ZAXIS INTERNATIONAL INC.Back
to Table of Contents
Notes to Unaudited Interim
September 30, 2012
Note 1. The Company
Zaxis International Inc. ("the Company") was incorporated in Ohio in 1989. On
August 25, 1995, Zaxis merged with a subsidiary of The InFerGene Company
("InFerGene") and InFerGene changed its name to Zaxis International Inc.
InFerGene was incorporated in California in 1984 and subsequently changed its domicile in
connection with the merger into Zaxis to Delaware in 1985. Prior to ceasing its operations in 2002, Zaxis manufactured and
distributed products used in a molecular separation process known as electrophoresis, a
procedure used in research, industrial and clinical laboratories worldwide. In November
2002, the Company and its subsidiaries filed a petition for bankruptcy in the U.S.
Bankruptcy Court Northern District of Ohio. On October 13, 2004, the Company emerged from
bankruptcy. At present, the Company has no business operations and is deemed to be a shell
Note 2. Going Concern
The accompanying financial statements have been prepared assuming the Company will
continue as a going concern. The Company has incurred losses, has negative operational
cash flows and has no revenues. The future of the Company is dependent upon Management
success in its efforts and limited resources to pursue and effect a business combination.
These conditions raise substantial doubt about the Company's ability to continue as a
going concern. These financial statements do not include any adjustments that might arise
from this uncertainty.
Note 3. Basis of Presentation
The Financial Statements of the Company have been prepared in accordance with generally
accepted accounting principles in the United States of America. In the opinion of
management, the accompanying unaudited financial statements include all adjustments,
consisting of only normal recurring accruals, necessary for a fair statement of financial
position, results of operations, and cash flows. The information included in this
Quarterly Report on Form 10-Q should be read in conjunction with the financial statements
and the accompanying notes included in our Annual Report on Form 10-K for the year ended
December 31, 2011. The accounting policies are described in the Notes to the
Financial Statements in the 2011 Annual Report on Form 10-K and updated, as
necessary, in this Form 10-Q. The year-end balance sheet data presented for comparative
purposes was derived from audited financial statements, but does not include all
disclosures required by accounting principles generally accepted in the United States. The
results of operations for the three and nine months ended September 30, 2012 are not
necessarily indicative of the operating results for the full year or for any other
subsequent interim period.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statement and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ
from the estimates.
Cash and Cash Equivalents: For financial statement presentation purposes, the
Company considers those short-term, highly liquid investments with original maturities of
three months or less to be cash or cash equivalents.
Fair Value of Financial Instruments: ASC # 825, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value information
about financial instruments. Fair value estimates discussed herein are based upon certain
market assumptions and pertinent information available to management as of September 30,
2012. These financial instruments include accounts payable and accrued expenses. Fair
values were assumed to approximate carrying values for these financial instruments since
they are short-term in nature and their carrying amounts approximate fair values.
Earnings per Common Share: Basic net loss per share is computed using the weighted
average number of common shares outstanding during the period. Diluted net loss per common
share is computed using the weighted average number of common and dilutive equivalent
shares outstanding during the period. Dilutive common equivalent shares consist of options
to purchase common stock (only if those options are exercisable and at prices below the
average share price for the period) and shares issuable upon the conversion of issued and
outstanding preferred stock. Due to the net losses reported, dilutive common equivalent
shares were excluded from the computation of diluted loss per share, as inclusion would be
anti-dilutive for the periods presented. There were no common equivalent shares required
to be added to the basic weighted average shares outstanding to arrive at diluted weighted
average shares outstanding as of September 30, 2012 or 2011.
Reclassification: Certain amounts in the prior period financial statements
have been reclassified to conform to the current period presentation. These
reclassifications had no effect on reported losses.
The Company accounts for income taxes in accordance with ASC # 740, "Accounting
for Income Taxes," which requires recognition of estimated income taxes payable
or refundable on income tax returns for the current year and for the estimated future tax
effect attributable to temporary differences and carry-forwards. Measurement of deferred
income tax is based on enacted tax laws including tax rates, with the measurement of
deferred income tax assets being reduced by available tax benefits not expected to be
ASC#740 requires that the Company recognize in its financial statements the impact of a
tax position, if that position is more likely than not of being sustained on audit, based
on the technical merits of the position. Management of the Company is not aware of any
additional needed liability for unrecognized tax benefits at September 30, 2012 and 2011.
Impact of recently issued accounting standards
There were no new accounting pronouncements that had a significant impact on the
Companys operating results or financial position.
