<PAGE> 1
FORM 10-QSB/A - QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
Zaxis International Inc.
(Name of Issuer as specified in its charter)
Delaware 0-15476 68-0080601
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
1890 Georgetown Road, Hudson Ohio 44236
(Address of principal executive office)
(330)650-0444
(Registrant's telephone number)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months and (2) has
been subject to such filings for the past 90 days. Yes[X] No []
As of March 31, 1999, there were 5,858,106 shares of Common Stock outstanding
Page 1 of 9
<PAGE> 2
ZAXIS INERNATIONAL. INC.
FORM~1O~QSB
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item I Financial Statements.
Consolidated Balance Sheets 3
Consolidated Statements of Operations:
Quarter ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 7-8
SIGNATURES 9
</TABLE>
Page 2 of 9
<PAGE> 3
ZAXIS INTERNATIONAL INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
ASSETS
------
<TABLE>
<CAPTION>
March 31 December 31,
1999 1998
----------- -----------
Current assets:
<S> <C> <C>
Cash $ 15,110 $ 49,327
Restricted cash
Accounts receivable, net 8,325 13,904
Inventory 53,346 64,738
Prepaid expenses and other 27,367 29,671
----------- -----------
Total current assets 104,148 157,640
Property and equipment:
Machinery and equipment 360,730 360,082
Office equipment 190,064 190,064
Leasehold improvements 86,992 86,992
637,786 637,138
Less accumulated depreciation 424,853 400,731
----------- -----------
212,933 236,407
Other assets:
Patent costs 38,167 37,910
Organization costs -- 395
----------- -----------
38,167 38,305
----------- -----------
Total assets $ 355,249 $ 432,352
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current portion of lease obligations $ 10,906 $ 10,906
Bank loan payable
Notes payable to directors 784,895 784,895
Notes payable 471,928 475,264
Accounts payable 670,774 476,962
Accrued expenses 528,856 449,341
----------- -----------
Total current liabilities 2,467,359 2,197,368
Long term debt:
Capitalized lease obligations 26,130 28,706
Long term notes payable 130,000 130,000
Long term notes directors 684,012 684,012
----------- -----------
Long term debt 840,142 842,718
Stockholders' equity:
Common stock 58,581 58,112
$.01 par value, 12,000,000 shares authorized,
5,858,106 and 5,811,216 shares issued and outstanding
Additional paid-in capital 5,988,092 5,984,885
Accumulated deficit (8,998,925) (8,650,731)
----------- -----------
Total stockholders' equity (2,952,252) (2,607,734)
--------------------------
Total liabilities and stockholders' equity $ 355,249 $ 432,352
=========== ===========
</TABLE>
See notes to consolidated financial statements
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<PAGE> 4
ZAXIS INTERNATIONAL INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net sales $ 47,948 $ 49,784
Cost of goods sold 128,318 137,852
Selling, general and administrative expenses 218,320 171,778
----------- -----------
Loss from operations (298,690) (259,846)
Other income (expense):
Interest income 150 233
Miscellaneous income
Loss on sale of asset
Interest expense (49,654) (32,176)
----------- -----------
Total other income (expense) (49,504) (31,943)
----------- -----------
Net loss $ (348,195) $ (291,789)
=========== ===========
Net loss per common share
Basic $ (0.06) $ (0.05)
=========== ===========
Diluted $ (0.06) $ (0.05)
=========== ===========
Weighted average number of shares outstanding
Basic 5,858,106 5,744,991
=========== ===========
Diluted 5,858,106 5,744,991
=========== ===========
</TABLE>
See notes to consolidated financial statements.
Page 4 of 9
<PAGE> 5
ZAXIS INTERNATIONAL INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(348,195) $(291,787)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 26,099 29,571
Compensation due to stock option grants 3,676
Changes in operating assets and liabilities:
Accounts receivable 5,578 29,078
Changes in operating assets 1,820
Inventory and prepaid expenses 11,875 2,413
Accounts payable and accrued expenses 81,083 45,654
--------- ---------
Cash used in operating activities (218,064) (185,071)
INVESTING ACTIVITIES:
Purchase of property and equipment (648) (6,386)
Deposits
Patent cost expenditures (1,840) (1,113)
--------- ---------
Cash used in investing activities (2,488) (7,499)
FINANCING ACTIVITIES:
Proceeds from sales of common stock and exercise of warrants
Net proceeds from notes payable 188,909 141,315
Payments on capital lease obligations (2,575) (2,217)
--------- ---------
Cash provided by financing activities 186,334 139,098
--------- ---------
Increase in cash (34,218) (53,472)
Cash at beginning of period 49,327 81,410
--------- ---------
Cash at end of period $ 15,108 $ 27,938
========= =========
</TABLE>
Cash at end of period variance due to rounding.
