SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Amendment No. 1 to
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 13, 1999
PETPLANET.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-10576 22-2298015
- ------------------------------ ----------- ---------------------------------
(State or other jurisdiction File Number (IRS Employer Identification No.)
of incorporation) Commission
21 Stillman Street, Ste. 600, San Francisco, California 94107
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 243-9000
TECHSCIENCE INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 1. Not Applicable.
Item 2.
As previously reported in the Form 8-K filed on June 3, 1999, Techscience
Industries Inc., a Delaware corporation (now known as Petplanet.com, Inc. and
hereinafter referred to as the "Company") and PetPlanet.com, Inc., a California
corporation, and the individual holders of all of the outstanding capital stock
of PPI (the "Holders") consummated a reverse acquisition (the "Reorganization")
on May 13, 1999 pursuant to a certain Agreement and Plan of Reorganization
("Agreement"). In connection with the Agreement, the Holders tendered to the
Company all issued and outstanding shares of common stock and common stock
equivalents of PPI in exchange for 6,754,640 shares of common stock of the
Company, and therefore PPI became the wholly owed subsidiary of the Company. The
Company also issued options to purchase 570,360 shares of the Company's common
stock to holders of options to purchase PPI common stock. Because the nature of
the Company's business completely changed as of the date of the Reorganization,
a current description of the Company's business operations is set forth below
The Company is the developer, producer, and operator of the Internet-based
network known as PetPlanet.com (www.petplanet.com) which is designed to cater to
the needs and interests of pet owners. PetPlanet.com is an emerging global
Internet network which seeks to present a focused target audience for pet
product and service providers. The Company targets households caring for one or
more pets (called "Pet Families") which make up over 60% of the households in
the United States. PetPlanet.com will provide a place where Pet Families can
access personalized local and national information, unique products and
services, and interact with others sharing similar interests. The Company
targets Pet Families by providing (i) comprehensive content, services and
features; (ii) active community participation; and (iii) targeted cost-effective
medium for business-to-consumer advertising. When fully launched, PetPlanet.com
will feature personalized national and local information, community-oriented
content, entertainment, and information to allow Pet Families to find and buy
products and services for their pets.
In order to achieve its objectives, the Company will seek to:
o expand the user base and enhance user experience with new features,
services and content;
o build the PetPlanet.com brand;
o enhance the PetPlanet.com site functionality and performance through
continued investments in technology and site infrastructure;
o expand globally through an aggressive acquisition program;
o establish additional strategic relationships with online distribution
partners;
o introduce the PetPlanet.com Store in September, 1999;
Pet Families in the USA spend over $23 billion a year on products and
services relating to their pets. While the major pet supply manufacturers and
retailers account for much of this commerce, the pet industry is also comprised
of many small-to-medium sized marketers of products and services who currently
depend on magazines and other media for much of their marketing and sales. The
Company believes that there is no clear leader in the Internet pet market. To
leverage the existing expertise of an established pet industry player,
PetPlanet.com has partnered with a top tier pet product distribution company
carrying over 25,000 products across all pet categories.
PetPlanet.com's business model is founded upon the concept of "community
driven e-commerce". The Company believes that in order to build a successful
e-commerce business that derives its sales from Pet Families, the experience
must blend elements focused on community, content and commerce. The network will
also offer elements such as the ability to create custom home pages,
personalized e-mail, chat and a personalized calendar with local and national
events.
Significant capital will be required to develop the site, secure online
distribution, generate brand identity and complete domestic and international
acquisitions. While the Company is projected to generate revenue in the first
year, the Company is projected to show significant losses in the first several
years of operation as it invests heavily in acquisition of market share.
Spending will concentrate primarily in building the brand through aggressive
marketing, taking advantage of newer technologies to enhance the network, and
building an adequate level of infrastructure to sustain the growth in the
business, and seek to make strategic acquisitions. The Company will seek
acquisition targets that complement its existing business, augment the
distribution of the pet community, enhance its technological capabilities,
and/or expand its ability to conduct commerce.
Items 3-6. Not Applicable
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
This amendment provides audited Financial Statements of PetPlanet.com,
Inc., a California corporation ("PPI") consisting of:
I. Independent Auditors' Report;
II. Balance Sheet as of March 31, 1999;
III. Statements of Operations for the years ended March 31, 1998, March 31, 1999
and the period October 3, 1996 (inception) to March 31, 1999;
IV. Statements of Stockholders' Equity (Deficit) for the years ended March 31,
1998, March 31, 1999 and the period October 3, 1996 (inception) to March
31, 1999;
V. Statements of Cash Flows for the years ended March 31, 1998, March 31, 1999
and the period October 3, 1996 (inception) to March 31, 1999; and
VI. Notes to Financial Statements.
(b) Pro forma financial information.