Note 4. Convertible Notes to Related Party
On October 2, 2009, we issued a convertible promissory note in the amount of $35,000.
The note bears interest of 12% per annum until paid or converted. Interest is payable
upon the maturity date (December 31, 2012). The conversion rate is $0.10 per share. The
note was issued in consideration of cash advances made and for services provided to the
Company by our President.
On August 1, 2011, we issued a convertible promissory note in the amount of $50,000.
The note bears interests of 12% per annum until paid or converted. Interest is
payable upon the maturity date (December 31, 2012). The conversion rate is $0.03 per
share. The note was issued in consideration for cash advances made and for services
provided to the Company by our President.
In accordance Accounting Standard Codification ( ASC # 815), Accounting
for Derivative Instruments and Hedging Activities, we evaluated the holders
non-detachable conversion right provision and liquidated damages clause, contained in the
terms governing the Note to determine whether the features qualify as an embedded
derivative instruments at issuance. Such non-detachable conversion right provision and
liquidated damages clause did not need to be accounted for as derivative financial
instruments. Additionally, since the conversion price of the two notes represented the
fair market value of the Companys common stock at the time of issuance, no
beneficial conversion feature exists.
Note 5. Related Party Transactions
Fair value of services: Our President provides services to the Company, which
services are accrued and are valued at $2,000 per month. The total of these accrued
expenses was $18,000 for the period ended September 30, 2012 and 2011, and is reflected in
the statement of operations as general and administrative expenses.
An entity controlled by the Companys President provided office space to the
Company valued at $1,000 per month. The total of $9,000 during the period ended September
30, 2012 and 2011 was recorded as accrued expenses and is reflected in the statement of
operations as general and administrative expenses.
Due Related Parties: Amounts due related parties consist of fair value of services
provided by our President, accrued office space expenses, corporate regulatory compliance
expenses and cash advances received from our President.
Such items due totaled $110,029 at September 30, 2012 and $80,029 at December 31, 2011.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION Back to Table of Contents
Some of the statements contained in this quarterly
report of Zaxis International Inc., Delaware corporation (hereinafter referred to as
"we", "us", "our", "Company" and the
"Registrant") discuss future expectations, contain projections of our plan of
operation or financial condition or state other forward-looking information.
Forward-looking statements give our current expectations or forecasts of future events. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "could,"
"would," "expect," "plan," "anticipate,"
"believe," "estimate," "continue," or the negative of such
terms or other similar expressions.
History and General Background of the Registrant
Zaxis was incorporated in
Ohio in 1989. On August 25, 1995, Zaxis merged with a subsidiary of The InFerGene Company
("InFerGene") and InFerGene changed its name to Zaxis International Inc.
InFerGene was incorporated in California in 1984 and subsequently changed its domicile to
Delaware in 1985.
The Company was a biotechnology holding company that
operated its business through a wholly owned subsidiary. The Company was a manufacturer
and distributor of products that were used in a molecular separation process known as
electrophoresis, a procedure used in more than 55,000 research, industrial and clinical
laboratories worldwide. The more common applications of this procedure include
protein-based separations such as the HDL and LDL components and sub-components of
cholesterol, the identification of various genes and gene products (e.g. DNA, RNA, etc.)
and the separation and identification of proteins in drug discovery applications
(Proteomics). A variety of techniques, formats, materials, compounds, equipment and
devices are employed in electrophoresis and Zaxis provided products to meet these needs.
The primary focus of the Company's former research and development efforts as well as its
former sales and marketing efforts were targeted toward the consumables segment of this
market. The Company's core products were the pre-cast gels and reagents used in these
The Company was not able to generate sufficient revenues
to support its operating expenses during fiscal year 2002. In addition, the Company was
not able to raise additional capital to fund its negative cash flow from operations
through borrowings or equity financing to support its business plan. As a result, the
Company ceased operations during the fourth quarter in 2002 and filed for bankruptcy. On October 13, 2004, the Company
emerged from bankruptcy.
result of the Bankruptcy Court order, Ivo Heiden was appointed to the board of directors
of the Registrant. Mr. Heiden was subsequently appointed as sole officer of the Registrant
Plan of Operation
Registrant has no present operations. Management determined to direct its efforts and
limited resources to pursue and effect a business combination.
