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 fiscalyear ended December 31, 1998 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
incorporation or organization) Number
4255 Route 9, Suite D
Freehold, New Jersey 07728
(Address/principal executive offices) (Zip Code)
Issuer's Telephone Number: (732) 409-1212
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, 1998: $ -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 April 9, 1999, 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
April 9, 1999.
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
Recission 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.
On September 25, 1998, the registrant, Martin I.
Saposnick, a former director of the registrant (and
representative of 720,000 shares of the registrant's
issued and outstanding common stock) and Jagerton Research
Limited, or its assignee, entered into a Stock Purchase
Agreement whereby Martin I. Saposnick agreed to sell
720,000 of the registrant's issued and outstanding common
stock to Jagerton Research Limited or its assignee for the
purchase price of $225,000. Such transaction closed on
December 14, 1998 upon full payment of the purchase price
and resignation of the registrant's directors and officers.
As of March 31, 1999, 730,000 of the registrant's issued
and outstanding common stock have been delivered to
Jagerton Research Limited, but such shares have not been assigned
to Jagerton Research Limited's assignee.
Facilities and Employees
The registrant presently is provided administrative
support services by Richard I. Anslow & Associates, its
present legal counsel. See Item 12.
As of the date of this Report, the registrant has no
employees.
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 April 7, 1999, there were approximately 81
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, 1998, 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.
On September 25, 1998, the registrant, Martin I.
Saposnick, a former director of the registrant (and
representative of 720,000 shares of the registrant's
issued and outstanding common stock) and Jagerton Research
Limited, or its assignee, entered into a Stock Purchase
Agreement whereby Martin I. Saposnick agreed to sell
720,000 of the registrant's issued and outstanding common
stock to Jagerton Research Limited or its assignee for the
purchase price of $225,000. Such transaction closed on
December 14, 1998 upon full payment of the purchase price
and resignation of the registrant's directors and officers.
As of March 31, 1999, 730,000 of the registrant's issued
and outstanding common stock have been delivered to
Jagerton Research Limited, but such shares have not been
assigned to Jagerton Research Limited's assignee.
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,
<TABLE>
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Total Assets $ -0- $3,260 $ -0- $ 136 $ 116
Short-Term
Obligations $131,525 $130,674 $4,307 $10,840 $9,767
Net Sales $ -0- $ -0- $ -0- $ -0- $ -0-
Net Income
(Loss) $<4,111> $(149,987) $2,767 $(6,853) $(5,216)
Net Income
(Loss) per
Common Share $ (a) $(.12) $ (a) $ (a) $ (a)
Dividends per
Common Share $ -0- $ -0- $ -0- $ -0- $ -0-
(a) Less than $0.01 per share.
</TABLE>
Plan of Operation
For the 12 months ending December 31, 1999 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 from the date of
the acquisition of the 730,000 issued and outstanding
shares of registrant by Jagerton Research Limited, the
registrant has had nominal general and administrative
expenses.
Liquidity and Capital Resources
As of December 31, 1998 the registrant's current
liabilities exceeded current assets by $131,525. For such
year, the registrant recognized a net loss of $4,111
on $-0- revenues, compared to a net loss in 1997 of
$149,957 on $ -0- revenues, and $76,000 of other
income recognized from the forgiveness of debt. Expenses
in 1997 and 1998 were comprised of general and
administrative costs associated with audit, legal and SEC
reporting obligations; such costs were funded in 1998 by
advances from Ameristar. See Part II, Item 5 "Recent Sales
of Unregistered Securities."
Results of Operations
For the two years ended December 31, 1998 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,
1998 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 1997 or 1998.
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 through fiscal 1998.
On March 25, 1997, the registrant filed a Current
Report on Form 8-K concerning the change in accounting
firms.
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
Index to Financial Statements
<TABLE>
<S> <C>
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
</TABLE>
F-9
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, 1998 and 1997, and the
related statements of operations, shareholders'
equity (deficit) and cash flows for the years
ended December 31, 1998, 1997 and 1996. 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, 1998 and 1997, and the results of
its operations and its cash flows for the years
ended December 31, 1998, 1997 and 1996.
/s/ Janet Loss
- -----------------------
Janet Loss, C.P.A., P.C.
