U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: February 28, 1998
Commission File Number: 0-21099
ZABA INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Colorado
(State or other jurisdiction of incorporation or organization)
84-1128300
(IRS Employer Identification No.)
20644 Eastleigh Crescent
Suite 302
Langley, British Columbia
(Address of principal executive offices)
V3A 4C4
(Zip Code)
(604) 533-8318
(Issuer's Telephone Number)
HA SPINNAKER, INC.
5650 Greenwood Plaza Blvd., #216
Englewood, Colorado 80111
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 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 shares of the registrant's only class of common stock
issued and outstanding, as of February 28, 1998, was 12,035,826
shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the three month period
ended February 28, 1998, are attached hereto.
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 unaudited financial statements and notes thereto
included herein. In connection with, and because it desires to
take advantage of, the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions
readers regarding certain forward looking statements in the
following discussion and elsewhere in this report and in any other
statement made by, or on the behalf of the Company, whether or not
in future filings with the Securities and Exchange Commission.
Forward looking statements are statements not based on historical
information and which relate to future operations, strategies,
financial results or other developments. Forward looking
statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are
beyond the Company's control and many of which, with respect to
future business decisions, are subject to change. These
uncertainties and contingencies can affect actual results and could
cause actual results to differ materially from those expressed in
any forward looking statements made by, or on behalf of, the
Company. The Company disclaims any obligation to update forward
looking statements.
Overview
Zaba International, Inc., f/k/a HA Spinnaker, Inc. (the
"Company"), was incorporated under the laws of the State of
Colorado on September 28, 1988. Effective August 4, 1997, pursuant
to a definitive agreement (the "Agreement"), the Company acquired
all of the issued and outstanding securities of Zaba International
Holdings USA, Inc., ("Zaba"), a Nevada corporation. The terms of
the transaction involved the Company undertaking a "reverse stock
split", wherein one share of common stock was issued in exchange
for every 12 shares of common stock issued and outstanding as of
the Closing Date and thereafter, issuing an aggregate of 9,628,660
shares of its "restricted" common stock to the former shareholders
of Zaba in exchange for all of the issued and outstanding stock of
Zaba. Zaba did not survive the transaction. The Company was the
surviving entity. As part of the terms of the aforesaid
transaction, the Company amended its Articles of Incorporation,
changing its name to its present name.
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<PAGE>
The following information is intended to provide a narrative
description of the Company's proposed operations, to identify key
trends affecting the Company's businesses and to identify other
factors affecting the Company for the three month period ended
February 28, 1998.
Plan of Operation
The Company has generated no revenues from its operations
since its inception. Since the Company has not generated revenues
and has never been in a profitable position, it operates with
minimal overhead. Until the end of October 1997, the Company's
primary activity was to seek out and acquire an acquisition
candidate. Relevant thereto, in October 1997, the Zaba Agreement
was executed. However, the former management of the Company
maintains a right of rescission, which it intends to exercise if
the Sweeprite Agreement does not close.
The Company holds an option to purchase all of the issued and
outstanding securities of three (3) Canadian companies, including
Sweeprite Mfg. Inc. ("Sweeprite"), Rite Way Mfg. Co. Ltd. ("Rite
Way") and Patchrite Inc. ("Patchrite"), all Saskatchewan
corporations. These companies are engaged in the businesses of
manufacturing, distribution and marketing of tillage and seeding
agricultural equipment (Rite Way), street sweepers (Sweeprite) and
asphalt surface pothole patchers (Patchrite) (hereinafter jointly
referred to as the "Sweeprite Companies"). The option expires June
30, 1998, as extended. It is the intention of the Company to
exercise this option prior to its expiration. However, there can
be no assurances that it will successfully do so. If it does not
successfully consummate this acquisition, the proposed merger
between the Company and Zaba International USA, Inc. may be voided
by the former members of the Company's Board of Directors, in their
sole discretion. The Company has no other business.
The purchase price to be paid by the Company for the Sweeprite
Companies is $3.35 million (Canadian). As of the date of this
report, the Company has tendered a non-refundable deposit to the
sellers of the Sweeprite Companies in the amount of $300,000. The
relevant Stock Purchase Agreement, as amended, provides for an
additional $200,000 non-refundable deposit to be tendered by the
Company on or before the earlier of (i) March 16, 1998; or (ii)
upon completion of an audit by the financing institution who has
agreed, subject to such audit, to finance a portion of the purchase
price of the Sweeprite Companies. Thereafter, an additional
payment of $500,000 shall be due 30 days after payment of the
aforesaid $200,000, with another payment of $500,000 30 days
thereafter, leaving a balance of $1.85 million due. Upon payment
of the initial $500,000 payment described above, the sellers'
securities will be assigned to the Company and placed in escrow.
