SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]. For the fiscal
year ended December 31, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 000-22151
PetHealth Systems, Inc. (f/k/a Triangle, Inc.)
(Exact Name of Registrant as Specified in its Charter)
Colorado 93-0969365
(State or other jurisdiction of (IRS Employer Ident. No)
incorporation or organization)
444 Madison Ave., Suite 1710
New York, New York 10022
(Address/principal executive offices) (Zip Code)
Issuer's Telephone Number: (212) 750-7878
Securities registered pursuant to Section 12(b) of the Act:None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
(Title of Class)
Check whether the issuer (1) 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
issuer was required to file such reports): Yes X No ; and (2)
has been subject to such filing requirements for the past 90 days:
Yes X No .
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and
no disclosure will be contained, to the best of the issuer's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB: [ X ].
State issuer's revenues for its most recent year ended
December 31, 1997: $ -0-.
State the aggregate market value of the 574,640 shares of
voting stock held by non-affiliates computed by reference to the
price at which the stock was sold, or the average bid and asked
prices of such stock, as reported by the Electronic Bulletin Board
of the NASD for the prior week:
$233,447 as March 20, 1998, based on the prior week average bid and
ask prices.
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
1,153,027 shares of Common Stock, as of March 3, 1998.
Documents Incorporated by Reference
If the following documents are incorporated by reference,
briefly describe them and identify the part of the Form 10-KSB into
which the document is incorporated: (1) any annual report to
security holders; (2) any proxy or information statement; and (3)
any prospectus filed pursuant to Rule 424(b) or (c) of the
Securities Act of 1933 ("Securities Act"). The listed documents
should be clearly described for identification purposes. None.
Transitional Small Business Disclosure Format: Yes No
X
PART I
Item 1. Description of Business
Corporate History Through December 31, 1997.
The Company (or "registrant") was organized as a Colorado
corporation on December 8, 1981 under the name Triangle, Inc. for
the purpose of evaluating, structuring and completing a merger with
or acquisition of, prospects consisting of private companies,
partnerships or sole proprietorships. In 1989, the registrant
closed a public offering of 20,316 units for gross proceeds of
$203,160; each unit contained 1,000 shares of Common Stock and
1,000 Class A and 1,000 Class B Warrants to Purchase Common Stock
(the Warrants expired in 1991). The registrant was funded as a
"blank check" company.
By December 31, 1991 the registrant had spent most of the
proceeds of the public offering on general and administrative
expenses, and in an unsuccessful merger transaction with Enterprise
Car Rental. Ltd., a British Columbia corporation, the contract for
which transaction was signed in 1989. After the merger had been
closed, the registrant advanced $120,000 to Enterprise to pay debts
and expenses, and in an unsuccessful merger transaction with
Enterprise Car Rental and other obligations. When the merger was
canceled, Enterprise gave the registrant a promissory note for
$150,000 to pay back the advanced funds and to pay the registrant's
expenses which had been incurred in the transaction; the note
subsequently was written off as uncollectible.
During fiscal years 1992 through 1995 the registrant's general
and administrative expenses were funded with proceeds of the
purchase of restricted shares of Common Stock by the principal
shareholders of the registrant. During such years, the registrant
was inactive except for its continued unsuccessful search for
business opportunities.
As of November 29, 1996 the registrant signed a letter of
intent for the acquisition by the registrant of PetCare, Inc.
("PetCare"), a Delaware corporation organized in November, 1996.
Such acquisition was closed on February 10, 1997. See below.
Registration under Section 12(g).
From 1989 through December 31, 1997 the registrant filed
periodic reports with the Securities and Exchange Commission
("Commission"), on a voluntary basis, pursuant to Section 15(d) of
the Securities Exchange Act of 1934 ("Exchange Act"). During such
period of time, the registrant had no class of securities
registered with the Securities and Exchange Commission pursuant to
Section 12 of the Exchange Act.
Effective February 14, 1997, the registrant's Common Stock was
registered with the Commission pursuant to Section 12(g) of the
Exchange Act. Pursuant to such registration, the registrant is
required to file periodic and other reports as required by Section
13 of the Exchange Act, and persons acquiring 5% or more of the
outstanding shares of Common Stock of the registrant are required
to file with the Commission a statement concerning such acquisition
of shares. In addition, the registrant is subject to the proxy and
information statement solicitation and distribution provisions of
Section 14 of the Exchange Act. Section 16(a) of the Exchange Act
requires the directors, executive officers, and significant
shareholders of the registrant, to file with the Commission certain
reports concerning their ownership of the registrant's securities
(See Part III, Item 9 below).
Acquisition of PetCare, Inc. in February, 1997, and Recision
of that Acquisition.
