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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, 1998.
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 (I.R.S. Employer
of incorporation of organization) Identification No.)
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, 1998: 3,805,000.
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CONTENTS
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PART I FINANCIAL STATEMENTS.
Item 1. Condensed Balance Sheets, March 31 and December 31, 1998. 3
Condensed Statements of Operations, three and nine-month periods
ended December 31, 1998 and 1997. 4
Condensed Statements of Cash Flows, nine-month periods
ended December 31, 1998 and 1997. 4
Notes to Condensed Financial Statements. 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 6-10
PART II OTHER INFORMATION.
Item 1. Legal proceedings. 10
Item 2. Changes in securities. 10
Item 3. Defaults upon senior securities. 10
Item 4. Submission of matters to a vote of security holders. 10
Item 5. Other information. 10
Item 6. Exhibits and reports on Form 8-K. 10
SIGNATURES 11
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
(Unaudited)
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 72,675 $ 139,254
Trade accounts receivable 800,494 1,121,753
Other current assets 56,732 46,956
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Total current assets 929,901 1,307,963
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Property and equipment, at cost 1,531,386 1,450,837
Accumulated depreciation (977,084) (977,566)
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Net property and equipment 554,302 473,271
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Deferred income taxes 137,259 132,575
Other assets 15,947 13,819
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TOTAL ASSETS $ 1,637,409 $ 1,927,628
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of Credit $ - $ 200,000
Accounts payable 40,464 113,829
Accrued expenses 160,796 278,168
Customer deposits 14,000 27,000
Current portion of long-term obligations 131,344 72,651
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Total current liabilities 346,604 691,648
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Long-term obligations 167,099 114,585
Stockholders' equity:
Common stock 3,805 3,785
Additional paid in capital 1,444,191 1,441,711
Retained earnings (deficit) (324,290) (324,101)
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Total stockholders' equity 1,123,706 1,121,395
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,637,409 $ 1,927,628
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</TABLE>
See notes to condensed financial statements.
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CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
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1998 1997 1998 1997
(Unaudited) (Unaudited)
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<S> <C> <C> <C> <C>
Net sales $ 853,287 $ 1,116,545 $ 2,855,731 $ 2,665,679
Operating expenses:
Production 403,302 419,557 1,216,354 1,070,584
Research and development 71,456 83,496 187,907 182,773
General and administrative 186,406 153,999 565,663 465,273
Marketing 215,337 199,272 659,793 557,158
Depreciation 67,694 49,136 192,212 131,799
Amortization of prior year's
software development costs - 66,667 - 97,096
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Total operating expenses 944,195 972,127 2,821,929 2,504,683
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Income (loss) from operations (90,908) 144,418 33,802 160,996
Other (expense) income, net (17,979) (14,377) (34,091) (29,661)
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Income (loss) before income taxes (108,887) 130,041 (289) 131,335
Income tax (expense) benefit 36,200 (42,600) 100 (43,300)
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NET INCOME (LOSS) $ (72,687) $ 87,441 $ (189) $ 88,035
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INCOME (LOSS) PER COMMON SHARE OF STOCK:
BASIC $ (0.019) $ 0.023 $ (0.000) $ 0.023
DILUTED $ (0.019) $ 0.023 $ (0.000) $ 0.023
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Weighted average number of common shares
outstanding during the period:
Basic 3,805,000 3,772,345 3,805,000 3,772,345
Diluted 3,895,000 3,837,345 3,895,000 3,837,345
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</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended December 31,
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1998 1997
(Unaudited)
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CASH FLOWS FROM OPERATIONS:
Net cash provided by operations $ 315,288 $ 258,250
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (114,407) (73,518)
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Net cash used in investing activities (114,407) (73,518)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit 740,000 730,000
Payments on line of credit (940,000) (790,000)
Debt and capital lease payments (69,960) (118,408)
Proceeds from exercise of stock options 2,500 2,500
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Net cash used in financing activities (267,460) (175,908)
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Net (decrease) increase in cash (66,579) 8,824
Cash, beginning of period 139,254 24,692
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CASH, END OF PERIOD $ 72,675 $ 33,516
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</TABLE>
See notes to condensed financial statements.
