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: August 31, 1999
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 80111
(Address of principal executive offices)
(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 August 31, 1999, was 2,407,165 shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the nine month period ended
August 31, 1999, 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.
PLAN OF OPERATION
The Company generated no revenues during the nine month period ended
August 31, 1999. 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 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 and/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.
SUBSEQUENT EVENT
In September 1999, the Company filed a report on Form 8-K with the SEC
advising that, effective September 22, 1999, the Company did enter into a letter
of intent with Merendon Mining Corporation Ltd. ("MMC"), a privately held
Canadian corporation based in
3
<PAGE>
Calgary, whereby the Company has agreed in principle to acquire all of the
issued and outstanding shares of MMC in exchange for issuance by the Company of
previously unissued "restricted" common stock. The relevant terms of the
proposed transaction require the Company to (i) undertake a "forward split" of
its common stock, whereby two (2) shares of common stock will be issued in
exchange for every share of common stock issued and outstanding in order to
establish the number of issued and outstanding Common Shares of the Company to
be 4,814,332 shares; and (ii) issue to the MMC shareholders an aggregate of
12,369,133 "restricted" common shares (post split), representing 72% of the
Company's then outstanding common stock, in exchange for all of the issued and
outstanding shares of MMC. Upon closing of this proposed transaction, MMC would
become a wholly owned subsidiary of the Company and the Company would change its
name to "Merendon Gold International Corporation."
The proposed share exchange is subject to satisfaction of certain
conditions, including completion of due diligence activities, the approval of
the transaction by all of the shareholders of MMC and confirmation of the
financial condition of MMC. The proposed transaction is expected to close by the
end of November 1999. If the proposed transaction with MMC is consummated, of
which there is no assurance, the present officers and directors of the Company
are expected to resign their respective positions with the Company, to be
replaced by the present management of MMC, or their designees. A copy of the
letter of intent between the Company and MMC is included as an exhibit to the
aforesaid Form 8-K and incorporated herein as if set forth.
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
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<PAGE>
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
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
nine month period ended August 31, 1999.
5
<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Balance Sheet
- -----------------------------------------------------------------
<CAPTION>
Unaudited Audited
August November
31, 1999 30, 1998
-------- --------
<S> <C> <C>
ASSETS
Current Assets - Cash $ 944 $ 44
-------- --------
TOTAL ASSETS $ 944 $ 44
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities - Accounts Payable 11,618 9,963
-------- --------
Total Current Liabilities 11,618 9,963
-------- --------
Long-Term Liabilities 0 0
-------- --------
TOTAL LIABILITIES 10,760 9,963
-------- --------
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 61,632 56,482
Deficit Accumulated During The
Development Stage (72,547) (66,642)
-------- --------
TOTAL SHAREHOLDERS' EQUITY (10,674) (9,919)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 944 $ 44
======== ========
The Accompanying Notes Are An Integral Part
of These Unaudited Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Unaudited Statement Of Operations
- -----------------------------------------------------------------
<CAPTION>
Unaudited Unaudited
Three Months Three Months
Ended Ended
August August
31, 1999 31, 1998
---------- ---------
<S> <C> <C>
Revenue $ 0 $ 0
Operating Expenses:
Legal And Accounting 5,238 1,567
Office (130) 0
---------- ---------
Total Expenses 5,108 1,567
---------- ---------
Net (Loss) (5,108) (1,567)
========== =========
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
- -----------------------------------------------------------------
<CAPTION>
September
28, 1988
Nine Months Nine Months (Inception)
Ended Ended Through
August August August
31, 1999 31, 1998 31, 1999
---------- --------- ----------
<S> <C> <C> <C>
Revenue $ 0 $ 0 $ 0
Operating Expenses:
Amortization 0 0 500
Legal And Accounting 6,035 14,079 37,420
Office Expense (130) 18 2,480
Rent 0 0 7,200
Stock Transfer Fees 0 0 340
Wages 0 0 25,000
---------- --------- ----------
Total Expenses 5,905 14,097 72,940
---------- --------- ----------
Net (Loss) Before
Other Income (5,905) (14,097) (72,940)
Other Income - Interest 0 0 393
---------- --------- ----------
Net (Loss) $ (5,905) $ (14,097) $ (72,547)
========== ========= ==========
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>
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<PAGE>
<TABLE>
Zaba International, Inc.