Pursuant to the Agreement and Plan of Share Exchange
("Exchange Agreement") between the registrant and PetCare, Inc.
entered into in February, 1997, the registrant acquired all the
outstanding shares of Common Stock of PetCare, Inc. from its
shareholders effective as of February 10, 1997, in exchange for
3,000,000 restricted shares of Common Stock of the registrant
issued to such individuals.
In addition, the following occurred in connection with the
closing of the Exchange Agreement: the three directors of the
registrant (as of February 7, 1996) elected the directors of
PetCare, Inc. to the board of directors of the registrant, and the
three directors resigned; the name of the registrant was changed to
PetHealth Systems, Inc.; and (effective as of February 24, 1997)
the outstanding shares of Common Stock of the registrant were
subjected to a 1 for 200 reverse stock split. Except as otherwise
noted, all share and per share information in this Report reflects
the reverse stock split. As of February 10, 1997, there were
issued and outstanding 3,285,030 shares of Common Stock of the
registrant.
PetCare, Inc. had intended to acquire and generate a series
of operating companion pet veterinarian hospitals; however, the
registrant was unable to raise the capital required to implement
the PetCare, Inc. business plan subsequent to the consummation of
the Exchange Agreement. Therefore, the Exchange Agreement was
canceled as of July 14, 1997.
Upon cancellation of the Exchange Agreement, the following
events occurred:
(a) 2,700,000 of the 3,000,000 shares of Common Stock (which
the registrant originally had issued to the five principal
shareholders of PetCare, Inc. in exchange for their shares of
Common Stock of PetCare, Inc.), were returned to the registrant for
cancellation. Such shares were returned by Ted A. Sprinkle, Jr.,
Kenneth J. Rotondo, Thomas A. LeVine, Joseph J. Messina, and MIS
Management, Inc. (an affiliate of Martin I. Saposnick). No
consideration was provided by the registrant, 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, were not
returned to the registrant for cancellation.
(b) Ted A. Sprinkle, Jr. (who became President and a director
of the registrant in February, 1997), and Kenneth J. Rotondo (who
became Executive Vice President and a director of the registrant in
February, 1997), resigned their positions with the registrant.
Thereafter, on July 18, 1997, Joseph J. Messina (who became a
director of the registrant in February, 1997), and Martin I.
Saposnick (who became a director of the registrant in February,
1997), acting as the remaining directors on the board of directors
of the registrant, elected as directors and/or officers of the
registrant, as of July 18, 1997, the following persons: Robert
Gordon, Director, President (Chief Executive Officer) and Chief
Financial Officer; Chip Kurzenhauser, Director; Bryan Skelton,
Director; and Gera Laun, Secretary. Thereafter, as of July 18,
1997, Mr. Messina and Mr. Saposnick resigned as directors of the
registrant.
(c) The registrant determined not to further pursue the
PetCare, Inc. business plan. No veterinarian hospitals have been
acquired and there are no contracts for such acquisitions. By a
separate Letter Agreement entered into in October of 1997, between
the registrant and two of the original founders of PetCare, Inc.
(Kenneth J. Rotondo and Ted A. Sprinkle, Jr.), the registrant
assigned all of its rights to the PetCare, Inc. business plan to
Healthy Pet, Inc. (a new company affiliated with Dr. Sprinkle and
Dr. Rotondo) for $76,000 cash paid by Healthy Pet to the
registrant. The registrant also agreed not to compete with Healthy
Pet. Healthy Pet is not affiliated with the registrant or any
affiliate of the registrant. Such $76,000 was returned to the two
investors who had purchased shares of the registrant in fiscal
1997. Such persons subsequently bought 38,000 restricted shares of
Common Stock from the registrant for $.01 per share.
The registrant also has demanded that Healthy Pet issue 123,795
restricted shares of Common Stock to the registrant, however such
shares have not been received as of the date of this report.
Facilities and Employees
The registrant presently is provided administrative support
services by and shares office space with Ameristar Group
Incorporated, a private corporation of which Joseph J. Messina and
Martin I. Saposnick are directors. See Item 12.
As of the date of this Report, the registrant employs two
officers.
Item 2. Description of Property.
See above.
Item 3. Legal Proceedings.
To the knowledge of the registrant, there is no litigation
pending or threatened against the registrant, or its officers and
directors in their capacities as such, nor are there any legal or
administrative proceedings to which the registrant or its officers
and directors, as such, are a party.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The registrant called a special shareholders' meeting 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.
(b) Not applicable.
(c) At the meeting, shareholders voted in favor of an
amendment to the Articles of Incorporation to change the
name of the registrant to "PetHealth Systems, Inc."; the
1 for 200 reverse stock split of the then outstanding
shares of Common Stock; the adoption of the 1997 Stock
Award Program and the reservation thereunder of (post
split) 300,000 shares of Common Stock; the readoption of
the Incentive Stock Option Plan; and the relocation of
the legal domicile of the registrant from Colorado to
Delaware, to be implemented by the Board of Directors at
a future date in its discretion.
