<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 second quarter ended April 30, 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 (I.R.S. Employer
of 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 March 6, 2000 the Registrant had 9,396,177 shares of Common Stock, $.01
par value, outstanding.
<PAGE>
PETPLANET.COM, INC.
(A Development State Company)
PETPLANET.COM, INC.
Quarterly Report on Form 10-QSB
For the Quarter Ended April 30, 2000
INDEX
<TABLE>
Page
----
PART I
<S> <C> <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 State Company)
ITEM I
CONSOLIDATED BALANCE SHEETS
(In 000's)
<TABLE>
<S> <C> <C>
April 30, October 31,
2000 1999
---- ----
(Unaudited)
---------
CURRENT ASSETS -
Cash $ 127 $ -
Accounts Receivable 1 1
Inventory 11 3
Prepaid Expenses - -
-------- -------
Total Current Assets 139 4
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION OF $48,000 AT APRIL 30, 2000
AND $17,000 AT OCTOBER 31, 1999
158 179
Other Assets 48 17
-------- -------
TOTAL ASSETS $ 345 $ 200
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts Liabilities 2,133 $ 1,853
Loans/Notes Payable 3,481 1,032
Current portion of Capital Lease Liability 17 17
-------- -------
Total Current Liabilities $ 5,631 $ 2,902
NONCURRENT LIABILITIES -
Capital Lease Liability 26 31
-------- -------
TOTAL LIABILITIES $ 5,657 $ 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 - 9,464,000 at April 30, 2000,
9,104,000 at October 31, 1999. 95 91
Additional paid-in capital 7,550 3,628
Deficit Accumulated During Development Stage (12,832) (6,303)
Loans Receivable - Option Exercise (64) (64)
Deferred Consulting Fees - (85)
Deferred Interest (62) -
-------- -------
Total Stockholders' Equity (Deficiency) (5,312) (2,733)
-------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 345 $ 200
======== =======
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(In 000's)
<TABLE>
<CAPTION>
CommonStock
----------- 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)
====== ====== ====== ======
SIX MONTHS ENDED April 30, 2000 (Unaudited)
Issuance of common stock 250 3 498 -
Conversion of Warrants to common stock 110 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 - - 280 -
Net Loss for period - - - (6,529)
------ ------ ------ ------
BALANCE APRIL 30, 2000 9,464 $ 95 $ 7,550 $ (12,832)
====== ====== ====== ======
Employee Deferred Stockholders'
Note Equity
Fees (Deficiency)
--------- --------- -------------
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)
===== ===== =====
SIX MONTHS ENDED April 30, 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 - - 280
Net Loss for period - 85 (6,444)
----- ----- -----
BALANCE APRIL 30, 2000 $ (64) $ (62) $ (5,312)
===== ===== =====
</TABLE>
<PAGE>
PETPLANET.COM, INC.
(A Development State Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in 000's)
<TABLE>
<CAPTION>
October 3,
Three Months Three Months Six Months Six Months 1996 (Date of
Ended Ended Ended Ended Inception) to
April 30, April 30, April 30, April 30, April 30,
2000 1999 2000 1999 2000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $ 34 $ - $ 71 $ - $ 81
COST OF GOODS 42 - 87 - 99
------- ------ ------- ----- --------
GROSS LOSS (8) - (15) - (17)
COSTS AND EXPENSES:
Product Development 238 50 521 75 2,085
Sales and Marketing Expenses 895 6 1,828 60 3,064
General and Administrative expenses 865 18 1,707 220 3,335
Depreciation/Amortization 16 - 32 1 49
------- ------ ------- ----- --------
Operating Income (2,022) (74) (4,103) (356) (8,550)
Interest expense 1,163 -- 2,426 - 4,282
------- ------ ------- ----- --------
NET LOSS $(3,185) $ (74) $(6,529) $(356) $(12,832)
======= ====== ======= ===== ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 9,414 6,754 9,332 6,754 5,062
======= ====== ======= ===== ========
BASIC AND DILUTED LOSS PER COMMON SHARE $(.34) $(.01) $(.70) $(.05) $(2.53)
======= ====== ======= ===== ========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In 000's)
<TABLE>
<CAPTION>
October 3,
Six Months Six Months 1996 (Date of
Ended Ended Inception) to
April 30, April 30, April 30,
2000 1999 2000
(Unaudited) (Unaudited) (Unaudited)
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(6,529) $(354) $(12,832)
Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
Depreciation 32 1 49
Deferred Consulting Fees 85 - 115
Deferred Interest (62) - (62)
Stockholders services contributed - 100 224
Common stock issued for services 35 - 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 2,574 102 4,779
Changes in operating assets and liabilities:
Accounts Receivable - - 1
Inventory (8) - (11)
Deposits (31) - (48)
Accounts Payable/Accrued Liabilities 281 17 2,138
------- ----- --------
Net cash flows - operating activities (3,623) (134) (5,539)
CASH FLOW FROM INVESTING ACTIVITIES -
