Viewbix Inc. — Regulatory Filings 2000

Nov 14, 2000

1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ZAXIS INTERNATIONAL INC. (Name of Issuer as specified in its charter) Delaware 0-15476 68-0080601 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 1890 Georgetown Road, Hudson Ohio 44236 (Address of principal executive office) (330) 650-0444 (Registrant's telephone number) Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months and (2) has been subject to such filings for the past 90 days. Yes[X] No [ ] As of September 30, 2000, there were 9,863,867 shares of Common Stock outstanding. 2 ZAXIS INTERNATIONAL INC. FORM 10-QSB

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See notes to consolidated financial statements. 6 7 ZAXIS INTERNATIONAL INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The financial statements present the consolidated financial position and results of operations of Zaxis International Inc. ("International" or "the Company") and Zaxis Inc. ("Zaxis") its wholly-owned subsidiary. Zaxis Inc. was founded in 1989 as a privately held Ohio corporation. On August 25, 1995, Zaxis merged with a subsidiary of The InFerGene Company ("InFerGene"). InFerGene was an inactive publicly traded Delaware corporation founded in 1985. Neither InFerGene nor its subsidiary had any assets or liabilities. The merger, for accounting purposes, was a reverse acquisition in which Zaxis acquired InFerGene. The acquisition was accounted for as a purchase with no value assigned to InFerGene. InFerGene then changed its name to Zaxis International Inc. The financial statements include the operations of Zaxis for all periods presented and the operations of International since the date of acquisition. All intercompany transactions and balances have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These interim financial statements include all adjustments of a normal recurring nature that in the opinion of management are necessary to make the financial statements not misleading. However, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the three- and nine-month periods ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. The consolidated balance sheet at December 31, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company and Subsidiary's annual report on Form 10-KSB for the year ended December 31, 1999. 2. COMMON STOCK AND WARRANTS During the three- and nine-month periods ended September 30, 2000, Zaxis International Inc., in connection with a private offering of securities, obtained subscriptions for a total of zero and 1,405,953 units, respectively, with each unit consisting of one share of common stock and Class Z, Series Z-3, Z-4, Z-5, and Z-6 Warrants entitling the holder in the aggregate to purchase one additional share of common stock. Warrents in the amount of $16,250 were executed in the third quarter. For the three- and nine- month periods ended September 30, 2000, $31,304 and $1,022,059 respectively had been received in cash, and $885,161 and $1,265,161, respectively of notes payable, accrued interest and commissions had been converted into common stock. 7 8 At the annual Shareholders Meeting in August, shareholders approved an amendment to the Company charter, increasing the shares of authorized stock from 12,000,000 to 20,000,000 and authorizing the creation of 10,000,000 shares of preferred stock. 3. LIQUIDITY During the three- and nine- month periods ended September 30, 2000, Zaxis incurred losses of $312,339 and $1,024,471, compared to losses of $291,271 and $998,239, respectively for the same periods in 1999. The operations of the Company have been financed primarily by loans from companies and individuals associated with members of the Board of Directors and the sale and issuance of securities under the Company's Private Placement Offering that was terminated by the Board of Directors effective March 31, 2000. In September 2000 the Company converted $650,000 in notes payable to certain Australian mutual funds into Zaxis International Inc. common stock. The debt conversion with these entities also included $235,161 of the related accrued interest on these notes payable and commissions owed to these funds for their previous fundraising activities. This transaction resulted in the issuance of 1,361,787 shares of Zaxis International Inc. common stock that after issuance of these shares represented a 13.8% ownership interest in the Company. As of September 30, 2000, Zaxis had received $170,000 from individual investors for which the Company issued convertible notes. Two of these notes totaling $45,000 are due June 2001, one note in the amount of $100,000 is due August 2001, and the remaining notes totaling $25,000 are due September 2001. One of the Company's larger customers has offered $200,000 in debt financing if these funds can be matched with additional debt or equity funding on a