This amendment also provides unaudited Pro forma Combined Financial
Information for the reverse acquisition of Techscience Industries, Inc., a
Delaware corporation (now known as PetPlanet.com, Inc. and hereinafter the
"Registrant") by PPI pursuant to an Agreement and Plan of Reorganization among
the Registrant, PPI and certain of PPI's shareholders dated as of May 31, 1999
(the "Reorganization Agreement"). The unaudited Pro forma Combined Financial
Information includes:
I. Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 1999;
and
II. Unaudited Pro Forma Condensed Combined Statement of Operations for the year
ended March 31, 1999.
The above audited consolidated financial statements and unaudited pro
forma combined financial information were not included in the Form 8-K filed by
the Registrant on June 3, 1999 because the information as of and for the year
ended March 31, 1999 was not determinable at such time.
All capitalized terms used herein but not otherwise defined shall have the
respective meanings given them in the Form 8-K filed by the Registrant on June
3,1999.
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page 2
------
<S> <C>
Independent Auditors' Report F-2
Financial Statements:
Balance Sheet at March 31, 1999 F-3
Statements of Operations for the years ended March 31, 1999 and 1998 and for
the period October 3, 1996, (Date of Inception), to March 31, 1999
F-4
Statements of Changes in Stockholders' Equity (Deficiency) for the periods
from October 3, 1996, (Date of Inception) to March 31, 1999 F-5
Statements of Cash Flows for the years ended March 31, 1999 and 1998 and for
the period October 3, 1996, (Date of Inception), to March 31, 1999
F-6
Notes to Financial Statements F-7 to 15
</TABLE>
<PAGE>
F-5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
PetPlanet.Com, Inc.
(A Development Stage Company)
We have audited the balance sheet of PetPlanet.Com, Inc., a California
corporation (A Development Stage Company) as of March 31, 1999 and the related
statements of operations, changes in stockholders' equity (deficiency) and cash
flows for each of the two years in the period then ended and for the period
October 3, 1996, (Date of Inception) to March 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PetPlanet.Com, Inc. at March
31, 1999, and the results of its operations and its cash flows for each of the
two years in the period then ended and for the period October 3, 1996, (Date of
Inception) through March 31, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 of the
financial statements, the Company is a development stage company, has suffered
recurring losses from operations and needs significant additional financing to
continue the development of its product. Resulting operating losses and negative
cash flows from operations are likely to occur until, if ever, profitability can
be achieved through successful marketing of its newly developed media. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
WISS & COMPANY, LLP
Livingston, New Jersey
July 27, 1999
F-2
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
BALANCE SHEET
MARCH 31, 1999
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS -
<S> <C>
Cash $ 104,982
FURNITURE, FIXTURES AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION OF $1,200 AT
MARCH 31, 1999 4,799
---------
$ 109,781
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Current portion of notes and interest payable to affiliated company
$ 74,392
Current portion of bridge loan payable 100,000
Accrued expenses 16,564
---------
Total Current Liabilities 190,956
---------
NONCURRENT LIABILITIES -
Notes and interest payable to affiliated company,
less current portion 8,480
---------
BRIDGE LOAN PAYABLE, LESS CURRENT PORTION 50,000
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, no par:
Authorized - 5,000,000 shares
Issued and outstanding - -0- shares
Common stock, no par, $.0005 per share stated value: Authorized -
25,000,000 shares Issued and outstanding - 10,250,000 at March 31,
1999
5,125
Additional paid-in capital 443,113
Deficit accumulated during development stage (472,893)
---------
(24,655)
Less deferred consulting fees (115,000)
---------
Total Stockholders' Equity (Deficiency) (139,655)
---------
$ 109,781
=========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
October 3,
1996 (Date of
Year Ended Year Ended Inception) to
March 31, March 31, March 31,
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING REVENUES $ -- $ -- $ --
------------ ------------ ------------
COSTS AND EXPENSES:
Consulting fees and product development 11,439 -- 11,439
Officers' compensation 212,238 100,000 336,238
Selling, general and administrative expenses 73,110 43,892 117,041
Interest expense 6,525 1,650 8,175
------------ ------------ ------------
303,312 145,542 472,893
------------ ------------ ------------