Purchase of property and equipment (11) (6) (155)
------- ----- --------
CASH FLOWS FROM FINANCING ACTIVITIES -
Proceeds from issuance of common stock 525 - 1,513
Proceeds of loans payable 1,890 150 2,895
Proceeds of loan allocated to purchase of warrants 1,351 1,351
Proceeds of notes from affiliated company - 15 71
Capital Lease Liability (5) - (9)
------- ----- --------
Net cash flows - financing activities 3,761 165 5,821
------- ----- --------
NET CHANGE IN CASH 127 25 127
CASH, BEGINNING OF PERIOD $ - 1 -
------- ----- ---------
CASH, END OF PERIOD $ 127 $ 26 $ 127
======= ===== =========
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 Tech Science Industries., 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 electronic
commerce associated with the sale of pet foods and related products,
advertising, sponsorships, membership fees and other sources.
NOTE 2 BASIS OF PRESENTATION
The consolidated financial statements as of April 30, 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 quarter ended April 30, 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
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. Aside from the trademark application issue
referred to in the "Subsequent Events", 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.
<PAGE>
NOTE 6 ACCOUNTING POLICY FOR OPTIONS
The Company uses the intrinsic value method of accounting 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 $90,000 and $180,000 or $.01 and $.02 respectively per share for
the three and six months ended April 30, 2000. For the six months ended April
30, 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.
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 May13, 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
<PAGE>
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 between the local
merchant/service provider and its local customer. The Company plans to provide
the infrastructure and tools necessary to empower thousands of 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 savings club geared specifically towards pet owners.
The Network is a joint initiative between PetPlanet.com and Protective Consumer
Direct. Among the many benefits to membership, consumers will receive valuable
savings on all purchases at PetPlanet.com.
RESULTS OF OPERATIONS
NET SALES
Net sales were $34,000 for the current quarter and $71,000 for the six
months ended April 30, 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
relatively flat as certain holiday promotion campaigns were discontinued in the
current quarter and were replaced with less aggressive offers. In addition,
delays in the launch of the Local Pet Business Network lessened the impact to
current quarter sales.
GROSS PROFIT
Gross Profit/(Loss) was ($8,000) for the current quarter and ($15,000) for
the six months ended April 30, 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 negative for the quarter
as a result of the Company's promotions offerings and cost of product shipment.
Factoring out these promotions, product gross margins were positive for the
quarter and for the six month period. The Company plans to continue offering
some promotional discounts for the foreseeable future. Although management
believes it will be able to further decrease the costs associated with
promotions in the future, no assurance can be given that the Company will not be
required to continue to offer appealing discounts or fund promotions in order to
remain competitive in the industry.
SALES AND MARKETING
Sales and Marketing expenses were $895,000 for the current quarter and
$1,828,000 for the six months ended April 30, 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. Sales and marketing expenses for
<PAGE>
the quarter included distribution payments to AOL, Mapquest, Gay.com and Go2Net
for preferred positioning on their sites, as well as other event sponsorships.
The Company is currently evaluating alternative strategies to acquire customers
in a more cost effective manner.
PRODUCT DEVELOPMENT
Product development expenses were $238,000 for the current quarter and
$521,000 for the six months ended April 30, 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.
Development costs will continue as the Company adds features to its flagship
brand and continues development of the Local Pet Business Network and PetVantage
club site.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $865,000 for the current quarter
and $1,707,000 for the sixth months ended April 30, 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 $1,163,000 for the current quarter and $2,426,000 for
the six months ended April 30, 2000. Interest charges relate primarily to loans
payable that the Company has entered into as part of financing activities.
