<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996.
Commission file number 0-11284
Z-Axis Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-0910490
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
7395 East Orchard Road, Suite A-100
Greenwood, Colorado 80111-2509
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 713-0200
Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
The number of common shares outstanding as of September 30, 1996: 3,765,000
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CONTENTS
PART I FINANCIAL STATEMENTS.
Item 1. Condensed Balance Sheets, March 31 and September 30, 1996. 3
Condensed Statements of Operations, three and six month
periods ended September 30, 1996 and 1995. 4
Condensed Statements of Cash Flows, six month periods
ended September 30, 1996 and 1995. 4
Notes to Condensed Financial Statements. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 5
PART II OTHER INFORMATION. 6
Item 1. Legal proceedings. 6
Item 2. Changes in securities. 6
Item 3. Defaults upon senior securities. 6
Item 4. Submission of matters to a vote of security holders. 6
Item 5. Other information. 6
Item 6. Exhibits and reports on Form 8-K. 6
SIGNATURES 7
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
September 30, March 31,
1996 1996
(Unaudited)
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ASSETS
Current assets:
Cash $ 74,980 $ 118,823
Trade accounts receivable 899,491 706,597
Other current assets 34,748 51,857
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Total current assets 1,009,219 877,277
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Property and equipment, at cost 2,149,112 2,157,602
Accumulated depreciation (1,761,344) (1,701,014)
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Net property and equipment 387,768 456,588
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Deferred income taxes 196,354 171,000
Capitalized software costs 134,339 134,339
Other assets 20,601 11,941
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TOTAL ASSETS $ 1,748,281 $ 1,651,145
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 208,593 $ 183,662
Accrued expenses 265,751 221,921
Customer deposits 42,768 29,553
Current portion of long-term obligations 124,609 48,994
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Total current liabilities 641,721 484,130
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Long-term obligations 101,371 110,129
Stockholders' equity:
Common stock 3,765 3,759
Additional paid in capital 1,439,231 1,438,487
Retained earnings (deficit) (437,807) (385,360)
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Total stockholders' equity 1,005,189 1,056,886
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,748,281 $ 1,651,145
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See notes to condensed financial statements.
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CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
-------------------------------------------------
1996 1995 1996 1995
(Unaudited) (Unaudited)
-------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 886,923 $ 667,442 $1,275,381 $1,266,007
Operating expenses:
Production 328,619 316,088 573,882 616,834
General and administrative 224,817 185,295 391,007 374,551
Marketing 157,610 149,032 315,313 312,759
Depreciation 39,782 43,437 82,411 89,242
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Total operating expenses 750,828 693,852 1,362,613 1,393,386
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Income (loss) from operations 136,095 (26,410) (87,232) (127,379)
Other (expense) income, net: (7,837) (4,417) 8,985 (9,611)
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Income (loss) before income taxes 128,258 (30,827) (78,247) (136,990)
Income tax (expense) benefit (42,346) 9,958 25,800 41,758
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NET INCOME (LOSS) $ 85,912 $ (20,869) $ (52,447) $ (95,232)
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INCOME (LOSS) PER COMMON SHARE OF STOCK:
NET INCOME (LOSS) PER COMMON SHARE OF STOCK $0.02 ($0.01) ($0.01) ($0.03)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD 3,765,000 3,759,000 3,765,000 3,759,000
- ----------------------------------------------------------------------------------------------
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</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
Six months ended September 30,
------------------------------
1996 1995
(Unaudited)
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CASH FLOWS FROM OPERATIONS:
Net cash used in operations $(79,541) $(79,562)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (16,097) (61,832)
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Net cash used in investing activities (16,097) (61,832)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit 80,000
Debt and capital lease payments (28,205) (58,606)
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Net cash provided by (used in) financing activities 51,795 (58,606)
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Net (decrease) in cash (43,843) (200,000)
Cash , beginning of period 118,823 285,150
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CASH, END OF PERIOD $ 74,980 $ 85,150
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See notes to condensed financial statements.
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NOTES TO CONDENSED FINANCIAL STATEMENTS.
NOTE 1.
The accompanying Condensed Balance Sheets at September 30, 1996 and March
31, 1996, Condensed Statements of Operations for the three and six month
periods ended September 30, 1996 and 1995 and Cash Flows for the six month
periods ended September 30, 1996 and 1995, should be read in conjunction with
the Company's financial statements and notes for the years ended March 31,
1996, 1995 and 1994. These condensed financial statements contain all
adjustments that management considers necessary for fair presentation.
