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 September 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
incorporation or organization) Identification No.)
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
November 13, 1997.
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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
September 30, 1997 and December 31, 1996 4
Unaudited Consolidated Statements of Operations
For Three and Nine Months Ended September 30, 1997
and September 30, 1996 and From Inception
(December 8, 1981) through September 30, 1997 5
Unaudited Consolidated Statements of Cash Flows
For Nine Months Ended September 30, 1997
and 1996 and From Inception (December 8, 1981)
to September 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
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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 nine
months ended September 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.
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PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, December 31,
1997 1996
ASSETS
CURRENT ASSETS:
Cash in checking $ 154 $ 0
FIXED ASSETS:
Equipment net of
depreciation of $366 $ 2,772 $ 0
TOTAL ASSETS: $ 2,926 $ 0
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 4,777 $ 4,307
Due to Ameristar Group
Incorporated (see Note 2) 90,000 0
TOTAL CURRENT LIABILITIES 94,777 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,
623,030 and 285,030 shares
issued and outstanding 292,954 216,954
Common Stock Issuable 24,500 0
Deficit accumulated during
development stage (409,305) (221,261)
TOTAL STOCKHOLDERS' (DEFICIT) (91,851) (4,307)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 2,926 $ 0
The accompanying notes are an integral part of the financial statements.
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PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended For the Period
September 30, September 30, December 8,1981
(Inception) to
1997 1996 1997 1996 Sept.30, 1997
Revenues $ - $ - $ - $ - $ -
OPERATING EXPENSES:
Legal and accounting 581 - 41,634 2,975 96,647
Management services
(Note 2) 30,000 - 90,000 - 90,000
Consulting Fees 24,500 - 45,000 - 45,000
Depreciation Expense 157 - 366 - 366
Filing and transfer fees 127 - 4,876 1,448 13,386
Public relations 0 - - - 14,414
Office and Printing
Expense 16 - 4,974 - 4,974
Taxes, Franchise - - 660 - 660
Travel Expenses - - 534 - 534
Other Expenses - 34 - 34 34,899
TOTAL OPERATING
EXPENSES 55,381 34 188,044 4,457 300,880
NET (LOSS) BEFORE
OTHER INCOME (EXPENSES) (55,381) (34) (188,044) (4,457) (300,880)
OTHER INCOME AND (EXPENSES):
Writeoff of advances
recision of merger - - - - (119,110)
Forgiveness of debt - - - 7,426 7,455
Interest income - - - - 3,230
TOTAL OTHER INCOME
(EXPENSES) - - - 7,426 (108,425)
NET INCOME (LOSS) $ (55,381) $ (34) $(188,044) $ 2,969 $(409,305)
NET (LOSS) PER
COMMON SHARE $ (.09) $ * $ (.08) $ .01 $ N/A
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING 623,030 283,213 2,397,697 283,215 N/A
* less than $.01 net loss per share
The accompanying notes are an integral part of the financial statements.
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PETHEALTH SYSTEMS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended For the Period
September 30, December 8,1981
(Unaudited) (Inception) to
1997 1996 Sept. 30, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) (188,044) $ 2,969 $ (409,305)
Adjustments to reconcile
net (loss) to net cash used
by operating activities:
Depreciation 366 - 366
Stock issued for
Services/expenses 24,500 - 50,925
Changes in operating assets
and liabilities:
Increase (decrease) in
Current liabilities 90,470 (6,734) 94,777
NET CASH (USED) BY
OPERATING ACTIVITIES (72,708) (3,765) (263,237)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchased Fixed Assets (3,138) - (3,138)
NET CASH (USED) BY
INVESTING ACTIVITIES (75,846) (3,765) (266,375)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
of common stock 76,000 3,625 327,964
Proceeds from issuance
of Class B common stock - - 10,000
Deferred offering costs - - (71,435)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 76,000 3,625 266,529
NET INCREASE (DECREASE) IN CASH (140) 154
CASH, BEGINNING OF PERIOD $ $ 136 $ 0
CASH, END OF PERIOD $ 154 $ (4) $ 154
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 Nine Months Ended September 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)
January 29, 1997, Pet-
Health Systems, Inc.
acquired all of the
3,000,000 issued and
outstanding shares of
Common Stock of Pet- 600,000,000
Care, Inc. in exchange
for 600,000,000 shares
of Common Stock of
PetHealth Systems, Inc.