(d) Not applicable.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
(a) Market information.
The registrant's Common Stock was not publicly traded during
the two fiscal years ended December 31, 1997 except for 232,000
shares (before the 1 for 200 reverse split) at $.05 per share,
prior to the registrant's transaction with PetCare, Inc. Since
December 31, 1997, the registrant's Common Stock has been quoted
under the symbol " PHSI " on the NASD's Electronic Bulletin Board.
However, there have been few shares traded. The current price
quotation as of this report date is $.0625 bid and $.75 asked.
(b) Holders.
At March 9, 1998, there were approximately 73 shareholders of
record of the registrant's Common Stock.
(c) Dividends.
The registrant has not paid any cash dividends with respect to
its Common Stock. There are no contractual restrictions on the
registrant's present or future ability to pay cash dividends,
however, the registrant intends to retain any earnings in the near
future for operations.
(d) Recent Sales of Unregistered Securities.
During the three years ended December 31, 1997, the registrant
has sold shares of Common Stock without registration under the
Securities Act of 1933, as set forth below. The registrant has not
sold, through the date of this report, any securities pursuant to
Regulation S and has no intention of conducting any such sales in
the future.
A total of 6,575 shares (after application of the 1 for 200
reverse stock split in 1997) were sold in 9 separate transactions
with officers and directors of the registrant, for total cash
proceeds to the registrant of $13,150 ($2.01 per share). Such
proceeds were used to pay general and administrative costs.
In February 1997, the registrant issued 3,000,000 shares to
the shareholders of PetCare, Inc. in exchange for the 3,000,000
(100%) shares of Common Stock of that company held by such persons.
In fiscal 1997, 2,700,000 of such shares were returned to the
registrant by the original recipients thereof, in connection with
the cancellation of the Exchange Agreement.
As disclosed in subparagraphs (i) through (ii) below, as
payment for services provided to the registrant, and for expenses
paid on behalf of the registrant, the registrant has issued 490,000
shares of Common Stock, all as of October 6, 1997.
(i) 400,000 of the 490,000 shares were issued under the 1997
Stock Award Plan (registered on Form S-8), an additional 50,000
shares were issued as restricted securities (not registered on Form
S-8), to the persons and in the respective amounts set forth below,
and 40,000 shares were issued to new officers and directors (see
(ii) below):
(a) services which have been performed (and expenses
which have been paid) by Ameristar Group Incorporated, an affiliate
of Joseph J. Messina and Martin I. Saposnick (former directors of
the registrant who were elected to the board of directors in
connection with the closing of the original Exchange Agreement, and
who resigned such positions in fiscal 1997), in the amounts of
100,000 shares to Wilmont Holdings Corp., an affiliate of Mr.
Messina, and 100,000 shares to Remsen Group, Ltd., an affiliate of
Mr. Saposnick;
(b) services provided by consultants to the registrant,
in the amount of 150,000 shares;
(c) services provided by Robert K. Ellis, a former
officer and director of the registrant who resigned upon closing of
the original Exchange Agreement, in the amount of 25,000 shares,
and services provided by Peter Ellis, a former officer and director
of the registrant who resigned upon closing of the original
Exchange Agreement, in the amount of 25,000 shares. Further, an
additional 50,000 shares were issued as restricted securities (not
registered on Form S-8), in the amounts of 25,000 shares to Robert
K. Ellis and 25,000 shares to Peter Ellis, for services provided by
such persons. The total of 100,000 shares issued to such two
individuals take the place of and cancel the proposed issuance of
75,000 shares to Robert K. Ellis (and an additional 75,000 shares
to his son Peter Ellis), plus an additional issuance of warrants to
purchase 75,000 shares of Common Stock, all as had been disclosed
in the registrant's Form 10-KSB Report for fiscal 1996; and
(ii) 40,000 shares of the 490,000 shares were issued as
restricted securities (not registered on Form S-8) to the new
officers and directors of the registrant, for services provided to
the registrant, in the amounts of 20,000 shares to Robert Gordon,
5,000 shares to Gera Laun, 5,000 shares to Chip Kurzenhauser, and
10,000 shares to Bryan Skelton; and
An incentive stock option to purchase 50,000 shares of Common
Stock has been issued to a consultant not affiliated with the
registrant. The option was issued under the Incentive Stock Option
Plan of the registrant, which Plan is registered with the
Securities and Exchange Commission on Form S-8. The option is
exercisable for three years from July 18, 1997, at $0.50 per share.
No underwriters were involved in the foregoing transactions.
None of the securities were offered to the public.
In connection with the foregoing transactions, the registrant
relied upon the exemption from the Section 5 registration
requirements of the Securities Act of 1933, provided by Section
4(2) thereof. Each person who acquired such shares either was an
officer and director of the registrant (with respect to the
transaction up until the closing of the original Exchange
Agreement), or represented to the registrant in connection with the
shares acquired under the Exchange Agreement that he was
experienced in financial and investment matters, that he had
reviewed all filings made by the registrant pursuant to Section
15(d) of the Securities Exchange Act of 1934 prior to closing of
the Exchange Agreement, and that he was acquiring such shares for
investment purposes under Rule 144 of the Securities Act of 1933.