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NOTES TO CONDENSED FINANCIAL STATEMENTS.
NOTE 1. INTERIM FINANCIAL INFORMATION
The accompanying Condensed Balance Sheets at December 31, 1998 and March 31,
1998, Condensed Statements of Operations for the three and nine-month periods
ended December 31, 1998 and 1997 and Cash Flows for the nine month periods ended
December 31, 1998 and 1997, should be read in conjunction with the Company's
financial statements and notes for the years ended March 31, 1998, 1997 and
1996. 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.
NOTE 2. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable consists of the following:
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<CAPTION>
December 31, March 31,
1998 1998
(Unaudited)
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Trade accounts receivable $ 849,651 $1,131,756
Less allowance for bad debt 49,157 10,003
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Trade accounts receivable, net $ 800,494 $1,121,753
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</TABLE>
Approximately 45% of the Company's trade receivables were due from two different
customers at December 31, 1998. Approximately 35% of the Company's trade
accounts receivable was due from one customer at March 31, 1998.
NOTE 3. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
(Unaudited)
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<S> <C> <C>
Capital lease obligations $298,443 $187,236
Less current portion 131,344 72,651
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Long term capital lease obligations $167,099 $114,585
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</TABLE>
The Company leases certain production and office equipment under the terms of
capital leases. The capitalized value of the leased equipment was $407,924 at
December 31, 1998 and $226,757 at March 31, 1998. The related accumulated
depreciation was $130,827 at December 31, 1998 and $48,824 at March 31, 1998.
These amounts are combined with similar equipment in the accompanying condensed
financial statements. Lessors have a security interest in all equipment
classified as a capital lease.
The Company maintains a line of credit in the amount of $400,000 with a bank,
which matures August 1999. If drawn upon, the indebtedness bears interest at the
bank's prime rate plus one percent per annum (8.75% at December 31, 1998 and
10.5% at March 31, 1998). The Company's accounts receivable secure any amounts
drawn under the line of credit. As of December 31, 1998 and March 31, 1998, the
balance outstanding was $0 and $200,000, respectively.
NOTE 4. 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 the entity. For
purposes of computing diluted earnings per share, dilutive securities
represented 90,000 and 65,000 common stock equivalents at December 31, 1998 and
1997, respectively.
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NOTE 5. COMPREHENSIVE INCOME
The Company had adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130). Comprehensive income is
comprised of net income and all changes to the statements of stockholders'
equity, except those due to investments by stockholders, changes in paid in
capital and distributions to stockholders. The adoption of SFAS No. 130 does not
impact the Company's financial statements for the three and nine-months ended
December 31,1998 and 1997.
NOTE 6. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued the
Statement of Financial Accounting Standards No. 131 "Disclosures about Segments
of an Enterprise and Related Information ("SFAS 131"). SFAS 131 supersedes
Statement of Financial Accounting Standards No. 14 "financial Reporting for
Segments of a Business Enterprise." SFAS 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 disclosures regarding products and services,
geographic areas and major customers. SFAS 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 in assessing performance. SFAS 131 is effective
for financial statements for periods beginning after December 15, 1997 and
require comparative information for earlier years to be restated. The Company's
results of operations and financial position will not be affected by adoption of
this standard.
In February 1998, the FASB issued Statement of Financial Accounting Standards
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits" ("SFAS No. 132") which standardizes the disclosure requirements for
pensions and other postretirement benefits and requires additional information
on changes in the benefit obligations and fair values of plan assets that will
facilitate financial analysis. SFAS No. 132 is effective for years beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated, unless such information is not readily available. Management
believes that adoption of this statement will have no impact on the Company's
financial statements.
