-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PfVXpH/HfRs7I8Tc22KkMhysejrdZl82M0Bbvh/DFsG69LdH214H5R97TqNH7ZhR WMzkDIQ0R2ylfEdgQCdWyw== 0001046532-99-000003.txt : 19990415 0001046532-99-000003.hdr.sgml : 19990415 ACCESSION NUMBER: 0001046532-99-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PETHEALTH SYSTEMS INC CENTRAL INDEX KEY: 0000832810 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 930969365 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-22151 FILM NUMBER: 99593222 BUSINESS ADDRESS: STREET 1: 444 MADISON AVE STE 1710 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127507878 MAIL ADDRESS: STREET 1: 444 MADISON AVENUE STREET 2: SUITE 1710 CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: TRIANGLE INC DATE OF NAME CHANGE: 19930701 10-K 1 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, 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.
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 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
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 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 --------- ---------
The accompanying notes are an integral part of the financial statements. F-11 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, 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
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 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.
F-13 PETHEALTH SYSTEMS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1998, 1997 and 1996 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 --------- ----------- ---------- ---------
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 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 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
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, 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)
*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 -----END PRIVACY-ENHANCED MESSAGE-----