SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended January 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _________
Commission File Number: 2-68701
Techscience Industries, Inc.
(Name of small business issuer in its charter)
Delaware 22-2298015
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Rockaway Place, Parsippany, New Jersey 07054
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number(973)-263-8951
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES [ ] NO [X]
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by the Court.
YES [ ] NO [X]
State the number of shares of each of the issuer's classes of common equity
outstanding at the latest practicable date: 1,600,000 shares of Common Stock as
of May , 1999.
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
<PAGE>
TECHSCIENCE INDUSTRIES, INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Unaudited Financial Statements: 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TECHSCIENCE INDUSTRIES INC.
(A Development Stage Company)
BALANCE SHEETS
January 31, October 31,
1999 1998
---- ----
(UNAUDITED)
ASSETS
3
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<TABLE>
<CAPTION>
TECHSCIENCE INDUSTRIES
STATEMENT OF CASHFLOWS
-----------------------------------
JANUARY 31, 1999 JANUARY 31, 1998
-----------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ -- $ (45)
Adjustments to reconcile net (loss) to net cash
provided by (used for) operating activities
Increase in accounts payable $ -- $ --
Cash Provided By (Used For) Operating Activities $ -- $ (45)
-----------------------------------
NET INCREASE IN CASH $ -- $ (45)
CASH, BEGINNING OF PERIOD $ 2,214 $ 2,304
-----------------------------------
CASH, END OF PERIOD $ 2,214 $ 2,259
===================================
</TABLE>
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<TABLE>
<CAPTION>
TECHSCIENCE INDUSTRIES
BALANCE SHEET
-------------------------------------
January 31, 1999 October 31, 1998
-------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,214 $ 2,214
-------------------------------------
Total Assets $ 2,214 $ 2,214
=====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 10,082 $ 10,082
-------------------------------------
Total Liabilities 10,082 10,082
-------------------------------------
STOCKHOLDERS' EQUITY
Capital stock 16,000 16,000
Capital in excess of par 1,261,310 1,261,310
(Accumulated deficit) (1,285,178) (1,285,178)
-------------------------------------
Total Stockholders' Equity (7,868) (7,868)
-------------------------------------
Total Liabilities and Stockholders' Equity $ 2,214 $ 2,214
=====================================
</TABLE>
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<TABLE>
<CAPTION>
TECHSCIENCE INDUSTRIES
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
-------------------------------------
January 31, 1999 January 31, 1998
-------------------------------------
<S> <C> <C>
REVENUE -- --
-------------------------------------
OPERATING EXPENSES:
BANK CHARGES -- 45.00
-------------------------------------
TOTAL OPERATING EXPENSES -- 45.00
NET (LOSS) -- (45.00)
=====================================
EARNINGS PER SHARE Nil Nil
=====================================
WEIGHTED AVERAGE SHARES OUTSTANDING 1,600,000 1,600,000
=====================================
</TABLE>
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<PAGE>
TECHSCIENCE INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
January 31, 1999
NOTE 1 - BASIS OF PRESENTATION:
The balance sheet at the end of the preceding fiscal year has been derived from
the audited balance sheet contained in the Registrant's Form 10-KSB for the year
ended October 31, 1998 (the "10-KSB")and is presented for comparative purposes.
All other financial statements are unaudited. In the opinion of management, all
adjustments which include only normal recurring adjustments necessary to present
fairly the financial position, results of operations and cash flows for all
periods presented have been made. The results of operations for interim periods
are not necessarily indicative of the operating results for the full year.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the 10-KSB for the
most recent fiscal year.
Loss per Share - Loss per share is based on the weighted average number of
shares outstanding during the periods. The effect of warrants outstanding and
shares issuable in connection with convertible debentures is not included since
it would be anti-dilutive.
NOTE 2 - PENDING REORGANIZATION:
As reported in the Registrant's Form 8-K Current Report dated May , 1999 and
filed simultaneously with this report, the Registrant entered into an Agreement
and Plan of Reorganization with PetPlanet.com, Inc., a privately owned
California corporation ("PPI") on May , 1999 (the "Reorganization Agreement").
The Reorganization Agreement contemplated a reverse merger business combination
wherein the Registrant will acquire all of the outstanding common stock and/or
options and warrants of PPI solely in exchange for an aggregate of 7,325,000
authorized but unissued shares of the Registrant's Common Stock, $.01 par value
per share (the
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"Reorganization Shares"), after which there will be 9,575,000 shares of the
Registrant's Common Stock issued and outstanding (the "Reorganization"), giving
PRO FORMA effect to the Reorganization and the four for 25 reverse split
enumerated in Note 3 below. The Reorganization Shares will be issued to PPI's
shareholders, option and warrant holders on a pro rata basis at which time PPI
will become a wholly owned subsidiary of the Registrant. Following the closing
of the Reorganization, it is expected that the name of the Registrant will be
changed to PPI and the Registrant will succeed to the Internet- based pet
oriented service business conducted by PPI.