The FASB recently issued Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
SFAS No. 133 established standards for recognizing all derivative instruments as
fair value. This statement is effective for fiscal years beginning after June
30, 1999. Management believes the adoption of this statement will have no impact
on the Company's financial statements.
The FASB recently issued Statement of Financial Accounting Standards No. 134
"Accounting for Mortgage-Backed Securitization of Mortgage Loans Held for Sales
by a Mortgage Banking Enterprise" ("SFAS No. 134"). SFAS No. 134 establishes
accounting and reporting standards for certain activities of mortgage banking
enterprises and other enterprises that conduct operations that are substantially
similar to the primary operations of a mortgage banking enterprise. This
statement is effective for the first fiscal quarter beginning after December 15,
1998. Management believes that adoption of this statement will have to impact on
the Company's financial statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The accompanying Condensed Balance Sheets at March 31 and December 31, 1998 and
Condensed Statements of Operations and Cash Flows for the three and nine-month
periods ended December 31, 1998 and 1997 should be read in conjunction with the
Company's financial statements and notes for the years ended March 31, 1998,
1997 and 1996. 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. Except where
otherwise noted, references to periods are to periods of fiscal years ended
March 31 of the year stated.
FORWARD LOOKING STATEMENTS
In addition to the historical information, this 10-Q and Annual Report
incorporated by reference herein, contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and the Company
desires to take advantage of the "Safe Harbor" provisions thereof. Therefore,
the Company is including this statement for the express purpose of availing
itself of the protections of such Safe Harbor with respect to all of such
forward-looking statements. The forward-looking statements in this report
reflect the Company's current views with respect to future events and financial
uncertainties, including those discussed herein, that could cause actual results
to differ materially from historical results or those anticipated. In this
report, the words "anticipates", "believes", "expects", "intends", "future" and
similar expressions identify forward-looking statements. Readers are cautioned
not to place undue reliance on the forward-looking statements contained herein,
which speak only as of the date hereof. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances that may arise after the date of this report.
RESULTS OF OPERATIONS
NET SALES
Net sales for the three and nine-month periods ended December 31, 1998 were
$853,287 and $2,855,731, respectively. Net sales for the corresponding periods
ended December 31, 1997 were $1,116,545 and $2,665,679, respectively. The
decrease in net sales for the three-month period ended December 31, 1998 as
compared to the three-month period ended December 31, 1997 was 23%. The decrease
for the third quarter of fiscal 1999 was a result of lower VuPoint revenues
earned as compared to the third quarter of fiscal 1998. VuPoint revenues are
discussed below in more detail. The increase in sales for the nine-month period
ended December 31, 1998 as compared to the nine-month period ended December 31,
1997 was 7%. The increase in revenues during the first three-quarters of fiscal
1998 was primarily due to an increase in core business revenues of 22%. Core
business revenues are primarily earned from providing animation and video
presentation services to the litigation support market. Litigation support
customers include law firms, corporations, insurance companies and certain
government agencies. The Company also earns revenues from the rental and service
of an advanced electronic courtroom presentation system consisting of
proprietary software in combination with off-the-shelf hardware. The system has
been named "VuPoint" and the Company has received trademark protection of the
name. The Company has applied for patent protection for the software. Revenues
from the rental of the VuPoint system and corresponding service revenues earned
during the three and nine-month periods ended December 31, 1998 were $8,930 and
$28,315 as compared to $215,056 and $314,193 for the same periods during fiscal
1998. The decrease in revenues from VuPoint rental and service was due to fewer
trials utilizing the system during the first three quarters of fiscal 1999 as
compared to the same periods during fiscal 1998. Management anticipates that
sales volume, including VuPoint rental and service revenue will increase during
the fourth quarter of fiscal 1999 as a result of increased client trial
activity.