Shares issued to the current officers and directors (see (ii)
above) were issued as restricted securities to such persons as
officers and directors, under Section 4(2).
Item 6. Management's Discussion and Analysis or Plan of Operation.
The following table sets forth certain selected financial data
with respect to the registrant, and is qualified in its entirety by
reference to the financial statements and notes thereto filed
herewith:
Fiscal Years Ending December 31,
1997 1996 1995 1994 1993
Total Assets $3,260 $ -0- $ 136 $ 116 $ 123
Short-Term
Obligations $130,674 $4,307 $10,840 $ 9,767 $8,283
Net Sales $ -0- $ -0- $ -0- $ -0- $ -0-
Net Income
(Loss) $(149,987)$2,767 $(6,853) $(5,216) $(33,944)
Net Income
(Loss) per
Common Share $(.12) $ (a) $ (a) $ (a) $ (a)
Dividends per
Common Share $ -0- $ -0- $ -0- $ -0- $ -0-
(a) Less than $0.01 per share.
Plan of Operation
For the 12 months ending December 31, 1998 the registrant will
require an indeterminate amount of capital. It is possible that
the registrant will be successful in locating a business
opportunity and negotiating and closing an acquisition thereof by
the issuance of restricted shares of the registrant's Common Stock,
without the necessity of paying any cash consideration for such
acquisition. However, if the registrant cannot effect a non-cash
acquisition, the registrant may have to raise funds from a private
offering of its securities under Rule 506 of Regulation D. There
is no assurance the registrant would obtain any such equity
funding.
As of the date of this report, and throughout fiscal 1997, the
registrant's general and administrative expenses which were paid
have been funded by advances from Ameristar Capital Corporation, a
private corporation affiliated with Joseph J. Messina and Martin I.
Saposnick, former directors of the registrant. As of December 31,
1997, such advances represent $2,500 of the liabilities of the
registrant, and the consulting agreement with Ameristar represents
$120,000 of such liabilities. See Note 2 to financial Statements,
"Related Party Transactions" and Part III, Item 12 "Certain
Relationships and Related Transactions."
Liquidity and Capital Resources
As of December 31, 1997 the registrant's current liabilities
exceeded current assets by $130,029. For such year, the registrant
recognized a net loss of $225,987 on $-0- revenues, compared to net
income in 1996 of $2,767 on $ -0- revenues, and $7,455 of other
income recognized from the forgiveness of debt. Expenses in 1996
and 1997 were comprised of general and administrative costs
associated with audit, legal and SEC reporting obligations; such
costs were funded in 1996 with proceeds of the registrant's sales
of shares of Common Stock to officers and directors, and in 1997 by
advances from Ameristar. See Part II, Item 5 "Recent Sales of
Unregistered Securities."
Results of Operations
For the two years ended December 31, 1997 the registrant was
engaged in no active business. The proposed business through the
acquisition of PetCare, Inc. in 1997 was wholly unsuccessful.
Activities (other than in connection with the unsuccessful
transaction with PetCare, Inc.) were limited to looking at various
business opportunities for possible acquisition by the registrant,
and paying the costs incident to periodic reporting to the
Commission, and audit and legal fees associated therewith.
Item 7. Financial Statements.
Financial statements of the registrant, as of December 31,
1997 and for the two years then ended, are included in this report
and incorporated herein by reference.
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.
There were no changes in or disagreements with accountants on
accounting and financial disclosure matters in fiscal 1996 or 1997.
Subsequent to December 31, 1996, the registrant dismissed the
independent accounting firm which had audited the financial
statements of the registrant for prior years. Such dismissal was
approved by the registrant's board of directors. There had been no
disagreements with the former accounting firm (Schmidt +
Associates, P.C.) on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure. The prior firm's audit reports had stated that the
financial statements had been prepared with the assumption that the
registrant would continue as a going concern.
In March 1997, the registrant engaged a separate independent
accounting firm (Janet Loss, CPA) to audit and report upon the
financial statements of the registrant for fiscal 1996 and fiscal
1997.
On March 25, 1997, the registrant filed a Current Report on
Form 8-K concerning the change in accounting firms.<PAGE>
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
Index to Financial Statements
Independent Auditor's Report . . . . . . . . . . . . .F-10
Financial Statements:
Balance Sheets. . . . . . . . . . . . . . . . . .F-11
Statements of Operations. . . . . . . . . . . . .F-12
Statements of Stockholders' Equity (Deficit). . .F-13
Statements of Cash Flows. . . . . . . . . . . . .F-14
Notes to Financial Statements . . . . . . . . . .F-15 - F-17
<PAGE>
Janet Loss, C.P.A., P.C.