March 28, 1999
F-10
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<S> <C> <C>
December 31,December 31,
1998 1997
----------- ------------
ASSETS
CURRENT ASSETS:
Cash in checking $ 0 $ 265
Stock Receivable 0 380
---------- -----------
TOTAL CURRENT ASSETS $ 0 $ 645
---------- ----------
FIXED ASSETS:
Equipment 03,138
Less accumulated appreciation 0 ( 523)
Net Fixed Assets 0 2,615
--------- ----------
TOTAL ASSETS $ 0 $ 3,260
--------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 406 $ 8,174
Accrued interest 3,819 0
Due to Jagerton Research Ltd. 127,300 0
Due to Ameristar Group
Incorporated (see Note 2) 0 122,500
-------- --------
TOTAL CURRENT LIABILITIES 131,525 130,674
-------- --------
STOCKHOLDERS' (DEFICIT):
Preferred Stock, $.10 par value,
100,000,000 shares authorized
none issued 0 0
Common Stock, Class A no par value,
800,000,000 shares authorized,
1,153,027 issued and outstanding 243,834 243,834
Deficit accumulated during
Development stage (375,359) (371,248)
--------- ---------
TOTAL STOCKHOLDERS' (DEFICIT) (131,525) (127,414)
-------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 0 $ 3,260
--------- ---------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-11
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
December 8,1981
<S> <C> <C> <C> <C>
Year Ended Year Ended Year Ended (Inception)to
December 31, December 31, December 31, December 31,
1998 1997 1996 1998
----------- ----------- ------------ -----------
Revenues $ 0 $ 0 $ 0 0
OPERATING EXPENSES:
Legal and accounting 2,625 46,650 2,975 104,288
Management services
(Note 2) 0 120,000 0 120,000
Consulting Fees 0 47,000 0 47,000
Depreciation Expense 920 523 0 1,443
Filing and transfer fees 841 5,550 1,649 14,901
Public relations 0 0 0 14,414
Office and Printing 202 4,776 0 4,978
Taxes, Franchise 220 685 0 905
Travel Expense 0 534 0 534
Other Expenses 0 269 64 35,168
------- ------- ----- --------
TOTAL OPERATING EXPENSES 4,808 225,987 4,688 343,631
-------- ------- ------ --------
NET (LOSS) BEFORE
OTHER INCOME (EXPENSES)( 4,808) ( 225,987) ( 4,688) ( 343,631)
------------- ----------- -------- ----------
OTHER INCOME AND (EXPENSES):
Writeoff of advances on
recision of merger 0 0 0 ( 119,110)
Sale of business plans 0 76,000 0 76,000
Loss on sale of fixed
assets ( 1,695) 0 0 ( 1,695)
Forgiveness of debt 6,211 0 7,455 13,666
Interest expense
(income) ( 3,819) ( 589)
------------ ---------
TOTAL OTHER INCOME
(EXPENSES) 697 76,000 7,455 ( 31,728)
--------- ------- ------ ----------
NET INCOME (LOSS) ($ 4,111) ($ 149,987) $ 2,767 ($375,359)
----------- ---------- --------- ----------
NET (LOSS) PER
COMMON SHARE N/A ($ .08 ) $ .01 $ N/A
---------- ----------- --------- ---------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING 1,153,027 1,888,492 284,781 N/A
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-12
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1998 and 1997
<TABLE>
<S> <C> <C> <C>
Common Stock Accumulated Total
Number During Stockholders'
of Development Equity
Shares Amount Stage (Deficit)
--------- ------- ------------- -----------
Balance,
January 1, 1997 $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 exchange
for 600,000,000 shares of
Common Stock of
PetHealth Systems, Inc. 600,000,000
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
recision of merger with PetCare, Inc. ( 2,700,000)
490,000 shares issued for consulting
services provided to the company as
of October, 1997 490,000 24,500 24,500
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)
Net (Loss) for the year ended
December 31, 1998 ( 4,111) ( 4,111)
--------- ---------- ----------- -------------
Balance,
December 31, 1998 1,153,027 $ 243,834 ($ 375,359) ($ 131,525)
--------- ---------- ----------- ------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-13
PETHEALTH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<S> <C> <C> <C> <C>
December 8, 1981
Year Ended Year Ended Year Ended (Inception)to
December 31, December 31, December 31, December 31,
1998 1997 1996 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ($ 4,111) ($ 149,987) $ 2,767 ($ 375,359)
Adjustments to reconcile
net (loss) to net cash used
by operating activities:
Amortization 0 0 0 750
Depreciation 920 523 0 1,443
Stock issued for
Services/expenses 0 26,500 0 52,925
Changes in operating assets
and liabilities:
Increase (decrease) in
accounts payable ( 7,768) 3,867 ( 6,533) 406
Increase accrued interest 3,819 0 0 3,819
Increase stock receivable 380 ( 380) 0 0
Increase due to Jagerton
Research Limited 127,300 0 0 127,300
Increase in due to
Ameristar Group Inc.( 122,500) 122,500 0 0
------------ ------- ---------- ----------
NET CASH PROVIDED(USED) BY
OPERATING ACTIVITIES( 1,960) 3,023 ( 3,766) ( 188,716)
------------ ------ ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Organization costs 0 0 0 ( 750)