OPERATING INCOME AND EXPENSES
Income (loss) from operations was $(90,908) and $33,802 for the three and
nine-month periods ended December 31, 1998. Income from operations was $144,418
and $160,996 for the corresponding three and nine-month periods ended December
31, 1997. The decrease in operating income during the three and nine-month
periods ended December 31, 1998 as compared to the same periods of fiscal 1997
was due to the decrease in VuPoint revenues noted above. Corresponding operating
expenses decreased by 3% for the three-month period ended December 31, 1998 as
compared to the three-month period ended December 31, 1997. Operating expenses
increased by 13% for the nine-month period
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ended December 31, 1998 as compared to the nine-month period ended December
31, 1997. The fluctuations in the components of operating expenses are
discussed in the following sections.
PRODUCTION EXPENSES
Production expenses were $403,302 and $1,216,354 for the three and nine-month
periods ended December 31, 1998 as compared to $419,557 and 1,070,584 for the
three and nine-month periods ended December 31, 1997. These results represent a
decrease of 4% for the three-month period ended December 31, 1998 and an
increase of 14% for the nine-month period ended December 31, 1998 as compared to
the same periods of the prior fiscal year. The decrease for the three-month
period ended December 31, 1998 is a result of the lower VuPoint revenues. The
cost associated with VuPoint service revenue is primarily contract labor. Since
the VuPoint revenues were significantly lower than the comparable quarter of the
prior fiscal year, the associated contract labor costs were also lower. The
increase for the nine-month period ended December 31, 1998 is consistent with
the increase in core business revenues and was primarily due to the higher
expenditures in labor needed to produce the resulting revenue levels. Production
costs for direct contract labor and other billable expenses will vary directly
with sales levels.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses were $71,456 and $187,907 for the three and
nine-month periods ended December 31, 1998 as compared to $83,496 and $182,773
for the three and nine-month periods ended December 31, 1997. These results
represent a decrease 14% for the three-month period ended December 31, 1998 and
an increase of 3% for the nine-month period ended December 31, 1998 as compared
to the same periods of the prior fiscal year. The decrease for the three-month
period ended December 31, 1998 was due to the fact that in the third quarter of
fiscal 1998, the Company utilized a significant level of contract labor employed
to program, test and document the VuPoint system. The same level of contract
labor was not needed during the third quarter of fiscal 1999. The increase in
research and development expenses for the nine-month period ended December 31,
1998 as compared to the same period of the prior fiscal year is due to addition
of a Director of Software Development during the second quarter of the current
fiscal year. This management level position was added in order to provide a
technical level of management support over the Company's software development
activities. Research and development costs are incurred as the Company continues
to refine and enhance the VuPoint system. Management considers VuPoint to have
significant long-term revenue potential and will continue further developments
in the foreseeable future. Research and development expenses are expected to
decrease in the fourth quarter of fiscal 1999 due to vacancies in the
department.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $186,406 and $565,663 for the three and
nine-month periods ended December 31, 1998 as compared to $153,999 and $465,273
for the three and nine-month periods ended December 31, 1997. These results
represent an increase of 21% and 22% for the three and nine-month periods ended
December 31, 1998 as compared to the same periods of the prior fiscal year. The
increase is due to an increase in the cost of office space rental, additional
professional fees for management consulting activities and an increase in the
reserves booked for accounts receivable.
MARKETING EXPENSES
Marketing expenses were $215,337 and $659,793 for the three and nine-month
periods ended December 31, 1998 as compared to $199,272 and $557,158 for the
three and nine-month periods ended December 31, 1997. These results represent an
increase of 8% and 18% for the three and nine-month periods ended December 31,
1998 as compared to the same periods of the prior fiscal year. The additional
expense in the third quarter of fiscal 1999 is due to the opening of a sales
office in Los Angeles, California. The increase for the nine-month period ended
December 31, 1998 is due to the combination of the opening of the new sales
office, as well as an increase in salespersons commissions directly related to
the increase in revenues for the same period. Sales commissions are calculated
as a percentage of revenues.
