U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
__________to__________
Commission File Number 000-22151
PETHEALTH SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 93-0969365
(State or other jurisdiction of (IRS Employer
Identification No.)
incorporation or organization)
444 Madison Avenue, Suite 1710, New York, NY 10022
(Address of principal executive offices)
(212) 750-7878
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), Yes No x ; and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
1,113,030 shares of Common Stock, no par value, outstanding on
August 1, 1997. .
PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
Form 10-QSB Quarterly Report
Table of Contents
Page
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements 3
Unaudited Consolidated Balance Sheets at June 30, 1997 and
December 31, 1996 4
Unaudited Consolidated Statements of Operations For Three and
Six Months Ended June 30, 1997 and June 30, 1996 and
From Inception (December 8, 1981) through June 30, 1997 5
Unaudited Consolidated Statements of Cash Flows For Six
Months Ended June 30, 1997 and 1996 and From Inception
(December 8, 1981) to June 30, 1997 6
Statement of Consolidated Stockholders' Equity (Deficit) 7
Notes to Consolidated Financial Statements 8 - 10
Item 2. Management's Discussion and Analysis of 11
Financial Condition and Results of Operations
PART II -- OTHER INFORMATION 12
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
SIGNATURES 12
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements:
BASIS OF PRESENTATION
The accompanying unaudited financial statements are presented in
accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-QSB
and item 310 under subpart A of Regulation S-B. In the opinion of
management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the six
months ended June 30, 1997 are not necessarily indicative of
results that may be expected for the year ending December 31, 1997.
For further information, refer to the consolidated financial
statements and footnotes thereto, included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1996, and
Form 8-K filed on July 14, 1997. <PAGE>
PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31,
1997 1996
ASSETS
CURRENT ASSETS:
Cash in checking $ 2,933 $ 0
FIXED ASSETS:
Equipment net of
depreciation of $209 $ 2,929 $ 0
OTHER ASSETS:
Organizational Costs $ 463 $ 0
Investment in Subsidiary $ (513) $ 0
Total Other Assets (50) 0
TOTAL ASSETS: $ 5,812 $ 0
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 6,782 $ 4,307
Accrued Expenses 60,000 0
TOTAL CURRENT LIABILITIES 66,782 4,307
STOCKHOLDERS' (DEFICIT):
Preferred Stock, $.10 par value,
100,000,000 shares authorized,
none issued - -
Common Stock, Class A no par value,
800,000,000 shares authorized,
3,285,030 and 285,030 shares
issued and outstanding 216,954 216,954
Common Stock Issuable 76,000 0
Deficit accumulated during
development stage (353,924) (221,261)
TOTAL STOCKHOLDERS' (DEFICIT) (60,970) (4,307)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 5,812 $ 0
The accompanying notes are an integral part of the financial statements. <PAGE>
PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended For the Period
June 30, June 30, December 8,1981
(Inception) to
1997 1996 1997 1996 June 30, 1997
Revenues $ - $ - $ - $ - $ -
OPERATING EXPENSES:
Legal and accounting 22,199 2,751 41,053 2,975 96,066
Management services
(Note 2) 30,000 - 60,000 - 60,000
Amortization 25 - 50 - 50
Consulting Fees 8,000 - 20,500 - 20,500
Depreciation Expense 157 - 209 209
Filing and transfer fees 421 1,448 4,749 1,448 13,259
Public relations 0 - - - 14,414
Office and Printing
Expense 3,971 - 4,908 - 4,908
Taxes, Franchise 62 - 660 - 660
Travel Expenses 534 - 534 - 534
Other Expenses - - - - 34,899
TOTAL OPERATING
EXPENSES 65,369 4,199 132,663 4,423 245,499
NET (LOSS) BEFORE
OTHER INCOME (EXPENSES)(65,369) (4,199) (132,663) (4,423) (245,499)
OTHER INCOME AND (EXPENSES):
Writeoff of advances
recision of merger - - - - (119,110)
Forgiveness of debt - 7,455 - 7,426 7,455
Interest income - - - 3,230
TOTAL OTHER INCOME
(EXPENSES) - 7,455 - 7,426 (108,425)
NET INCOME (LOSS) $ (65,369) $ 3,256 $(132,663) $3,003 $(353,924)
NET (LOSS) PER
COMMON SHARE $ * $ * $ * $ * $
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING 3,285,030 283,215 3,285,030 283,215 N/A
* less than $.01 net loss per share
The accompanying notes are an integral part of the financial statements.<PAGE>
PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended For the Period
June 30, December 8,1981
(Unaudited) (Inception) to
1997 1996 March 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (132,663) $ 3,003 $ (353,924)
Adjustments to reconcile
net (loss) to net cash used
by operating activities:
Amortization 50 - 50
Depreciation 209 - 209
Stock issued for
Services/expenses - - 26,425
Changes in operating assets
and liabilities:
Increase (decrease) in
Current liabilities 62,475 (6,734) 66,782
NET CASH (USED) BY
OPERATING ACTIVITIES (69,929) (3,731) (260,458)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchased Fixed Assets (3,138) - (3,138)
NET CASH (USED) BY
INVESTING ACTIVITIES (3,138) 0 (3,138)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
of common stock 76,000 3,600 327,964
Proceeds from issuance
of Class B common stock - - 10,000
Deferred offering costs - - (71,435)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 76,000 3,600 266,529
NET INCREASE (DECREASE) IN CASH (131)
CASH, BEGINNING OF PERIOD $ 2,933 $ 136 $ 0
CASH, END OF PERIOD $ 2,933 $ 5 $ 2,933
The accompanying notes are an integral part of the financial statements.
PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Six Months Ended June 30, 1997
Deficit
Accumulated Total
Number Common During Stockholders'
Of Stock Development Equity
Shares Amount Issuable Stage (Deficit)
Balance,
January 1, 1997 57,006,090 $216,954 $ 0 $(221,261) $ (4,307)
PetHealth Systems,
Inc. acquired all
of the 3,000,000
issued and out-
standing shares
of Common Stock 600,000,000
of PetCare, Inc.
in exchange for
600,000,000 shares
of Common Stock of
PetHealth Systems, Inc.
1 for 200 Reverse
Stock Split (653,721,060)
Monies advanced for
Common Stock $ 76,000 $ 76,000
Net Loss for the
Six Months Ended
June 30, 1997 -- -- -- $(132,663) $(132,663)
Balance,
June 30, 1997 3,285,030 $216,954 $ 76,000 $(353,924) $(60,970)
The accompanying notes are an integral part of the financial statements.
<PAGE>
PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
PetHealth Systems, Inc., formerly Triangle, Inc. (the "Company") is
a development stage organization formed under the laws of the State
of Colorado on December 8, 1981. Since inception, the Company has
been inactive except for recent organizational and initial
financing efforts. The Company's fiscal year end is December 31,
and there was no activity prior to the year ended December 31,
1988.
Accounting Method
The Company records income and expenses on the accrual method.
Organization Costs
Costs incurred in organizing the Company are being amortized
over a sixty-month period.
Deferred Offering Costs
The Company incurred costs in connection with its public
offering. When the offering of the Company's stock was
successful in April of 1989, these costs were charged as a
reduction of the proceeds of the offering.
NOTE 2 - RELATED PARTY TRANSACTIONS
Consulting Agreement - Ameristar Group Incorporated. The Company
has agreed to pay Ameristar Group Incorporated $10,000 per month
for the first 12 months after the first receipt of funds from an
equity financing of the Company, for financial consulting and
general administrative support services which are provided to the
Company by Ameristar Group Incorporated. No payments have been made
as of the date of this report. Such general administrative support
services have included the provision of office space and equipment,
telephone and other telecommunication services, and administrative
and clerical support staff. Such agreement was not negotiated at
arms'length due to the relationship between the Company and Mr.
Saposnick and Mr. Messina, directors and record or beneficial
shareholders of the Company.
In 1997, the Company received advances of monies for its operating
expenses from a related company, Ameristar Group Incorporated, in
accordance with an agreement between the two companies. This
Agreement shall be in effect until June 30, 1997 at which time the
parties will determine if this agreement is to be extended or
modified.
PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - CAPITALIZATION
In December of 1981, the Company authorized 50,000 shares of no par
value common stock. In March of 1988, the Company amended and
restated its certificate of incorporation to authorize 800,000,000
shares of no par value common stock and 100,000,000 shares of $.10
par value preferred stock. No preferred stock is issued or
outstanding as of June 30, 1997.
NOTE 4 - INCENTIVE STOCK OPTION PLAN
Effective March 3, 1988, the Company adopted an incentive stock
option plan for company executives and key employees. The Company
has reserved 10,000,000 common shares for issuance pursuant to the
plan. The plan provides that no option may be granted at an
exercise price less than the fair market value of the common shares
of the Company on the date of grant and no option can have a term
in excess of ten years. To date, no options have been granted
pursuant to the plan.
NOTE 5 - MERGER AND RELATED RECISION
In August of 1989, the Company consummated an exchange transaction
pursuant to which Triangle acquired all of the outstanding shares
of Enterprise Car Rental, Ltd. d.b.a. Wheels International Rent A
Car ("Wheels") in exchange for 326,500,800 shares of no par value
common stock. In conjunction with the merger, Triangle advanced
$119,110 to Wheels. Effective September 30, 1989, Triangle and
Wheels consummated a Compromise and Settlement Agreement pursuant
to which the merger was reversed. Wheel's shareholders returned all
but 10,000,000 common shares to Triangle in exchange for their
original shares of Wheels to indemnify and hold harmless Triangle
from actions by third parties to Wheels and to secure performance
of obligations of Wheels to cooperate in any legal actions
undertaken by Triangle against third parties of Wheels.