Management believes that as
a result of the relative uncertainty in the United States equity markets over the past few
years, many privately-held companies have been closed off from the public market and
traditional IPO's. During the past few years, many privately-held or public companies
attempted to divest non-core assets and divisions and valuations of these assets and
divisions have decreased significantly. Therefore, Management believes that there are
substantial business opportunities to effect attractive acquisitions. As a public entity
with its shares of common stock registered under the Exchange Act and publicly trading,
Management believes to be well positioned to identify target acquisitions and to effect a
business combination in order to take advantage of these current trends.
Effecting a business combination
Prospective investors in the
Company's common stock will invest in the Company without an opportunity to evaluate the
specific merits or risks of any one or more business combinations. A business combination
may involve the acquisition of, or merger with, a company which needs to raise substantial
additional capital by means of being a publicly traded company, while avoiding what it may
deem to be adverse consequences of undertaking a public offering itself. These include
time delays, significant expense, loss of voting control and compliance with various
Federal and state securities laws. A business combination may involve a company which may
be financially unstable or in its early stages of development or growth.
Registrant has not identified a target business or target industry
The Company's effort in
identifying a prospective target business will not be limited to a particular industry and
the Company may ultimately acquire a business in any industry Management deems
appropriate. To date, the Company has not selected any target business on which to
concentrate our search for a business combination. While the Company intends to focus on
target businesses in the United States, it is not limited to those entities and may
consummate a business combination with a target business outside of the United States.
Accordingly, there is no basis for investors in the Company's common stock to evaluate the
possible merits or risks of the target business or the particular industry in which we may
ultimately operate. To the extent we effect a business combination with a financially
unstable company or an entity in its early stage of development or growth, including
entities without established records of sales or earnings, we may be affected by numerous
risks inherent in the business and operations of financially unstable and early stage or
potential emerging growth companies. In addition, to the extent that we effect a business
combination with an entity in an industry characterized by a high level of risk, we may be
affected by the currently unascertainable risks of that industry. An extremely high level
of risk frequently characterizes many industries which experience rapid growth. In
addition, although the Company's Management will endeavor to evaluate the risks inherent
in a particular industry or target business, we cannot assure you that we will properly
ascertain or assess all significant risk factors.
of target businesses
The Registrant anticipates
that target business candidates will be brought to our attention from various unaffiliated
sources, including securities broker-dealers, investment bankers, venture capitalists,
bankers and other members of the financial community, who may present solicited or
unsolicited proposals. Our Management may also bring to our attention target business
candidates. While we do not presently anticipate engaging the services of professional
firms that specialize in business acquisitions on any formal basis, we may engage these
firms in the future, in which event we may pay a finder's fee or other compensation. In no
event, however, will we pay Management any finder's fee or other compensation for services
rendered to us prior to or in connection with the consummation of a business combination.
of a target business and structuring of a business combination
Management owns 82% of the
issued and outstanding shares and will have broad flexibility in identifying and selecting
a prospective target business. In evaluating a prospective target business, our Management
will consider, among other factors, the following:
financial condition and results of operation of
the target company; growth potential;
experience and skill
of management and availability of additional personnel;
stage of development
of the products, processes or services;
degree of current or
potential market acceptance of the products, processes or services;
and degree of intellectual property or other protection of the products, processes or
of the industry; and
costs associated with
effecting the business combination.
These criteria are not
intended to be exhaustive. Any evaluation relating to the merits of a particular business
combination will be based, to the extent relevant, on the above factors as well as other
considerations deemed relevant by our Management in effecting a business combination
consistent with our business objective. In evaluating a prospective target business, we
will conduct a due diligence review which will encompass, among other things, meetings
with incumbent management and inspection of facilities, as well as review of financial and
other information which will be made available to us.
We will endeavor to
structure a business combination so as to achieve the most favorable tax treatment to us,
the target business and both companies' stockholders. We cannot assure you, however, that
the Internal Revenue Service or appropriate state tax authority will agree with our tax
treatment of the business combination.
The time and costs required
to select and evaluate a target business and to structure and complete the business
combination cannot presently be ascertained with any degree of certainty. Any costs
incurred with respect to the identification and evaluation of a prospective target
business with which a business combination is not ultimately completed will result in a
loss to us.
lack of business diversification
We may seek to effect
business combinations with more than one target business. It is probable that we will have
the ability to effect only a single business combination. Accordingly, the prospects for
our success may be entirely dependent upon the future performance of a single business.