NET LOSS $ (303,312) $ (145,542) $ (472,893)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 10,054,800 2,000,000 5,221,900
============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.03) $ (.07) $ (.09)
============ ============ ============
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
Deficit
Common Stock Accumulated
Per No Par Additional During Deferred Stockholders'
Share $.0005 Paid-in Development Consulting Equity
Amount Shares Stated Value Capital Stage Fees (Deficiency)
------ ---------- ------------ ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OCTOBER 3, 1996 (DATE OF INCEPTION) TO
MARCH 31, 1997 -
Common stock issued in October 1996 .0005 2,000,000 $ 1,000 $ - $ - $ - $ 1,000
Stockholder services contributed - - 24,000 - - 24,000
Net loss - - - (24,039) - (24,039)
----------- ---------- -------------- ---------- -------- ---------
BALANCE, MARCH 31, 1997 2,000,000 1,000 24,000 (24,039) - 961
YEAR ENDED MARCH 31, 1998 -
Stockholder services contributed - - 100,000 - - 100,000
Net loss - - - (145,542) - (145,542)
---------- ---------- ------------- ---------- -------- ---------
BALANCE, MARCH 31, 1998 2,000,000 1,000 124,000 (169,581) - (44,581)
YEAR ENDED MARCH 31, 1999 -
Common stock issued in April 1998 .0005 8,000,000 4,000 - - - 4,000
Stockholder services contributed - - 100,000 - - 100,000
Common stock issued for services in
January 1999 250,000 125 116,875 - (115,000) 2,000
Options issued for services - - 102,238 - - 102,238
Net loss - - - (303,312) - (303,312)
------------ ----------- ------------- ---------- -------- ---------
BALANCE, MARCH 31, 1999 10,250,000 $ 5,125 $443,113 $(472,893) $(115,000) $(139,655)
========== ========= ======== ========= ========= =========
See accompanying notes to financial statements
</TABLE>
F-5
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
October 3,
1996 (Date of
Year Ended Year Ended Inception) to
March 31, March 31, March 31,
1999 1998 1999
------------- ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(303,312) $(145,542) $(472,893)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Depreciation 1,200 -- 1,200
Stockholders services contributed 100,000 100,000 224,000
Common stock issued for services 2,000 -- 2,000
Options issued for services 102,238 -- 102,238
Changes in operating assets and liabilities:
Accrued expenses 15,701 -- 15,701
Accrued interest 5,585 1,650 7,235
--------- --------- ---------
Net cash flows - operating activities (76,588) (43,892) (120,519)
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES -
Purchase of property and equipment (5,999) -- (5,999)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES -
Proceeds from issuance of common stock 4,000 -- 5,000
Proceeds of Bridge loan payable 150,000 -- 150,000
Proceeds of notes from affiliated company 33,000 43,500 76,500
--------- --------- ---------
Net cash flows - financing activities 187,000 43,500 231,500
--------- --------- ---------
NET CHANGE IN CASH 104,413 (392) 104,982
CASH, BEGINNING OF PERIOD 569 961 --
--------- --------- ---------
CASH, END OF PERIOD $ 104,982 $ 569 $ 104,982
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ -- $ -- $ --
========= ========= =========
Income taxes paid $ -- $ -- $ --
========= ========= =========
Stock issued for deferred consulting fees $ 115,000 $ -- $ 115,000
========= ========= =========
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 1 - Nature of the Business and Summary of Significant Accounting
Policies:
Nature of the Business - PetPlanet.Com, Inc. (the "Company") is a
development stage company, located in San Francisco, California
and was incorporated under the laws of the State of California in
October 1996 (Date of Inception) (Note 7). The Company is engaged
in the development of a World Wide Web site. The Company's core
product and brand intends to feature personalized, national and
local information, community driven content, entertainment and
unique products and services. Company revenues are expected to
come from electronic commerce associated with the sale of pet
foods and related products, advertising and sponsorships, other
sources.
Financial Instruments - Financial instruments include cash and
notes payable and accrued expenses. The amounts reported for
financial instruments are considered to be reasonable
approximations of their fair values, based on market and other
information available to management.
Furniture, Fixtures and Equipment - Furniture, fixtures and
equipment are stated at cost. The Company provides for
depreciation using an accelerated method, based upon estimated
useful life of 5 years for furniture, fixtures and equipment.
Income Taxes - Deferred income taxes result primarily from net
operating losses and the differences resulting from reporting on
the cash basis of accounting for tax reporting purposes.