The stockholders' (deficit) in the accompanying financial
statements has been reported as if the merger had not taken place.
The 10,000,000 common shares not returned are recorded as issued in
October of 1989 for no consideration. The advances to Wheels of
$119,110 were written off at December 31, 1989. Management does not
anticipate any further contingencies associated with this failed
merger, however, there is no assurance that there will be no
further contingencies.
PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - MERGER WITH PETCARE, INC.
On January 29, 1997, an Agreement and Plan of Share Exchange
("Agreement") was entered into by and between the Company and (I)
PetCare, Inc., a Delaware corporation and (ii) the PetCare
shareholders. Under the terms of this Agreement, Triangle, Inc.
acquired all of the 3,000,000 issued and outstanding shares of
common stock of PetCare, Inc. in exchange for 600,000,000 shares of
the common stock of Triangle, Inc. It is intended that this
transaction shall be a tax-free exchange of shares. The Triangle,
Inc. shares are voting shares, are restricted from transfer without
registration under the Securities Act of 1933, as amended, and are
subject to escrow until PetCare completes the acquisition of its
first veterinary hospital.
NOTE 7 - SUBSEQUENT EVENT
The Company has been unable to raise the capital required to
implement the PetCare, Inc, business plan (acquisition of operating
veterinarian hospitals and consolidation of operations thereof).
Therefore, as of July 7, 1997, PetHealth Systems, Inc. and the
former principal shareholders of PetCare, Inc., have agreed to the
cancellation of the Agreement and Plan of Share Exchange.
Upon the cancellation of the original agreement, 2,700,000 of the
3,000,000 shares of the common stock (which the Company originally
had issued to the five principal shareholders of PetCare, Inc.)
were returned to the company for cancellation. No consideration
was provided by the company, or any third party, in connection with
such return of shares. The remaining 300,000 shares of common
stock which had been originally issued to minority shareholders of
PetCare, Inc. for services provided to PetCare, Inc. prior to its
acquisition by the registrant, will not be returned to the
registrant for cancellation.
NOTE 8 - NAME CHANGED
The corporate name has been changed from Triangle, Inc. to
PetHealth Systems, Inc. effective February 10, 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations:
Acquisition of PetCare, Inc.
An Agreement and Plan of Share Exchange ("Exchange Agreement")
between Triangle, Inc. and PetCare, Inc. was entered into on
January 29, 1997. Effective February 10, 1997, pursuant to the
Exchange Agreement, Triangle, Inc. acquired all of the outstanding
shares of Common Stock of PetCare, Inc. from its shareholders in
exchange for 3,000,000 (post-split) restricted shares of Common
Stock of Triangle, Inc. issued to those shareholders. Also, the
name of the registrant was changed from Triangle, Inc. to PetHealth
Systems, Inc., new Directors were elected and the former Directors
resigned, and the outstanding shares of Common Stock of the
registrant were subjected to a 1 for 200 reverse split, effective
February 24, 1997.
As a result of the closing of the Exchange Agreement, the business
of the registrant as of the end of the period covered by this
Report was to purchase and operate companion pet veterinary
hospital practices which meet certain financial criteria and
demographic profiles for growth. However, subsequent to the end of
such period, the registrant has determined that the PetCare
business plan is not viable, and such business plan will no longer
be pursued. Reference is made to the Form 8-K Report filed in
July, 1997.
Results of Operations
The Company did not have any operating income during the six month
period ended June 30, 1997, and has not had any operating income
since its inception. For this period, the registrant recognized a
net loss of $ 65,369 compared to net income of $3,256 for the
period ended June 30, 1996. General and administrative expenses
during the current period were funded by Ameristar Capital
Corporation, a private corporation affiliated with two directors of
the registrant (who resigned subsequent to the end of the period).
Expenses were comprised of costs associated with audit, legal and
SEC reporting obligations, and by a limited amount of equity
capital raised in the prior quarter.
In March 1997, the registrant received proceeds of $76,000 from
private equity financing. No further equity capital was raised in
the quarter ended June 30, 1997.
Liquidity and Capital Resources
At June 30, 1997 the Company had no capital resources other than an
insignificant amount of cash.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in Securities.
Not applicable for the period covered by this report.
However, there has been a change in control of the Company
after the close of the period covered by this Report, as
disclosed in the Form 8-K Report filed in July, 1997.
Item 3. Defaults Upon Senior Securities. Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 5. Other Information. None.
Item 6. Exhibits and Reports of Form 8-K. None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed in its behalf by the undersigned,
thereunto duly authorized, on August , 1997.
PETHEALTH SYSTEMS, INC.
By:/s/Robert Gordon
Robert Gordon
President