Results for interim periods are not necessarily indicative of results for a
full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the Company's
financial statements and notes for the fiscal years ended March 31, 1996,
1995 and 1994. Except where otherwise noted, references to periods are to
periods of fiscal years ended March 31 of the year stated.
FINANCIAL CONDITION.
At September 30, 1996, the Company's working capital position was $367,498,
an increase of $143,797 during the current quarter and a decrease of $25,649
over the position at March 31, 1996. The increase for the second quarter is
in part attributed to $80,000 in borrowings on a line of credit. Cash flow
from operations was $(79,541) for the six months ended September 30, 1996, as
compared to $131,925 for the three months ended June 30, 1996. It is
management's opinion that through cash management and other measures, working
capital for the foreseeable future will be sufficient to meet operating
requirements.
Capital additions were $3,217 and $12,880 during the three month periods
ended June 30 and September 30, 1996, respectively.
Debt and capital lease payments were $15,154 and $13,051 during the three
month periods ended June 30 and September 30, 1996, respectively.
RESULTS OF OPERATIONS.
During the three and six month periods ended September 30, 1996, results of
operations were $136,095 and $(87,232), respectively. Results of operations
for the corresponding periods of the preceding year were $(26,410) and
$(127,379), respectively. The positive operating income during the second
quarter of the current fiscal year was primarily attributable to
significantly higher sales volumes, as compared to the first quarter which
experienced slower sales volumes. Operating expenses increased by 8% during
the three month period ended September 30, 1996 when compared to
corresponding period of the prior fiscal year. However, operating expenses
decreased by 2% during the six month period ended September 30, 1996 when
compared to the corresponding period of the prior fiscal year. Production
expenses for the second quarter of fiscal year 1997 were higher than those of
the corresponding quarter of the proceeding year primarily due to use of
contract labor which supported the increase in sales volume. Production
expenses for the six month period ended September 30, 1996 were lower than
those of the corresponding period of the preceeding year primarily due to
staff reduction which occurred during the first quarter of fiscal year 1997.
Included in the production expenses for the three and six months ended
September 30, 1996 are approximately $36,800 and $78,000, respectively, of
research and development cost, as compared to $33,700 and $50,000 during the
corresponding periods of the prior fiscal year. Management anticipates that
sales volumes and operating results are expected to stabilize during the
third and fourth quarters.
The Company had a net deferred tax asset of $196,354 at September 30, 1996 as
compared to $171,000 at March 31, 1996. The increase in the deferred tax
asset was the direct result of the corresponding decrease in the Company's
income before taxes for the six months ended September 30, 1996. The Company
has established a valuation allowance of $85,000 at March 31, 1996 and
September 30, 1996 against the deferred tax asset as management believes that
it is more likely than not, that the deferred tax asset related to tax
credits and a portion of the loss carryforwards may not be realized before
all carryforward expiration dates.
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PART II OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders of the Corporation was held at the
corporate offices on September 16, 1996. The following individuals
were elected to serve as directors of the corporation:
NAME SHARES VOTED FOR SHARES VOTED AGAINST ABSTENTIONS
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Steven H. Cohen 2,186,719 5,500 6,950
Alan Treibitz 2,187,219 5,000 6,950
Marilyn T. Heller 2,186,719 5,500 6,950
Paul I. Bortz 2,187,219 5,000 6,950
Phillip J. Hogue 2,187,219 5,000 6,950
The shareholders also voted to adopt the Employee Stock Option Plan as
described in the Proxy dated July 31, 1996. The shares were voted at
the Annual Meeting of Shareholders as follows:
SHARES VOTED FOR SHARES VOTED AGAINST ABSTENTIONS
---------------------------------------------------
Adoption of the Employee
Stock Option Plan 2,010,624 39,186 149,359
ITEM 5. OTHER INFORMATION.
In August 1996, the Company moved it's principal offices to 7395 E.
Orchard Road, Suite A-100, Greenwood Village, Colorado 80111-2509
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) No exhibits.
(b) No reports on Form 8-K have been filed during the quarter ended
September 30, 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Z-AXIS CORPORATION
By: /S/ ALAN TREIBITZ
-------------------------------
Alan Treibitz
President
Date: November 14, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, 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/ ALAN TREIBITZ Director, President, Treasurer,
- ---------------------- Chief Financial Officer, Principal
Alan Treibitz Accounting Officer November 14, 1996
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