However, management of the Sweeprite Companies will not change
unless and until the full purchase price is tendered, which is
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scheduled to occur on or before June 15, 1998. Former management's
right of rescission remains in effect until the proposed
transaction with the Sweeprite Companies successfully closes. In
the event the Sweeprite Companies transaction does not close, the
transaction with Old Zaba shall be voided and former management
will assume control of the Company once again. In such event, the
Company will continue to attempt to implement its former business
plan of acquiring an existing business or assets. A complete
description of the Company's former business plan is included in
the Form 10-SB registration statement previously filed by the
Company, the contents of which are incorporated herein as if set
forth.
Assuming that the Company successfully exercises its option
described above, the Company will, through three (3) wholly owned
subsidiary companies, be engaged in the business of manufacturing
tillage and seeding agricultural equipment ("Riteway"), street
sweepers ("Sweeprite") and what current management views as a new
asphalt surface pothole patcher ("Patchrite"). Riteway and
Sweeprite have been engaged in its businesses since 1969.
Both the agricultural and road maintenance markets are growing
at a rapid rate. The annual market for the Company's agricultural
equipment amounts to over $1 billion in sales. The road
maintenance industry for sweepers is in excess of $500 million per
year. On a consolidated basis, during the last fiscal year, these
companies generated annual revenues of approximately $10 million,
an increase of 30% over the previous year.
Riteway and Sweeprite's sales are made primarily to dealers,
who accounted for approximately 95% of the sales in the last fiscal
year, with the balance of 5% made as direct sales. The
relationship with its dealers are usually established at large
trade shows, as well as through efforts undertaken by in-house
representatives. Since its inception, these companies have built
up a system of distributors and dealers in 5 provinces in Canada,
13 states in the US and 10 other countries located throughout the
world.
Following is a brief description of current products, which
will be acquired by the Company if the option discussed above is
exercised, of which there can be no assurance:
Agricultural Tillage & Seeding Equipment
The agricultural equipment division has a dealership network
of 100+ dealers throughout Western canada and the US. As of the
date of this report, approximately 85% of sales are in Canada, with
the 15% balance in the US. Its principal products include (i)
jumbo harrows, which is a conventional tilling that requires
nominal tilling operations by breaking and distributing straw. This
device also incorporates herbicide more efficiently than
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traditional harrows; (ii) air seeders (Accu-Seeder), which seeds,
fertilizes and packs in one operation and includes a floating shank
that delivers seek and fertilizer at a uniform depth, regardless of
the unevenness of the ground, and a rock picker. Management
believes that the market for these products is expanding and
anticipates that revenues will continue to increase during the next
few fiscal years. However, there can be no assurances that this
will occur.
Road Sweepers
Sweeprite brand sweepers have been sold to communities in
every province across Canada, as well as the Canadian Dept. of
National Defense. Approximately half of the sales of its sweepers
have been sold to US customers, including the US Dept. of Defense's
military bases throughout the world. Sales have also been made in
Australia, Taiwan, Indonesia and the Czech Republic. Sweeprite
presently produces its sweepers in a plant located in Saskatchewan,
Canada. In the event the Option is exercised, the Company intends
to also open an assembly plant in Staten Island, New York, in order
to assist the Company's planned US expansion. However, there can
be no assurances that such a plant will be constructed in the
future.
The Company intends to increase its sweeper business through
acquisitions of contractor companies and small to mid-size sweeping
companies, especially those sweeping companies which are located in
close proximity to the Company's proposed NY plant. As of the date
of this report, the Company is negotiating to acquire three
separate sweeping companies. However, there can be no assurances
that the Company will be able to successfully consummate these
acquisitions, or that the acquisition of any or all of these
companies will result in increased profitability to the Company.
It is anticipated that the total cost of these acquisitions will be
approximately $1 million (US).
Pothole Patchers
The Company intends to market this product under the tradename
"Patchrite Pothole Patcher". As of the date of this report, only
nominal activity has been undertaken in this regard. However, based
upon minimal marketing efforts, management of the Company believes
that its concept of combining the entire process into a self-
sustaining one person unit which technology has been developed by
the Company is unsurpassed in the industry. There can be no
assurances that the Company will successfully market this product
in the future.
Liquidity and Capital Resources
The Company presently has nominal cash or cash equivalents.
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<PAGE>
The Company presently has an outstanding loan due a
shareholder in the principal amount of $270,971. A significant
portion ($214,000 US) was utilized by the Company for the initial
non-refundable deposit relating to the Sweeprite Companies
acquisition, with the balance for working capital. It accrues
interest at the rate of 9% per annum and is due upon demand.