(A Development Stage Company)
Unaudited Statement Of Cash Flows
- ------------------------------------------------------------------------
<CAPTION>
September
28, 1988
Nine Months Nine Months (Inception)
Ended Ended Through
August August August
31, 1999 31, 1998 31, 1999
-------- -------- --------
<S> <C> <C> <C>
Net (Loss) $ (5,905) $(14,097) $(72,547)
Plus Items Not Affecting Cash Flow:
Amortization 0 0 500
Expenses Paid By Shareholder 0 7,005 32,977
Stock Issued For Services 0 0 2,000
Increase (Decrease) In
Accounts Payable 1,655 5,548 11,618
-------- -------- --------
Net Cash Flows From Operations (4,250) (1,544) (25,452)
-------- -------- --------
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 5,150 1,500 14,796
Issuance of Common Stock 0 0 12,100
-------- -------- --------
Cash Flows From Financing 5,150 1,500 26,896
-------- -------- --------
Net Increase (Decrease) In Cash 900 (44) 944
Cash At Beginning Of Period 44 88 0
-------- -------- --------
Cash At End Of Period $ 944 $ 44 $ 944
======== ======== ========
Summary Of Non-Cash Investing And Financing Activities:
Expenses Paid By Shareholder On
Behalf Of Company $ 0 $ 7,005 $ 32,977
======== ======== ========
Stock Issued For Services $ 0 $ 0 $ 2,000
======== ======== ========
The Accompanying Notes Are An Integral Part
of These Unaudited Financial Statements.
</TABLE>
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<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 1,666,666 0 167 1,833 - - 2,000
Net (Loss) November
30, 1988 - - - - - (4,825) (4,825)
---------- --------- ------ ------------ ---------- -------- --------
Balance At November
30, 1988 1,666,666 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) 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 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 2,383,333 0 $ 239 $ 39,733 $ 0 $(38,990) $ 982
Net (Loss) November
30, 1991 - - - - - (907) (907)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1991 2,383,333 0 $ 239 $ 39,733 $ 0 $(39,897) $ 75
Net (Loss) November
30, 1992 - - - - - (100) (100)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1992 2,383,333 0 $ 239 $ 39,733 $ 0 $(39,997) $ (25)
Net (Loss) November
30, 1993 - - - - - (75) (75)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1993 2,383,333 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
---------- --------- ------ ------------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net (Loss) November
30, 1994 - - - - - (525) (525)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1994 2,383,333 0 $ 239 $ 39,733 $ 0 $(40,597) $ (625)
Net (Loss) 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) 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) 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) November
30, 1998 - - - - - (14,807) (14,807)
---------- --------- ------ ------------ ---------- -------- --------
Balance at November
30, 1998 2,407,165 0 $ 241 $ 56,482 $ 0 $(66,642) $ (9,919)
Contribution to Equity - - - 5,150 - - 5,150
Net Loss at August
31, 1999 - - - - - (5,905) (5,905)
---------- --------- ------ ------------ ---------- -------- --------
Balance at August
31, 1999 2,407,165 0 $ 241 $ 61,632 $ 0 $(72,547) $(10,674)
========== ========= ====== ============ ========== ======== ========
* 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>
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<PAGE>
Zaba International, Inc.
Notes to Unaudited Financial Statements
For The Nine Month Period Ended August 31, 1999
- ----------------------------------------------
Note 1 - Unaudited Financial Information
- ----------------------------------------
The unaudited financial information included for the three month and nine month
interim periods ended August 31, 1999 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 nine month period ended August 31, 1999 are not
necessarily indicative of the results expected for the fiscal year ended
November 30, 1999.
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, 1998 as filed with the Securities
and Exchange Commission and the audited financial statements included therein.
Note 3 - Subsequent Event
- -------------------------
Effective September 22, 1999, the Company entered into a letter of intent with
Merendon Mining Corporation Ltd. ("MMC"), a privately held Canadian corporation
based in Calgary, whereby the Company has agreed in principle to acquire all of
the issued and outstanding shares of MMC in exchange for issuance by the Company
of previously unissued "restricted" common stock. The relevant terms of the
proposed transaction require the Company to (i) undertake a "forward split" of
its common stock, whereby two (2) shares of common stock will be issued in
exchange for every share of common stock issued and outstanding in order to
establish the number of issued and outstanding Common Shares of the Company to
be 4,814,332 shares; and (ii) issue to the MMC shareholders an aggregate of
12,369,133 "restricted" common shares (post split), representing 72% of the
Company's then outstanding common stock, in exchange for all of the issued and
outstanding shares of MMC.
The proposed share exchange is subject to satisfaction of certain conditions,
including completion of due diligence activities, the approval of the
transaction by all of the shareholders of MMC and confirmation of the financial
condition of MMC. The proposed transaction is expected to close by the end of
November 1999. If the proposed transaction with MMC is consummated, of which
there can be no assurance, the present officers and directors of the Company are
expected to resign their respective positions with the Company, to be replaced
by the present management of MMC, or their designees and the name of the Company
is expected to change to "Merendon Gold International Corporation."
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: November 19, 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 AUGUST 31, 1999
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 NINE MONTH PERIOD ENDED AUGUST 31, 1999,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> AUG-31-1999
<CASH> 944
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 944
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 944
<CURRENT-LIABILITIES> 11,618
<BONDS> 0
0
0
<COMMON> 241
<OTHER-SE> (10,915)
<TOTAL-LIABILITY-AND-EQUITY> 944
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,905
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,905)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,905)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,905)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
