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: May 31, 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.)
5650 GREENWOOD PLAZA BLVD, SUITE 216
ENGLEWOOD, COLORADO
(Address of principal executive offices)
20644 EASTLEIGH CRESCENT, SUITE 302
LANGLEY, BRITISH COLUMBIA V3A 4C4
(Former Address of Small Business Issuer)
(303) 741-1118
(Issuer's Telephone Number)
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 May 31, 1998, was 2,407,165 shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the six month period ended May
31, 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.
2
<PAGE>
Subsequently, in June, 1998, and pursuant to the terms of the
Agreement, former management, who had reserved a right to rescind the Agreement,
exercised their respective rights. As a result, former members of management
assumed the positions with the Company which they had resigned upon closing of
the Agreement and the 9,628,660 shares of common stock issued pursuant to the
Agreement were redeemed back to the Company's Treasury. However, the name change
and reverse split referenced above remained in effect.
RESULTS OF OPERATIONS
The Company generated no revenues during the six month period ended May
31, 1998. Management of the Company anticipates that the Company will not
generate any significant revenues until the Company accomplishes its business
objective of merging with a nonaffiliated entity or acquiring assets from the
same.
The Company's securities are currently not liquid. There are no market
makers in the Company's securities and it is not anticipated that any market
will develop in the Company's securities until such time as the Company
successfully implements its business plan of engaging in a business opportunity,
either by merger or acquisition of assets. The Company presently has no liquid
financial resources to offer such a candidate and must rely upon an exchange of
its stock to complete such a merger or acquisition.
PLAN OF OPERATION
The Company intends to seek to acquire assets or shares of an entity
actively engaged in business, in exchange for its securities. As of the date of
this report, management of the Company has had preliminary discussions with
potential merger or acquisition candidates, but there is no definitive agreement
between the Company and any third party relevant thereto. In the event the
Company does enter into an agreement with such a third party, the Board of
Directors does intend to obtain certain assurances of value of the target entity
assets prior to consummating such a transaction, with further assurances that an
audited financial statement would be provided within sixty days after closing of
such a transaction. Closing documents relative thereto will include
representations that the value of the assets conveyed to or otherwise so
transferred will not materially differ from the representations included in such
closing documents, or the transaction will be voidable.
The Company has no full time employees. The Company's President,
Secretary and Treasurer have agreed to allocate a portion of their time to the
activities of the Company, without compensation. These officers anticipate that
the business plan of the Company can be implemented by their devoting
approximately 20 hours per month to the business affairs of the Company and,
3
<PAGE>
consequently, conflicts of interest may arise with respect to the limited time
commitment by such officers.
Because the Company presently has nominal overhead or other material
financial obligations, management of the Company believes that the Company's
short term cash requirements can be satisfied by management injecting whatever
nominal amounts of cash into the Company to cover these incidental expenses.
There are no assurances whatsoever that any additional cash will be made
available to the Company through any means.
LIQUIDITY AND CAPITAL RESOURCES
The Company presently has nominal cash or cash equivalents.
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 nominal assets,
including no 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 a merger or acquisition. Management intends
to address this potential problem with any prospective merger or acquisition
candidate. There can be no assurances that new management of the Company will be
able to avoid a problem in this regard after a merger or acquisition is so
consummated.
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
4
<PAGE>
(b) Reports on Form 8-K
The Registrant 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. This issue is no longer relevant, as the Company rescinded its Agreement
with Zaba International Holdings USA, Inc., a Nevada corporation,and the
business of the Company has reverted back to its original business plan outlined
herein and in prior reports filed with the Securities and Exchange Commission.
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.
5
<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Balance Sheet
- -----------------------------------------------------------------
<CAPTION>
Unaudited Audited
May November
31, 1998 30, 1997
-------- --------
<S> <C> <C>
ASSETS
Current Assets - Cash $ 44 $ 88
-------- --------
TOTAL ASSETS $ 44 $ 88
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities - Accounts Payable 7,685 3,705
-------- --------
Total Current Liabilities 7,685 3,705
-------- --------
Long-Term Liabilities 0 0
-------- --------
TOTAL LIABILITIES 7,665 3,705
-------- --------
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 2,407,165 Shares 241 241
Capital Paid In Excess Of
Par Value 56,482 47,977
Deficit Accumulated During The
Development Stage (64,364) (51,835)
-------- --------
TOTAL SHAREHOLDERS' EQUITY (7,641) (3,617)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 44 $ 88
======== ========
The Accompanying Notes Are An Integral Part
of These Unaudited Financial Statements.