DEPRECIATION EXPENSE
Depreciation expenses were $67,694 and $192,212 for the three and nine-month
periods ended December 31, 1998 as compared to $49,136 and $131,799 for the
three and nine-month periods ended December 31, 1997. The increase is due to
additions to property and equipment in the amount of $339,910 during the fiscal
year ended March 31, 1998 as
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well as additions to property and equipment and equipment under capital
leases in the amount of $303,003 during the nine-month period ended December
31, 1998.
AMORTIZATION OF PRIOR YEARS' SOFTWARE DEVELOPMENT COSTS
The decrease in amortization costs was due to amortization of capitalized
software development costs related to VuPoint in the amount of $66,667 and
$97,096 for the three and nine-month periods ended December 31, 1997. These
costs were fully amortized by fiscal year ended March 31, 1998; accordingly, no
amortization costs were recorded for the three and nine-month periods ended
December 31, 1998.
OTHER EXPENSE
Other expense was $17,979 and $34,091 for the three and nine-month periods ended
December 31, 1998 as compared to $14,377 and $29,661 for the three and
nine-month periods ended December 31, 1997. The increase of 25% for the three
months ended December 31, 1998 as compared to the same period ended December 31,
1997 was due to loss on disposal of production equipment. The overall decrease
of 15% in other expenses for the nine-month period ended December 31, 1998 as
compared to the same period ended December 31, 1997 is due to lower interest
costs as certain debt obligations were paid off during the fiscal year ended
March 31, 1998.
INCOME TAX EXPENSE
Income tax (expense)/benefit was $36,200 and $100 for the three and nine-month
periods ended December 31, 1998 as compared to $(42,600) and $(43,300) for the
three and nine-month periods ended December 31, 1997. The decrease in income tax
expense for the first three-quarters of the current fiscal year is the result of
the decrease in income from operations noted above.
The Company had a net deferred tax asset of $137,259 at December 31, 1998 as
compared to $132,575 at March 31, 1998. The increase in the deferred tax asset
was the result of the estimation of the Company's tax liability for the current
fiscal year and the corresponding adjustments to the account. The Company files
corporate income tax returns on a cash basis, which based on the timing of cash
payments and disbursements could result in taxable income. The Company has
established a valuation allowance of $14,000 at December 31, 1998 and March 31,
1998 against the deferred tax asset as management believes that it is more
likely than not, that the deferred tax asset related to the tax credits and a
portion of the loss carryforwards may not be realized before all carryforward
expiration dates.
NET INCOME
Net income (loss) was $(72,687) and $(189) for the three and nine-month periods
ended December 31, 1998 as compared to $87,441 and $88,035 for the three and
nine-month periods ended December 31, 1997. Basic earnings (loss) per share were
$(0.019) and $0.000 for the three and nine-month periods ended December 31, 1998
as compared to $0.023 and $0.023 for the three and nine-month periods ended
December 31, 1997. Diluted earnings (loss) per share were $(0.019) and $0.00 for
the three and nine-month periods ended December 31, 1998 as compared to $0.023
and $0.023 for the three and nine-month periods ended December 31, 1997. The
decrease in net income, basic earnings per share and diluted earnings per share
for the current fiscal year is due to the lower level of operating income than
in the prior fiscal year for the same periods.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company's working capital position was $583,297, a
decrease of $125,026 during the current quarter and a decrease of $33,018 over
the position at March 31, 1998. The year-to-date decrease is attributed to the
decrease in accounts receivable at December 31, 1998. Cash flow from operations
was $315,288 for the nine- months ended December 31, 1998, as compared to
$258,250 for the nine-months ended December 31, 1997. The majority of the
Company's cash flow from operations during the first three quarters of fiscal
1999 was used to paydown the line of credit, purchase new equipment and make
normal payments on capital lease obligations. 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.
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Capital additions were $163,990 and $295,574 during the three and nine-month
periods ended December 31, 1998; $181,167 of these additions were financed
through capital lease arrangements.
