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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, 1997.
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, 1997: 3,785,000.
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CONTENTS
PART I FINANCIAL STATEMENTS.
Item 1. Condensed Balance Sheets, March 31 and
December 31, 1997. 3
Condensed Statements of Operations, Three and
nine month periods ended December 31, 1997 and 1996. 4
Condensed Statements of Cash Flows, Nine month
periods ended December 31, 1997 and 1996. 4
Notes to Condensed Financial Statements. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 5-6
PART II OTHER INFORMATION. 7
Item 1. Legal proceedings. 7
Item 2. Changes in securities. 7
Item 3. Defaults upon senior securities. 7
Item 4. Submission of matters to a vote of security holders. 7
Item 5. Other information. 7
Item 6. Exhibits and reports on Form 8-K. 7
SIGNATURES 8
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
December 31, March 31,
1997 1997
(Unaudited)
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Assets
Current assets:
Cash $ 33,516 $ 24,692
Trade accounts receivable 953,764 862,104
Other current assets 46,589 28,018
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Total current assets 1,033,869 914,814
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Property and equipment, at cost 1,383,515 1,720,575
Accumulated depreciation (924,759) (1,395,578)
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Net property and equipment 458,756 324,997
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Deferred income taxes 123,130 166,000
Capitalized software costs 215,515 312,611
Other assets 17,305 17,486
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TOTAL ASSETS $ 1,848,575 $ 1,735,908
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of Credit $ 140,000 $ 200,000
Accounts payable 113,113 161,049
Accrued expenses 208,823 163,217
Customer deposits 29,000 22,500
Current portion of long-term obligations 89,300 37,842
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Total current liabilities 580,236 584,608
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Long-term obligations 112,311 85,808
Stockholders' equity:
Common stock 3,785 3,765
Additional paid in capital 1,441,711 1,439,231
Retained earnings (deficit) (289,468) (377,504)
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Total stockholders' equity 1,156,028 1,065,492
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,848,575 $ 1,735,908
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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,
------------------------- -------------------------
1997 1996 1997 1996
(Unaudited) (Unaudited)
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<S> <C> <C> <C> <C>
Net sales $1,116,545 $ 465,935 $2,665,679 $1,741,316
Operating expenses:
Production 569,720 261,773 1,350,454 835,655
General and administrative 153,999 174,918 465,273 565,926
Marketing 199,272 134,401 557,157 449,713
Depreciation 49,136 38,382 131,799 120,793
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Total operating expenses 972,127 609,474 2,504,683 1,972,087
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Income (loss) from operations 144,418 (143,539) 160,996 (230,771)
Other (expense) income, net: (14,377) (3,668) (29,660) 5,318
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Income (loss) before income taxes 130,041 (147,207) 131,336 (225,453)
Income tax (expense) benefit (42,600) 48,200 (43,300) 74,000
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NET INCOME (LOSS) $ 87,441 $ (99,007) $ 88,036 $ (151,453)
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INCOME (LOSS) PER COMMON SHARE OF STOCK:
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NET INCOME (LOSS) PER COMMON SHARE OF STOCK $ 0.02 $ (0.03) $ 0.02 $ (0.04)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD 3,785,000 3,765,000 3,785,000 3,765,000
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CONDENSED STATEMENTS OF CASH FLOWS
Nine months ended
December 31,
-------------------------
1997 1996
(Unaudited)
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<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net cash provided by (used in) operations $ 258,250 $ (107,335)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (269,888) (26,284)
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Net cash used in investing activities (269,888) (26,284)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit 730,000 260,000
Payments on line of credit (790,000) (180,000)
Borrowings on capital leases 196,370
Debt and capital lease payments (118,408) (44,797)
Proceeds from exercise of stock options 2,500
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Net cash provided by (used in) financing activities 20,462 35,203
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Net (decrease) in cash 8,824 (98,416)
Cash, beginning of period 24,692 118,823
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CASH, END OF PERIOD $ 33,516 $ 20,407
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</TABLE>
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, 1997 and
1996, Condensed Statements of Operations for the three and nine
month periods ended December 31, 1997 and 1996 and Cash Flows for
the nine month periods ended December 31, 1997 and 1996, should be
read in conjunction with the Company's financial statements and
notes for the years ended March 31, 1997, 1996 and 1995. 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, 1997,
1996 and 1995. 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, 1997, the Company's working capital position was $453,633 an
increase of $175,771 during the current quarter and an increase of $123,427
over the position at March 31, 1997. Cash flow from operations was $258,250
for the nine months ended December 31, 1997, as compared to $(107,335) for
the nine months ended December 31, 1996. The increase in working capital and
cash flow from operations for the current quarter and fiscal year is
attributable to higher sales volumes than in the prior fiscal year coupled
with aggressive accounts receivable collections. 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 $197,388 and $269,888 during the three and nine month
periods ended December 31, 1997, respectively, as compared to $13,404 and
$26,284 during the three and nine month periods ended December 31, 1996. The
increase in capital additions was due mainly to acquisition of new production
facility equipment through a capital lease arrangement. The new equipment
replaces and upgrades old equipment that has become obsolete due to advances
in technology.
