THIS DOCUMENT IS A COPY OF THE 10-Q FILED ON NOVEMBER 5, 1996 PURSUSANT TO A
RULE 201 TEMPORARY HARDSHIP EXEMPTION
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Three Months Ended Commission File Number
September 30, 1996 0-23328
ZERON ACQUISITIONS II, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA 13-3666344
(State of Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification No.
370 Lexington Avenue, 19th Floor, New York, New York 10017
(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, Including Area Code (212) 687-4230
Indicate by check mark whether the registrant (1) has 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 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the issuer has filed all documents and reports
required to be filed by Sections 2, 13 or 15(d) of the Securities Act of 1934
subsequent to the distribution of securities under a plan confirmed by a
court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $.001 par value, 278,750
(Title of Class) (Shares outstanding at
September 30, 1996)
ZERON ACQUISITIONS II, INC.
FORM 10-Q
THREE MONTHS ENDED SEPTEMBER 30, 1996
INDEX
Page
PART I FINANCIAL INFORMATION
ITEM 1 Balance Sheet, September 30, 1996 2
Statement of Income and Expenses,
September 30, 1996 3
Statement of Stockholders' Equity
for the period ended September
30, 1996 4
Statement of Cash Flows, September
30, 1996 5
Notes to Financial Statements 6
Management's Discussion and
Analysis of Results of Operations 7
PART II Other Information - Items 1-6 11
Signatures 12
(i)
ZERON ACQUISITIONS II, INC.
(A development stage company)
BALANCE SHEET
Unaudited
ASSETS
September December
30, 1996 31, 1995
Current Assets:
Cash........................................... $265,115 $568,105
Certificate of Deposit......................... 269,777 0
Prepaid Assets................................. 921 0
Total Current Assets........................... 535,813 568,105
Other Assets:
Due for Zeron International Ltd................ 2,331
Organization Costs-Net of Amortization......... 42 117
Total Other Assets............................. 2,373 117
TOTAL ASSETS................................... $538,186 $568,222
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts Payables and Accrued Expenses........ $ 5,000 $ 7,100
TOTAL CURRENT LIABILITIES...................... 5,000 7,100
Stockholder's Equity:
Common Stock, par value $.001; authorized
75,000,000 shares, issued and outstanding
278,750 shares September 30, 1996 and
December 31, 1995............................. 279 279
Preferred Stock, par value $.001; authorized
15,000,000 shares, none issued and outstanding. 0 0
Additional Paid-In Capital.................... 624,860 624,860
Deficit Accumulated During Development Stage... (91,953) (64,017)
TOTAL STOCKHOLDER'S EQUITY..................... 533,186 561,122
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY....................................... $538,186 $568,222
ZERON ACQUISITIONS II, INC.
(A development stage company)
STATEMENT OF INCOME AND EXPENSES
Unaudited
FOR THE PERIODS
(Cumulative)
11/16/92
1/1/96 1/1/95 1/1/94 (Inception)
to to to to
9/30/96 9/30/95 9/30/94 9/30/96
INTEREST INCOME.............. $ 17,081 $ 12,145 $ 9,022 $ 46,300
EXPENSES:
Consulting................. 11,250 11,250 5,000 40,625
Rent....................... 11,250 11,250 5,000 40,625
New York State and City
Franchise Tax............. 346 1,191 729 5,115
Filing Fees................ 3,289 2,738 1,712 10,164
Amortization............... 75 75 75 458
Bank Charges............... 397 310 200 1,885
Professional Fees.......... 18,410 11,456 3,175 37,541
Office..................... 0 500 0 1,840
Total Expenses............ 45,017 38,770 15,891 138,253
NET INCOME (LOSS) FOR
PERIOD.................... $(27,936) $(26,624) $ (6,869) $(91,953)
EARNINGS (LOSS) PER SHARE... $ (.10) $ (.10) $ (.02)
WEIGHTED AVERAGE OF
OUTSTANDING SHARES........ 278,750 278,750 278,750
ZERON ACQUISITIONS II, INC.
