<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the third quarter ended July 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file No. 000-10576
PETPLANET.COM, INC.
--------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2298015
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21 Stillman Street, Suite 600, San Francisco, California 94107
-------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 243-9000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01 per share.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 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 September 6, 2000 the Registrant had 9,496,177 shares of Common
Stock, $.01 par value, outstanding.
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
PETPLANET.COM, INC.
Quarterly Report on Form 10-QSB
For the Quarter Ended July 31, 2000
INDEX
<TABLE>
<CAPTION>
Page
----
PART I
<S> <C>
Item 1. Consolidated Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8
PART II
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 10-QSB 11
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
ITEM I
CONSOLIDATED BALANCE SHEETS
(In 000's)
<TABLE>
<CAPTION>
July 31, October 31,
2000 1999
---- ----
(Unaudited)
-----------
<S> <C> <C>
CURRENT ASSETS -
Cash $ - $ -
Accounts Receivable 2 1
Inventory 11 3
Prepaid Expenses - -
-------- -------
Total Current Assets 13 4
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION OF
$64,000 AT JULY 31, 2000 AND $17,000 AT OCTOBER 31, 1999 146 179
Other Assets 53 17
-------- -------
TOTAL ASSETS $ 212 $ 200
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts Payable $ 3,066 $ 1,853
Deferred Revenue 2 -
Loans/Notes Payable 4,049 1,032
Current portion of Capital Lease Liability 17 17
-------- -------
Total Current Liabilities $ 7,134 $ 2,902
NONCURRENT LIABILITIES -
Capital Lease Liability 19 31
-------- -------
TOTAL LIABILITIES $ 7,153 $ 2,933
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, no par value:
Authorized -2,000,000, none issued
Issued and outstanding - -0- shares
Common stock, $.01 par value:
Authorized - 20,000,000 shares
Issued and outstanding - 9,104,000 at October 31, 1999,
9,496,000 at July 31, 2000 95 91
Additional paid-in capital 7,691 3,628
Deficit Accumulated During Development Stage (14,601) (6,303)
Loans Receivable - Option Exercise (64) (64)
Deferred Consulting Fees - (85)
Deferred Interest (62) -
-------- -------
Total Stockholders' Equity (Deficiency) (6,941) (2,733)
-------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 212 $ 200
======== =======
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
PETPLANET.COM, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in 000's)
<TABLE>
<CAPTION>
October 3,
Three Months Three Months Nine Months Nine Months 1996 (Date of
Ended Ended Ended Ended Inception) to
July 31, July 31, July 31, July 31, July 31,
2000 1999 2000 1999 2000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $ 23 $ - $ 94 $ - $ 104
COST OF GOODS 19 - 106 - 118
------- ------ ------- ------ --------
GROSS LOSS 4 - (12) - (14)
COSTS AND EXPENSES:
Product Development 151 126 672 181 2,236
Sales and Marketing 397 25 2,225 85 3,461
General and Administrative 754 559 2,461 666 4,089
Depreciation/Amortization 16 4 48 5 65
------- ------ ------- ------ --------
Operating Income (1,313) (714) (5,418) (937) (9,865)
Interest expense 454 2 2,880 4 4,736
------- ------ ------- ------ --------
NET LOSS $(1,768) $ (716) $(8,298) $ (941) $(14,601)
======= ====== ======= ====== ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 9,496 8,713 9,386 7,407 5,339
======= ====== ======= ====== ========
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.19) $ (.08) $ (.88) $ (.13) $ (2.73)
======= ====== ======= ====== ========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(In 000's)
<TABLE>
<CAPTION>
Common Stock Additional Deficit Accumulated
--------------------
$.01 Par Paid-in During Development
Shares Value Capital Stage
---------- -------- ---------- -------------------
<S> <C> <C> <C> <C>