Risk Concentrations:
(a) Significant Employees - The Company's activities are to a
great extent performed by the President and a select few
employees and consultants. As a result, the Company is
dependent upon the ability of these employees to continue
with these activities.
(b) Dependence on the Internet - The success of the Company's
operations is contingent upon its ability to attract a
market on the Internet. There can be no assurance that the
Company may not be adversely affected by the matters
affecting the Internet.
(c) Cash - The Company maintains its cash balances in financial
institutions which are insured by the Federal Deposit
Insurance Corporation up to $100,000. At March 31, 1999, the
Company has uninsured balances totalling approximately
$12,000.
F-7
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Use of Estimates - 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 and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from
those estimates.
Software Development Costs - The Company accounts for software
development costs of its Web Site in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 86, "Accounting for
Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed." Costs incurred prior to the establishment of the Web
Site as a technologically feasible media are expensed as incurred
and reflected as product development costs in the accompanying
statements of operations.
There were no software development costs capitalized in the
fiscal years ended March 31, 1999 and 1998. During these periods,
the period between the establishment of technological feasibility
and the introduction of the Web Site was very short.
Consequently, costs otherwise capitalizable after technological
feasibility were expensed as they were insignificant.
Earnings (Loss) Per Share - Basic earnings per share excludes any
dilutive effects of options, warrants, and convertible
securities. Basic earnings per share is computed using the
weighted-average number of common shares outstanding during the
period. Diluted earnings per share is computed using the
weighted-average number of common and common stock equivalent
shares outstanding during the period. Common equivalent shares
are excluded from the computation if their effect is
antidilutive.
Note 2 - Going Concern:
The Company's financial statements have been presented on the
basis that it is a going concern which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company is a development stage
company and has had a history of losses since its inception in
October 1996.
The Company's continued existence is dependent upon its ability
to achieve profitable operations and obtain additional financing.
The following represents the Company's principal operating and
liquidity problems and management's plans to overcome them.
Operating Trends and Future Prospects - The Company is a
development stage company and has had no revenues since its
inception. The Company is currently attempting to develop an
Internet market for individuals with an interest in pets. The
future growth and profitability of the Company will be
principally dependent
F-8
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
upon its ability to successfully develop and market its services
on the Internet. The Company has not enhanced its identity in
this media to the point where it has been able to generate
revenues. The Company anticipates that it will incur substantial
operating expenses in connection with this effort and expects
these expenses to result in continuing and significant operating
losses until such time, if ever, the Company is able to achieve
adequate revenue levels.
Recent Financing Activities - The Company's capital requirements
have been and will continue to be significant. In the past, the
Company has financed its working capital requirements primarily
through cash flow generated from loans from an affiliated
company. The Company is dependent on obtaining additional
financing to fund its future operations and working capital
requirements and continues to seek to raise additional capital
through the sale of common stock. The Company is aggresively
seeking arrangements with respect to, or sources of, additional
financing. However, there can be no assurance that additional
financing will be available to the Company on acceptable terms,
or at all. In view of the Company's limited resources, its
anticipated expenses and the competitive environment in which the
Company operates, any inability to obtain additional financing
would severely limit the Company's ability to enhance its
identity on the Internet.
Note 3 - Related Party Transactions:
Notes Payable - At March 31, 1999, the Company owed approximately
$83,000 to a company owned by a stockholder of the Company. The
notes bear interest at 8.0% per annum and are due as follows:
Year Ended March 31,
--------------------
2000 $ 75,000
2001 8,000
-----------
$ 83,000
Employment Agreement - Vice President, Marketing - In March 1999,
the Company formalized a consulting agreement with a Director,
for marketing services rendered from April 1998. The terms of the
agreement call for compensation of $8,000 per month commencing
March 1999 and a ten year option for 400,000 shares issued in
March 1999 for services rendered as a consultant for the period
April 1998 to March 1999. At March 31, 1999, the Company has
recorded compensation of $88,000 for options issued in connection
with services rendered.
Upon completion of the Financing, (see subsequent events Note 7),
compensation of $8,000 per month will end and the consultant will
become an employee earning an annual salary of $110,000 per
annum, plus a discretionary bonus of at least
F-9
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
20% of the base salary per annum. The employment agreement can be
terminated by either party at any time with notice.
Note 4 - Commitments and Contingencies:
Leases - The Company rents office space on a month-to-month
basis. Rent expense for the Company's facilities approximated
$6,000, $7,100 and $17,600, for the years ended March 31, 1999
and 1998 and for the period October 3, 1996, (Date of Inception)
through March 31, 1999, ("the 1999 Cumulative Period"),
respectively.