(A development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
Unaudited
FOR THE PERIOD INDICATED
Total
Additional Retained Stock-
Common Paid-In Earnings Holders
Stock Capital (Deficit) Equity
Issuance of Common Shares on
June 4, 1992 at par value
($.001 per share) For Cash $ 160 $ 1,440 $ 1,600
Sale of 18,750 Shares for Cash
in July, 1992 19 29,981 30,000
Net Loss for Period Ended December
31, 1992 $ (62) ( 62)
Net Loss for Period Ended December
31, 1993 (1,766) (1,766)
Sale of 100,000 Shares -
January 13, 1994 100 624,900 625,000
Deferred Offering Costs Charged
to Paid-In-Capital (31,461) (31,461)
Net Loss For Period Ended December
31, 1994 (27,184) (27,184)
Total Stockholders Equity -
December 31, 1994 279 624,860 (29,012) 596,127
Net Loss for Period Ended December
31, 1995 (35,005) (35,005)
Total Stockholders Equity -
December 31, 1995 279 624,860 (64,017) 561,122
Net Income for Period Ended
September 30, 1996 (27,936) (27,936)
Total Stockholders Equity -
September 30, 1996 $279 $624,860 $(91,953) $533,186
ZERON ACQUISITIONS II, INC.
(A development stage company)
STATEMENT OF CASH FLOWS
FOR THE PERIODS
(Cumulative)
11/16/92
1/1/96 1/1/95 1/1/94 (Inception)
to to to to
9/30/96 9/30/95 9/30/94 9/30/96
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (Loss) $(27,936) $(26,624) $ (6,869) $ (91,953)
Adjustments to Reconcile
Net Loss to net cash used
by operating activities
Non-cash items included in loss:
Amortization 75 75 75 458
CHANGES IN ASSETS AND LIABILITIES:
Certificate of Deposits (269,777) 0 0 (269,777)
Other Assets (3,252) 0 21,306 (3,752)
Current Liabilities (2,100) 6,250 0 5,090
Cash Provided (Used) in
Operations (302,990) (20,299) 14,512 (360,024)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of Common Stock -
Net of Costs 0 0 596,414 625,139
NET INCREASE (DECREASE) IN
CASH (302,990) (20,299) 610,926 265,115
CASH AT BEGINNING OF PERIOD 568,105 604,660 8,149 0
CASH AT END OF PERIOD $265,115 $584,361 $619,075 $ 265,115
ZERON ACQUISITIONS II, INC.
NOTES TO FINANCIAL STATEMENTS
Unaudited
September 30, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed 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 Rule
10-01 of Regulation S-X. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of Management, all adjustments
considered necessary for a fair presentation have been included. These
adjustments were considered usual and normal in nature. For the period ended
September 30, 1996, the Company had no operational activities other than the
preparation for the public offering as presented in the Balance Sheet. The
recovery of assets and the continuation of the Company as a going concern are
dependent upon the Company's ability to obtain additional financing and upon
future profitable operations. For further information, refer to the financial
statements and footnotes included in the Company's annual report on Form 10-K
for the year ended December 31, 1995.
ZERON ACQUISITIONS II, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
September 30, 1996
As of July 1, 1996, Global Business Alliance, Inc., a Canadian
corporation, owner of hardware, software, and certain assets including but not
limited to the rights to the IBEX 2000 system, entered into an agreement (the
"Transfer Agreement") to assign the license for the IBEX 1000, all rights for
the IBEX 2000 and certain other assets (the "Assets") to Zeron Acquisitions
II, Inc. (the "Company"). The Company intends to use the Assets in order to
market and further commercialize the IBEX 1000 system and further develop,
market and commercialize the IBEX 2000 system. As consideration for the
acquisition of the Assets, the Company will pay $100 and assume the obligation
to pay royalty payments to Global Business Alliance, Inc. pursuant to certain
license agreements. The closing of the transaction is subject to many
preconditions, and numerous other terms described in the Transfer Agreement.
Global Business Alliance, Inc. is in the business of providing global
electronic network services allowing organizations of all sizes to conduct a
complete range of essential business functions with one another electronically
over a secured open architecture over a variety of networks including the
Internet.
In connection with the transaction, Zeron Acquisitions II, Inc. shall
validly issue and deliver 9,681,500 common shares of Zeron's duly authorized,
fully paid and non-assessable common stock, $.001 par value, as follows:
4,840,750 shares to Metcalfe Investments Limited, 1,500,000 shares to The Mady
Jalinous Trust and 3,340,750 shares to Mady Jalinous. The 9,681,500 common
shares will represent approximately 95.6% of the Company's outstanding common
stock following the closing.