OCTOBER 3, 1996 (DATE OF INCEPTION) TO MARCH 31, 1997
Common stock issued in October 1996 1,278 $ 13 $ - $ -
Stockholder services contributed - - 12 -
Net loss - - - (24)
---------- -------- -------- ---------
BALANCE, MARCH 31, 1997 1,278 13 12 (24)
YEAR ENDED MARCH 31, 1998 -
Stockholder services contributed - - 100 -
Net loss - - - (146)
---------- -------- -------- ---------
BALANCE, MARCH 31, 1998 1,278 13 112 (170)
YEAR ENDED OCTOBER 31, 1999 -
Effect of merger along with underlying equity financing in May 1999 2,250 22 961 -
Conversion of bridge financing into equity in May 1999 100 1 49 -
Exercise of options by employee in May 1999 at $.29 per share 204 2 62 -
Common stock issued in period 5,112 51 (47) -
Stockholder services contributed - - 100 -
Common stock issued for services 160 2 115 -
Options issued for services - - 102 -
Discount on issuance of convertible debt - - 71 -
Interest - - 1,763
Consulting Services - - 287 -
Vendors - - 53
Net loss - - - (6,133)
---------- -------- -------- ---------
BALANCE, OCTOBER 31, 1999 9,104 $ 91 $ 3,628 $ (6,303)
========== ======== ======== =========
NINE MONTHS ENDED July 31, 2000 (Unaudited)
Issuance of common stock 250 3 498 -
Conversion of Warrants to common stock 142 1 34 -
Allocation of notes payable proceeds to purchase of warrants - - 1,351 -
Issuance of Company options, warrants and beneficial conversion feature
of notes payable for:
Interest - - 1,759 -
Vendors - - 420 -
Net Loss for period - - - (8,298)
---------- -------- -------- ---------
BALANCE JULY 31, 2000 9,496 $ 95 $ 7,691 $ (14,601)
========== ======== ======== =========
<CAPTION>
Employee Deferred Stockholders'
Note Equity
Fees (Deficiency)
-------- -------- -------------
<S> <C> <C> <C>
OCTOBER 3, 1996 (DATE OF INCEPTION) TO MARCH 31, 1997
Common stock issued in October 1996 $ - $ - $ 13
Stockholder services contributed - - 12
Net loss - - (24)
-------- -------- -------------
BALANCE, MARCH 31, 1997 - - 1
YEAR ENDED MARCH 31, 1998 -
Stockholder services contributed - - 100
Net loss - - (146)
-------- -------- -------------
BALANCE, MARCH 31, 1998 - - (45)
YEAR ENDED OCTOBER 31, 1999 -
Effect of merger along with underlying equity financing in May 1999 - - 983
Conversion of bridge financing into equity in May 1999 - - 50
Exercise of options by employee in May 1999 at $.29 per share (64) - -
Common stock issued in period - - 4
Stockholder services contributed - - 100
Common stock issued for services - (115) 2
Options issued for services - - 102
Discount on issuance of convertible debt - - 73
Interest 1,763
Consulting Services - - 287
Vendors 53
Net loss - 30 (6,103)
-------- -------- -------------
BALANCE, OCTOBER 31, 1999 $ (64) $ (85) $ (2,733)
======== ======== =============
NINE MONTHS ENDED July 31, 2000 (Unaudited)
Issuance of common stock - - 501
Conversion of Warrants to common stock - - 35
Allocation of notes payable proceeds to purchase of warrants - - 1,351
Issuance of Company options, warrants and beneficial conversion feature
of notes payable for:
Interest - (62) 1,697
Vendors - - 420
Net Loss for period - 85 (8,213)
-------- -------- -------------
BALANCE JULY 31, 2000 $ (64) $ (62) $ (6,941)
======== ======== =============
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In 000's)
<TABLE>
<CAPTION>
October 3,
Nine Months Nine Months 1996 (Date of
Ended Ended Inception) to
July 31, July 31, July 31,
2000 1999 2000
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (8,298) $ (941) $ (14,601)
Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
Depreciation 48 5 65
Deferred Consulting Fees 85 - 115
Deferred Interest (62) - (62)
Stockholders services contributed - 42 224
Common stock issued for services 35 2 37
Discount on issuance of convertible debt - - 71
Options and warrants issued and amortization
of loan discount and beneficial conversion
feature on notes payable for interest and services 3,022 71 5,229
Changes in operating assets and liabilities:
Accounts Receivable (1) - (2)
Inventory (8) - (11)
Deposits (36) - (53)