dollar for dollar basis. As of September 30, 2000, Zaxis received $175,000 in matching debt financing under this financing offer. One note in the amount of $30,000 is due on June 15, a second note in the amount of $45,000 is due on July 20, 2001 and the remaining $100,000 of these notes is due on demand. The Company continues to rely upon these sources to sustain on-going operations, research, production development and sales development. The Company will necessarily be reliant upon such sources of funding until the marketing of the Company's principal products can be brought to a level sufficient to support its operating requirements. These conditions cause doubt about the Company's ability to continue as a going concern. No adjustments to the amounts or classification of assets and liabilities that could result from the outcome of this uncertainty are reflected in the financial statements. 4. NET LOSS PER COMMON SHARE The effects of outstanding options and warrants have not been included in the calculation of net loss per share. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three and Nine Months Ended September 30, 2000. RESULTS OF OPERATIONS Sales for the third quarter of 2000 totaled $160,255 as compared with $84,345 for 1999's third quarter. Sales for the nine months ended September 30, 2000, were $303,708 as compared to $176,496 for the same period in 1999. Operating costs were $455,818 for the third quarter of 2000 as compared with $325,980 for the same period in 1999. Operating costs for the nine months ended September 30, 2000, were $1,280,291 as compared with $1,025,997 for the first nine months of 1999. These increases were primarily attributable to costs incurred in the Company's fundraising and sales efforts. Interest expense decreased slightly from $49,653 to $43,966 for the quarters ended September 30, 1999 and September 30, 2000, respectively, and from $148,961 to $134,546 for the nine months ended September 30, 1999 and September 30, 2000, respectively, due to the conversions of notes payable to equity offset by the impact of the additional borrowings that occurred during this time period. Net loss for the third quarter of 2000 amounted to $312,339 as compared to a net loss of $291,271 for the same quarter of 1999. The net loss for the nine months ended September 30, 2000, was $1,024,471 while the Company incurred a net loss of $998,239 for the same period in 1999. FINANCIAL CONDITION AND LIQUIDITY Cash used for operations amounted to $1,362,141 for the nine months ended September 30, 2000. Plant and equipment expenditures amounted to $30,189. Cash provided from financing activities for the nine months ended September 30, 2000 included $1,022,059 from the sale of unregistered securities under the Company's Private Placement Offering and $345,000 in proceeds from the issuance of notes payable. To support its anticipated cash needs, the Company will be required to raise additional capital through borrowings or equity financings. There can be no assurance this will be achieved. The Company is working in 2000 to maintain steady relations with creditors while it strives to improve sales volumes and demonstrate that the Company can be successful. The Company needs to secure additional immediate financing to allow it to explore several opportunities for its products that are now available for market introduction and to afford it time to build sales volumes of the Company's products to profitable levels. In the period required for product introduction and sales growth, the Company will also need to satisfy obligations to current creditors. Pursuant to this need, the Company continues to seek interim and long-term debt or equity funding. New funds were obtained through the Company's Private Placement Offering in the first quarter of 2000. The Company issued the securities under this Private Placement Offering in reliance 9 10 upon the exemption afforded by Section 4(2) of the Securities Act of 1933 and other available exemptions. This Offering was terminated effective March 31, 2000. In September 2000 the Company converted $650,000 in notes payable to certain Australian mutual funds into Zaxis International Inc. common stock. The debt conversion with these entities also included the related accrued interest on these notes payable and commissions owed to these funds for their previous fundraising activities. This transaction resulted in the issuance of 1,361,787 shares of Zaxis International Inc. common stock that after issuance of these shares represented a 13.8% ownership interest in the Company. As of September 30, 2000, Zaxis had received $170,000 from individual investors for which the Company issued convertible notes. Two of these notes totaling $45,000 are due June 2001, one note in the amount of $100,000 is due August 2001, and the remaining notes totaling $25,000 are due September 2001. One of the