The Company has no other financial resources as of the date of
this report. In order to consummate the Sweeprite Companies
transaction, the Company intends to undertake a private offering of
its securities. The Company has obtained commitments in principle
from various entities to fund this equity offering. As of the date
of this report there has been no definitive structure established
for this proposed offering, including the type of security to be
sold and the sale price thereof. Among the parties who have
verbally committed to the Company to assist in this funding is
Select Capital, Inc., Miami, Florida. However, there can be no
assurances that the Company will raise any capital, or that if such
capital is raised, that it will be sufficient to enable the Company
to acquire the Sweeprite Companies. The total purchase price of
the proposed acquisition is $3.35 million (Canadian).
Additionally, the Company also has a tentative commitment from
NationsCredit, New York, NY, to provide the Company with
approximately $4 million in secured loans once the Sweeprite
Companies acquisition is consummated. This loan would be utilized
for working capital, as well as "floor planning" for the Company's
distribution network throughout the United States for the Sweeprite
Companies equipment. As of the date of this report, NationsCredit
is engaged in an independent audit of the Sweeprite Companies in
order to insure that their due diligence related to the proposed
loan is completed in a timely manner. The terms of this proposed
loan have not been finalized as of the date of this report.
Year 2000 Disclosure
Many existing computer programs use only two digits to
identify a year in the date field. These programs were designed
and developed without considering the impact of the upcoming change
in the century. If not corrected, many computer applications could
fail or create erroneous results by or at the Year 2000. As a
result, many companies will be required to undertake major projects
to address the Year 2000 issue. Because the Company has no assets,
including any personal property such as computers, it is not
anticipated that the Company will incur any negative impact as a
result of this potential problem. However, it is possible that
this issue may have an impact on the Company after the Company
successfully consummates the Sweeprite Companies acquisition. In
response thereto, the Company does intend to implement a new
computer system following the anticipated closing of the Sweeprite
Companies acquisition. The acquisition of this new equipment will
be undertaken with this issue in mind.
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<PAGE>
The Company has filed an application with the National
Association of Securities Dealers ("NASD") for trading on the
NASDAQ over the counter Bulletin Board, which application is
presently pending.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - NONE
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
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
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed a Form 8-K dated December 15, 1997,
providing unaudited consolidated financial statements of Zaba
International Holdings USA, Inc., the Company's successful merger
candidate, as of October 28, 1997, and unaudited pro forma Balance
Sheet of the company as of October 29, 1997.
The Registrant also filed a Form 8-K dated January 14,
1998, reporting the extension of an option held by the Company to
purchase all of the issued and outstanding securities of Sweeprite
Mfg. Inc., Rite Way Mfg. Co. and Patchrite Inc., all Saskatchewan
corporations, engaged in the businesses of manufacturing,
distribution and marketing of tillage and seeding agricultural
equipment, street sweepers and asphalt surface pothole patchers to
January 31, 1998.
Additionally, the Registrant filed a Form 8-K dated
January 22, 1898, advising that Comiskey & Company, P.C., the
Registrant's independent accountant for the Registrant's two most
recent fiscal years, resigned and were replaced with the accounting
firm of Kish, Leake & Associates, P.C., independent public
accountants to audit the Registrant's fiscal year ended November
30, 1997, as well as future financial statements.
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<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Balance Sheet
_________________________________________________________________
<CAPTION>
Unaudited Audited
February November
28, 1998 30, 1997
-------- --------
<S> <C> <C>
ASSETS
Current Assets - Cash $ 88 $ 88
Other Assets - Acquisition Deposit 214,000 214,000
-------- --------
TOTAL ASSETS $214,088 $214,088
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts Payable 80,050 71,895
Advances From Shareholder 270,971 270,971
-------- --------
Total Current Liabilities 351,021 342,866
-------- --------
Long-Term Liabilities 0 0
-------- --------
TOTAL LIABILITIES 351,021 342,866
-------- --------
SHAREHOLDERS' EQUITY
Preferred Stock, $.001 Par Value
Authorized 100,000,000 Shares;
Issued And Outstanding -0- Shares 0 0
Common Stock, $.0001 Par Value
Authorized 1,000,000,000 Shares;
Issued And Outstanding 12,035,826 Shares 1,203 1,203
Capital Paid In Excess Of
Par Value Of Common Stock 3,517 3,517
Retained Earnings (Deficit)
Accumulated During The
Development Stage ( 141,653) ( 133,498)
-------- --------
TOTAL SHAREHOLDERS' EQUITY ( 136,933) ( 128,778)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $214,088 $214,088
======== ========
<FN>
