRD QUARTER OF FISCAL 1999
                                                                        PAGE 21


                                   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)
<PAGE>
 
                                                                       FORM 10-Q
POWER PLUS CORPORATION                              THIRD QUARTER OF FISCAL 1999
                                                                          PAGE 3



                         PART 1-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

<TABLE> 
<CAPTION> 
                                     THIRD QUARTER
                            (period ended 31 October 1998)
                                      FISCAL 1999


CONSOLIDATED STATEMENT OF OPERATIONS  (UNAUDITED)

 (Amounts are expressed in Canadian Dollars)                                         NINE-MONTH AND YEAR-TO-DATE
                                                         THREE MONTHS ENDED 31 OCTOBER         PERIOD ENDED 31 OCTOBER   
                                                        ------------------------------------------------------------------
                                                               1998          1997                  1998            1997  
                                                        ------------------------------------------------------------------
<S>                                                        <C>             <C>             <C>             <C>                     
SALES                                                      $     30,523    $  1,519,355    $    598,315    $  6,337,332  
Cost of sales                                                    17,250       1,179,666         461,995       4,072,820  
                                                           ------------    ------------    ------------    ------------  
GROSS PROFIT                                                     13,273         339,689         136,320       2,264,512  
EXPENSES                                                                                                                 
   Operating and administration                                  79,596       3,789,733       2,193,883      11,583,778  
   Asset write-down -- see Notes 2 & 8                                0               0         490,485               0  
   Financing  charges  payable in stock -- see Note 4            76,927               0         492,805               0  
   Amortization                                                       0         348,846         127,753         989,439  
                                                           ------------    ------------    ------------    ------------  
(LOSS) FROM OPERATIONS                                         (143,251)     (3,798,890)     (2,678,122)    (10,308,705) 
Non-cash  gain/(loss)  from abandonment and sale                                                                         
 of subsidiaries - see Notes 2 & 8                             (257,506)              0       2,641,527               0  
                                                           ------------    ------------    ------------    ------------  
PROFIT (LOSS) FROM OPERATIONS                                  (400,756)     (3,798,890)        (36,544)    (10,308,705) 
Deficit, beginning of period                                 23,871,785      11,733,967      24,235,997       5,224,152  
                                                           ------------    ------------    ------------    ------------  
DEFICIT, END OF PERIOD                                     $ 24,372,591    $ 15,532,857    $ 24,372,591    $ 15,532,857  
                                                           ============    ============    ============    ============  
                                                                                                                         
EARNINGS PER SHARE                                         $      (0.02)   $      (0.48)   $       0.00    $      (1.62)    
                                                                                                                         
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                   16,913,389       7,843,248      13,634,123       6,271,164    
</TABLE> 
<PAGE>
 
                                                                       FORM 10-Q
POWER PLUS CORPORATION                              THIRD QUARTER OF FISCAL 1999
                                                                          PAGE 4
<TABLE> 
<CAPTION> 
CONSOLIDATED BALANCE SHEET
  (Amounts are expressed in Canadian Dollars)                              ---------------------------------------------------------
                                                                                     31 October 1998        31 January 1998
                                                                           ---------------------------------------------------------
                                                                                        (unaudited)            (audited)
<S>                                                                        <C>                              <C>  
                                                  ASSETS
     Current Assets
          Cash and cash equivalents                                                      $209,473                 $147,590
          Accounts receivable                                                           1,210,455                  342,842
          Inventory                                                                        65,348                  756,375
          Prepaid expenses                                                                 24,260                   68,907
                                                                                     ------------             ------------
                                                                                        1,509,536                1,315,714
     Capital assets, net                                                                  311,125                1,288,846
     Deferred charges, net                                                                      0                  253,680
     Other assets, net                                                                          0                  546,328
                                                                                     ------------             ------------
                                                                                       $1,820,661               $3,404,568
                                                                                     ============             ============

                                                   LIABILITIES
     Current Liabilities
          Accounts payable and accrued liabilities                                     $1,983,743               $4,972,867
                                                                                     ------------             ------------
     Long-term Liabilities
          Accrued interest payable on long-term debt on maturity -- see Note 4            228,626                  762,944
          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                                       3,155,000                1,900,000
                                                                                     ------------             ------------
                                                                                        3,383,626               11,764,194
                                                                                     ------------             ------------
                                                                                        5,367,369               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                                                                          (24,272,541)             (24,310,170)
                                                                                     ------------             ------------
                                                                                       (3,546,708)             (13,332,493)
                                                                                       $1,820,661               $3,404,568
                                                                                     ============             ============
</TABLE> 
<PAGE>
 
                                                                       FORM 10-Q
POWER PLUS CORPORATION                              THIRD QUARTER OF FISCAL 1999
                                                                          PAGE 5
<TABLE> 
<CAPTION> 
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION  (UNAUDITED)

  (Amounts are expressed in Canadian Dollars)                                              NINE-MONTH AND YEAR-TO-DATE