Company's larger customers has offered $200,000 in debt financing if these funds can be matched with additional debt or equity funding on a dollar for dollar basis. As of September 30, 2000, Zaxis received $175,000 in matching debt financing under this financing offer. One note in the amount of $30,000 is due on June 15, a second note in the amount of $45,000 is due on July 20, 2001 and the remaining $100,000 of these notes is due on demand. The Company continues to rely upon these sources to sustain on-going operations, research, production development and sales development. Additional discussions have been initiated with potential new investors for debt and/or equity funding, however, none of these discussions or potential borrowings or investments have been completed as of September 30, 2000. Zaxis International Inc. will continue to be reliant upon such funding sources until the sales and marketing programs result in sufficient revenue to support the Company's operations. There can be no assurance that the Company will continue to receive investor funding or that the Company will be able to strengthen its customer base sufficiently to generate the sales volume required to meet or exceed the cost of operations. PART II. OTHER INFORMATION ITEM 2(c). CHANGES IN SECURITIES--ISSUANCES OF UNREGISTERED SECURITIES During the period ended September 30, 2000, in transactions exempt from registration, Zaxis International Inc. sold 2,936,370 shares of Common Stock in exchange for cash ($1,022,059) convertible notes, related interest and commissions ($1,265,161). ITEM 3. DEFAULT UPON SENIOR SECURITIES At September 30, 2000, the Company was delinquent on Convertible Note principal payments of $535,922 and interest payments of $128,309. 10 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On August 10, 2000 the Company held its Annual Meeting of Stockholders. According to the Company's Certified List of Stockholders as of the Record Date for this meeting, there were 8,470,776 shares of common stock outstanding and entitled to vote at this meeting. There were present in person at this meeting or by proxy the holders of 7,904,611 shares of Zaxis International Inc.'s common stock. There were eight Director candidates for the five Board of Director positions to be elected at this Annual Meeting. Five Director nominees were set forth in the Company's proxy materials distributed in advance of this meeting and the other three Director candidates were nominated from the floor during the Annual Meeting. Following are the vote tabulations for the eight Director candidates as provided by the Company's independent Inspector of Elections (Bold type identifies the five Directors elected). For Against --- ------- Stephen N. Anderson 3,456,930 77,108 Dr. Malvin L. Eutick 3,434,590 24,448 STEVEN C. FICYK 7,810,651 18,960 RONALD F. HANSON 7,881,318 23,293 Melvin Weisblatt 3,012,509 446,529 WILLIAM MARTIN 4,450,573 JAMES ROBERTS 4,450,573 ROBERT TURNER* 4,450,573 * individual was nominated from the floor at the Annual Meeting There were also four other proposals set forth in the Company's proxy materials that were voted on during the Annual Meeting of Stockholders. Following are the vote tabulations for these four proposals that were all approved by the stockholders. The first proposal voted on by the stockholders was a proposal to amend the Company's Certificate of Incorporation to increase the number of authorized shares of common stock to 20,000,000. For 7,481,532 Against 421,869 Abstain 1,210 The second proposal voted on by the stockholders was to amend the Company's Certificate of Incorporation to authorize the issuance of 10,000,000 preferred shares. For 5,631,746 Against 129,834 Abstain 1,473 Broker Non-Vote 2,141,558 11 12 The third proposal voted on by the stockholders was to increase the number of shares reserved for the Non-Employee Directors' Stock Option Plan to 250,000 shares. For 7,430,985 Against 457,409 Abstain 16,217 The fourth proposal voted on by the stockholders was to ratify the appointment of Ernst & Young LLP as the independent accountants for Zaxis International Inc. For 7,901,476 Against 2,050 Abstain 1,085 Item 6. Exhibits and Reports on Form 8-K Exhibits Exhibit Number Description ------ ----------- 27 Financial Data Schedule A. Reports on Form 8-K during the Quarter Ended September 30, 2000 None 12 13 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf the undersigned, thereunto duly authorized. Zaxis International Inc. ------------------------ (Registrant) November 13, 2000 BY: S/S John Hrobsky ---------------- John Hrobsky President & Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following person on behalf of the Registrant and in the capacity and on the date indicated. Signature Title Date - --------- ----- ---- /s/John Hrobsky President & Chief Executive Officer November 13, 2000 - ------------------ 13