February 24, 1997
1 for 200 Reverse
Stock Split (653,721,060)
July 1, 1997
Common Shares issued for
Private Placement 38,000 76,000 76,000
July 18, 1997
2,700,000 shares are
retired and canceled, ( 2,700,000)
due to recision of
merger with PetCare, Inc.
490,000 shares will be - 24,500 24,500
issued for consulting
services provided to the
company as of October 6, 1997
Net Loss for the
nine months ended
September 30, 1997 -- -- -- $(188,044) $(188,044)
Balance,
September 30,1997 623,030 $292,954 $ 24,500 $(409,305) $(91,851)
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.,(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. All
advances shall be repaid by PetHealth Systems, Inc. together with
simple interest at the rate of 6 percent. This Agreement was
extended until December 31, 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 September 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 AND RECISSION 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 was intended that this
transaction shall be a tax-free exchange of shares.
The Company was 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 7 - SUBSEQUENT EVENT
The Company will issue 490,000 shares of common stock on October 6,
1997 for consideration of consulting services performed for the
company. The 490,000 shares will be issued to related parties of
the company at a value equal to the average bid and ask price for
the common stock as reported for the five business days prior to
October 6, 1997. The Company will issue 400,000 of the 490,000
shares under the 1997 Stock Award Plan.
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:
Results of Operations
The Company did not have any operating income during the nine month
period ended September 30, 1997, and has not had any operating
income since its inception. For this period, the registrant
recognized a net loss of $ 188,044 compared to a net loss of
$4,457 for the period ended September 30, 1996. General and
administrative expenses during the current period were funded by
Ameristar Capital Corporation, a private corporation affiliated
with two former directors of the registrant (who resigned during
the period). 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. No further equity capital was raised as
of September 30, 1997.
Liquidity and Capital Resources
At September 30, 1997 the Company had no capital resources other
than an insignificant amount of cash, and will rely on advances
from related parties to fund administrative expenses pending
acquisition of an operating company. Presently there are no
agreements in place for such acquisition, and there is no assurance
any acquisition will be consummated. Alternatively, the Company
may seek equity funding for administrative costs and anticipated
costs of negotiating a possible acquisition, but such equity
funding currently is not underway.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in Securities.
(a), (b) Not applicable for the three month period covered by this
report. However, there was a change in control of the
Company in the period ended June 30, 1997, as disclosed
in the Form 8-K Report filed in July, 1997.
(c) During the nine months ended September 30, 1997, the
registrant sold 38,000 restricted shares of Common Stock
(for $76,000 cash) in a private placement, pursuant to
Rule 506 of Regulation D. The shares were sold in May,
1997 to three investors; no underwriter was involved.
Subsequent to September 30, 1997, as part of the
recission agreement with PetCare, Inc., the Company
released the business plans relating to the acquisition
and operation of veterinary hospitals to two of the
founders of PetCare, Inc. in consideration of their
payment in the amount of $76,000. The registrant had
previously decided not to pursue the veterinary business
plan.
Also, subsequent to September 30, 1997, $76,000 was
refunded to the three private placement investors. In
consideration for their investment interest and support,
the investors will retain their shares in exchange for a
payment of $.01 per share to the Company.
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. One Form 8-K Report was filed (on
July 31, 1997), to report the recission of the merger agreement with
PetCare, Inc. See footnote (6) to the financial information in Part I
of this 10-QSB Report.
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 November 13, 1997.
PETHEALTH SYSTEMS, INC.
By:/s/ Robert Gordon
Robert Gordon
President