                                                                                             PERIOD ENDED 31 OCTOBER
                                                                                  -------------------------------------------
                                                                                          1998                   1997
                                                                                  -------------------------------------------
<S>                                                                               <C>                         <C> 
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
     (LOSS) FROM OPERATIONS                                                            $ (2,678,072)          $(10,308,705)
     ITEMS NOT AFFECTING CASH
          Asset write-down -- see Notes 2 & 8                                               490,485                      0
          Financing charges payable in stock -- see Note 4                                  492,805                      0
          Amortization                                                                      127,753                779,439
                                                                                       ------------           ------------
                                                                                         (1,567,029)            (9,529,266)
                                                                                       ------------           
     CHANGES IN NON CASH OPERATING ITEMS                                                   (317,255)             1,046,401
                                                                                       ------------           ------------
                                                                                         (1,884,284)            (8,482,865)
                                                                                       ------------           ------------

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              4,356,398
  10% Promissory Notes -- see Notes 4 & 6                                                 1,255,000                      0
  Special Notes -- see Note 7                                                                     0                210,000
                                                                                       ------------           ------------
                                                                                          1,255,000              6,470,776
                                                                                       ------------           ------------

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
     (Purchase) of capital assets                                                                 0             (1,793,795)
     Sale of assets -- see Notes 2 & 8                                                      753,000                      0
                                                                                       ------------           ------------
                                                                                            753,000             (2,117,997)
                                                                                       ------------           ------------
INCREASE (DECREASE) IN CASH DURING PERIOD                                                   123,716             (3,805,884)
CASH, BEGINNING OF PERIOD                                                                   147,590              4,341,243
                                                                                       ------------           ------------
CASH, END OF PERIOD                                                                    $    209,473           $    535,359
                                                                                       ============           ============
</TABLE> 
<PAGE>
 
POWER PLUS CORPORATION                                                 FORM 10-Q
                                                    THIRD 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 October 1998 pertaining to the
         current fiscal year ending 31 January 1999 ("Fiscal 1999"), and
         the three-month and year-to-date period ended 31 October 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 (S).50.4(1) of the
         Bankruptcy and Insolvency Act Canada. The insolvency of PPUSA and
         -----------------------------
         sale of PPCan resulted from the Company's inability to continue
         funding start-up operations pending attaining critical mass and
         profitability. (See Item 2 - Management Discussion and Analysis.)

NOTE 3:  In the opinion of management, the Consolidated Balance Sheet as at 31
         October 1998 and the Consolidated Statements of Operations and
         Changes in Financial Position for the three-month and year-to-date
         periods ended 31 October 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 October 1998 and the
         Consolidated Statements of Operations and Changes in Financial
         Position for the three-month and year-to-date periods ended 31
         October 1998 and 1997 are unaudited. The Consolidated Balance
         Sheet for Fiscal 1998 was audited and reported to shareholders
         (please refer to the FORM 10-K for Fiscal 1998). 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
                                                    THIRD QUARTER OF FISCAL 1999
                                                                          PAGE 7





NOTE 6:  Up to the end of the period, the Company has executed
         promissory notes evidencing indebtedness in the aggregate
         principal amount of $3,155,000 of unsecured loans advanced to the
         Company and bearing interest payable on maturity at an annual rate
         of 10%. The Company executed additional promissory notes on
         similar terms and conditions for $36,000 subsequent to the period
         ended 31 October 1998. The holders agreed to the replacement of
         these unsecured loans totaling $3,191,000, during Quarter 4 of
         Fiscal 1999, by 10% first fixed and floating charge secured
         debentures maturing 31 January 2000 with interest accruing and
         payable upon maturity.

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,
         together with interest thereon, were converted into 5,080,767
         common shares on the basis of a conversion price of $1.25 per
         common share.

NOTE 8:  a)  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, consisted primarily of store fixtures and
             leasehold improvements, were abandoned where situated at various
             locations to offset existing liabilities to landlords. Accordingly,
             PPUSA, now discharged from its Chapter 11 Petition, no longer
             carries on business in the US.

         b)  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
             on 7 October 1998. Pursuant to a closing date of the sale,
             PPCan continued to operate the business as a going concern.

         c)  On 26 November 1998, the Company completed the sale of PPCan
             pursuant to a share purchase agreement dated 30 October 1998
             between the Company and Battery Plus Inc, an arm's length
             party. As a result, all claims of the creditors of PPCan as
             compromised are now fully satisfied.

         Accordingly, these interim financial statements reflect the write-down
         of PPCan's 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, after netting certain adjustments pertaining to the
         implementation of PPCan's Proposal with a gain on the abandonment of
         PPUSA, representing the effect of reversing its obligations to arm's
         length creditors, a non-cash gain of $2,641,527 is reported. The
         implementation of the Proposal, including the payment of the dividend
         from the fund to the creditors of PPCan, will have the effect of
         substantially reducing the amount of accounts payable reported herein.