Accounts Payable/Accrued Liabilities 1,213 106 3,070
Unearned Revenues 2 - 2
----------- ----------- -----------
Net cash flows - operating activities (4,000) (715) (5,916)
CASH FLOW FROM INVESTING ACTIVITIES -
Purchase of property and equipment (15) (46) (159)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES -
Proceeds from issuance of common stock 536 872 1,524
Proceeds of loans payable 2,140 - 3,145
Proceeds of loan allocated to purchase of warrants 1,351 - 1,351
Proceeds of notes from affiliated company - 13 71
Capital Lease Liability (12) - (16)
----------- ----------- -----------
Net cash flows - financing activities 4,000 885 6,075
----------- ----------- -----------
NET CHANGE IN CASH - 124 -
CASH, BEGINNING OF PERIOD - 2 -
----------- ----------- -----------
CASH, END OF PERIOD $ - $ 126 $ -
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 6 $ - $ 6
=========== =========== ===========
Income taxes paid $ - $ - $ -
=========== =========== ===========
Stock issued for deferred consulting fees $ - $ - $ 115
=========== =========== ===========
</TABLE>
<PAGE>
NOTE 1 BUSINESS DESCRIPTION
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). On May 15, 1999, the
Company consummated a reverse acquisition with Techscience Industries Inc., a
Delaware corporation ("TSCI"). After the acquisition, the Company became the
wholly-owned subsidiary of TSCI. As part of this transaction, TSCI changed its
name to PetPlanet.com, Inc.
The Company's primary business services the pet industry in several
areas. The Company supports the Business to Consumer market through the
operation of its flagship PetPlanet.com website and is supplemented by the
PetVantage Network, a savings club geared towards the pet enthusiast. The
Business to Business model channel is currently serviced through the Company's
Local Pet Business Network (LPBN) where independent merchants are Internet
enabled to better service their loyal customer base with the support of local
distribution. Revenues are expected to be derived primarily from club
membership fees and electronic commerce associated with the sale of pet related
products, advertising, sponsorships and other sources.
NOTE 2 BASIS OF PRESENTATION
The consolidated financial statements as of July 31, 2000 and 1999
have been prepared by PetPlanet.com, Inc. ("the Company") pursuant to the rules
and regulations of the Securities and Exchange commission (the "SEC"). These
statements are unaudited and, in the opinion of management, include all
adjustments (consisting of normal recurring adjustments and accruals) necessary
to present fairly the results for the periods presented. The Balance Sheet at
October 31, 1999 has been derived from the audited financial statements at that
date. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such SEC rules and regulations.
Operating results for the nine months and quarter ended July 31, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ended October 31, 2000. The consolidated financial statements should be read in
conjunction with the audited financial statements and the accompanying notes
included in the Company's 10-KSB for the period ended October 31, 1999.
NOTE 3 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 in substantial doubt and is
dependent upon its ability to obtain additional financing and eventually achieve
profitable operations.
NOTE 4 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
<PAGE>
disclosures of contingent 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 estimates.
NOTE 5 COMMITMENTS AND CONTINGENCIES
From time to time, the Company is subject to legal proceedings and claims
in the ordinary course of business, including employment related claims and
claims of alleged infringement of trademarks, copyrights and other intellectual
property rights. The Company currently is unaware of any such legal proceedings
or claims that it believes will have, individually or in the aggregate, a
material adverse effect on its business, prospects, financial condition and
operating results.
