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 March 31, 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. (f/k/a Triangle, 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
3,285,030 shares of Common Stock, no par value, outstanding on March 31, 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 March 31, 1997 and
December 31, 1996 4
Unaudited Consolidated Statements of Operations For Three
Months Ended March 31, 1997 and March 31, 1996 and
From Inception (December 8, 1981) through March 31, 1997 5
Unaudited Consolidated Statements of Cash Flows For Three
Months Ended March 31, 1997 and 1996 and From Inception
(December 8, 1981) to March 31, 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 13
SIGNATURES 13
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 three months ended
March 31, 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.
<PAGE>
PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31,
1997 1996
ASSETS
CURRENT ASSETS:
Cash in checking $ 72,734 $ 0
FIXED ASSETS:
Equipment net of
depreciation of $52 $ 3,086 $ 0
OTHER ASSETS:
Organizational Costs $ 463 $ 0
Investment in Subsidiary $ (488) $ 0
Total Other Assets (25) 0
TOTAL ASSETS: $ 75,795 $ 0
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 21,933 $ 4,307
Accrued Expenses 30,000 0
Due to Ameristar Capital Corporation 19,463
TOTAL CURRENT LIABILITIES 71,396 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 (288,555) (221,261)
TOTAL STOCKHOLDERS' (DEFICIT) 4,399 (4,307)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 75,795 $ 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
For the Three Months Ended For the Period
March 31, December 8,1981
(Unaudited) (Inception) to
1997 1996 March 31, 1997
Revenues $ - $ - $ -
OPERATING EXPENSES:
Legal and accounting 18,854 224 73,867
Management services (Note 2) 30,000 - 30,000
Amortization 25 - 25
Consulting Fees 12,500 - 12,500
Depreciation Expense 52 - 52
Filing and transfer fees 4,328 - 12,838
Public relations - - 14,414
Office and Printing Expense 937 - 937
Taxes, Franchise 598 - 598
Other Expenses - 29 34,899
TOTAL OPERATING EXPENSES 67,294 253 180,130
NET (LOSS) BEFORE
OTHER INCOME (EXPENSES) (67,294) (253) (180,130)
OTHER INCOME AND (EXPENSES):
Writeoff of advances
recision of merger - - (119,110)
Forgiveness of debt - - 7,455
Interest income - - 3,230
TOTAL OTHER INCOME
(EXPENSES) - - (108,425)
NET INCOME (LOSS) $ (67,294) $ (253) $ (288,555)
NET (LOSS) PER
COMMON SHARE $ * $ * $ *
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 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 Three Months Ended For the Period
March 31, December 8,1981
(Unaudited) (Inception) to
1997 1996 March 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (67,294) $ (253) $ (288,555)
Adjustments to reconcile
net (loss) to net cash used
by operating activities:
Amortization 25 - 775
Depreciation 52 52
Stock issued for
Services/expenses - - 26,425
Changes in operating assets
and liabilities:
Increase (decrease) in
Current liabilities 67,089 (3,373) 71,396
NET CASH (USED) BY
OPERATING ACTIVITIES (128) (3,626) (189,907)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchased Fixed Assets (3,138) - (3,138)
Organization costs - - (750)
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 72,734 3,600 72,734
NET INCREASE (DECREASE) IN CASH 72,734 (26) 72,734
CASH, BEGINNING OF PERIOD $ 0 $ 136 $ 0
CASH, END OF PERIOD $ 72,734 $ 110 $ 72,734
The accompanying notes are an integral part of the financial statements.
<PAGE>
PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Three Months Ended March 31, 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
Three Months Ended
March 31, 1997 -- -- -- $ (67,294) $(67,294)
Balance,
March 31, 1997 3,285,030 $216,954 $ 76,000 $(288,555) $ 4,399
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 March 31, 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.
Also, under the terms of the Agreement, certain conditions
precedent were met by the registrant, which included among other
items, a 1-for-200 reverse stock split of its common stock on
February 23, 1997.
NOTE 7 - 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 date of this Report is to purchase and operate companion
pet veterinary hospital practices which meet certain financial criteria and
demographic profiles for growth.