Product Release Fee - In August 1997, the Company and the
Company's principal shareholder entered into an agreement with
another shareholder, whereby the principal shareholder agreed to
purchase 400,000 shares of the other shareholder's stock. As part
of that agreement, the Company agreed to pay the minority
shareholder $15,000 in cash or stock warrants as a product
release fee within 90 days of the Company's full-scale commercial
release of the Company's web page. The Company will bear this
liability at such time that the commercial release occurs.
Note 5 - Income Taxes:
Deferred income taxes reflect the net effects of temporary
differences between the amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The principal temporary difference arises from net
operating loss carryforwards and the differences resulting from
reporting on the cash basis of accounting for tax reporting
purposes. At March 31, 1999, federal and state net operating loss
carryforwards approximated $225,000. These carryforwards can be
used to offset current and future taxable income through the year
2019. A valuation allowance is provided when it is more likely
than not that some portion of the deferred tax asset will not be
realized. The Company has determined, based on the Company's
prior history of recurring losses, that a full valuation
allowance is appropriate at March 31, 1999.
F-10
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 6 - Stockholders' Equity:
Stock Split - In August 1998, the Company's Board of Directors
approved and the Company filed an amended certificate of
incorporation in California to increase the number of authorized
shares to 25,000,000 shares of common stock and 5,000,000 shares
of preferred stock and affect a two thousand-for-one common share
stock split. Common shares and per share amounts have been
retroactively restated for all periods presented to reflect the
stock split.
1999 Stock Option Agreement - On March 1, 1999 the Board of
Directors consented to the adoption of the 1999 Stock Option
Plan (the "Plan"). The Plan has reserved 2,000,000 shares of
common stock for the issuance of options ("Options") to
employees, officers and, under certain circumstances, directors
of and consultants to the Company ("Eligible Participants").
Options granted under the Plans may be either "incentive stock
options" ("ISOs") as defined in Section 422 of the Internal
Revenue Code of 1986, which are eligible to employees only as
amended (the "Code"), or "nonqualified stock options" ("NQSOs")
which are eligible for grant to any of the aforementioned
parties. The Plan does not provide for the issuance of stock
appreciation rights, restricted stock awards or deferred stock
awards. The Board of Directors has sole discretion and
authority, consistent with the provisions of the Plans, to
select the Eligible Participants to whom Options will be granted
under the Plans, the number of shares which will be covered by
each Option and the form and terms of the agreement to be used.
All employees and officers of the Company (except for members of
the Committee) are eligible to participate in the Plans.
Directors are eligible to participate only if they have been
declared to be "eligible directors" by resolution of the Board
of Directors.
The Board of Directors is empowered to determine the exercise
price of Options granted under the Plan in accordance with the
following:
<TABLE>
<CAPTION>
Type of Grant Exercise or Purchase Price
------------- --------------------------
<S> <C>
ISO's or NQSO's issued to 10% or
more shareholder of common stock At least 110% of the fair market value per
in the Company share on the date of grant.
ISO's issued to a less than 10% shareholder of
common stock in the Company At least the fair market value per share on the
date of grant.
NQSO's issued to a less than 10% shareholder of
common stock in the Company At least 85% of the fair market value on the
date of grant.
F-11
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Type of Grant Exercise or Purchase Price
Shares issued to 10% or more shareholder of At least thefair market value per share on the
common stock in the Company date of grant.
Shares issued to a less than 10%
Shareholder of common stock in the Company At least 85% of the fair market value on the
date of grant.
Other awards To be determined by the Board of Directors or
other administrator
</TABLE>
The Board of Directors has the authority to determine the time or
times at which Options granted under the Plans become
exercisable, but Options expire no later than ten years from the
date of grant (five years with respect to Optionees who own at
least 10% of the outstanding common stock of the Company).
Options are nontransferable, other than by will and the laws of
descent, and generally may be exercised only by an employee while
employed by the Company or within 90 days after termination of
employment (one year from termination resulting from death or
disability).
No incentive stock option may be granted to an Employee if, as
the result of such grant, the aggregate fair market value
(determined at the time each option was granted) of the shares
with respect to which incentive stock options are exercisable for
the first time by such Employee during any calendar year (under
all such plans of the Company and any parent and subsidiary)
exceeds $100,000. The Plan does not confer upon any Employee any
right with respect to the continuation of employment by the
Company, nor do the Plans interfere in any way with the
Employee's right or the Company's right to terminate the
Employee's employment at any time.