NOTE 6 ACCOUNTING POLICY FOR OPTIONS
The Company uses the intrinsic value method of accounting (APB 25) to
measure compensation expense for options issued to employees. If the fair value
method had been used to measure compensation expense, net loss would have
increased by approximately $91,000 and $272,000 or $.01 and $.03 respectively
per share for the three and nine months ended July 31, 2000. For the nine months
ended July 31, 2000, the fair value of options granted were estimated at the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions, respectively: risk free interest rate of 6%,
dividend yield of 0.0%, volatility factors of the expected market price of the
Company's common stock of 67% and a weighted average life of the options ranging
up to four years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of trade options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require that
the stock is not traded publicly, the employee stock options have
characteristics significantly different from those of normal publicly traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
NOTE 6 NET LOSS PER SHARE
Basic loss 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.
NOTE 7 SUBSEQUENT EVENTS
See Item 2 of part II below for settlement of a trademark infringement
case.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report on Form 10-QSB contains certain "forward-looking
statements." These statements are generally accompanied by words such as
"intend," "anticipate," "believe," "estimate," "expect" or similar terms
referenced in the Private Securities Litigation Reform Act of 1995. They are
typically used where certain factors may cause actual results to be materially
different from the future outcome expressed or implied by such statements.
Although the Company believes that the assumptions underlying its forward-
looking statements are reasonable, any of these assumptions could, of course,
prove to be inaccurate. Therefore, the Company cannot assure you that it will
realize the results contemplated in any of these statements. You should not
regard such forward-looking information as a representation by the Company that
future expectations will be achieved. It is important to note that past
performance is not necessarily predictive of future performance. Although
forward-looking statements may appear throughout this report, your attention is
directed specifically to this Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The Company launched its e-commerce component, and effectively commenced
its business, in September, 1999. The Company had no other source of revenue
prior to that time. Accordingly, period-to-period comparisons in this Item are
not meaningful or appropriate.
OVERVIEW
PetPlanet.com, Inc., a Delaware corporation (the "Company") is a
development stage company, located in San Francisco, California. On May 13,
1999, the Company (then known as Techscience Industries Inc.) ("TSCI") and
PetPlanet.com, Inc. ("PPI"), a California corporation incorporated in October
1996 (Date of Inception) 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 Plan of Reorganization
("Reorganization Agreement"). Pursuant to the Reorganization Agreement, the
Holders tendered to the Company all issued and outstanding shares of common
stock of PPI in exchange for 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 shares of the Company's common stock to holders of
options to purchase PPI common stock. The Reorganization was accounted for as a
reverse acquisition. As part of the Reorganization, TSCI changed its name to
PetPlanet.com, Inc. on May 20, 1999 The description herein of the operations of
the Company include, to the extent applicable, the operations of its wholly
owned subsidiary, PPI.
Simultaneous with the closing of the Reorganization, all of the then
officers and directors of the Company tendered their respective resignations in
accordance with the terms of the Reorganization Agreement. Shareholders elected
Steven E. Marder and Kim Marder to serve on the Board of Directors of the
Company (the "Board"). The Board subsequently appointed Steven E. Marder as the
President and Chief Executive Officer of the Company. Raymond J Skiptunis was
subsequently added to the Board in May 2000.
The Company plans to differentiate itself from its well-funded "Business
to Consumer" competition with a unique "Business to Business to Consumer" model.
With the launch of Local Pet Business Network (LPBN), the Company intends to
capitalize on the most valuable e-commerce relationship
<PAGE>
between the local merchant/service provider and its local customer. The Company
plans to provide the infrastructure and tools necessary to empower pet-related
businesses to service their loyal local customer base as well as grow their
existing customer base.
In addition, the Company recently announced the launch of the PetVantage
Network. PetVantage is a discount club geared specifically towards pet owners.
The Network is a joint initiative between PetPlanet.com and Protective Consumer
Direct, a wholly owned division of Protective Life. Among the many benefits to
membership, consumers will receive valuable savings on all purchases at
PetPlanet.com. The Club is key to the Company's ongoing strategy of low cost
customer acquisition.