See Accompanying Notes To These Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Unaudited Statement Of Operations
_________________________________________________________________
<CAPTION>
August
28, 1997
(Inception)
Three Months Three Months Through
February February February
28, 1998 28, 1997 28, 1998
---------- -------- ----------
<S> <C> <C> <C>
Revenue $ 0 $ 0 $ 0
Expenses:
Consulting & Wages 0 0 10,415
Fees 0 0 130
Legal And Accounting 6,755 0 101,665
Office 0 0 2,938
Professional Fees 0 0 18,133
Rent 1,400 0 1,400
Travel 0 0 6,972
---------- -------- ----------
Total Expenses 8,155 0 141,653
---------- -------- ----------
Net (Loss) ( 8,155) 0 (141,653)
========== ======== ==========
Basic (Loss)
Per Common Share ($0.00) $0.00 ($0.01)
========== ======== ==========
Weighted Average Common
Shares Outstanding 12,035,826 0 12,035,826
========== ======== ==========
<FN>
See Accompanying Notes To These Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Unaudited Statement Of Cash Flows
______________________________________________________________________
<CAPTION>
August
28, 1997
Three Months Three Months(Inception)
Ended Ended Through
February February February
28, 1998 28, 1997 28, 1998
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net (Loss) ($ 8,155) $ 0 ($141,653)
Stock Issued For Services 0 0 715
Expenses Paid By Shareholder
On Behalf Of Company 0 0 61,617
Increase In Accounts Payable 8,155 0 75,909
-------- -------- --------
Net Cash Flows From Operations 0 0 (3,412)
-------- -------- --------
Cash Flows From Investing Activities: 0 0 0
-------- -------- --------
Net Cash Flows From Investing 0 0 0
-------- -------- --------
Cash Flows From Financing Activities:
Funds Received As Additional Capital
Contribution 0 0 3,500
-------- -------- --------
Cash Flows From Financing 0 0 3,500
-------- -------- --------
Net Increase (Decrease) In Cash 0 0 88
Cash At Beginning Of Period 88 0 0
-------- -------- --------
Cash At End Of Period $ 88 $ 0 $ 88
======== ======== ========
Summary Of Non-Cash Investing And Financing Activities:
Debt Paid By Shareholder On
Behalf Of Company $ 61,617
========
Acquisition Deposit Paid By
Shareholders $214,000
========
Stock Issued For Services $ 715
========
<FN>
See Accompanying Notes To These Financial Statements.
</TABLE>
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<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Unaudited Statement Of Shareholders' Equity
____________________________________________________________________________________________
<CAPTION>
(Deficit)
Accumulated
Number Of Number Of Capital Paid During The
Common Preferred Common In Excess Of Development
Shares Shares Stock Par Value Stage Total
---------- --------- ------ ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Balance At August 28, 1997 0 0 $ 0 $ 0 $ 0 $ 0
Common stock issued at
inception, as restated
for reverse acquisition 9,628,660 0 963 (963) 0 0
October 1997 For Services
Valued $.03 Per Share 23,833 - 2 713 - 715
Common Stock Issued In
Reverse Acquisition 2,383,333 - 238 (4,379) - (4,141)
Contribution To Equity - - - 8,146 - 8,146
Net (Loss) At November
30, 1997 - - - - (133,498) (133,498)
---------- --------- ------ ------------ ---------- --------
Balance At November
30, 1997 12,035,826 0 $1,203 $ 3,517 ($ 133,498)($128,778)
Net (Loss) at February
28, 1998 (8,155) (8,155)
---------- --------- ------ ------------ ---------- --------
Balance at February
28, 1998 12,035,826 0 $1,203 $ 3,517 ($ 141,653)($136,933)
========== ========= ====== ============ ========== ========
<FN>
See Accompanying Notes To These Financial Statements.
</TABLE>
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Zaba International, Inc.
(A Development Stage Company)
Notes to Unaudited Financial Statements
For The Three Month Period Ended February 28, 1998
- --------------------
Note 1 - Unaudited Financial Information
- ----------------------------------------
The unaudited financial information included for the three month interim periods
ended February 28, 1998 and February 28, 1997 were taken from the books and
records without audit. However, such information reflects all adjustments
(consisting only of normal recurring adjustments, which are of the opinion of
management, necessary to reflect properly the results of Interim periods
presented). The results of operations for the three month period ended February
28, 1998 are not necessarily indicative of the results expected for the fiscal
year ended November 30, 1998.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
and Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ZABA INTERNATIONAL, INC.
(Registrant)
Dated: April 21, 1998
By: s/Robert Zaba
--------------------------------
Robert Zaba,
President
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ZABA INTERNATIONAL, INC.
Exhibit Index to Quarterly Report on Form 10-QSB
For the Quarter Ended February 28, 1998
EXHIBITS Page No.
EX-27 Financial Data Schedule . . . . . . . . . . . . 15
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED FEBRUARY 28,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> FEB-28-1998
<CASH> 214,088
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 214,088
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 214,088
<CURRENT-LIABILITIES> 351,021
<BONDS> 0
0
0
<COMMON> 1,203
<OTHER-SE> (138,136)
<TOTAL-LIABILITY-AND-EQUITY> 214,088
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,155
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,155)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,155)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