NOTE 3- REVERSE SPLIT
On March 18, 1999, the Registrant filed a Certificate of Amendment to its
Certificate of Incorporation with the Secretary of State of the State of
Delaware implementing a four for twenty five reverse split all issued and
outstanding shares of its common stock, $.01 par value per (the "Reverse
Split"). The Reverse Split was adopted by the holders of a majority of the
Registrant's common stock after due notice to non-consenting stockholders
pursuant to applicable Delaware law. As a result of the Reverse Split all
10,000,000 issued and outstanding shares of common stock were reduced to
1,600,000 shares. The financial data reported herein has been adjusted to
reflect the Reverse Split.
NOTE 4 - MANAGEMENT'S ACTIONS TO OVERCOME OPERATING AND LIQUIDITY PROBLEMS:
The Registrant's financial statements have been presented on the going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Registrant's viability as a
going concern is dependent upon its ability to consummate the Reorganization and
PPI ability to achieve profitable operations through increased sales and raising
additional financing.
NOTE 5 -CONVERTIBLE NOTES AND CONVERSION OPTION
The Registrant has an option to convert an aggregate of $50,000 of principal due
from PPI pursuant to the March 4, 1999 10% Secured Convertible Promissory Note
payable to TSCI by PPI into an aggregate of 100,000 shares of the Registrant's
common stock, $.01 par value per share. In addition, the Registrant has issued
promissory notes convertible into an aggregate of 400,000 shares of the
Registrant's common stock, $.01 par value per share. It is expected that all
issued and outstanding derrivatives will be converted at the closing of the
Reorganization.
NOTE 6-SUBSEQUENT EVENTS
On February 5, 1999, and pursuant to the terms and conditions of five identical
Accredited Investor Subscription Agreements with non-affiliated investors, the
Registrant consummated a private placement under Rule 506 of Regulation D under
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the 33 Act (the "Seed Money Private Offering"). The Seed Money Offering, which
provided the necessary funding to implement the Reorganization, was comprised
$24,800 principal amount of 30 day convertible promissory notes bearing interest
at 9.6% per annum (the "Notes"). The Notes are convertible into an aggregate of
400,000 authorized but unissued shares of the Registrant's common stock, $.01
par value per share at $.062 per share which are ineligible for public sale for
a period of 30 months from the date of issuance.
Thereafter on February 25, 1999, and pursuant to a Certificate of Restoration
and Revival duly filed with the Delaware Secretary of State, the Registrant
reinstated its Certificate of Incorporation in Delaware.
On February 19, 1999, and pursuant to the terms and conditions of two identical
Accredited Investor Subscription Agreements with non-affiliated investors, the
Registrant consummated a private placement under Rule 506 of Regulation D under
the 33 Act (the "Bridge Private Offering"). The Bridge Private Offering, which
provided the funding for the Registrant's bridge loan with PPI, was comprised of
$150,000 principal amount of 10% promissory notes (the "Notes") and 100,000
unregistered shares of the Registrant's Common Stock, $.01 par value per share
(the "Bridge Shares"). The Notes are due and payable on and the Bridge Shares
are issuable at the closing date of the Reorganization with PPI (the "Closing").
On February 26, 1999, all of the Registrant's directors and the holders of
approximately 67% of the issued and outstanding shares of the Registrant's
common stock, $.01 par value per share, consented in writing to the adoption of
a number of actions designed to implement the Reorganization (the "Majority
Consent"). The Consent, which was adopted pursuant to the permissive provisions
of Section 228(a) and 228(c) of the General Corporation Law of the State of
Delaware (the "Delaware Sections"), was comprised of the authorization and/or
approval of the following actions: (i) the Reorganization; (ii) an amendment to
the Registrant's Certificate of Incorporation to effectuate: (a) an increase in
the number of authorized shares of common stock, $.01 par value per share to
20,000,000; (b) a four for twenty-five reverse split of all issued and
outstanding shares (the "Reverse Split"); (c) the creation of an authorized
class of 2,000,000 "blank check" shares of Preferred Stock, $.01 par value per
share; and (d) a change of the name of the Registrant to PetPlanet.com, Inc.;
(iii) a private placement under Rule 506 of Regulation D under the Securities
Act of 1933, as amended (the "Act") of an aggregate of 400,000 post Reverse
Split Shares at $.062 per Share, which Shares shall be restricted for 30
months (the "Seed Money Private Offering"); (iv) a minimum of 250,000 and a
maximum of 375,000 restricted and post Reverse Split shares of common stock at
$4.00 per share offered in units of $25,000; and (v) an amendment to the
Registrant's 1984 Incentive Stock Option Plan creating the 1999 Long Term
Incentive Plan wherein an aggregate of 2,000,000 Post Reverse Split Shares are
reserved for issuance of grants thereunder.
