SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[ ] Transitional Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended November 30, 1998
Commission File No. 0-21099
ZABA INTERNATIONAL, INC.
------------------------
(Name of small business issuer in its charter)
Colorado 84-1128300
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number
5650 Greenwood Plaza Blvd, Suite 216
Englewood, Colorado
(303) 741-1118
--------------
(Address, including zip code and telephone number, including area
code, of registrant's executive offices)
Securities registered under Section 12(b) of the Exchange Act:
none
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock
------------
(Title of class)
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 preceding 12
months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
---- ----
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. x
Issuer's revenues for its most recent fiscal year: $ -0-
(Continued on Following Page)
<PAGE>
State the aggregate market value of the voting stock held by non-affiliates,
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: As of June 28, 1999: $0.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of June 28, 1999 there were
2,407,165 shares of the Company's common stock issued and outstanding.
Documents Incorporated by Reference:
This Form 10-KSB consists of Thirty Pges.
Exhibit Index is located at Page Twenty Nine.
2
<PAGE>
TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
ZABA INTERNATIONAL, INC.
PAGE
----
Facing Page
Index
PART I
Item 1. Description of Business..................... 4
Item 2. Description of Property..................... 5
Item 3. Legal Proceedings........................... 6
Item 4. Submission of Matters to a Vote of
Security Holders........................ 6
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters......... 6
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 7
Item 7 Financial Statements........................ 11
Item 8. Changes in and Disagreements on Accounting
and Financial Disclosure................ 23
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons, Compliance with
Section 16(a) of the Exchange Act....... 23
Item 10. Executive Compensation...................... 24
Item 11. Security Ownership of Certain Beneficial
Owners and Management................... 26
Item 12. Certain Relationships and Related
Transactions............................ 26
PART IV
Item 13. Exhibits and Reports on Form 8-K........... 27
SIGNATURES............................................. 28
3
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
HISTORY
Zaba International, Inc. (the "Company"), was incorporated on September 28,
1988 under the laws of the State of Colorado under the name HA Spinnaker, Inc.,
to engage in any lawful corporate undertaking. The Company's current principal
business purpose is a "shell" corporation engaged in seeking out and acquiring
another business entity or opportunity. Between September 1988 and January 1990,
the primary activity of the Company was directed towards organizational efforts.
In January 1990, the Company filed a registration statement on Form S-18, which
the Company abandoned in May 1991 due to adverse market conditions. In July
1996, the Company filed a registration statement on Form 10-SB with the
Securities and Exchange Commission, which registration statement became
effective in April 1998. The purpose of the registration statement was
management's belief that the primary attraction of the Company as a merger
partner or acquisition vehicle will be its status as a reporting company
pursuant to the Securities Exchange Act of 1934, as amended.
DESCRIPTION OF BUSINESS
In August 1997, the Company executed an agreement whereby it intended to
acquire all of the issued and outstanding securities of Zaba International
Holdings USA, Inc. ("Old Zaba"), a Nevada corporation (the "Zaba Agreement").
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 shareholders of Old Zaba in exchange for all of their issued and
outstanding stock of Old Zaba. Zaba did not survive the transaction. The Company
also changed its name to "Zaba International, Inc."
Subsequent to August 4, 1997, former management discovered a material
inaccuracy in the representations and warranties made by Old Zaba and included
in the Zaba Agreement. Pursuant to the terms of said Zaba Agreement, management
of the Company provided notice of the same to management of Old Zaba. As a
result, management of Old Zaba had twenty (20) days from the date of such notice
to cure any and all defects. Failure of Old Zaba to properly cure within the 20
day period would have caused the Zaba Agreement to be terminated in accordance
with its terms. Effective October 29, 1997, the Company and Zaba did execute an
Amendment to the Zaba Agreement, the Agreement was ratified, subject however to
a right of rescission granted to former management, to be exercised if, and only
if, Old Zaba failed to close a material acquisition on or
4
<PAGE>
before December 31, 1997. This material acquisition was exercising 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 ("Riteway"), street
sweepers ("Sweeprite") and asphalt surface pothole patchers ("Patchrite")
(hereinafter jointly referred to as the "Sweeprite Companies"). Old Zaba failed
to exercise its option and thereafter, on June 1, 1998, the Zaba Agreement was
rescinded by the mutual consent of the parties.