<PAGE> 6
ZAXIS INTERNATIONAL INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements present the consolidated financial position and results
of operations of Zaxis International Inc. (International) and Zaxis Inc. (Zaxis
or the Company) its wholly-owned subsidiary.
Zaxis Incorporated was founded in 1989 as a privately held Ohio corporation. On
August 25, 1995, Zaxis merged with a subsidiary of The InFerGene Company
(InFerGene). InFerGene was an inactive publicly traded Delaware corporation
founded in 1985. Neither InFerGene nor its subsidiary had any assets or
liabilities. The merger, for accounting purposes, was a reverse acquisition in
which Zaxis acquired InFerGene. The acquisition was accounted for as a purchase
with no value assigned to InFerGene. InFerGene then changed its name to Zaxis
International Inc. The financial statements include the operations of Zaxis for
all periods presented and the operations of International since the date of
acquisition. All intercompany transactions and balances have been eliminated.
As an interim report, the financial statements and notes thereto do not include
all of the disclosures necessary for a full presentation of financial condition
and operating results, and should be read in conjunction with the financial
statements for the year ended December 31, 1998.
2. LIQUIDITY
Zaxis incurred losses of $348,195 during the three months ended March 31, 1999,
and $291,787 in the nine months ended March 31, 1999. During 1999, operations of
the Company have been financed by loans from shareholders and private investors,
members of the Board of Directors, and related persons and entities. The Company
continues to rely upon these and related sources to sustain on-going operations,
research, product development and sales development. The Company continues with
other discussions regarding long-term debt and/or equity fundings. The Company
will continue to be reliant upon investor fundings until the marketing of the
Company's principal products can be brought to a level sufficient to support the
operating requirements of the Company. These conditions cause doubt about the
Company's ability to continue as a going concern. No adjustments to the amounts
or classification of assets and liabilities, which could result from the outcome
of this uncertainty, are reflected in the financial statements.
3. NET LOSS PER COMMON SHARE
The effects of outstanding options and warrants have not been included in the
calculation of net less per share.
Page 6 of 9
<PAGE> 7
Item 2. Management's Discussion and Analysis.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of operations
Sales for the three months ended March 31, 1999, totaled $47,948 compared with
$49,784 for 1998's first three months. Cost of goods sold for the months ended
March 31, 1999, was $128,318, exceeding sales by $80,370. Cost of goods sold for
the same period in 1998, was $137,852, exceeding sales by $88,068. Selling,
general and administrative expenses were $218,320 for the three months ended
March 31, 1999, up from $171,778 for the same period in 1998.
Financial Condition and Liquidity
The Company needs to secure immediate finacing to allow it to explore several
opportunities from new products that are now available for market introduction
and to afford it time to build sales volumes of these new products to profitable
levels. In the period required for product introduction and sales growth, the
Company will need to satisfy obligations to current creditors. Pursuant to this
need, the Company continues to seek interim funding.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None of substantial nature.
Item 2(c). Changes in Securities None
Item 3. Default upon Senior Securities
The company is more than 30 days past due on principal payment on three
individual C series notes totaling $65,000. The Company is more than 30 days
past due on interest payments on above referenced C series notes and 9 1/2%
Convertible notes in the amount of $241,288.52.
Page 7 of 9
<PAGE> 8
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits:
None
B. Reports on Form 8-K during the Quarter Ended March 31, 1999:
None
Page 8 of 9
<PAGE> 9
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf the undersigned, thereunto duly
authorized.
Zaxis International Inc.
------------------------
(Registrant)
May 19, 1999 BY: S/S Conaly Bedell
-----------------
Conaly Bedell, President
Chief Executive Officer
May 19, 1999 BY: S/S Conaly Bedell
-----------------
Acting Accounting Officer
Page 9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 15,110
<SECURITIES> 0
<RECEIVABLES> 8,325
<ALLOWANCES> 0
<INVENTORY> 53,346
<CURRENT-ASSETS> 104,148
<PP&E> 637,786
<DEPRECIATION> 424,853
<TOTAL-ASSETS> 355,249
<CURRENT-LIABILITIES> 2,467,359
<BONDS> 0
0
0
<COMMON> 58,581
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 355,249
<SALES> 47,948
<TOTAL-REVENUES> 48,098
<CGS> 128,318
<TOTAL-COSTS> 346,638
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,654
<INCOME-PRETAX> (348,195)
<INCOME-TAX> 0
<INCOME-CONTINUING> (348,195)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (348,195)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