Debt and capital lease payments were $269,960 for the nine-month period ended
December 31, 1998. Debt and capital lease payments are reported at net of
borrowings. The proceeds from borrowing during these periods were used for
financing normal operations and acquisition of new production equipment.
YEAR 2000 COMPLIANCE
GENERAL
Many older computer systems, software products and embedded chips that are in
use today were programmed to accept two digit entries in the date code field
(e.g. "98" for "1998"). These systems, software and embedded chips need to be
modified or upgraded to distinguish twenty-first century dates (e.g. "2002")
from twentieth century dates (e.g. "1902"), in order to avoid the possibility of
erroneous results or systems failures.
The Company's management has launched an effort to address any potential Year
2000 compliance issues relating to its 1) internal operating systems, 2)
vendors, facilities and other third parties and 3) software products that it
licenses to customers. Management believes that adequate resources have been
allocated to this effort and expects that any Year 2000 considerations will not
materially impact the Company's internal operations. Year 2000 considerations
may have an affect on some of the Company's customers and suppliers, and thus
indirectly affect the Company.
CORPORATE INFRASTRUCTURE STATE OF READINESS
Management is addressing the Year 2000 issues with respect to the software
product ("VuPoint") which it intends to license to existing and potential
customers. VuPoint currently is Year 2000 compliant and any modifications or
rewrites of the software code will be tested to be assured that they are also
Year 2000 compliant. Management is also evaluating the Company's internal
critical business systems that have date sensitivity. Any internal critical
business systems that are not Year 2000 compliant will be replaced or modified
before their potential "failure date". Management will be communicating with
major vendors, suppliers, landlords and other third parties regarding Year 2000
compliance of embedded processors in the Company's computers and facilities,
software and other information technology, and other products and services which
the Company obtains from third parties.
COSTS
The Company has not incurred any significant costs associated with Year 2000
compliance evaluations or modifications. Management has not estimated the
possible future cost of replacing or modifying critical business systems, as the
extent to which any of these systems might be non-compliant has not been
completely determined. However, based on the evaluations completed to date, none
of the Company's critical business systems will require significant modification
or replacement.
RISKS
The VuPoint software that the Company intends to offer to its customers under
licensing arrangements, might contain undetected errors or failures when first
introduced or when new versions are released, even though the product is
intended to be Year 2000 compliant. While the Company is assessing, correcting
and testing VuPoint in regard to Year 2000 compliance, there can be no
assurances that the product or future releases of the product will not contain
undetected date sensitivity errors. If the Company is unable or is delayed in
making the necessary date code changes to VuPoint or future releases of the
product, the Company does not anticipate that there would be a material adverse
effect upon the Company's business, operating results, financial condition and
cash flows.
There can be no assurances that the systems of other parties upon which the
Company relies will be made Year 2000 compliant on a timely basis. The Company
utilizes third party vendor equipment, telecommunications products, and software
products. Management intends to take steps to address the impact, if any, of the
Year 2000 issue surrounding such third party products. However, third parties'
Year 2000 compliance efforts are not within the control of the Company. The
failure of any critical technology components to operate properly may have a
material impact on business operations or require the Company to incur
unanticipated expenses to remedy any problems.
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The most substantial operational risks are those that are beyond the Company's
control, including the progress of government agencies and compliance efforts of
utility companies. It is possible that interruptions in vital services due to
Year 2000 non-compliance will interfere with normal business operations. Such
failures could materially and adversely affect the Company's results of
operations.
Forward-looking statements contained in this Year 2000 Compliance disclosure
should be read in conjunction with the Company's disclosure under the heading of
Forward Looking Statements for the purposes of the Safe Harbor provisions of the
Private Securities Litigation Act of 1995.
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.
11 of 12
<PAGE>
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 Officer February 16, 1999
- ----------------------
Steven H. Cohen
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 Officer February 16, 1998
- ----------------------
Steven H. Cohen
/s/ Alan Treibitz Director, President, Treasurer,
- ---------------------- Chief Financial Officer February 16, 1998
Alan Treibitz
12 of 12
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