As a result of the rescission, the Company's then current officers and
members of the Board of Directors resigned their positions with the Company and
certain members of the Board who had previously held such positions prior to the
Zaba Agreement again assumed management positions with the Company. See "Part
III, Item 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act."
See "Part II, Item 6, Management's Discussion - Plan of Operation", below
for a more detailed description of the Company's business plan.
The current business activities of the Company classify it as a "blank
check" company. Many states have enacted statutes, rules and regulations
limiting the sale of securities of "blank check" companies in their respective
jurisdictions. Management does not intend to undertake any efforts to cause a
market to develop in the Company's securities until such time as the Company has
successfully implemented its business plan described herein.
EMPLOYEES
During the fiscal year ended November 30, 1998, the Company had no full
time employees. The Company's President has agreed to allocate a portion of his
time to the activities of the Company, without compensation. This officer
anticipates that the business plan of the Company can be implemented by his
devoting approximately 20 hours per month to the business affairs of the Company
and, consequently, conflicts of interest may arise with respect to the limited
time commitment by such officer.
ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES. The Company operates from offices at 5650 Greenwood Plaza
Blvd., Suite 216, Englewood, Colorado 80111. This space is provided to the
Company on a rent free basis by the President of the Company. It is anticipated
that this arrangement will remain until such time as the Company successfully
consummates
5
<PAGE>
a merger or acquisition. Management believes that this space will meet the
Company's needs for the foreseeable future.
OTHER PROPERTY. The Company has no properties and at this time has no
agreements to acquire any properties. The Company intends to attempt to acquire
assets or a business in exchange for its securities which assets or business is
determined to be desirable for its objectives.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings which are pending or have been
threatened against the Company of which management is aware.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
(a) Market Information. There is presently no trading market for the common
equity of the Company.
(b) Holders. There are thirty-two (32) holders of the Company's Common
Stock.
As of the date of this report, all of the shares of the Company's Common
Stock are eligible for sale under Rule 144 promulgated under the Securities Act
of 1933, as amended, subject to certain limitations included in said Rule. In
general, under Rule 144, a person (or persons whose shares are aggregated), who
has satisfied a one year holding period, under certain circumstances, may sell
within any three month period a number of shares which does not exceed the
greater of one percent of the then outstanding Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any
quantity limitation by a person who has satisfied a two year holding period and
who is not, and has not been for the preceding three months, an affiliate of the
Company.
(c) Dividends.
(1) The Company has not paid any dividends on its Common Stock. The
Company does not foresee that the Company will have the ability to pay a
dividend on its Common Stock in the fiscal year ended November 30, 1999, unless
the Company successfully consummates a merger or acquisition and the relevant
candidate has
6
<PAGE>
sufficient assets available to undertake issuance of such a dividend and
management elects to do so, of which there can be no assurance.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
audited 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.
(a) Plan of Operation.
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of an
Exchange Act registered corporation. The Company does not restrict its search to
any specific business, industry, or geographical location and the Company may
participate in a business venture of virtually any kind or nature. This
discussion of the proposed business is purposefully general and is not meant to
be restrictive of the Company's virtually unlimited discretion to search for and
enter into potential business opportunities. Management anticipates that it may
be able to participate in only one potential business venture because the
Company has nominal assets and limited financial resources. See "Part II, Item 7
- - Financial Statements." This lack of diversification should be considered a
substantial risk to shareholders of the Company because it will not permit the
Company to offset potential losses from one venture against gains from another.
7
<PAGE>
The Company is seeking a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
The Company may acquire assets and establish wholly owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Due to general
economic conditions, rapid technological advances being made in some industries
and shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes), for all shareholders and other factors.
Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a publicly registered company without incurring the cost and time
required to conduct an initial public offering. The owners of the business
opportunities will, however, incur significant legal and accounting costs in
connection with acquisition of a business opportunity, including the costs of
preparing Form 8-K's, 10-K's or 10-KSB's, agreements and related reports and
documents. The Securities Exchange Act of 1934 (the "34 Act") specifically
requires that any merger or acquisition candidate comply with all applicable
reporting requirements, which include providing audited financial statements to
be included within the numerous filings relevant to complying with the 34 Act.