Information on option activity for the year ended March 31, 1999
is as follows:
Weighted Average
Shares Under Exercise Price
------------ --------------
Option
Balance - beginning of year - $ -
Options granted:
To officers/directors (a) 400,000 .20
Other grants (b) 577,000 .28
-------- ------
Total grants 977,000 .25
------- ------
Balance - end of year 977,000 $ .25
======= ======
a. Consists of option issued to VP of Marketing for 400,000
shares of the Company's stock at a weighted average fair
value of $.28 per option.
b. Weighted Average fair value per option was $.16.
F-12
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
The Company utilized the value of services provided by the
grantees as a benchmark for valuing the options granted during
the year.
Consulting Agreement - Financing Facilitator - In January 1999,
the Company entered into a one-year agreement with a consultant
to facilitate and evaluate potential financing opportunities for
the Company. The consultant's responsibilities included securing
$600,000 to $1,000,000 bridge financing for the Company and
securing at least an additional $3,000,000 in financing through a
private placement.
The consultant shall be entitled to a 2% cash commission based on
the value of the financing obtained, 20,000 shares of common
stock vesting over the first 90 days of the agreement, the lesser
of 60,000 shares or one share for each $10 of bridge financing
obtained for the Company and additional shares based on private
placement proceeds, other than bridge financing, ranging from
30,000 shares for $500,000 of private placement proceeds to
170,000 shares for proceeds in excess of $4,000,000.
The agreement can be terminated by either party at any time with
notice.
Note 7 - Subsequent Events:
Acquisition Agreement - On May 13, 1999, the Company and the
individual holders of all of the Company's outstanding common
stock consummated a reverse acquisition (the "Reorganization"),
with Techscience Industries, Inc., a Delaware Corporation,
("TSCI"). The Reorganization provided for an exchange of stock
whereby the holders of all of the Company's outstanding common
stock and common stock equivalents exchanged the stock in
exchange for 6,754,640 shares of TSCI's common stock, $.01 par
value per share and 570,360 TSCI options respectively. After the
exchange, the Company became the wholly owned subsidiary of TSCI.
As part of the Reorganization, TSCI changed its name to
PetPlanet.Com, Inc.
In addition, as part of this agreement, TSCI made a $150,000
bridge loan to the Company, with interest at 10% per annum,
collateralized by 51% of the Company's common stock. The loan was
repaid at the closing by payment of $100,000 in cash and $50,000
in common stock.
Web Site Development Agreement - In April 1999, the Company
entered into an agreement with a technology company, (the
"Development Company"), to design, develop and enhance the
computer software and information technology associated with the
Company's commercial web site. In accordance with the agreement,
the Company issued an option to the
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Development Company for the right to purchase 210,527 shares of
the Company's common stock. In addition, the Company has agreed
to make payments based on a series of milestones for the project,
which are expected to approximate $200,000.
Employment Agreements - In April 1999, the Company entered into a
series of employment agreements. All of the employment agreements
were contingent upon the completion of the aforementioned merger
or securing funding of $1,000,000 for the Company (the
"Financing"). The following serves to summarize those agreements:
o Vice President, On Line Development - Prior to the
Financing, the Company entered into a consulting agreement
for on line development for $95,000 per annum. Upon
completion of the Financing, the agreement converted to an
employment agreement with an annual salary of $95,000 per
annum, plus a discretionary bonus of at least 20% of the
base salary per annum. The employment agreement can be
terminated by either party at any time with notice.
o Vice President, Finance and Operations - Prior to the
Financing in March 1999, the Company entered into a
consulting agreement for finance, operations and strategic
planning services for $72,000 per annum. Upon completion of
the Financing, the agreement converted to an employment
agreement with an annual salary of $90,000 per annum, plus a
discretionary bonus of at least 20% of the base salary per
annum. The employment agreement can be terminated by either
party at any time with notice.
Employment Agreement - Chief Executive Officer - In April 1999,
the Company entered into a two year employment agreement with its
principal stockholder for an annual salary of $125,000 per annum
to serve in the capacity of Chief Executive Officer, ("CEO"), and
Chairman of The Board with bonuses of based on certain achieved
net revenues and average unique visits to the Company's Internet
site, subject to Board of Director approval.
In addition, the CEO is also entitled to a stock option for each
20% incremental increase per annum in the fair market value of
the Company's common stock. To the extent that the fair market
value of the Company's common stock increases by an increment of
at least 20% from the beginning to the end of the fiscal year,
the CEO will be entitled to a stock option for 50,000 shares.