Unlike other entities which may have the resources to complete several business
combinations of entities operating in multiple industries or multiple areas of a single
industry, it is probable that we will not have the resources to diversify our operations
or benefit from the possible spreading of risks or offsetting of losses. By consummating a
business combination with only a single entity, our lack of diversification may:
subject us to numerous economic, competitive and regulatory developments, any or
all of which may have a substantial adverse impact upon the particular industry in which
we may operate subsequent to a business combination, and
result in our
dependency upon the development or market acceptance of a single or limited number of
products, processes or services.
ability to evaluate the target business' management
Although we intend to
closely scrutinize the management of a prospective target business when evaluating the
desirability of effecting a business combination, we cannot assure you that our assessment
of the target business' management will prove to be correct. In addition, we cannot assure
you that the future management will have the necessary skills, qualifications or abilities
to manage a public company intending to embark on a program of business development.
Furthermore, the future role of our director, if any, in the target business cannot
presently be stated with any certainty. While it is possible that our director will remain
associated in some capacity with us following a business combination, it is unlikely that
he will devote his full efforts to our affairs subsequent to a business combination.
Moreover, we cannot assure you that our director will have significant experience or
knowledge relating to the operations of the particular target business.
Following a business
combination, we may seek to recruit additional managers to supplement the incumbent
management of the target business. We cannot assure you that we will have the ability to
recruit additional managers, or that additional managers will have the requisite skills,
knowledge or experience necessary to enhance the incumbent management.
Liquidity and Capital Resources
We will use our limited personnel and
financial resources in connection with seeking new business opportunities, including
seeking an acquisition or merger with an operating company. It may be expected that
entering into a new business opportunity or business combination will involve the issuance
of a substantial number of restricted shares of common stock. If such additional
restricted shares of common stock are issued, our shareholders will experience a dilution
in their ownership interest in the Registrant. If a substantial number of restricted
shares are issued in connection with a business combination, a change in control may be
expected to occur.
On September 30, 2012, we had no assets
and had total current liabilities of $214,829 consisting of $110,029 in advances from and accruals due to
related parties, short-term notes in the amount of $85,000, accrued interest expenses of
$19,300 and accounts payable of $500.
connection with our plan to seek new business opportunities and/or effecting a business
combination, we may determine to seek to raise funds from the sale of restricted stock or
debt securities. We have no agreements to issue any debt or equity securities and cannot
predict whether equity or debt financing will become available at terms acceptable to us,
if at all.
are no limitations in our articles of incorporation on our ability to borrow funds or
raise funds through the issuance of restricted common stock to effect a business
combination. Our limited resources may make it difficult to borrow funds or raise capital.
Our inability to borrow funds or raise funds through the issuance of restricted common
stock required to effect or facilitate a business combination may have a material adverse
effect on our financial condition and future prospects, including the ability to complete
a business combination. To the extent that debt financing ultimately proves to be
available, any borrowing will subject us to various risks traditionally associated with
indebtedness, including the risks of interest rate fluctuations and insufficiency of cash
flow to pay principal and interest, including debt of an acquired business.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Back to Table of Contents
We have not entered
into, and do not expect to enter into, financial instruments for trading or hedging
CONTROLS AND PROCEDURES Back to Table of Contents
Evaluation of disclosure controls and
procedures. As of September 30, 2012, the Company's chief executive officer and chief
financial officer conducted an evaluation regarding the effectiveness of the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under
the Exchange Act. Based upon the evaluation of these controls and procedures, our
chief executive officer and chief financial officer concluded that our disclosure controls
and procedures were effective as of the end of the period covered by this report.
Changes in internal controls.
During the quarterly period covered by this report, no changes occurred in our internal
control over financial reporting that materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL
PROCEEDINGS Back to Table of Contents
RISK FACTORS Back
to Table of Contents
In addition to the other
information set forth in this report, you should carefully consider the factors discussed
in Part I, Item 1. Description of Business, subheading Risk Factors in
our Annual Report on Form 10-K for the year ended December 31, 2011, which could
materially affect our business, financial condition or future results. The risks described
in our Annual Report on Form 10-K are not the only risks facing our company.
Additional risks and uncertainties not currently known to us or that we currently deem to
be immaterial also may materially adversely affect our business, financial condition
and/or operating results.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Back to Table of Contents
3. DEFAULTS UPON SENIOR SECURITIES Back to Table of Contents
4. MINE SAFETY DISCLOSURE. Back to Table of Contents
5. OTHER INFORMATION Back to Table of Contents
6. EXHIBITS Back to Table of Contents
(a) The following documents
are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any
document incorporated by reference is identified by a parenthetical reference to the SEC
filing that included such document.
||Certification of CEO/CFO
pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
||Certification of CEO/CFO
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.