Nevertheless, the officers and directors of the Company have not conducted
market research and are not aware of statistical data which would support the
perceived benefits of a merger or acquisition transaction for the owners of a
business opportunity.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the officers and directors of the Company, none of whom is a
professional business analyst. Management intends to concentrate on identifying
preliminary prospective business opportunities which may be brought to its
attention through present associations of the Company's officers and directors,
or by the Company's shareholders. In analyzing
8
<PAGE>
prospective business opportunities, management will consider such matters as the
available technical, financial and managerial resources; working capital and
other financial requirements; history of operations, if any; prospects for the
future; nature of present and expected competition; the quality and experience
of management services which may be available and the depth of that management;
the potential for further research, development, or exploration; specific risk
factors not now foreseeable but which then may be anticipated to impact the
proposed activities of the Company; the potential for growth or expansion; the
potential for profit; the perceived public recognition of acceptance of
products, services, or trades; name identification; and other relevant factors.
Officers and directors of the Company expect to meet personally with management
and key personnel of the business opportunity as part of their investigation. To
the extent possible, the Company intends to utilize written reports and personal
investigation to evaluate the above factors. The Company will not acquire or
merge with any company for which audited financial statements cannot be obtained
within a reasonable period of time after closing of the proposed transaction.
Management of the Company, while not especially experienced in matters
relating to the new business of the Company, is relying upon their own efforts
and, to a much lesser extent, the efforts of the Company's shareholders, in
accomplishing the business purposes of the Company. No outside consultants or
advisors are being utilized by the Company to effectuate its business purposes
described herein. However, if the Company does retain such an outside consultant
or advisor, any cash fee earned by such party will need to be paid by the
prospective merger/acquisition candidate, as the Company has no cash assets with
which to pay such obligation. There have been no contracts or agreements with
any outside consultants and none are anticipated in the future.
The Company does not restrict its search for any specific kind of firms,
but may acquire a venture which is in its preliminary or development stage,
which is already in operation, or in essentially any stage of its corporate
life. It is impossible to predict at this time the status of any business in
which the Company may become engaged, in that such business may need to seek
additional capital, may desire to have its shares publicly traded, or may seek
other perceived advantages which the Company may offer. However, the Company
does not intend to obtain funds in one or more private placements to finance the
operation of any acquired business opportunity until such time as the Company
has successfully consummated such a merger or acquisition.
The Company does incur nominal expenses in the implementation of its
business plan described herein. Because the Company has no capital with which to
pay these anticipated expenses, present management of the Company has and will
continue to pay these charges with their personal funds, as interest free loans
to the
9
<PAGE>
Company. However, the only opportunity which management has to have these loans
repaid will be from a prospective merger or acquisition candidate. Management
has agreed among themselves that the repayment of any loans made on behalf of
the Company will not impede, or be made conditional in any manner, to
consummation of a proposed transaction.
The Company has no full time employees. The Company's President has agreed
to allocate a portion of his time to the activities of the Company, without
compensation. This officer anticipates that the business plan of the Company can
be implemented by his devoting approximately 20 hours per month to the business
affairs of the Company and, consequently, conflicts of interest may arise with
respect to the limited time commitment by such officer.
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.
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 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.
ITEM 7. FINANCIAL STATEMENTS
10
<PAGE>
ZABA INTERNATIONAL, INC.
(Fka H A Spinnaker, Inc.)
FINANCIAL STATEMENTS
with
Independent Auditors' Report
For The Fiscal Years Ended November 30, 1998 And 1997
And the Period September 28, 1988 (inception) through November 30, 1998
11
<PAGE>
ZABA INTERNATIONAL, INC.
(Fka H A Spinnaker, Inc.)
TABLE OF CONTENTS
Page
----
Independent Auditors' Report 1
Financial Statements
Balance Sheet 2
Statement of Operations 3
Statement of Cash Flows 4
Statement of Shareholder's Equity 5-6
Notes to the Financial Statements 7-10
12
<PAGE>
Kish, Leake & Associates P.C.