Certified Public Accountant
3525 S. Tamarac Drive, Suite 120
Denver, Colorado 80237
Board of Directors
PetHealth Systems, Inc.
(A Development Stage Company)
I have audited the accompanying balance sheets of PetHealth
Systems, Inc. (a development stage company)as of December 31, 1997
and 1996, and the related statements of operations, shareholders'
equity (deficit) and cash flows for the years ended December 31,
1997, 1996 and 1995. These financial statements are the
responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements based on my
audits.
I conducted my audits in accordance with generally accepted
auditing standards. Those standards require that I plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide
a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
PetHealth Systems, Inc. (a development stage company) as of
December 31, 1997 and 1996, and the results of its operations and
its cash flows for the years ended December 31, 1997, 1996 and
1995.
/s/ Janet Loss
Janet Loss, C.P.A., P.C.
March 27, 1998
<PAGE>
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1997 1996
ASSETS
CURRENT ASSETS:
Cash in checking $ 265 $ 0
Stock Receivable 380 0
TOTAL CURRENT ASSETS $ 645 $ 0
FIXED ASSETS:
Equipment 3,138 0
Less accumulated appreciation (523) 0
Net Fixed Assets 2,615 0
TOTAL ASSETS $ 3,260 $ 0
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 8,174 $ 4,307
Due to Ameristar Group
Incorporated (see Note 2) 122,500 0
TOTAL CURRENT LIABILITIES 130,674 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,
1,153,027 and 285,030 shares
issued and outstanding 243,834 216,954
Deficit accumulated during
development stage (371,248) (221,261)
TOTAL STOCKHOLDERS' (DEFICIT) (127,414) (4,307)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 3,260 $ 0
The accompanying notes are an integral part of the financial statements.
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
December
8,1981
Year Ended Year Ended Year Ended (Inception) to
December 31, December 31, December 31, December 31,
1997 1996 1995 1997
Revenues $ - $ - $ - -
OPERATING EXPENSES:
Legal and accounting 46,650 2,975 6,395 101,663
Management services
(Note 2) 120,000 - - 120,000
Consulting Fees 47,000 - - 47,000
Depreciation Expense 523 - - 523
Filing and transfer fees 5,550 1,649 250 14,060
Public relations - - - 14,414
Office and Printing 4,776 - - 4,776
Taxes, Franchise 685 - - 685
Travel Expense 534 - - 534
Other Expenses 269 64 208 35,168
TOTAL OPERATING EXPENSES 225,987 4,688 6,853 338,823
NET (LOSS) BEFORE
OTHER INCOME (EXPENSES) (225,987) (4,688) (6,853) (338,823)
OTHER INCOME AND (EXPENSES):
Writeoff of advances
recision of merger - - - (119,110)
Sale of business plans 76,000 76,000
Forgiveness of debt - 7,455 - 7,455
Interest income - - - 3,230
TOTAL OTHER INCOME
(EXPENSES) 76,000 7,455 - (32,425)
NET INCOME (LOSS) $(149,987) $ 2,767 $ (6,853) $(371,248)
NET (LOSS) PER
COMMON SHARE $ (.08) $ .01 $ (.02) $ N/A
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,888,492 284,781 281,760 N/A
The accompanying notes are an integral part of the financial statements.
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1997 and 1996
Common Stock
Deficit
Accumulated Total
Number During Stockholders'
of Development Equity
Shares Amount Stage (Deficit)
Balance, January 1, 1996 56,643,090 $213,324 $(224,028) $(10,704)
Issuance of stock to officer for
cash, January 1996 ($.01 per share) 100,000 1,000 -- 1,000
Issuance of stock to officer for
cash, February 1996($.01 per share) 260,000 2,600 -- 2,600
Issuance of stock to officer for
cash, December, 1996($.01 per share) 3,000 30 -- 30
Net Income for y/e December 31, 1996 -- -- 2,767 2,767
Balance, December 31, 1996 57,006,090 $216,954 $(221,261) $ (4,307)
January 29, 1997, PetHealth Systems,
Inc. acquired all of the 3,000,000
issued and outstanding shares of
Common Stock of PetCare, Inc.in 600,000,000
exchange for 600,000,000 shares of
Common Stock of PetHealth Systems, Inc.
February 24, 1997 1 for 200 Reverse
Stock Split (653,721,063)
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, due to (2,700,000)
recision of merger with PetCare, Inc.
490,000 shares issued for consulting 490,000 24,500 24,500
services provided to the company as
of October, 1997
October 16, 1997, cancellation of
private placement (38,000) (76,000) (76,000)
October 16, 1997, stock issued for
cash, ($.01 per share) 38,000 380 380
December 11, 1997 Shares issued for
consulting services 40,000 2,000 2,000
Net Loss for the year ended
December 31, 1997 -- --$(149,987)$(149,987)
Balance, December 31, 1997 1,153,027 $243,834$(371,248)$(127,414)
The accompanying notes are an integral part of the financial statements.
