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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000797542-05-000016.txt : 20050517
<SEC-HEADER>0000797542-05-000016.hdr.sgml : 20050517
<ACCEPTANCE-DATETIME>20050517152329
ACCESSION NUMBER:		0000797542-05-000016
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20040930
FILED AS OF DATE:		20050517
DATE AS OF CHANGE:		20050517

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ZAXIS INTERNATIONAL INC
		CENTRAL INDEX KEY:			0000797542
		STANDARD INDUSTRIAL CLASSIFICATION:	IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835]
		IRS NUMBER:				680080601
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-15746
		FILM NUMBER:		05838564

	BUSINESS ADDRESS:	
		STREET 1:		115 EAST 57TH STREET, 11TH FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
		BUSINESS PHONE:		646-202-9679

	MAIL ADDRESS:	
		STREET 1:		115 EAST 57TH STREET, 11TH FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	INFERGENE CO
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>zaxs.htm
<TEXT>
<html>

<head>
<title>qsb</title>
</head>

<body>

<hr SIZE="4" NOSHADE COLOR="#000000">

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<p ALIGN="CENTER"><b><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="4">UNITED STATES<br>
SECURITIES AND EXCHANGE COMMISSION<br>
</font><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="3">Washington, D.C. 20549<br>
</font></b><font SIZE="4" FACE="Times New Roman, Times, Serif">___________________<br>
<br>
<strong>FORM 10-QSB<br>
</strong>___________________</font></p>

<p ALIGN="CENTER">&nbsp;</p>

<p style="MARGIN: 0in 0in 0pt 0.5in; COLOR: windowtext; TEXT-INDENT: -0.5in"
align="center"><b><font style="FONT-WEIGHT: bold; FONT-SIZE: 12pt" face="Wingdings"
size="3">&#253</font><font style="FONT-WEIGHT: bold; FONT-SIZE: 3pt" size="1">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</font><font style="FONT-WEIGHT: bold; FONT-SIZE: 12pt" size="3">QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>

<p style="MARGIN: 0in 0in 0pt; COLOR: windowtext">&nbsp;</p>

<p style="MARGIN: 0in 0in 0pt; COLOR: windowtext; TEXT-ALIGN: center" align="center"><font
style="FONT-WEIGHT: bold; FONT-SIZE: 10pt" face="Times New Roman" size="2"><b>For the
quarterly period ended September 30, 2004</b></font></p>

<p style="MARGIN: 0in 0in 0pt; COLOR: windowtext">&nbsp;</p>

<p style="MARGIN: 0in 0in 0pt; COLOR: windowtext; TEXT-ALIGN: center" align="center"><b><font
style="FONT-WEIGHT: bold; FONT-SIZE: 10pt" face="Times New Roman" size="2">OR</font></b></p>

<p style="MARGIN: 0in 0in 0pt; COLOR: windowtext; TEXT-ALIGN: center" align="center">&nbsp;</p>

<p style="MARGIN: 0in 0in 0pt 0.5in; COLOR: windowtext; TEXT-INDENT: -0.5in"
align="center"><b><font style="FONT-WEIGHT: bold; FONT-SIZE: 12pt" face="Wingdings"
size="3">o</font><font style="FONT-WEIGHT: bold; FONT-SIZE: 3pt" size="1">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</font><font style="FONT-WEIGHT: bold; FONT-SIZE: 12pt" size="3">TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>

<p style="MARGIN: 0in 0in 0pt; COLOR: windowtext; TEXT-ALIGN: center" align="center">&nbsp;</p>

<p style="MARGIN: 0in 0in 0pt; COLOR: windowtext; TEXT-ALIGN: center" align="center"><font
style="FONT-WEIGHT: bold; FONT-SIZE: 10pt" face="Times New Roman" size="2">For the
transition period from
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>

<p style="MARGIN: 0in 0in 0pt; COLOR: windowtext; TEXT-ALIGN: center" align="center">&nbsp;</p>