Certified Public Accountants
J.D.Kish, C.P.A., M.B.A. 7901 E Belleview Ave - Suite 220
James D. Leake, C.P.A., M.T. Englewood, Colorado 80111
--------------------- Telephone (303) 779-5006
Arleen R. Brogan, C.P.A. Facsimile (303) 779-5724
Independent Auditor's Report
----------------------------
We have audited the accompanying balance sheet of Zaba International, Inc. (Fka
H A Spinnaker, Inc.) (a Developmental Stage Company), at November 30, 1998, and
the related statement of operations, cash flows, and shareholders' equity for
the fiscal years ended November 30, 1998 and 1997 and the period September 28,
1988 (inception) through November 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Zaba International, Inc. (Fka H
A Spinnaker, Inc.) at November 30, 1998 and the results of its operations and
its cash flows for the fiscal years ended November 30, 1998 and 1997 and the
period September 30, 1988 (inception) through November 30, 1998 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company is a development stage enterprise.
The lack of sufficient working capital to operate as of November 30, 1998 raises
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are described in Note 5. The financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.
s/Kish, Leake & Associates, P.C.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
June 4, 1999
-1-
13
<PAGE>
<TABLE>
Zaba International, Inc.
(fka H A Spinnaker, Inc.)
(A Development Stage Company)
Balance Sheet
- -----------------------------------------------------------------
<CAPTION>
November
30, 1998
--------
<S> <C>
ASSETS
Current Assets - Cash $ 44
--------
TOTAL ASSETS $ 44
========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities - Accounts Payable $ 9,963
Long-Term Liabilities 0
--------
TOTAL LIABILITIES 9,963
--------
SHAREHOLDERS' EQUITY
Preferred Stock, $.001 Par Value
Authorized 100,000,000 Shares;
Issued And Outstanding -0- Shares 0
Common Stock, $.0001 Par Value
Authorized 1,000,000,000 Shares;
Issued And Outstanding 2,407,165 Shares 241
Capital Paid In Excess Of
Par Value Of Common Stock 56,482
Retained Earnings (Deficit) Accumulated During The
Development Stage (66,642)
--------
TOTAL SHAREHOLDERS' EQUITY (9,919)
--------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 44
========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
</TABLE>
-2-
14
<PAGE>
<TABLE>
Zaba International, Inc.
(fka H A Spinnaker, Inc.)
(A Development Stage Company)
Statement Of Operations
- -----------------------------------------------------------------
<CAPTION>
Unaudited
September
28, 1988
(Inception)
Year Ended Year Ended Through
November November November
30, 1998 30, 1997 30, 1998
--------- -------- ---------
<S> <C> <C> <C>
Revenue $ 0 $ 0 $ 0
Expenses:
Amortization 0 0 500
Fees 0 130 0
Legal And Accounting 14,789 4,690 31,385
Office 18 2,461 2,610
Rent 0 0 7,200
Stock Transfer Fees 0 340 340
Wages 0 0 25,000
--------- -------- ---------
Total 14,807 7,621 67,035
--------- -------- ---------
(Loss) Before Other Income (14,807) (7,621) (67,035)
Other Income - Interest 0 0 393
Net (Loss) $ (14,807) $ (7,621) $ (66,642)
========= ======== =========
Basic and Fully Diluted
(Loss) Per 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 Financial Statements.
</TABLE>
-3-
15
<PAGE>
<TABLE>
Zaba International, Inc.
(fka H A Spinnaker, Inc.)