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
December 8,1981
Year Ended Year Ended Year Ended (Inception) to
12/31 12/31 12/31 December 31,
1997 1996 1995 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (149,987) $ 2,767 $ (6,853) $ (371,248)
Adjustments to reconcile
net (loss) to net cash used
by operating activities:
Amortization - - - 750
Depreciation 523 - - 523
Stock issued for
Services/expenses 26,500 - - 52,925
Changes in operating assets
and liabilities:
Increase (decrease) in
accounts payable 3,867 6,533 1,073 8,174
Increase in stock receivable(380) - - (380)
Increase in due to
Ameristar Group Inc. 122,500 0 122,500
NET CASH PROVIDED(USED) BY
OPERATING ACTIVITIES 3,023 (3,766) (5,780) (186,756)
CASH FLOWS FROM INVESTING ACTIVITIES:
Organization costs - - (750)
Purchased Fixed Asset (3,138) (3,138)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
of common stock 380 3,630 5,800 252,344
Proceeds from issuance
of Class B common stock - - - 10,000
Deferred offering costs - - - (71,435)
NET CASH PROVIDED (USED)BY
FINANCING ACTIVITIES (2,758) 3,630 5,800 187,021
NET INCREASE (DECREASE) IN CASH 265 (136) 20 265
CASH, BEGINNING OF PERIOD $ 0 $ 136 $ 116 $ 0
CASH, END OF PERIOD $ 265 $ 0 $ 136 $ 265
The accompanying notes are an integral part of the financial statements.
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO 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 were 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, former
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 June 30, 1998 at which time the
parties will determine if this agreement is to be extended or modified.
The company issued 490,000 shares of common stock on October 6, 1997 for
consideration of consulting services performed for the company. The 490,000
shares were 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 issued 400,000 of the
490,000 shares under the 1997 Stock Award Plan. On December 11, 1997, 40,000
shares were issued for consideration of consulting services performed for the
company.
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO 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.
NOTE 6 - MERGER AND RECISION 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.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - CONTINUED
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 - NAME CHANGED
The corporate name has been changed from Triangle, Inc. to PetHealth Systems,
Inc. effective February 10, 1997.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons, Compliance with Section 16(a) of the Exchange
Act.
The officers and directors of the Company as of the date of
this report are:
Name Position
Robert Gordon Director, President
(Chief Executive
Officer), Chief
Financial Officer
Gera Laun Secretary
Chip Kurzenhauser Director
Bryan Skelton Director
Robert Gordon is President as well as Chief Financial Officer
and Director. He is also President and a Director of Concorde
Strategies Group, Inc., a public company that intends to acquire
small growing businesses. Mr. Gordon was previously Executive Vice
President of Contex, Inc., an investment banking and consulting
firm in Naples, Florida. Prior to Contex, Mr. Gordon was Managing
Director of Taffy's Dancewear, an apparel company, President and
Chief Operating officer of a public company, Maxaxam Corporation,
that manufactured precision parts and conducted research and
development, a management consultant, Executive Vice President of
Marsan Securities Co., Inc., a financial services company, and
Director of MIS for Kinney Shoe Corporation. Mr. Gordon has a B.A.
degree in Economics from Union College.
Gera Laun is Secretary. Ms. Laun is also Secretary and
Treasurer of Ameristar Capital Corporation, an equipment leasing
company, and Secretary of Concorde Strategies Group, Inc., a public
company that intends to acquire small growing businesses.
Previously, Ms. Laun was Manager, Processing Department of Vendor
Funding Co., Inc. an equipment leasing and asset based lending
company. Also, Ms. Laun was Manager, Mail Order Catalog/Retail for
La Shack, Inc.
Chip Kurzenhauser is a Director. Mr. Kurzenhauser has, since
1990, been self employed as a business representative and
consultant for various companies and projects. Among his work
during this period he has served as a consultant to American
Exposition, Inc. A New York City based company engaged in
conducting interactive, multi-media and digital video trade
seminars; Post Perfect, Inc., also a New York City based company
engaged in video post production; and he has been engaged as a
producer/consultant by several media production companies
including, among others, EMI Music Group, Globalvision, Inc. and
Crystal Vision Productions. Prior thereto, from 1988 to 1990, Mr.
Kurzenhauser served as Vice President for Finance and production
Control for Viacom Productions, inc. Mr. Kurzenhauser holds a
Bachelor of Arts Degree from Hofstra University and a Masters of
Business Administration from Fordham University. He has also won
critical acclaim for his work and has received EMMYS for his work
with both "20/20" and "The Great American Dream Machine."
Bryan Skelton, CPA, is a Director. For the past ten years, Mr.