Purchased Fixed Assets 1,695 ( 3,138) 0 ( 1,443)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
of common stock 0 380 3,630 252,344
Proceeds from issuance
of Class B common stock 10,000
Deferred offering costs 0 0 0 ( 71,435)
--------- ------- --------- ----------
NET CASH PROVIDED (USED)BY
FINANCING ACTIVITIES 1,695 ( 2,758) 3,630 188,716
--------- ------- -------- ----------
NET INCREASE (DECREASE)
IN CASH ( 265) 265 ( 136) 0
CASH, BEGINNING OF PERIOd$ 265 $ 0 $ 136 $ 0
CASH, END OF PERIOD$ 0 $ 265 $ 0 $ 0
--------- ----------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-14
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
- -----------------------------------
In 1997, the Company accrued $10,000 per month for
financial consulting and general administrative support
services which were provided to the Company by Ameristar
Group Incorporated. Such agreement was not negotiated
at arm's length due to the relationship between the
Company and Mr. Saposnick and Mr. Messina, former
directors and record of beneficial shareholders' of the
Company.
In 1997, the Company also received advances of monies
for its operating expenses from Ameristar Group
Incorporated, in accordance with an agreement between the
two companies.
On September 25, 1998, a promissory note was signed
for $127,300 for monies due Ameristar Group Incorporated
with interest accruing at 12% per annum. Subsequently,
this note was paid for by Jagerton Research Limited
in December of 1998, and the Company now owes the
liability of $127,300 to Jagerton Research Limited with
interest accruing at 12%.
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.
F-15
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,
F-16
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.
F-17
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
- ---------------- -------------------------
Giuseppe
Coniglione Director, President
Chief Executive Officer,
Chief Financial Officer
Secretary
Giuseppe Coniglione is President, Chief Executive Officer,
Chief Financial Officer, Secretary and Director. Mr.
Coniglione has worked as an asset manger since 1988, most
recently in partnership with 2 individuals. Prior to
such time he ran and owned an independent asset management
company from 1993 to mid - 1998.
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, 1998. No other
executive officers of the registrant have received any
compensation in the three fiscal years ended December 31,
1998.
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
<TABLE>
<S> <C> <C>
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
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 1998 -0- -0- -0- -0- -0- -0- -0-
President, 1997 -0- -0- -0- -0- -0- -0- -0-
CEO, CFO
Robert K. Ellis 1996 $-0- -0- -0- $-0- -0- -0-$-0-
CEO and
President
</TABLE>
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.
<TABLE>
<S> <C> <C> <C>
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership Class
Common, Giuseppe Coniglione* 680,000 shares 58.97%
no par 15466 SW 146th Street (additional option to (Not including
Miami, FL 33196 Purchase 50,000 shares) option)
direct
Officers and directors
as a group (1 person) 680,000 58.97%
(Not including
option)
</TABLE>
*Officer and/or director. As of December
31, 1998 Jagerton Research Limited did not effectuate the
transfer of such 680,000 shares. However, Jagerton
Research Limited and Mr. Coniglione have agreed to such
transfer based on services rendered to the registrant by
Mr. Coniglione
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.
On September 25, 1998, the registrant, Martin I.
Saposnick, a former director of the registrant (and
representative of 720,000 shares of the registrant's
issued and outstanding common stock) and Jagerton Research
Limited, or its assignee, entered into a Stock Purchase
Agreement whereby Martin I. Saposnick agreed to sell
720,000 of the registrant's issued and outstanding common
stock to Jagerton Research Limited or its assignee for
the purchase price of $225,000. Such transaction closed
on December 14, 1998 upon full payment of the purchase
price and resignation of the registrant's directors and
officers. As of March 31, 1999, 730,000 of the
registrant's issued and outstanding common stock have
been delivered to Jagerton Research Limited, but such
shares have not been assigned to Jagerton Research
Limited's assignee.
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.
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/ Giuseppe Coniglione
----------------------
Giuseppe Coniglione
April 14, 1999
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/ Giuseppe Coniglione
-------------------
Giuseppe Coniglione, President, Chief
Executive Officer, Chief
Financial Officer, Secretary
and Director
April 14, 1999