(A Development Stage Company)
Statement Of Cash Flows
- ----------------------------------------------------------------------
<CAPTION>
Unaudited
September
28, 1988
(Inception)
Year Ended Year Ended Through
November November November
30, 1998 30, 1997 30, 1998
-------- -------- --------
<S> <C> <C> <C>
Net (Loss) $(14,807) $ (7,621) $(66,642)
Adjustments To Reconcile Net Loss To
Net Cash Used In Operating
Activities: 0 0 0
Amortization 0 0 500
Debt paid by shareholder on behalf
of Company 7,005 4,141 37,908
Stock Issued For Services 0 0 2,715
Changes In Operating Assets
And Liabilities:
Increase in Organization Costs 0 0 (500)
Increase (Decrease) In
Accounts Payable 6,258 3,568 9,963
-------- -------- --------
Net Flows From Operations (1,544) 88 (16,056)
-------- -------- --------
Cash Flows From Investing Activities: 0 0 0
-------- -------- --------
Net Cash Flows From Investing 0 0 0
-------- -------- --------
Cash Flows From Financing Activities:
Stock Issued By Founding Shareholders 0 0 12,100
Funds Received As Additional Capital
Contribution 1,500 0 4,000
-------- -------- --------
Cash Flows From Financing 1,500 0 16,100
-------- -------- --------
Net Increase In Cash (44) 88 44
Cash At Beginning Of Period 88 0 0
-------- -------- --------
Cash At End Of Period $ 44 $ 88 $ 44
======== ======== ========
Summary Of Non-Cash Investing And Financing Activities:
Debt paid by shareholder on
behalf of Company $ 7,005 $ 4,141 $ 37,907
======== ======== ========
Stock Issued For Services $ 0 $ 715 $ 2,715
======== ======== ========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
</TABLE>
-4-
16
<PAGE>
<TABLE>
Zaba International, Inc.
(fka H A Spinnaker, Inc.)
(A Development Stage Company)
Statement Of Shareholders' Equity
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
(Deficit)
Accumulated
Number Of Number Of Capital Paid Stock During The
Common Preferred Common In Excess Of Subscription 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 1,666,667 0 167 1,833 - - 2,000
Net (Loss) At November
30, 1988 - - - - - (4,825) (4,825)
---------- --------- ------ ------------ ---------- ----------- --------
Balance At November
30, 1988 1,666,667 0 167 1,833 0 (4,825) (2,825)
November 1, 1989, Stock
Issued for cash at
$.0112 per share 591,667 0 59 6,941 (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) At November
30, 1989 - - - - - (16,900) (16,900)
---------- --------- ------ ------------ ---------- ----------- --------
Balance At November
30, 1989 2,383,333 0 239 13,761 (5,100) (21,725) (12,825)
Stock Subscription
Received - - - - 5,100 - 5,100
Related Party Debt
Forgiveness - - - 25,972 - - 25,972
Net (Loss) At November
30, 1990 - - - - - (17,265) (17,265)
---------- --------- ------ ------------ ---------- ----------- --------
Balance At November
30, 1990 2,383,333 0 239 39,733 0 (38,990) 982
Net (Loss) At November
30, 1991 - - - - - (907) (907)
---------- --------- ------ ------------ ---------- ----------- --------
Balance At November
30, 1991 2,383,333 0 239 39,733 0 (39,897) 75
Net (Loss) At November
30, 1992 - - - - - (100) (100)
---------- --------- ------ ------------ ---------- ----------- --------
Balance At November
30, 1992 2,383,333 0 239 39,733 0 (39,997) (25)
Net (Loss) At November
30, 1993 - - - - - (75) (75)
---------- --------- ------ ------------ ---------- ----------- --------
Balance At November
30, 1993 2,383,333 0 239 39,733 0 (40,072) (100)
Net (Loss) At November
30, 1994 - - - - - (525) (525)
---------- --------- ------ ------------ ---------- ----------- --------
Balance At November
30, 1994 2,383,333 0 239 39,733 0 (40,597) (625)
-5-
17
<PAGE>
<CAPTION>
(Deficit)
Accumulated
Number Of Number Of Capital Paid Stock During The
Common Preferred Common In Excess Of Subscription Development
Shares Shares Stock Par Value Receivable Stage Total
---------- --------- ------ ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net (Loss) At November
30, 1995 - - - - - (2,747) (2,747)
---------- --------- ------ ------------ ---------- ----------- --------
Balance At November
30, 1995 2,383,333 0 239 39,733 0 (43,344) (3,372)
Net (Loss) At November
30, 1996 - - - - - (869) (869)
---------- --------- ------ ------------ ---------- ----------- --------
Balance At November
30, 1996 2,383,333 0 239 39,733 0 (44,213) (4,241)
October 1997 for Services
Valued At $.03 Per Share 23,832 - 2 713 - - 715
Contribution to Equity - - - 8,146 - - 8,146
Net (Loss) At 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) At November
30, 1998 - - - - - (14,807) (14,807)
---------- --------- ------ ------------ ---------- ----------- --------
Balance At November
30, 1998 2,407,165 0 $ 241 $ 56,482 $ 0 $ (66,642) $ (9,919)
========== ========= ====== ============ ========== =========== ========
* - 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 Financial Statements.