Debt and capital lease payments were $284,411 and $908,408 during the three
and nine month periods ended December 31, 1997, respectively as compared to
$166,592 and $224,797 during the three and nine month periods ended December
31, 1996. Debt and capital lease payments are reported at gross amounts. The
proceeds from borrowing during these periods were used for financing normal
operations and acquisition of new production equipment. Amounts available
under the line of credit were $110,000 for the nine month period ended
December 31, 1997 as compared to $0 for the nine month period ended December
31, 1996.
RESULTS OF OPERATIONS.
During the three and nine month periods ended December 31, 1997, income from
operations was $144,418 and $160,996 respectively, as compared to losses from
operations of $(143,539) and $(230,771) for the three and nine month periods
ended December 31, 1996. Sales volumes for the three and nine months ending
December 31, 1997 as compared to the corresponding periods of the previous
fiscal year show an increase of 140% and 53% respectively. Management
attributes this positive trend to an increase in large engagements, as well
as continued sales of VuPoint services and equipment rentals.
Operating expenses increased by 60% and 27% during the three and nine months
periods ended December 31, 1997, respectively, when compared to corresponding
periods of the prior fiscal year. This trend is primarily attributable to the
increase in production contract labor costs and billable expenses as a direct
result of the corresponding increases in the sales volumes for the same
periods. In addition, research and development costs have increased due to
contract labor employed to program, test and document the VuPoint software
system as well as amortization of past capitalized software development
costs. Included in the production expenses for the three and nine months
ended December 31, 1997, are approximately $150,000 and $280,000,
respectively, of research and development cost as compared to $33,500 and
$111,600 during the corresponding periods of the prior fiscal year. General
and Administrative expenses
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were lower during the three and nine month periods ending December 31, 1997
as compared to the same periods of the prior fiscal year due to
reclassification of payroll taxes and other expenses to their respective
departments. Marketing expenses for the three and nine month periods ended
December 31, 1997 increased 48% and 24% as compared to the same periods of
the prior fiscal year due to increased expenditures on advertising, as well
as higher commissions due to the increase in the sales levels. Management
anticipates that sales volumes and operating expenses are expected to remain
at the same levels during the fourth quarter.
The Company had a net deferred tax asset of $123,130 at December 31, 1997 as
compared to $166,000 at March 31, 1997. The decrease in the deferred tax
asset was the direct result of the corresponding increase in the Company's
income before taxes for the nine months ended December 31, 1997. The Company
has established a valuation allowance of $65,000 at March 31, 1997 and
December 31, 1997 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.
ACCOUNTING PRONOUNCEMENTS.
On March 3, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 "Earnings per Share"
(SFAS No. 128). This pronouncement provides a different method of calculating
earnings per share than is currently used in accordance with the Accounting
Principles Board Opinion (APB No. 15), "Earnings Per Share". SFAS No. 128
provides for the calculation of "Basic" and "Diluted" earnings per share.
Basic earnings per share includes no dilution and is computed by dividing
income available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflect
the potential dilution of securities that could share in the earnings of an
entity, similar to fully diluted earnings per share. The Company will adopt
SFAS No. 128 in fiscal 1998 and its implementation is not expected to have a
material effect on the financial statements.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS No. 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence
as other financial statements.
Also, in June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information" which supersedes SFAS No. 14
"Financial Reporting for Segments of a Business Enterprise." SFAS No. 131
establishes standards for the way that public companies report information
about operating segments in annual financial statements and requires
reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosure regarding products and services, geographic areas and major
customers. SFAS No. 131 defines operating segments as components of a
company about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and assessing performance.
Both SFAS No. 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these
standards, management as been unable to fully evaluate the impact, if any,
they may have on future financial statement disclosures. Results of
operations and financial position, however, will be unaffected by
implementation of these standards.
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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 3, 1998
- ------------------------ Officer
Steven H. Cohen
Date: February 2, 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 3, 1998
- ------------------------ Officer
Steven H. Cohen
/s/ Alan Treibitz Director, President, Treasurer, February 3, 1998
- ------------------------ Chief Financial Officer
Alan Treibitz
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
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<RECEIVABLES> 954
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<PP&E> 1,393
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<TOTAL-ASSETS> 1,848
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0
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<TOTAL-LIABILITY-AND-EQUITY> 1,848
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