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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 December 31, 1996.
Commission file number 0-11284
Z-Axis Corporation
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(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 Identification No.)
incorporation of organization)
7395 East Orchard Road, Suite A-100
Greenwood Village, Colorado 80111
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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 December 31, 1996: 3,765,000.
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CONTENTS
PART I FINANCIAL STATEMENTS.
Item 1. Condensed Balance Sheets, March 31 and December 31, 1996. 3
Condensed Statements of Operations, Three and nine month
periods ended December 31, 1996 and 1995. 4
Condensed Statements of Cash Flows, Nine month periods
ended December 31, 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
December 31, March 31,
1996 1996
(Unaudited)
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ASSETS
Current assets:
Cash $ 20,407 $ 118,823
Trade accounts receivable 701,381 706,597
Other current assets 33,757 51,857
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Total current assets 755,545 877,277
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Property and equipment, at cost 2,157,268 2,157,602
Accumulated depreciation (1,799,726) (1,701,014)
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Net property and equipment 357,542 456,588
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Deferred income taxes 244,554 171,000
Capitalized software costs 134,339 134,339
Other assets 20,281 11,941
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TOTAL ASSETS $ 1,512,261 $ 1,651,145
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 131,776 $ 183,662
Accrued expenses 205,315 221,921
Customer deposits 74,661 29,553
Current portion of long-term obligations 120,491 48,994
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Total current liabilities 532,243 484,130
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Long-term obligations 73,835 110,129
Stockholders' equity:
Common stock 3,765 3,759
Additional paid in capital 1,439,231 1,438,487
Retained earnings (deficit) (536,813) (385,360)
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Total stockholders' equity 906,183 1,056,886
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,512,261 $ 1,651,145
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See notes to condensed financial statements.
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CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
Three months ended Nine months ended
December 31, December 31,
--------------------------------------------------
1996 1995 1996 1995
(Unaudited) (Unaudited)
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<S> <C> <C> <C> <C>
Net sales $ 465,935 $ 820,280 $1,741,316 $2,086,287
Operating expenses:
Production 261,773 374,635 835,655 991,469
General and administrative 174,918 181,379 565,926 555,930
Marketing 134,401 146,732 449,713 459,491
Depreciation 38,382 43,018 120,793 132,260
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Total operating expenses 609,474 745,764 1,972,087 2,139,150
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Income (loss) from operations (143,539) 74,516 (230,771) (52,863)
Other (expense) income, net: (3,668) (8,604) 5,318 (18,215)
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Income (loss) before income taxes (147,207) 65,912 (225,453) (71,078)
Income tax (expense) benefit 48,200 (18,302) 74,000 23,456
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NET INCOME (LOSS) $ (99,007) $ 47,610 $ (151,453) $ (47,622)
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INCOME (LOSS) PER COMMON
SHARE OF STOCK:
NET INCOME (LOSS) PER COMMON
SHARE OF STOCK $ (0.03) $ 0.01 $ (0.04) $ (0.01)
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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
Nine months ended December 31,
------------------------------
1996 1995
(Unaudited)
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CASH FLOWS FROM OPERATIONS:
Net cash used in operations $(107,335) $ 61,477
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (26,284) (72,960)
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Net cash used in investing activities (26,284) (72,960)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit 80,000
Debt and capital lease payments (44,797) (81,124)
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Net cash provided by (used in) financing
activities 35,203 (81,124)
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Net (decrease) in cash (98,416) (92,607)
Cash, beginning of period 118,823 285,150
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CASH, END OF PERIOD $ 20,407 $192,543
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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 December 31,
1996 and 1995, Condensed Statements of Operations for the
three and nine month periods ended December 31, 1996 and
1995 and Cash Flows for the nine month periods ended
December 31, 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 December 31, 1996, the Company's working capital position
was $223,302, a decrease of $144,196 during the current
quarter and a decrease of $25,649 over the position at March
31, 1996. Cash flow from operations was $(107,335) for the
nine months ended December 31, 1996, as compared to $61,477
for the nine months ended December 31, 1995. The decrease
in working capital and cash flow from operations for the
current fiscal year is attributable to lower sales volumes
than in the prior fiscal year coupled with slightly higher
operating costs. It is management's opinion that through
cash management and other measures, working capital for the
foreseeable future will be sufficient to meet operating
needs.
Capital additions were $13,404 and $26,284 during the three
and nine month periods ended December 31, 1996,
respectively.
Debt and capital lease payments were $31,746 and $44,797
during the three and nine month periods ended December 31,
1996, respectively.
RESULTS OF OPERATIONS.
During the three and nine month periods ended December 31,
1996, loss from operations was $(143,539) and $(230,771)
respectively. Results of operations for the corresponding
periods of the preceding year were $74,516 and $(52,863)
respectively. Sales volumes for the three and nine months
ending December 31, 1996 as compared to the corresponding
periods of the previous fiscal year show a decrease of 43%
and 17% respectively. Management attributes this trend to
employee turnover in the sales department resulting in a
temporary decline in sales volumes while the recently hired
replacement salesmen are in training to learn the scope of
the Company's services and how to secure new clients and
projects. Additionally, there is an increase in price
sensitivity on the part of existing and potential customers
for the services that the Company provides.
Operating expenses decreased by 18% and 8% during the three
and nine months periods ended December 31, 1996,
respectively, when compared to corresponding periods of the
prior fiscal year. This trend is primarily attributable to
the decrease in production payroll, which occurred during
the first quarter of 1997 and lower contract labor costs as
a result of the decrease in sales volumes. Included in the
production expenses for the three and nine months ended
December 31, 1996, are approximately $33,500 and $111,600,
respectively, of research and development cost as compared
to $39,500 and $89,500 during the corresponding periods of
the prior fiscal year.
The Company had a net deferred tax asset of $244,554 at
December 31, 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 nine months ended December 31, 1996. The
Company has established a valuation allowance of $85,000 at
March 31, 1996 and December 31, 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.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) No exhibits.
(b) Reports on Form 8-K
No reports were filed by the registrant during the
third quarter of this fiscal year.
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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, hereunto duly authorized.
Z-AXIS CORPORATION
/s/ Steven H. Cohen Director, Chief Executive February 12, 1997
- ------------------------- Officer
Steven H. Cohen
Date: February 12, 1997
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/ Steven H. Cohen Director, Chief Executive February 12, 1997
- ------------------------- Officer
Steven H. Cohen
/s/ Alan Treibitz Director, President, Treasurer, February 12, 1997
- ------------------------- Chief Financial Officer
Alan Treibitz
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<PERIOD-END> DEC-31-1996
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