</TABLE>
-6-
18
<PAGE>
Zaba International, Inc.
(Fka H A Spinnaker, Inc.)
(A Development Stage Company)
Notes to Financial Statements
At November 30, 1998
- --------------------
Note 1 - Organization and Summary of Significant Accounting Policies
- --------------------------------------------------------------------
Organization:
- ------------
On September 28, 1988 Zaba International, Inc. (Fka H A Spinnaker, Inc.) ("the
Company") was incorporated under the laws of Colorado, for the purpose of
seeking potential business acquisitions. It has been in the development stage
since inception. Its activities to date have been limited to organizational
efforts and raising capital.
Developmental Stage:
The Company is currently in the developmental stage and has no significant
operations to date.
Reverse Acquisition Rescission:
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 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.
Fiscal Year:
The Company has selected November 30 as its fiscal year end.
Statement of Cash Flows:
For purposes of the statement of cash flows, the Company considers demand
deposits and highly liquid-debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Cash paid for interest and taxes in the period ended November 30, 1998 was $-0-.
Basic (Loss) Per Common Share:
The net (loss) per common share is computed by dividing the net (Loss) for the
period by the weighted average number of shares outstanding at November 30,
1998.
-7-
19
<PAGE>
Zaba International, Inc.
(Fka H A Spinnaker, Inc.)
(A Development Stage Company)
Notes to Financial Statements
At November 30, 1998
- --------------------
Use Of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts. Actual results could differ from those estimates.
Note 2 - Capital Stock
- ----------------------
Common Stock:
The Company initially authorized 1,000,000,000 shares of $.0001 par value common
stock. The Company had 28,600,000 shares of common stock. In October 1997, the
Company's shareholders approved a 12 to 1 reverse split. After the split the
Company issued 23,833 shares of $.0001 par value common stock for services
valued at $.03 per share and 9,628,660 shares in exchange for all of the
outstanding shares of Zaba International Holdings USA, Inc., also a development
stage shell. In June 1998 this transaction was rescinded, therefore the
9,628,660 shares of common stock was returned to the Company and those shares
were cancelled.
Stock Purchase Warrants:
Class A Common Stock Purchase Warrants were issued as part of the initial
capitalization in September 1988. There are 23,833,333 after split warrants.
Each Class A Warrant entitles the holder to purchase one share of common stock
for an after split price of $.24 per share (post reverse split). The number of
shares of stock issuable upon exercise of the Class A Warrants are adjustable
upon the occurrence of certain events, including shareholder distributions,
stock splits, combinations, recapitalization, mergers, or reorganizations. The
Company reserves the right to call any or all warrants upon 30 days written
notice at an after split redemption price of $.00012 per warrant. The warrants
expired July 1, 1998.
-8-
20
<PAGE>
Zaba International, Inc.
(Fka H A Spinnaker, Inc.)
(A Development Stage Company)
Notes to Financial Statements
At November 30, 1998
- --------------------
Note 2 - Capital Stock (Continued)
- ---------------------------------
Preferred Stock
The Company initially authorized 100,000,000 shares of $.001 par value
non-voting preferred stock, the rights and preferences of which to be determined
by the Board Of Directors at the time of issuance. As of November 30, 1998 no
preferred stock has been issued.
The Company has declared no dividends through November 30, 1998.
Note 3 - Income Taxes
- ---------------------
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset federal income taxes.
Due to the Company's net operating loss in the year ended November 30, 1998 of
$14,807 there are no income taxes currently due. As of November 30, 1998 the
Company has a deferred tax asset of $2,961 primarily from its net operating loss
carry forward which has been fully reserved through a valuation allowance.
The components of the deferred income tax asset arising under FASB Statement No.
109 and recognized in the accompanying balance sheet at November 30, 1998 are as
follows:
Deferred Tax Asset $2,961
Valuation Allowance (2,961)
------
$ 0
======
The Company has net operating loss carryforwards of $66,642 which will expire
between 2003 and 2019.
-9-
21
<PAGE>
Zaba International, Inc.