Skelton has been associated with Lucent Technologies, and is
currently Assistant Controller of Consolidations and External
Reporting. Previously, Mr. Skelton was a Management Consultant for
KPMG Peat Marwick performing financial consulting services. Prior
to that, Mr. Skelton was involved in financial systems development
for AT&T Information Systems. Mr. Skelton has an M.S. degree in
taxation and an MBA degree in finance.
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to the registrant under Rule 16a-3(e) during its
most recent fiscal year, and Forms 5 and amendments thereto
furnished to the registrant with respect to its most recent fiscal
year, and any written representation referred to in Item 405(b) of
Regulation S-B, no director, officer, beneficial owner of more than
10% of the Common Stock of the registrant failed to file on a
timely basis any reports required by Section 16(a) of the Exchange
Act during the most recent fiscal year.
Item 10. Executive Compensation.
The following table sets forth the compensation paid to the
Chief Executive Officer, of the registrant in the three fiscal
years ended December 31, 1997. No other executive officers of the
registrant have received any compensation in the three fiscal years
ended December 31, 1997.
Subsequent to December 31, 1996, the Company issued securities
to Robert K. Ellis, former President and director of the Company,
and to Peter Ellis, former Secretary and Treasurer and director of
the Company, for the services provided by such persons for many
years to the Company for which they were not paid any compensation.
Such securities (shares of Common Stock) replace the Warrants which
had previously been proposed to be issued to such persons. See
Part II, Item 5. The shares issues in 1997 were of minimal value.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARs(#) ($) ($)
- --------------------------------------------------------------------------------
Robert Gordon 1997 -0- -0- -0- -0- -0- -0- -0-
President,
CEO, CFO
Robert K. Ellis 1996 $-0- -0- -0- $-0- -0- -0- $-0-
CEO and 1995 -0- $-0- -0- -0- -0- -- -0-
President
<PAGE>
Cash Compensation.
As of the date of this report, there is no policy regarding payment
of any fees to non-executive directors, but such persons will be
reimbursed for out-of-pocket expenses related to the business of
the Company or attendance at meetings of the board of directors.
Stock Plans.
Incentive Stock Option Plan.
The Company adopted an Incentive Stock Option Plan ("ISOP") in
1988, and the shareholders of the Company readopted the ISOP in
February 1997, to provide for the grant of options to purchase
Common Stock; the options are intended to qualify for the delayed
income recognition provisions of Section 422A of the Internal
Revenue Code of 1986, as amended. 50,000 shares are reserved for
issue on exercise of options which may be granted in the future.
Options may be granted to employees and directors of the Company,
as determined by the board of directors or a committee thereof.
The exercise price must always equal at least the fair market value
of the Common Stock on option grant date; options granted to
holders of more than 10% of the Company's Common Stock must have an
exercise price equal to 110% of fair market value on the option
grant date. Options may have a term of up to 10 years, except for
options granted to 10% holders, which must have a term not
exceeding 5 years. Options to purchase 50,000 shares have been
granted to date. The Company has filed with the Commission a
registration statement on Form S-8 to register the resale of such
shares as may be issued on exercise of options which may be granted
in the future.
1997 Stock Award Plan.
In 1997, the Company adopted the 1997 Stock Award Plan, pursuant to
which up to 400,000 shares of Common Stock may be issued to persons
for consulting or other services provided to the Company, as
determined by the board of directors or a committee thereof. Such
shares will be valued based on market price at the time of issue
and the services provided; issuance of shares will constitute
income to the recipient and be treated as an expense on the books
of the Company. The Company has filed a registration statement on
Form S-8 to register the resale of such shares as may be issued.
In February 1997 the new board of directors of the Company approved
the issuance of 75,000 shares to two former officers (37,500 shares
each), for services valued at $75,000 ($37,500 each) previously
provided to the Company. See "Certain Relationships and Related
Transactions."
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The number of issued and outstanding shares of Common Stock of the
registrant, and the percentage of the total of the outstanding
shares, owned as of the date of this report, by (i) each officer
and director of the registrant, (ii) each person known to the
registrant to own 5% or more of the total issued and outstanding
shares of Common Stock of the registrant, and (iii) the officers
and directors of the registrant as a group, are stated below.