This stock option bonus can not exceed options for 500,000 shares
per annum, (representing a 200% or more total increase or ten
individual 20% incremental increases in the fair market value of
the Company's common stock).
F-14
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
The agreement also calls for a written option to renew the term
of the agreement. In the event the Company declines to renew the
option, the Company shall be obligated to pay the CEO a severance
payment equal to one year's base salary in four quarterly
installments.
The Company granted an option to the CEO for 700,000 shares of
the Company's common stock, at an exercise price equal to the
fair market value on the close of the day immediately prior to
the commencement of employment, with 175,000 shares vesting on
the anniversary and the remainder vesting thereafter in quarterly
installments of 43,750 shares per quarter.
Note 8 - New Accounting Pronouncements - New Accounting Pronouncements -
In March 1998, the Accounting Standards Executive Committee
issued Statement of Position 98-1 ("SOP 98-1"), Accounting for
the Costs of Computer Software Developed or Obtained for Internal
Use. SOP 98-1 requires all costs related to the development of
internal use software other than those incurred during the
application development stage to be expensed as incurred. Costs
incurred during the application development stage are required to
be capitalized and amortized over the estimated useful life of
the software. SOP 98-1 is effective for fiscal years ending March
31, 2000.
In April 1998, the American Institute of Certified Public
Accountants issued SOP 98-5, Reporting on The Costs of Start-Up
Activities. SOP 98-5 is effective for the Company's fiscal year
ending March 31, 2000. SOP 98-5 requires costs of start-up
activities and organization costs to be expensed as incurred.
In addition to the aforementioned pronouncements, SFAS 133,
Accounting for Derivative Instruments and Hedging Activities was
issued in June 1998 for years ending after June 15, 1998.
The Company does not expect that any of the aforementioned
pronouncements will have a significant effect on its financial
statements.
F-15
<PAGE>
PETPLANET.COM, INC.
(Formerly Techscience Industries, Inc.)
(A Development Stage Company)
PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
(formerly Techscience Industries, Inc.)
PROFORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
PPI PPI
Delaware California Proforma
January 31, March 31, ---------------------------------------
ASSETS 1999 1999 Adjustments Reference Consolidated
---- ---- ----------- --------- ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS -
Cash $ 2,000 $ 105,000 $ 897,000 b,c,f $ 1,004,000
FURNITURE, FIXTURES AND EQUIPMENT,
LESS ACCUMULATED DEPRECIATION - 5,000 - 5,000
-- ------ -- -----
$ 2,000 $ 110,000 $ 897,000 $ 1,009,000
======== ========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of notes and interest
payable to affiliated company $ - $ 74,000 $ - $ 74,000
Current portion of bridge loan payable - 100,000 (100,000) b,e -
Accounts payable and accrued expenses 10,000 17,000 (4,000) b,e 23,000
------- ------- ------- ------
Total Current Liabilities 10,000 191,000 (104,000) 97,000
NONCURRENT LIABILITIES -
Notes and interest payable to affiliated company,
less current portion - 8,000 - 8,000
Bridge loan payable, less current portion - 50,000 (50,000) b,e -
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock - - - -
Common stock 16,000 5,000 75,000 a,b,c,d,e,f 91,000
Additional paid-in capital 1,261,000 443,000 (240,000) a,b,c,d,e,f,g 1,454,000
Deficit accumulated during development stage (1,285,000) (472,000) 1,255,000 a,c,f (502,000)
----------- --------- ---------- ---------
(8,000) (24,000) 1,085,000 1,053,000
Less: deferred consulting fees - (115,000) 30,000 (85,000)
Less: officer loan receivable - - (64,000) g (64,000)
-- -- -------- --------
Total Stockholders' Equity (Deficiency) (8,000) (139,000) 1,051,000 904,000
------- --------- ---------- -------
$ 2,000 $ 110,000 $ 897,000 $ 1,009,000
======== ========== ========== ===========
</TABLE>
See accompanying notes to proforma condensed consolidated financial statements.
2
PETPLANET.COM, INC.
(A Development Stage Company)
(formerly Techscience Industries, Inc.)
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
PPI PPI
Delaware California
Year Ended Year Ended Proforma
January 31, March 31, -----------------------------------------
1999 1999 Reference Adjustments Consolidated
---- ---- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Product development -- 11,000 -- 11,000
Consulting fees and officers' compensation -- 212,000 -- 212,000
Selling, general and administrative expenses 7,000 75,000 f 31,000 113,000
Interest expense -- 7,000 -- 7,000
----------- ----------- ----------- -----------
NET LOSS $ (7,000) $ (305,000) $ (31,000) $ (343,000)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,600,000 9,105,000
=========== =========== =========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE $ -- $ (0.04)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to proforma condensed consolidated financial statements.