Loans have increased significantly from prior periods as the Company has funded
its efforts to market the e-commerce launch of the site as well as other
operating activities.
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.
LIQUIDITY AND CAPITAL RESOURCES
As of April 30, 2000, the Company's principal source of liquidity consisted
of $127,000 of cash. Net cash used in operating activities was $3.6 million
for the six months ended April 30, 2000. Net operating cash flows were
primarily attributable to net losses for the quarter.
Net cash provided by financing activities was $3.8 million for the six
months ended April 30, 2000 resulting from the issuance of several convertible
notes as well as $525,000 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 through the next 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.
<PAGE>
RECENT EVENTS
In January of 2000, the Company entered into an exclusive one year
agreement with Online Partners (Gay.com), the leading gay and lesbian affinity
portal. The combination fee and revenue share relationship will establish
PetPlanet.com as Gay.com's exclusive e-commerce, advertising and programming
partner in the pet channel. Management believes that the relationship will
allow the Company to gain access to the largest number of gay and lesbian pet
parents online.
In April, the Company officially launched the Local Pet Business Network to
its charter customers. The Network allows local independent retailers to
supports their loyal local customer base with a dynamic e-commerce enabled web
presence. The Company is rolling out the program in the Midwest and expects to
expand to other areas of the country in the coming months.
Also in April, the financial public relations firm The Wall Street Group
was retained by the Company to assist in increasing awareness and visibility in
the investment community. The Wall Street Group is the oldest firm of its kind
specializing in developing investment community sponsorship for the shares of
growth companies.
In May, the investment banking firm Ryan, Beck and Co. was retained by the
Company to 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. Except as otherwise set forth herein, 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.
A Canadian attorney recently contacted the Company regarding a possible
Canadian trademark infringement against a Canadian product retailer. Management
does not anticipate this to be a problem as the Company has established rights
under U.S. trademark law and does not market or deliver products to Canada.
ITEM 2. CHANGES IN SECURITIES AND USE OR PROCEEDS
During March, 2000, the Company issued an aggregate principal amount of
$1,000,000 of its 12% Non-negotiable Convertible Notes (the "Note") due March
2001. In connection with the issuance of the Note, the
<PAGE>
Company issued warrants ("Warrants") corresponding with the Notes to acquire an
aggregate of 166,660 shares exercisable at $4.00 per share and terminating in
March 2003. In the event that $2.5 million of financing is not obtained within
sixty days after the issuance dates, then the Warrants will be for 200,000
shares at $2 per share. The issuance of all of the Note and 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of the Shareholders on May 5, 2000 (the
"Meeting"). The shareholders elected the following directors of the Company to
serve until the next annual meeting. The total number of votes cast "For" and
"Withheld" in respect of the following nominees are as set forth opposite their
respective names:
<TABLE>
<CAPTION>
Votes For Votes Abstaining
<S> <C> <C>
Steven E. Marder 7,584,891 3,910
Kim A. Marder 7,584,891 3,910
Raymond J. Skiptunis 7,565,861 22,940
</TABLE>
The shareholders ratified and approved the Company's 1999 Stock Option
Plan, the details of which were set forth in the Proxy Statement. The total
number of shares cast "For," cast "Against," and "Abstention" are set forth
below.
Votes For Votes Against Abstentions
6,459,289 203,314 2,624
Finally, the shareholders of the Company ratified and approved the
selection of Wiss & Company, LLP, as the Company's independent public accountant
for the fiscal year ending October 31, 2000. The total number of shares cast
"For," cast "Against," and "Abstention" are as follows.
Votes For Votes Against Abstentions
7,588,161 480 160
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 10QSB
27.1 Financial Data Schedule for quarter ended April 30, 2000.
SIGNATURES
<PAGE>
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: June 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
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Steven E. Marder Chairman, President and Chief Executive Officer June 14, 2000
------------------------ (Principal Executive Officer)
Steven E. Marder
/s/ Jeffrey P. Harris Senior Vice President of Finance and Operations June 14, 2000
------------------------ (Principal Financial Officer)
Jeffrey P. Harris
/s/ Kim Marder Executive Vice President June 14, 2000
------------------------
Kim Marder
/s/ Raymond J. Skiptunis Director June 14, 2000
------------------------
Raymond J. Skiptunis
</TABLE>