9
<PAGE>
On March 4, 1999, and pursuant to the terms and conditions of a written Bridge
Loan Agreement with PPI (the "Bridge Agreement"), the Registrant advanced the
sum of $150,000 to PPI in order to fund PPI's operations in anticipation of the
closing of the Reorganization (the "Bridge Loan"). The Bridge Loan was evidenced
by a 10% secured, convertible promissory note due at the closing of the
Reorganization (the "Bridge Note"). The Bridge Agreement provided that in the
event the Reorganization does not close on or before May 15, 1999, the term of
the Bridge Agreement shall be automatically extended to the earlier of the
closing date of the first equity or debt financing consummated by PPI or October
1, 1999. The Bridge Note was secured by a continuing first lien and security
interest in and to: (i) such number of authorized but unissued shares of PPI's
common stock, no par value per share, as shall, when added to the number of
issued and outstanding shares, shall equal fifty one (51%) percent of PPI's
total issued and outstanding common stock capitalization; (ii) the right and
title to PPI's PetPlanet.com domain name, website, website software and any and
all copyrights, trademarks, servicemarks owned by PPI or acquired by PPI after
the date of the Bridge Agreement; and (iii) any and all inventory, accounts
receivable or other tangible or intangible assets acquired by PPI after the date
of the Bridge Agreement.
On March 12, 1999, the Registrant, fulfilling its obligations under the Delaware
Sections, caused Notice of Consent to Action by Majority Shareholders
(comprising the Majority Consent) together with a President's letter to
Shareholders (the "Statutory Notice") to be mailed to the Registrant's
shareholders and all broker dealers holding shares for the benefit of the
Registrant's shareholders. The Statutory Notice was accompanied by a Notice of
the Reverse Split, a transmittal form, a substitute Form W-9 and instructions
for the transmittal form.
On March 18, 1999, the Registrant filed a Certificate of Amendment to its
Certificate of Incorporation to be filed with the secretary of State of the
State of Delaware implementing the Reverse Split.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PLAN OF OPERATION.
The Registrant's plan of action for the three months ended January 31, 1999,
during which period no revenues from operations were generated, was to complete
the process of bring itself current in its periodic reporting obligations under
the Securities Exchange Act of 1934(the "34 Act"), preparing for an annual
meeting of its stockholders as required by the New Jersey Business Corporation
Act, and preparing for the filing of a Form 10-SB Registration Statement with a
view towards registering its Common Stock under Section 12(g) of the 34 Act. In
furtherance of its principal plan of operations, the Registrant sought to
continue to pursue and close the Reorganization with PPI. It was expected that
the Registrant would be
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<PAGE>
able to implement its plan of operations without the raising of additional
capital. It was similarly expected that the aforesaid $25,000 would be
sufficient capital to satisfy the Registrant's capital requirements during the
period up to and including May 15, 1999 that management estimated it would take
to bring the Registrant current under the 34 Act and to close the
Reorganization. During the three months ended January 31, 1999, the Registrant
did not: (i) expend any funds on product research or development; (ii) purchase
or plan to purchase any plant or equipment; (iii) have any employees other than
its part time executive officers and directors.
YEAR 2000 ISSUE
The Registrant does not have any computer systems that need to be reviewed to
identify the systems that could be affected by the "Year 2000" issue. The Year
2000 problem is the result of computer programs being written using two digits
rather than four digits to define the year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major system failure or
miscalculations. The Registrant is unaware of whether or not PPI has conducted a
comprehensive review of its computer systems to identify the systems that could
be affected by the "Year 2000" issue. The Registrant is unaware whether the Year
2000 problem will pose significant operational problems for PPI after the
closing of the Reorganization. Accordingly, there can be no assurance that the
systems of other companies on which PPI's systems may rely, if any, also will
be timely converted or that any such failure to convert by another company would
not have an adverse effect on PPI's systems.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-B
Exhibit 27-Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended January 31,
1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 13, 1999 Techscience Industries, Inc.
By: /s/ JAMES T. WOLL
----------------------------------
James T. Woll, President
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's audited financial statements for the year ended January 31, 1999 (as
filed with the Company's annual report on Form 10-KSB for such year) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000318523
<NAME> Techscience Industries, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> OCT-31-1998
<PERIOD-END> JAN-01-1999
<EXCHANGE-RATE> 1
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2
<CURRENT-LIABILITIES> 10
<BONDS> 0
0
0
<COMMON> 16
<OTHER-SE> (24)
<TOTAL-LIABILITY-AND-EQUITY> 2
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
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<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Gives effect a 4-for-25 reverse stock split effective at the close of
business on March 18, 1999. Prior financial data schedules have not been
restated to reflect such reverse stock split.
</FN>
</TABLE>