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership Class
Common, Robert Gordon* 20,000 shares 1.7%
no par 444 Madison Ave., Ste 1710 direct
New York, NY 10022
Gera Laun* 5,000 shares 0.4%
444 Madison Ave., Ste 1710 direct
New York, NY 10022
Chip Kurzenhauser* 5,000 shares 0.4%
444 Madison Ave., Ste 1710 direct
New York, NY 10022
Bryan Skelton* 49,600 shares 4.3%
444 Madison Ave., Ste 1710 direct
New York, NY 10222
Remsen Group, Ltd. 100,000 shares 8.7%
40 Remsen Street direct
Brooklyn, NY 11223
J. J. Kadele, Inc. 100,000 shares 8.7%
37 Parkway East direct
Yonkers, NY 10701
Wilmont Holdings Corp. 100,000 shares 8.7%
33 Wilputte Place direct
New Rochelle, NY 10804
Robert K. Ellis 65,378 shares 5.7%
830 N.E. Loop 410 Ste 305B direct
San Antonio, TX 78209
Peter Ellis 73,409 shares 6.4%
1938 W Woodlawn direct
San Antonio, TX 78201
David Joshua Consulting Inc. 60,000 shares 5.2%
92 Orange Avenue Box 343 direct
Suffern, NY 10901
Officers and directors
as a group (4 persons) 79,600 6.9%
* Officer and/or director
<PAGE>
Item 12. Certain Relationships and Related Transactions
Exchange Transaction. The original Exchange Agreement,
pursuant to which PetCare, Inc. was acquired as a wholly-owned
subsidiary, and the Company was recapitalized by the reverse stock
split, was negotiated at arms' length between the former directors
of the Company, and the directors of PetCare, Inc. (such four
individuals became the directors of the Company following the
Exchange in February 1997, then resigned later in 1997). The shares
of Common Stock of PetCare, Inc. which were acquired by the
PetCare, Inc. shareholders were purchased by such persons for
$3,000 aggregate cash consideration, and for services provided by
such persons and by other shareholders of PetCare, Inc. Subsequent
to their capitalization of PetCare, additional funding of
approximately $50,000 has been provided by Ameristar Group
Incorporated, a corporation owned by Mr. Saposnick and Mr. Messina,
former directors of the registrant.
Issuance of Shares to Officers. During the two fiscal years
ended December 31, 1996 the Company issued 6,575 shares of
restricted Common Stock to two former officers at $2.01 per share
(for a total of $13,150 cash) contributed to the Company by such
persons to pay general and administrative expenses.
Consulting Agreement - Ameristar Group, Incorporated. The
Company has agreed to pay Ameristar Group, Incorporated $10,000 per
month for the 12 months after 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. 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, who were directors in
fiscal 1997 and who continue to be beneficial shareholders of the
Company.
Issuance of Shares by PetCare, Inc. Prior to Exchange. Prior
to the negotiation of the Agreement and Plan of Share Exchange
between PetCare, Inc. and the Company, in December, 1996 PetCare,
Inc. issued 300,000 shares of Common Stock, to persons not
affiliated with PetCare, Inc., for services provided to PetCare
including legal, accounting and marketing consulting services.
Such shares were exchanged for an equal number of shares of Common
Stock of PetHealth Systems, Inc. upon consummation of the Exchange.
Such shares of PetHealth Systems, Inc. constituted restricted
securities under the 1933 Act and Rule 144 promulgated thereunder
by the Commission, however, because such shares were issued as
compensation under a compensatory plan or contract pursuant to Rule
701 promulgated by the Commission, such shares may be resold by the
holders without registration under the Act commencing 90 days after
issuance by PetCare, Inc.
Proposed Acquisition of Animal Health Center. Dr. Kenneth J.
Rotondo, an officer, director and principal shareholder of the
Company, is the owner and chief executive officer of Animal Health
Center ("AHC"), a veterinary hospital located in Clifton Park, New
York. In fiscal 1997, the Company had entered into a letter of
intent with Dr. Rotondo to acquire AHC on terms to be finalized.
However, this transaction was abandoned by the parties in fiscal
1997 due to the recision of the Exchange. See Part I, Item 1.<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Title of Exhibit
2.0 Agreement and Plan of Share Exchange(1)
3.1 Amendments to Articles of Incorporation(2)
10.1 1997 Stock Award Plan(2)
10.2 Incentive Stock Option Plan(2)
(1) Incorporated by reference from exhibits filed with the Form 8-K, which was
filed with the Commission on February 19, 1997.
(2) Incorporated by reference from exhibits filed with the
registrant's Registration Statement on Form S-8, filed
February 21, 1997, registration number 333-22203.
(b) Reports filed on 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 20, 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.
Form 8-K filed on July 31, 1997 re: recision of the merger
agreement with PetCare, Inc.
Form 8-K/A filed on October 14, 1997 re: issuance of Common
Shares
Signatures
In accordance with Section 13 of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PetHealth Systems, Inc.
(Registrant)
/s/ Robert Gordon
Robert Gordon
March 30, 1998
Pursuant to the requirements of the Exchange Act, this report has
been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Robert Gordon
Robert Gordon, President, Chief
Financial Officer, Director
March 30, 1998
/s/ Gera Laun
Gera Laun, Secretary
March 30, 1998
/s/ Chip Kurzenhauser
Chip Kurzenhauser, Director
March 30, 1998
/s/ Bryan Skelton
Bryan Skelton, Director
March 30, 1998