(Fka H A Spinnaker, Inc.)
(A Development Stage Company)
Notes to Financial Statements
At November 30, 1998
- --------------------
Note 4 - Related Party Events
- -----------------------------
During the fiscal year ended November 30, 1998 the Company maintained its
principal offices at an address provided by an officer and director on a cost
free basis. This office was located at 5650 Greenwood Plaza Blvd., Suite 214,
Englewood, CO 80111. No expense has been recorded as the value of the address is
considered immaterial.
The Company received $1,500 cash from a shareholder and shareholders made
advances on behalf of the Company to pay expenses of $7,005 during the fiscal
year ended November 30, 1998.
Note 6 - Basis Of Presentation
- ------------------------------
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred losses from its inception through November
30, 1998. It has not established revenues sufficient to cover its operating
costs and to allow it to continue as a going concern. The Company needs to
complete a merger that will allow it to work toward profitability and positive
cash flow.
-10-
22
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
In January, 1998, the Company filed a Form 8-K, advising of the change in
independent certified accountants, changing from Comiskey & Company to Kish,
Leake & Associates, who have audited the Company's financial statements
appearing elsewhere in this report. There were no disagreements with Comiskey &
Company on accounting and financial disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
Directors are elected for one-year terms or until the next annual meeting
of shareholders and until their successors are duly elected and qualified.
Officers continue in office at the pleasure of the Board of Directors.
The Directors and Officers of the Company as of the date of this report are
as follows:
Name Age Position
- ---------------- --- -------------------------
Gregory W. Skufca 41 President and Director
William L. Skufca 68 Director
Mr. Gregory W. Skufca is the son of William Skufca. There is no arrangement
or understanding between the Company (or any of its directors or officers) and
any other person pursuant to which such person was or is to be selected as a
director or officer.
All Directors of the Company will hold office until the next annual meeting
of the shareholders and until successors have been elected and qualified.
Officers of the Company are elected by the Board of Directors and hold office
until their death or until they resign or are removed from office.
(b) Resumes:
GREGORY W. SKUFCA, is President and a director of the Company, positions he
has held since the Company's inception with the exception of an eleven month
period from August 1997 through June 1998 applicable to the Zaba Agreement and
subsequent rescission discussed elsewhere herein. In addition to his positions
with the Company, since January 1989, Mr. Skufca is also the President of
Financial Communications, Englewood, Colorado, a sole proprietorship engaged in
assisting public and private investors, assisting in the obtaining and
structuring of venture capital
23
<PAGE>
financing and public relations. Prior, from May 1987 through January 1989, Mr.
Skufca served as a loan officer and consultant with Skufca-Meyer Financial
Corp., Lakewood, Colorado, a small privately held lender specializing in
residential mortgages and corporate financing. In March 1990, Mr. Skufca
co-founded GS2 Partnership, a Colorado general partnership, for the purposes of
providing funding to start-up and development stage companies. Mr. Skufca
obtained a Bachelor's degree from the University of Colorado at Boulder in 1980.
He devotes only such time as necessary to the business of the Company, which is
not expected to exceed 20 hours per month.
WILLIAM L. SKUFCA, has been a director of the Company since its inception,
with the exception of an eleven month period from August 1997 through June 1998,
applicable to the Zaba Agreement and subsequent rescission discussed elsewhere
herein. In addition to his position with the Company, since January 1989 Mr.
Skufca has been the president of Surety Mortgage, a real estate mortgage company
specializing in conventional, FHA and HUD financing. Mr. Skufca obtained a BSBA
degree from the University of Denver and holds a Colorado real estate broker's
license. He devotes only such time as necessary to the business of the Company.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and person who own more than 10% of the Company's Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. All of the aforesaid persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
There were no changes in the securities holdings of any officer, director
or principal shareholder.
ITEM 10. EXECUTIVE COMPENSATION.
REMUNERATION
The following table reflects all forms of compensation for services to the
Company for the fiscal years ended November 30, 1998 and 1997 of the chief
executive officer of the Company.