<p style="FONT-SIZE: 10pt; MARGIN: 0in 0in 0pt; COLOR: windowtext; TEXT-ALIGN: center"
align="center"><b><font style="FONT-WEIGHT: bold; FONT-SIZE: 10pt" face="Times New Roman"
size="2">Commission file</font><font style="FONT-WEIGHT: bold"> number 0-15476</font></b></p>

<p style="FONT-SIZE: 10pt; MARGIN: 0in 0in 0pt; COLOR: windowtext; TEXT-ALIGN: center"
align="center">&nbsp;</p>

<p ALIGN="center"><font face="TIMES NEW ROMAN, TIMES, SERIF" size="5"><b>ZAXIS
INTERNATIONAL INC.<br>
</b></font><font face="TIMES NEW ROMAN, TIMES, SERIF" size="1">(Exact Name Of Registrant
As Specified In Its Charter)</font></p>

<table ALIGN="CENTER" CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
  <tr VALIGN="TOP" BGCOLOR="#66FFFF">
    <td ALIGN="CENTER" WIDTH="55%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2"><u>Delaware</u></font></p>
    </div></td>
    <td WIDTH="3%">&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td WIDTH="3%">&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td WIDTH="3%">&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td ALIGN="CENTER" WIDTH="40%" COLSPAN="3"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><font
    FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2"><u><p>68-0080601</u></font></p>
    </div></td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="CENTER" WIDTH="55%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="1">(State of Incorporation)</font></p>
    </div></td>
    <td WIDTH="3%"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="CENTER" WIDTH="40%" COLSPAN="3"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="1">(I.R.S. Employer Identification No.)</font></p>
    </div></td>
  </tr>
  <tr VALIGN="TOP" BGCOLOR="#66FFFF">
    <td ALIGN="CENTER" WIDTH="55%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><font
    FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2"><p></font>&nbsp;</p>
    </div></td>
    <td WIDTH="3%">&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td WIDTH="3%">&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td WIDTH="3%">&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td>&nbsp;&nbsp;&nbsp;&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp;&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp;&nbsp; </td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="CENTER" WIDTH="55%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><font
    FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2"><u><p>115 East 57th Street, Suite 1118, New
    York, NY</u></font></p>
    </div></td>
    <td WIDTH="3%">&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td WIDTH="3%">&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td WIDTH="3%">&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td ALIGN="CENTER" WIDTH="40%" COLSPAN="3"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><font
    FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2"><u><p>10022</u></font></p>
    </div></td>
  </tr>
  <tr VALIGN="TOP" BGCOLOR="#66FFFF">
    <td ALIGN="CENTER" WIDTH="55%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="1">(Address of Principal Executive Offices)</font></p>
    </div></td>
    <td WIDTH="3%"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="CENTER" WIDTH="40%" COLSPAN="3"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="1">(ZIP Code</font></p>
    </div></td>
  </tr>
</table>

<p align="center">&nbsp;<font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">Registrant's
Telephone Number, Including Area Code: (646) 202-9679</font></p>

<p ALIGN="JUSTIFY"><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">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
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.&nbsp;&nbsp;Yes&nbsp;&nbsp;[
&nbsp; ]&nbsp;&nbsp;No&nbsp;[X]<br>
<br>
At September 30, 2004, the Registrant had 16,245,623 shares of common stock outstanding.</font></p>

<p ALIGN="JUSTIFY">&nbsp;</p>

<p ALIGN="JUSTIFY">&nbsp;</p>

<hr SIZE="2" NOSHADE COLOR="#000000">

<hr SIZE="4" NOSHADE COLOR="#000000">

<p><br clear="all" style="page-break-before:always; mso-break-type:section-break">
</p>

<hr NOSHADE SIZE="5">
<font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="3">

<hr SIZE="1" NOSHADE COLOR="#000000">
</font>

<p ALIGN="CENTER"><a name="TABLE OF CONTENTS"><strong><font size="2">TABLE OF CONTENTS</font></strong></a></p>