Effective at closing, the officers and directors of Zeron Acquisitions
II, Inc. will resign in favor of Peter Sandiford and Mady Jalinous as
replacement directors. Gary Takata, a current officer and director of Zeron
Acquisitions II, Inc., and Johann Wong, an affiliate of the Placement Agent
conducting the Private Placement described below, were granted the right to
designate one member to Zeron's board of directors subject to the reasonable
approval of Peter Sandiford and Mady Jalinous. The right to designate a
director expires on the occurrence of certain events.
Preconditions
Among the preconditions that must be satisfied prior to a closing under
the Transfer Agreement is the provision of opinion letters from Global
Business Alliance, Inc.'s counsel and auditors that the proposed transaction
will not be subject to any adverse application of any "Bulk Sale" statutes to
which Global Business Alliance, Inc. is subject and that Global Business
Alliance, Inc.'s liabilities will not become or be required to be disclosed
for financial reporting purposes as liabilities of the Company.
Among the additional preconditions are the receipt of all required third
party consents, opinion letters, necessary approvals, and the resignation of
the Company's current directors and officers, to be replaced by Peter
Sandiford and Mady Jalinous.
Private Placement
The Company agreed to use its best efforts to conduct a private placement
("Private Placement") of its convertible preferred stock (the "Preferred
Shares"). The Company intends to raise not less than $2,750,000 and up to
$5,500,000 by the sale of its Preferred Shares. The Preferred Shares will
bear an annual dividend of 9% payable in additional shares of preferred stock.
The Preferred Shares will be convertible into common stock of the Company
at the investor's option at the lesser of 60% of the offering price per share
of the Company's common stock in any secondary public offering, or 70% of the
sales price per share or valuation of the Company's common stock in any
combination, merger or non-public offering equity transaction or sale by the
Company in any of which the Company raises in the aggregate at least $2.5
million dollars, but in any event at not less than $2.50 per common share nor
more than $7.50 per common share, prior to anti-dilution adjustments.
At the election of each holder of Preferred Shares, 50% of such Preferred
Shares may be converted into common stock of the Company at 60% of the average
closing bid price per share of the Company's common stock for the five trading
days prior to such conversion on such exchange where the common stock is
trading, provided such conversion is elected within six months of the latest
sale date of any Preferred Shares in the private offering of up to 1,100,000
Preferred Shares and prior to the transaction described above. In the event
the transaction described above does not close within six months of the latest
sale date of any Preferred Shares in the private offering of up to 1,100,000
Preferred Shares, then 100% of the Preferred Shares may be so converted. The
conversion price shall be no less than $2.50 nor more than $7.50 per common
share, prior to anti-dilution adjustments.
The Preferred Shares and underlying equity will be issued subject to
demand registration and piggy-back registration rights.
The net proceeds of the Private Placement will be employed by the Company
as follows: up to $1,800,000 shall be applied to prepaid royalties under the
License Agreement to be used to satisfy certain of Global Business Alliance,
Inc.'s liabilities. A maximum of $900,000 of the first $2,500,000 of proceeds
of the Private Placement may be employed for such purpose, and an additional
$.75 of each dollar raised in the Private Placement in excess of $2,500,000
may be employed for such purpose, up to an aggregate of $1,800,000 for all
such payments. The additional Private Placement proceeds shall be utilized
for general corporate purposes and working capital.
The closing on a minimum of $2,500,000 net proceeds from the Private
Placement is a precondition to the closing of the transaction with Global
Business Alliance, Inc.
The Private Placement and closing under the Transfer Agreement may occur
contemporaneously. Global Business Alliance, Inc. may determine at any time
not to consummate the purchase of the Assets transaction described in the
Transfer Agreement.