</TABLE>
6
<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Unaudited Statement Of Operations
- -----------------------------------------------------------------
<CAPTION>
Unaudited Unaudited
Three Months Three Months
May May
31, 1998 31, 1997
---------- ---------
<S> <C> <C>
Revenue $ 0 $ 0
Operating Expenses:
Legal And Accounting 5,757 1,115
Office 18 581
---------- ---------
Total Expenses 5,775 1,696
---------- ---------
Net (Loss) (5,775) (1,696)
========== =========
Basic (Loss)
Per Common Share $ (0.00) $ (0.00)
========== =========
Weighted Average Common
Shares Outstanding 2,407,165 2,407,165
========== =========
The Accompanying Notes Are An Integral Part
of These Unaudited Financial Statements.
</TABLE>
7
<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Unaudited Statement Of Operations
- -----------------------------------------------------------------
September
28, 1988
(Inception)
Six Months Six Months Through
May May May
31, 1998 31, 1997 31, 1998
---------- --------- ----------
<S> <C> <C> <C>
Revenue $ 0 $ 0 $ 0
Operating Expenses:
Amortization 0 0 500
Legal And Accounting 12,512 2,137 29,108
Office Expense 17 1,039 2,609
Rent 0 0 7,200
Stock Transfer Fees 0 0 340
Wages 0 0 25,000
---------- --------- ----------
Total Expenses 12,529 3,176 64,757
---------- --------- ----------
Net (Loss) Before
Other Income (12,529) (3,176) (64,757)
Other Income - Interest 0 0 393
---------- --------- ----------
Net (Loss) (12,529) (3,176) (64,364)
========== ========= ==========
Basic (Loss)
Per Common Share ($0.01) ($0.00)
========== =========
Weighted Average Common
Shares Outstanding 2,407,165 2,407,165
========== =========
The Accompanying Notes Are An Integral Part
of These Unaudited Financial Statements.
</TABLE>
8
<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Unaudited Statement Of Cash Flows
- ------------------------------------------------------------------------
<CAPTION>
September
28, 1988
Six Months Six Months (Inception)
Ended Ended Through
May May May
31, 1998 31, 1997 31, 1998
-------- -------- --------
<S> <C> <C> <C>
Net (Loss) $(12,529) $ (3,176) $(64,364)
Plus Items Not Affecting Cash Flow:
Amortization 0 0 500
Expenses Paid By Shareholder 7,005 0 32,977
Stock Issued For Services 0 0 2,000
Increase (Decrease) In
Accounts Payable 3,980 (3,636) 7,685
-------- -------- --------
Net Cash Flows From Operations (1,544) (6,812) (21,202)
-------- -------- --------
Cash Flows From Investing Activities:
(Increase) in Organization Costs 0 0 (500)
-------- -------- --------
Net Cash Flows From Investing 0 0 (500)
-------- -------- --------
Cash Flows From Financing Activities:
Cash Contributions From Shareholder 1,500 7,141 9,646
Issuance of Common Stock 0 0 12,100
-------- -------- --------
Cash Flows From Financing 1,500 7,141 21,746
-------- -------- --------
Net Increase (Decrease) In Cash (44) 329 44
Cash At Beginning Of Period 88 0 0
-------- -------- --------
Cash At End Of Period $ 44 $ 329 $ 44
======== ======== ========
Summary Of Non-Cash Investing And Financing Activities:
Expenses Paid By Shareholder On
Behalf Of Company $ 7,005 $ 0 $ 32,977
======== ======== ========
Stock Issued For Services $ 0 $ 0 $ 2,000
======== ======== ========
The Accompanying Notes Are An Integral Part
of These Unaudited Financial Statements.