<table ALIGN="CENTER" CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
  <tr VALIGN="BOTTOM">
    <th nowrap ALIGN="LEFT"><font face="Times New Roman" size="2">Item</font><hr SIZE="1"
    NOSHADE COLOR="#000000" ALIGN="LEFT" WIDTH="22%">
    </th>
    <th></th>
    <th></th>
    <th></th>
    <th nowrap ALIGN="LEFT"><font face="Times New Roman" size="2">Description</font><hr
    SIZE="1" NOSHADE COLOR="#000000" ALIGN="LEFT" WIDTH="60%">
    </th>
    <th COLSPAN="3" nowrap><font face="Times New Roman" size="2">Page</font><hr SIZE="1"
    NOSHADE COLOR="#000000" WIDTH="22%">
    </th>
  </tr>
  <tr VALIGN="TOP" BGCOLOR="#66FFFF">
    <td ALIGN="CENTER" WIDTH="12%" COLSPAN="8"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="2"><strong>PART I - FINANCIAL INFORMATION<br>
    </strong></font></p>
    </div></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp; </font></td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="LEFT" WIDTH="12%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="2">ITEM 1.</font></p>
    </div></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="LEFT" WIDTH="75%"><div STYLE="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><a
    HREF="#a050"><p></a><font size="2"><a href="#ITEM 1.&nbsp;FINANCIAL STATEMENTS">FINANCIAL
    STATEMENTS.</a></font></p>
    </div></td>
    <td WIDTH="5%" ALIGN="RIGHT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="RIGHT"><font size="2">3</font></td>
    <td WIDTH="5%" ALIGN="LEFT" nowrap><font size="2">&nbsp;&nbsp;</font></td>
  </tr>
  <tr VALIGN="TOP" BGCOLOR="#66FFFF">
    <td ALIGN="LEFT" WIDTH="12%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="2">ITEM 2.</font></p>
    </div></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="LEFT" WIDTH="75%"><div STYLE="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><a
    HREF="#a051"><p></a><font size="2"><a
    href="#ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION">MANAGEMENT'S
    DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.</a></font></p>
    </div></td>
    <td WIDTH="5%" ALIGN="RIGHT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="RIGHT"><font size="2">3</font></td>
    <td WIDTH="5%" ALIGN="LEFT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="LEFT" WIDTH="12%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="2">ITEM 3.</font></p>
    </div></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="LEFT" WIDTH="75%"><div STYLE="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><p><font
    size="2"><a href="#ITEM 3. CONTROLS AND PROCEDURES">CONTROLS AND PROCEDURES.</a></font></p>
    </div></td>
    <td WIDTH="5%" ALIGN="RIGHT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="RIGHT"><font size="2">4</font></td>
    <td WIDTH="5%" ALIGN="LEFT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp; </font></td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="center" WIDTH="12%" COLSPAN="8" bgcolor="#00FFFF"><div
    STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font size="2"><strong>PART II - OTHER
    INFORMATION<br>
    </strong></font></p>
    </div></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp; </font></td>
  </tr>
  <tr VALIGN="TOP" BGCOLOR="#66FFFF">
    <td ALIGN="LEFT" WIDTH="12%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="2">ITEM 1.</font></p>
    </div></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="LEFT" WIDTH="75%"><div STYLE="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><p><font