During the quarter, the Company undertook aggressive cost cutting measures
after evaluating the results of certain marketing relationships as well as the
difficulty of securing additional capital in a violatile marketplace. These
cost saving measures included:
- The discontinuation of certain costly online marketing distribution
agreements (AOL/Mapquest) and aggressive online product discounting
- A reduction in new product development initiatives
- Reduced general and administration costs through employee attrition and
other overhead cost savings
The impact of these cost reductions has included lower product revenues
but more favorable product margins and a significantly reduced overall cash burn
rate.
Management continues to actively lower the cash burn rate and will use
additional funds to execute on the Company's new cost-effective customer
acquisition and conversion strategies.
RESULTS OF OPERATIONS
NET SALES
Net sales were $23,000 for the current quarter and $94,000 for the nine
months ended July 31, 2000. Net sales consist primarily of product sales to
customers and charges to customers for outbound shipping and handling and are
net of product returns and promotional discounts. Sales for the quarter were
down from the prior quarter as the Company terminated many of its online
marketing relationships which had served to drive consumer traffic to the site.
In addition, online shipping promotions were discontinued and replaced with less
aggressive offers.
GROSS PROFIT
Gross Profit/(Loss) was $4,000 for the current quarter and ($11,000) for
the nine months ended July 31, 2000. Gross Profit is calculated as net sales
less the cost of sales, consisting of product costs sold to customers as well as
outbound shipping and handling costs. Gross profit was a positive 17% for the
quarter as a result of the Company's reduction in online product promotions.
However, promotions run earlier in the year have driven margins negative year-
to-date. The Company plans to continue offering some promotional discounts for
the foreseeable future as necessary to remain competitive in the industry but
will place a high emphasis on maintaining favorable product margins.
<PAGE>
SALES AND MARKETING
Sales and Marketing expenses were $397,000 for the current quarter and
$2,225,000 for the nine months ended July 31, 2000. These expenses consist
primarily of advertising and promotional expenditures, public relations and
online distribution agreements. The Company significantly increased it
advertising expenditures in fiscal 2000 to correspond with the launch of the e-
commerce portion of the site. However, in the current quarter, the Company
terminated several distribution agreements to help significantly reduce cash
flow including agreements with AOL, Mapquest and Go2Net. In the future, the
Company plans to execute a more cost effective means of customer acquisition
utilizing the PetVantage Network and its alliance with Protective Life.
PRODUCT DEVELOPMENT
Product development expenses were $151,000 for the current quarter and
$672,000 for the nine months ended July 31, 2000. Product development costs
consist primarily of payments to our third party technology partner and related
expenses for the continued development and maintenance of our website. Product
development related expenses have slowed during the current as part of the
Company's overall cost containment policy. However, additional development costs
will be required for the Company to support the existing flagship brand and
continue development of the PetVantage club site.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $754,000 for the current quarter
and $2,461,000 for the nine months ended July 31, 2000. These costs consist
primarily of payroll and related expenses for executive and administrative
personnel, facilities expenses, professional service expenses, travel and other
back-office expenses.
INTEREST EXPENSE
Interest expense was $454,000 for the current quarter and $2,880,000 for
the nine months ended July 31, 2000. Interest charges relate primarily to loans
payable that the Company has entered into as part of financing activities. A
significant portion of these interest charges relate to stock based compensation
calculations (non-cash based).
INCOME TAXES
The Company has not generated any taxable income to date and therefore has
not paid any federal income taxes since inception. Utilization of the Company's
existing net operating loss carryforwards, which will begin to expire in 2012,
may be subject to certain limitations under section 382 of the Internal Revenue
Code of 1986, as amended. The Company has taken a valuation allowance on the
full amount of the net operating loss carryforwards since it is likely the
benefit will not be realized in the future.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $4,000,000 for the nine months
ended July 31, 2000. Net operating cash flows were primarily attributable to net
losses for the year-to-date.
Net cash provided by financing activities was $4,015,000 million for the
nine months ended July 31, 2000 resulting from the issuance of several
convertible notes as well as $536,000 of common stock investment. The notes
carry conversion prices ranging from $2 to $5 per share of the Company's common
stock.