For each public or private offering of the Company's common stock or any
successor security or any security or debt instrument exchangeable or
convertible into common stock (which are so actually converted) commenced at
any time before the common shares of the Company into which the Preferred
Shares are convertible are fully registered as described above, and are free
trading without any restriction, and which offering is subsequently completed
at a per share price of less than $6.25, subject to adjustment for mergers,
stock splits, recapitalizations and similar anti-dilution adjustments; then
for each such public offering or for private offerings which raise in the
aggregate not less than $2.5 million dollars (other than the Private Placement
described in the Transfer Agreement), the Company shall issue to every holder
of Preferred Shares for no additional consideration sufficient shares of
common stock (or any successor security) so as to make the average price paid
by each such holder the same price as offered in the aforedescribed public or
private offering. Such additional shares will be included in the registration
statement filed or to be filed in connection with any such public offering, or
in the case of a private offering in a registration statement relating to such
additional shares, so that the additional shares shall be fully registered and
freely tradable. The Company will bear the entire expense of any such
registration. The Company's additional shares will be distributed
comtemporaneously with the distribution of securities to the public or private
offerees of the Company's offering, as the case may be. In the event the
entire Private Placement described in the Transfer Agreement is raised by sale
of Preferred Shares in the Private Placement, then the anti-dilution
protection described above shall be provided to the holders of Preferred
Shares regardless of the aggregate amount of funds raised in private
offerings.
The Company has engaged the services of domestic and off-shore placement
agents to sell the Preferred Shares. The off-shore placement agent (the
"Off-Shore Placement Agent") for the Private Placement will receive
commissions of 7%, a non-accountable expense allowance of 3% and warrants to
purchase one share of the Company's common stock for each $10 raised in the
Private Placement. The Warrants will be exercisable for five years, at the
lesser of $6.25 or 105% of the conversion price of the Preferred Shares. In
the event the Off-Shore Placement Agent assists in the raising of funds
contemplated by the Private Placement, then the Off-Shore Placement Agent will
receive only the non-accountable expense allowance and one warrant for each
$10 raised in connection with such funds. The warrant exercise price is
subject to adjustment upon the occurence of certain events. The Off-Shore
Placement Agent will not receive commissions, non-accountable expense
allowance, common stock, or warrants for any funds not raised by the Off-Shore
Placement Agent or for which the Off-Shore Placement Agent did not assist. In
the event not less than $5,000,000 is raised in the Private Placement, the
Off-Shore Placement Agent will also receive 40,000 shares of the Company's
common stock as additional compensation. The Off-Shore Placement Agent will
receive a pro rata portion of the aforedescribed 40,000 common shares to the
extent the Private Placement raises at least $2.1 million dollars but less
than $5.0 million dollars of net proceeds.
The Off-Shore Placement Agent will receive cash commissions of 10% of the
amount raised by it. The Off-Shore Placement Agent will receive ten (10)
Warrants for each eight (8) Preferred Shares sold in the Private Placement to
purchase up to a maximum of 1,000,000 common shares of the Company's common
stock at $2.50 per share. The Warrant will be issued with demand and
piggyback registration rights relating to the underlying common stock.
All shares issuable upon conversion of the Preferred Shares will be
issued in reliance on the exemption under Regulation S under the Securities
Act of 1933, as amended, if applicable.
Shares in Escrow
Of the Company's common shares to be issued to Metcalfe Investments
Limited, The Mady Jalinous Trust and Mady Jalinous, Metcalfe Investments
Limited and Mady Jalinous shall each deposit 1,223,342 common shares in escrow
as security against claims against the Company by creditors of Global Business
Alliance, Inc. and in the event of a determination that certain liabilities of
Global Business Alliance, Inc. become or are deemed to be liabilities of the
Company.
Change in Control
Upon closing and issuance of 9,681,500 shares of the Company's common
stock to Metcalfe Investments Limited, The Mady Jalinous Trust and Mady
Jalinous, they will collectively own approximately 95.6% of the outstanding
shares of common stock of the Company as of the closing.
Uncertainty of Closing
There are no assurances that the preconditions to closing described in
the Transfer Agreement will be satisfied, nor that a closing will take place
pursuant to the Transfer Agreement. The Transfer Agreement including the
preconditions to closing may be modified upon the consent of the Company and
Global Business Alliance, Inc.
General Financial Information
At September 30, 1996, the Company's current assets amounted to $535,813,
while current liabilities amounted to $5,000.
In connection with the transactions with Global Business Alliance, Inc.
as described above, the Company has paid legal fees of approximately $14,999
as of September 30, 1996.
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 Securities Holders
- None
Item 5 Other Information - None
Item 6 Exhibits and Reports on Form 8-K - None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ZERON ACQUISITIONS II, INC.
Gary Takata
By:________________________________
Gary Takata
President and Director
Date: November 5, 1996