    size="2"><a href="#ITEM 1. LEGAL PROCEEDINGS">LEGAL PROCEEDINGS.</a></font></p>
    </div></td>
    <td WIDTH="5%" ALIGN="RIGHT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="RIGHT"><font size="2">4</font></td>
    <td WIDTH="5%" ALIGN="LEFT" nowrap><font size="2">&nbsp;&nbsp;</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="LEFT" WIDTH="12%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="2">ITEM 2.</font></p>
    </div></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="LEFT" WIDTH="75%"><div STYLE="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><p><font
    size="2"><a href="#ITEM 2. CHANGES IN SECURITIES">CHANGES IN SECURITIES.</a></font></p>
    </div></td>
    <td WIDTH="5%" ALIGN="RIGHT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="RIGHT"><font size="2">5</font></td>
    <td WIDTH="5%" ALIGN="LEFT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr VALIGN="TOP" BGCOLOR="#66FFFF">
    <td ALIGN="LEFT" WIDTH="12%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="2">ITEM 3.</font></p>
    </div></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="LEFT" WIDTH="75%"><div STYLE="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><p><font
    size="2"><a href="#ITEM 3.&nbsp;DEFAULTS UPON SENIOR SECURITIES">DEFAULT UPON SENIOR
    SECURITIES.</a></font></p>
    </div></td>
    <td WIDTH="5%" ALIGN="RIGHT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="RIGHT" VALIGN="TOP"><font size="2">5</font></td>
    <td WIDTH="5%" ALIGN="LEFT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="LEFT" WIDTH="12%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="2">ITEM 4.</font></p>
    </div></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="LEFT" WIDTH="75%"><div STYLE="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><p><font
    size="2"><a href="#ITEM 4.&nbsp;SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS">SUBMISSION
    OF MATERS TO A VOTE OF SECURITY HOLDERS.</a></font></p>
    </div></td>
    <td WIDTH="5%" ALIGN="RIGHT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="RIGHT"><font size="2">5</font></td>
    <td WIDTH="5%" ALIGN="LEFT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr VALIGN="TOP" BGCOLOR="#66FFFF">
    <td ALIGN="LEFT" WIDTH="12%"><div STYLE="MARGIN-LEFT: 0px; TEXT-INDENT: 0px"><p><font
    size="2">ITEM 5.</font></p>
    </div></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="LEFT" WIDTH="75%"><div STYLE="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><p><font
    size="2"><a href="#ITEM 5.&nbsp;OTHER INFORMATION">OTHER INFORMATION.</a></font></p>
    </div></td>
    <td WIDTH="5%" ALIGN="RIGHT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td ALIGN="RIGHT"><font size="2">5</font></td>
    <td WIDTH="5%" ALIGN="LEFT" nowrap><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td ALIGN="LEFT" WIDTH="12%"><font size="2">ITEM 6.</font></td>
    <td WIDTH="3%"></td>
    <td WIDTH="3%"></td>
    <td WIDTH="3%"></td>
    <td ALIGN="LEFT" WIDTH="75%"><font size="2"><a
    href="#ITEM 6.&nbsp;EXHIBITS AND REPORTS ON FORM 8-K">EXHIBITS AND REPORTS ON FORM 8-K.</a></font></td>
    <td WIDTH="5%" ALIGN="RIGHT" nowrap></td>
    <td ALIGN="RIGHT"><font size="2">5</font></td>
    <td WIDTH="5%" ALIGN="LEFT" nowrap></td>
  </tr>
</table>
<b><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="3">