<PAGE>
PETPLANET.COM, INC.
(Formerly Techscience Industries, Inc.)
(A Development Stage Company)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- Acquisition:
On May 13, 1999, PetPlanet.Com, Inc., (formerly Techscience
Industries Inc.), is a publicly held Delaware corporation, (the
"Company" or "PPI Delaware"), and PetPlanet.Com, Inc., a
California corporation (PPI" or "PPI California"), and the
individual holders of all of the outstanding capital stock of PPI
(the "Holders") consummated a reverse acquisition (the
"Reorganization") pursuant to a certain Agreement and a Plan of
Reorganization ("Agreement") dated May 12, 1999. Pursuant to the
Agreement, the Holders tendered to the Company all issued and
outstanding (10,570,000) shares of common stock of PPI in
exchange for 6,754,640 shares of common stock of the Company, and
therefore PPI became the wholly owed subsidiary of the Company.
The Company also issued options to purchase 570,360 shares of the
Company's common stock to holders of options to purchase PPI's
common stock. Therefore, a total of 7,325,000 shares of Common
Stock of the Company are issuable in respect of all common stock
and common stock equivalents of PPI.
The Reorganization, which has been accounted for as a reverse
acquisition, provides that the assets and liabilities of both
companies shall be combined at their adjusted historical cost
basis. In addition, the equity of PPI California shall be carried
at adjusted historical cost basis and the accumulated deficit of
PPI Delaware shall be offset with additional paid in capital. Par
values of PPI California, the surviving company, will be adjusted
to that of the Company. The financial information of PPI
California reflects the results of operations for the period
April 1, 1998 to March 31, 1999. The financial information of PPI
Delaware reflects the results of operations for the period
February 1, 1998 to January 31, 1999.
As a result of the Reorganization, the then outstanding shares of
PPI Delaware are considered outstanding commencing with the date
of Reorganization. The historical financial statements of PPI
Delaware subsequent to the Reorganization will no longer be
reported, as PPI California's financial statements are now
considered the financial statements of the ongoing reporting
entity.
Note 2 -- Presentation and Pro Forma Adjustments:
The unaudited pro forma condensed consolidated statements of
operations for the year ended March 31, 1999 presented has been
prepared as if the acquisition described in Note 1 had been
consummated as of April 1, 1998.
Pro forma adjustments have been made for the following:
a) To reflect the exchange of 6,754,640 shares of the company's
stock, and the issuance of options to purchase 570,360
shares of the Company's stock in exchange or 10,570,000
shares representing 100% of PPI California's common stock
and common stock equivalents.
<PAGE>
PETPLANET.COM, INC.
(Formerly Techscience Industries, Inc.)
(A Development Stage Company)
b) To reflect the payment of $100,000 bridge financing at the
closing of the merger.
c) To reflect net proceeds of $972,000 from the $1 million
private placement of 250,000 shares of the Company's common
stock completed May 13, 1999. In addition, to record
consulting fees of $30,000 associated with the completion of
the $1 million private placement.
d) To adjust common stock to the par value of PPI Delaware, the
surviving legal entity.
e) To record the conversion of $50,000 of outstanding bridge
loan payable into 100,000 shares of PPI California's common
stock on May 13, 1999.
f) To record the proceeds and conversion of approximately
$25,000 of convertible debt plus $1,000 of interest at 9.6%
per annum into 400,000 shares of the Company's common stock
completed May 13, 1999.
g) To record a $64,000 loan receivable resulting from the
exercise of options for 320,000 shares of PPI California
stock immediately prior to the merger at an exercise price
of $.20 per share.
Note 3 - PPI Delaware Statement of Operations:
Statements of operations for PPI Delaware were derived from the
annual financial statements included in PPI Delaware's Form
10-KSB for the year ended October 31, 1998, plus the most recent
interim period reported on Form 10-QSB (March 31, 1999), less
comparable periods of the prior year (March 31, 1998).
Note 4 - Earnings Per Share:
Net loss per share is calculated by treating all shares of common
stock issued after March 31, 1999 outstanding for all periods
reported.
<PAGE>
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 hereunto duly authorized.
PETPLANET.COM, INC.
(Registrant)
Date: August 4, 1999
By: /S/ Steven E. Marder
--------------------
Chairman and CEO