</TABLE>
9
<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Unaudited Statement Of Shareholders' Equity
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
(Deficit)
Accumulated
Number Of Number Of Capital Paid Stock During The
Common Preferred Common In Excess Of Subscriptions Development
Shares Shares Stock Par Value Receivable Stage Total
---------- --------- ------ ------------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance At
September 28, 1988 *,** 0 0 $ 0 $ 0 $ 0 $ 0 $ 0
September 28, 1988, Stock
Issued for Services at
$.0012 per share 1,666,686 0 167 1,833 - - 2,000
Net (Loss) November
30, 1988 - - - - - (4,825) (4,825)
---------- --------- ------ ------------ ---------- -------- --------
Balance At November
30, 1988 1,666,686 0 $ 167 $ 1,833 0 $ (4,825) $ (2,825)
November 1, 1989, Stock
Issued for cash at
$.0112 per share 591,666 0 59 8,941 (100) - 6,900
November 1, 1989, Stock
Issued for cash at
$.04 per share 125,000 0 13 4,987 (5,000) - 0
Net (Loss) November
30, 1989 - - - - - (16,900) (16,900)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1989 2,383,332 0 $ 239 $ 13,761 $ (5,100) $(21,725) $(12,825)
Stock Subscriptions
Received - - - - 5,100 - 5,100
Related Party Debt
Forgiveness - - - 25,972 - - 25,972
Net (Loss) November
30, 1990 - - - - - (17,265) (17,265)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1990 2,383,332 0 $ 239 $ 39,733 $ 0 $(38,990) $ 962
Net (Loss) November
30, 1991 - - - - - (907) (907)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1991 2,383,332 0 $ 239 $ 39,733 $ 0 $(39,897) $ 75
Net (Loss) November
30, 1992 - - - - - (100) (100)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1992 2,383,332 0 $ 239 $ 39,733 $ 0 $(39,997) $ (25)
Net (Loss) November
30, 1993 - - - - - (75) (75)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1993 2,383,332 0 $ 239 $ 39,733 $ 0 $(40,072) $ (100)
10
<PAGE>
<CAPTION>
(Deficit)
Accumulated
Number Of Number Of Capital Paid Stock During The
Common Preferred Common In Excess Of Subscriptions Development
Shares Shares Stock Par Value Receivable Stage Total
---------- --------- ------ ------------ ---------- -------- -------
Net (Loss) November
30, 1994 - - - - - (525) (525)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1994 2,383,332 0 $ 239 $ 39,733 $ 0 $(40,597) $ (625)
Net (Loss) November
30, 1995 - - - - - (2,747) (2,747)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1995 2,383,332 0 $ 239 $ 39,733 $ 0 $(43,344) $ (3,372)
Net (Loss) November
30, 1996 - - - - - (869) (869)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1996 2,383,332 0 $ 239 $ 39,733 $ 0 $(44,213) $ (4,241)
October 1997 for Services
Valued At $.03 Per Share 23,833 - 2 713 - - 715
Contribution to Equity - - - 8,146 - - 8,146
Net (Loss) November
30, 1997 - - - - - (7,622) (7,622)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1997 2,407,165 0 $ 241 $ 48,592 $ 0 $(51,835) $ (3,002)
Contribution to Equity - - - 7,890 - - 7,890
Net (Loss) May 31, 1998 - - - - - (12,529) (12,529)
---------- --------- ------ ------------ ---------- -------- --------
Balance at May 31, 1998 2,407,165 0 $ 241 $ 56,482 $ 0 $(64,384) $ (7,641)
========== ========= ====== ============ ========== ======== ========
* Restated to reflect a 12 to 1 reverse split.
** Restated to reflect subsequent rescission of prior merger.
The Accompanying Notes Are An Integral Part
of These Unaudited Financial Statements.
</TABLE>
11
<PAGE>
Zaba International, Inc.
Notes to Unaudited Financial Statements
For The Six Month Period Ended May 31, 1998
- --------------------------------------------
Note 1 - Unaudited Financial Information
- ----------------------------------------
The unaudited financial information included for the three month and six month
interim period ended May 31, 1998 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 six month period ended May 31, 1998 are not necessarily
indicative of the results expected for the fiscal year ended November 30, 1998.
Note 2 - Financial Statements
- -----------------------------
Management has elected to omit substantially all footnotes relating to the
condensed financial statements of the Company included in the report. For a
complete set of footnotes, reference is made to the Company's Annual Report on
Form 10-KSB for the year ended November 30, 1997 as filed with the Securities
and Exchange Commission and the audited financial statements included therein.
Note 3 - Rescission of Prior Acquisition
- ----------------------------------------
On June 1, 1998, the Company entered into a rescission agreement with Zaba
International Holdings USA, Inc. ("Zaba"), a privately held British Columbia,
Canada corporation, whereby the Company and Zaba did agree to rescind the
previous asset acquisition agreement entered into between the aforesaid parties
in August 1997. As part of the terms of this rescission, Zaba and its assignees
did agree to tender back into the Company's treasury an aggregate of 9,628,660
"restricted" common shares, representing approximately 80% of the Company's then
outstanding common stock. Zaba also agreed to repay certain balances incurred by
the Company applicable to the rescission and other related activities of the
Company.
12
<PAGE>
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: May 12, 1999
By: s/Gregory W. Skufca
------------------------------------
Gregory W. Skufca, President
13
<PAGE>
ZABA INTERNATIONAL, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED MAY 31, 1998
EXHIBITS Page No.
EX-27 Financial Data Schedule.....................................15
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORAMTION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE FISCAL QUARTER ENDED MAY 31, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> MAY-31-1998
<CASH> 44
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 44
<CURRENT-LIABILITIES> 7,685
<BONDS> 0
0
0
<COMMON> 241
<OTHER-SE> (7,882)
<TOTAL-LIABILITY-AND-EQUITY> 44
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,775
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,775)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,775)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,775)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