The Company believes that current cash and cash equivalents will be
sufficient to meet its anticipated cash needs for an additional month and has
substantial doubt about its ability to continue operations beyond such period
without obtaining additional financing and/or consummating a strategic alliance
with a well-funded business partner. Although the Company is continually
pursuing additional funding, no assurances can be given that the Company will be
able to obtain additional debt or equity financing or that it will be successful
in finding a merger partner or joint venturer. Failure to obtain additional
sources of financing will adversely affect the Company's ability to continue
operations. No assurance can be given that, if the Company can obtain additional
financing or a strategic alliance, that such financing or alliance will be on
terms acceptable to the Company and will not result in substantial dilution to
existing shareholders of the Company.
RECENT EVENTS
In May, 2000, the investment banking firm Ryan, Beck and Co. was retained
by the Company to act as financial advisor and assist in pursuing and evaluating
strategic opportunities. Ryan, Beck and Co. is primarily expected to assist in
the areas of general financial advisement, mergers and acquisitions, and
additional fund raising activities.
In June, the Company officially launched the PetVantage Network. The
Network is a joint strategic initiative between the Company and Protective
Consumer Direct, wholly owned division of Protective Life (NYSE:PL). PetVantage
is a pet club subscription program that will offer a variety of online and
offline savings and benefits including pet supplies through PetPlanet.com,
discounts off of vet visits, pet insurance and savings on various travel related
expenses.
PART II
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings and claims
in the ordinary course of business, including employment related claims and
claims of alleged infringement of trademarks, copyrights and other intellectual
property rights. The Company is currently unaware of any such legal proceedings
or claims that it believes will have, individually or in the aggregate, a
material adverse effect on its business, prospects, financial condition and
operating results.
<PAGE>
ITEM 2. CHANGES IN SECURITIES AND USE OR PROCEEDS
During May 2000, the Company issued a Warrant (the "Warrant") to acquire
an aggregate of 100,000 shares of the Company's common stock at $3.50 per share
to an investment firm as partial compensation for services. The security expires
in May 2005. The issuance of the Warrant was exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to Section 4(2) thereof and/or Rule 506 of Regulation D of the
Securities Act.
Also during May 2000, a previously-issued Warrant to acquire an aggregate
of 166,666 shares at an exercise price of $4.00 per share was reissued at an
aggregate of 200,000 shares at an exercise price of $2.00 per share. This
adjustment was made as result of the failure of a condition subsequent in the
previously-issued Warrant. Likewise, the issuance of the Warrant was exempt from
the registration requirements of the Securities Act pursuant to Section 4(2)
thereof and/or Rule 506 of Regulation D of the Securities Act.
In September 2000, an option holder exercised the right to acquire 134,535
shares of common stock at a purchase price of $0.39 per share. This holder held
the option under the 1999 PetPlanet.com, Inc. Stock Option Plan (the "Plan"),
pursuant to the terms thereof, and the accompanying form Stock Option Agreement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 10QSB
27.1 Financial Data Schedule for quarter ended July 31, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PETPLANET.COM, INC.
Date: September 14, 2000 By: /s/ Steven E. Marder
-----------------------------------------
Steven E. Marder, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
is signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
MUST BE SIGNED BY EACH MEMBER OF THE BOARD AND ITS PRINCIPAL EXEC OFFICER, ITS
CONTROLLER OR PRINCIPAL ACCOUNTING OFFICER IF ANY AND ITS PRINCIPAL FINANCIAL
OFFICER
Signatures Title
----------------------------------------------------------------------
/s/ Steven E. Marder
----------------------------
Steven E. Marder Chairman, President
and Chief Executive Officer
Dated: September 14, 2000
/s/ Kim Marder
----------------------------
Kim Marder Executive Vice President
of Marketing
Dated: September 14, 2000
/s/ Jeffrey P. Harris
----------------------------
Jeffrey P. Harris Executive Vice President
of Operations and Finance
Dated: September 14, 2000
/s/ Raymond Skiptunis
----------------------------
Raymond J. Skiptunis Director
Dated: September 14, 2000