24
<PAGE>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------------
Annual Compensation Awards Payouts
--------------------- -------------------- -------
Securities
Other Under- All
Name Annual Restricted lying Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
- ---------- ---- ------ ----- ------ -------- ------- ------- ------
Gregory
Skufca (1)(2)
President 1998 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
& Director 1997 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
- -------------------------
(1) Mr. Skufca did not receive any salary during the fiscal year ended
November 30, 1998 from the Company. From August 1997 through June 1,
1998, Mr. Skufca vacated his position with the Company and was replaced
by Robert Zaba, who resigned June 1, 1998 simultaneous with the
rescission of the Zaba Agreement. Mr. Zaba did not receive any salary
from the Company during his tenure as President.
(2) It is not anticipated that any executive officer of the Company will
receive compensation exceeding $100,000 during the fiscal year ending
November 30, 1999, unless the Company successfully closes a merger or
acquisition.
The Company maintains a policy whereby the directors of the Company may be
compensated for out of pocket expenses incurred by each of them in the
performance of their relevant duties. The Company did not reimburse any director
for such expenses during the fiscal year ended November 30, 1998.
In addition to the cash compensation set forth above, the Company
reimburses each executive officer for expenses incurred on behalf of the Company
on an out-of-pocket basis. The Company cannot determine, without undue expense,
the exact amount of such expense reimbursement. However, the Company believes
that such reimbursements did not exceed, in the aggregate, $1,000 during fiscal
year 1998.
There are no bonus or incentive plans in effect, nor are there any
understandings in place concerning additional compensation to the Company's
officers.
25
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) and (b) Security Ownership of Certain Beneficial Owners and Management.
The table below lists the beneficial ownership of the Company's voting
securities by each person known by the Company to be the beneficial owner of
more than 5% of such securities, as well as by all directors and officers of the
issuer. Unless otherwise indicated, the shareholders listed possess sole voting
and investment power with respect to the shares shown.
NAME AND AMOUNT AND
ADDRESS OF NATURE OF
TITLE BENEFICIAL BENEFICIAL PERCENT OF
OF CLASS OWNER OWNER CLASS
- -------- ------------------------- ---------- ----------
Common Gregory W. Skufca(1) 1,200,000 49.9%
5650 Greenwood Plaza Blvd.
Suite 216
Englewood, CO 80111
Common William L. Skufca(1) 570,833 23.7%
620 Front Range Rd.
Littleton, CO 80120
Common Jack Beam 466,666 19.3%
3433 E. 7th Ave.
Denver, CO 80206
Common Reed Johnson 125,000 5.2%
2175 E. Grapevince Rd.
Idledale, CO 80453
Common All Directors 1,770,833 73.6%
and Officers as a
Group (2 persons)
(1) Officer and/or director of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the fiscal year ended November 30, 1998, the Company maintained its
principal offices at an address provided by an officer and director on a cost
free basis. This office was located at 5650 Greenwood Plaza Blvd., Suite 214,
Englewood, CO 80111.
26
<PAGE>
The Company received $1,500 cash from a shareholder and shareholders made
advances on behalf of the Company to pay expenses of $7,005 during the fiscal
year ended November 30, 1998.
There have been no other related party transactions, or any other
transactions or relationships required to be disclosed pursuant to Item 404 of
Regulation S-B.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1* Certificate and Articles of Incorporation
3.2* Bylaws
EX-27 Financial Data Schedule
* Filed with the Securities and Exchange Commission in the Exhibits to Form
10-SB, filed in July 1996 and are incorporated by reference herein.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the last quarter of
the fiscal year ended November 30, 1998.
27
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on June 28, 1999.
ZABA INTERNATIONAL, INC.
(Registrant)
By:/s/ Gregory W. Skufca
-----------------------------------
Gregory W. Skufca, President and
Treasurer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
indicated on June 28, 1999.
/s/ Gregory W. Skufca
------------------------------
Gregory W. Skufca, Director
/s/ William Skufca
------------------------------
William Skufca, Director
28
<PAGE>
ZABA INTERNATIONAL, INC.
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998
EXHIBITS Page No.
EX-27 Financial Data Schedule.....................................30
29
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
<CASH> 44
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 44
<CURRENT-LIABILITIES> 9,963
<BONDS> 0
0
0
<COMMON> 241
<OTHER-SE> (10,160)
<TOTAL-LIABILITY-AND-EQUITY> 44
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,807
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (14,807)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,807)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,807)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