Results of Operations
The Company did not have any operating income during the quarterly period ended
March 31, 1997, and has not had any operating income since its inception. For
this quarterly period, the registrant recognized a net loss of $ 67,294 compared
to a net loss of $ 253 for the quarterly period ended March 31, 1996. General
and administrative expenses during the current quarterly period were funded by
Ameristar Capital Corporation, a private corporation affiliated with two
directors of the registrant. Expenses were comprised of costs associated with
audit, legal and SEC reporting obligations.
In March 1997, the registrant received proceeds of $76,000 from private equity
financing, and is seeking additional such funding as of the date of this report
to meet its cash requirements and execute its business plan. There is no
assurance that the financing efforts will be successful.
Liquidity and Capital Resources
At March 31, 1997 the Company had no capital resources other than an
insignificant amount of cash, and sought such resources (through sale of equity
securities) to continue the execution of the business plan acquired through the
acquisition of PetCare, Inc. Unless and until the funds are raised, the Company
will be unable to execute their business plan of acquiring operating veterinary
hospitals.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in Securities
(a) and (b) For information about changes in the number of shares of
Common Stock outstanding during the period covered by this Report, see
Item 4 below.
(c) During the first quarter of 1997, the Company initiated offers to
sell, to qualified investors, 1,000,000 shares of Common Stock, at $2.00
per share. Such offering was conducted pursuant to the Regulation D (Rule
506) exemption from the Section 5 registration requirements of the
Securities Act of 1933, and applicable exemption provisions of state
securities laws. In late March, 1997 a total of 38,000 shares of Common
Stock were sold, for proceeds of $76,000. No underwriter was involved in
the offers or sales. All shares sold are restricted securities under the
1933 Act.
The offering was terminated in the second quarter of 1997, no further
shares having been sold.
Item 3. Defaults Upon Senior Securities. Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of shareholders was held on February 7, 1997. No proxies
were solicited for and no information statement was distributed in
connection with such meeting. The record date for the meeting was January
24, 1997.
At the meeting, shareholders voted in favor of the following proposals:
1. A proposed amendment to the Articles of Incorporation to change the
name of the registrant to "PetHealth Systems, Inc."
2. A 1-for-200 reverse split of the outstanding shares of Common Stock of
the registrant, such that the 57,006,090 shares of Common Stock then
issued and outstanding would become 285,030 shares of Common Stock.
(Proposals 1 and 2 were proposed in connection with and as contemplated by
the Exchange Agreement with PetCare, Inc.)
3. The adoption of the "1997 Stock Award Program" and the reservation
thereunder of 300,000 shares of Common Stock (after the reverse stock
split is in effect) for issuance to employees and consultants for
services to be rendered in the future. The number of shares to be
issued would in any instance be based on the value of services
rendered to the registrant, as determined by the board of directors,
and the market price of the Common Stock on the date the shares are
granted.
4. The readoption of the 1988 Incentive Stock Option Plan ("ISOP") of the
registrant as the "1997 Incentive Stock Option Plan" with any
qualified option to be granted thereunder to have a term not to exceed
10 years from approval of such ISOP by the shareholders, with the ISOP
expiring on such tenth anniversary.
5. The relocation of the legal domicile of the registrant from Colorado
to Delaware, without material change to the provisions of the Articles
of Incorporation of the registrant. Implementation of such relocation
of legal domicile would be through further action of the board of
directors and the filing of Articles of Incorporation and Articles of
Merger in the State of Delaware, and other corporate filings in the
State of Colorado, however, the board of directors would not be
required to implement such relocation and will have the authority to
abandon such relocation in their sole discretion.
Subsequent to January 24, 1997, the Company registered its class of Common
Stock within the Securities and Exchange Commission, pursuant to Section
12(g) of the Securities Exchange Act of 1934.
Item 5. Other Information. None.
Item 6. Exhibits and Reports of Form 8-K
Form 8-K filed on February 19, 1997 re: Agreement and Plan of Share
Exchange with PetCare, Inc.
Form 8-K filed on March 14, 1997 re: change in registrant's certifying
accountants
Form 8-K/A filed on April 11, 1997 re: amendment to Form 8-K filed on
February 19, 1997 - certified financial statements for registrant and
PetCare, Inc. for December 31, 1996 and consolidated pro-forma for
December 31, 1996.
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 July 15, 1997.
PETHEALTH SYSTEMS, INC.
By:/s/ Robert Gordon
Robert Gordon, President