<hr SIZE="1" NOSHADE COLOR="#000000">
</font></b>

<hr NOSHADE SIZE="5">

<p><br clear="all" style="page-break-before:always; mso-break-type:section-break">
</p>
<div>

<p ALIGN="CENTER"><font size="2"><b>PART I - FINANCIAL INFORMATION</b></font></p>

<p ALIGN="JUSTIFY"><font size="2"><a name="ITEM 1.&nbsp;FINANCIAL STATEMENTS">ITEM
1.&nbsp;FINANCIAL STATEMENTS</a><b> </b></font><a href="#TABLE OF CONTENTS"><font size="1">Back
to Table of Contents</font></a></p>

<p ALIGN="JUSTIFY"><font size="2">The Registrant's unaudited interim financial statements
are attached hereto. <a href="#Unaudited Interim Financial Statements">Unaudited Interim
Financial Statements</a></font></p>

<p ALIGN="JUSTIFY"><font size="2"><a
name="ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION">ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION</a> </font><font size="1"><a
href="#TABLE OF CONTENTS">Back to Table of Contents</a></font></p>

<p ALIGN="JUSTIFY"><font size="2">Some of the statements contained in this quarterly
report of Zaxis International Inc., Delaware corporation (hereinafter </font><font
size="2" color="#000000">referred to as &quot;we&quot;, &quot;us&quot;, &quot;our&quot;,
&quot;Company&quot; and the &quot;Registrant</font><font size="2">&quot;) 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. You can identify these statements by the fact
that they do not relate strictly to historical or current facts. They use of words such as
&quot;anticipate,&quot; &quot;estimate,&quot; &quot;expect,&quot; &quot;project,&quot;
&quot;intend,&quot; &quot;plan,&quot; &quot;believe,&quot; and other words and terms of
similar meaning in connection with any discussion of future operating or financial
performance. From time to time, we also may provide forward-looking statements in other
materials we release to the public.</font></p>

<p align="justify"><font size="2" color="#000000"><u>General Background</u></font></p>

<p align="justify" style="text-align: justify"><font size="2">The Registrant was a
biotechnology holding company that operated its business through wholly owned subsidiary.
Zaxis was incorporated in Ohio in 1989. On August 25, 1995, Zaxis merged with a subsidiary
of The InFerGene Company (&quot;InFerGene&quot;) and InFerGene changed its name to Zaxis
International Inc. For accounting and tax purposes, the merger was treated as a reverse
acquisition in which Zaxis acquired International. InFerGene was incorporated in
California in 1984 and subsequently changed its domicile to Delaware in 1985. </font></p>

<p align="justify"><font size="2">On November 6, 2002, the Registrant filed a voluntary
Chapter 7 petition under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court Northern
District of Ohio (case no. 02-55160). </font><font face="Times New Roman" size="2">As a
result of the Chapter 7 petition, the Registrant's assets were transferred to a United
States Trustee and the Registrant terminated its business operations.</font><font size="2">
</font><font face="Times New Roman" size="2">During 2003 and 2004, the Bankruptcy Trustee
had disposed of substantially all of the assets of the Registrant and its subsidiaries. </font><font
size="2">On October 13, 2004, the Bankruptcy Court approved an Order confirming the sale
of debtor's interest in personal property to Park Avenue Group Inc. and confirming that
Park Avenue Group, Inc. is a good faith purchaser pursuant to 11 USC Section363(m).</font></p>

<p align="justify"><font size="2">In connection with the Order confirming the sale of
debtor's interest in certain intangible personal property to Park Avenue Group Inc.
approved by the U.S. Bankruptcy Court Northern District of Ohio on October 13, 2004, the
Court authorized Park Avenue Group to appoint a new board of directors. On October 13,
2004, Park Avenue Group appointed </font><font size="2" color="#000000">Ivo Heiden to the
board of directors of the Registrant, which board of director subsequently appointed Ivo
Heiden (&quot;Management&quot;) to be president of the Registrant.</font><font size="2">
The Court order further provided that the sale was free and clear of liens, claims and
interests of others and that the sale was free and clear of any and all other real or
personal property interests, including any interests in Zaxis's subsidiaries. On November
30, 2004; the Registrant's board of directors approved and authorized an amendment of
Registrant's Article of Incorporation to establish a series B convertible preferred stock,
par value $0.0001 (&quot;Series B Convertible Preferred Stock&quot;). The holders of the
Series B Convertible Preferred Stock shall be entitled to 20 (twenty) votes on all matters
submitted to a vote of the stockholders of the Registrant. The holders of Series B
Convertible Preferred Stock shall have the right to convert each share into 20 (twenty)
shares of common stock upon their written request at any time.</font></p>

<p align="justify"><font size="2"><u>Change in Control following Emergence from Bankruptcy</u></font></p>

<p style="text-align: justify"><font size="2">The material terms of the transaction
confirmed by Bankruptcy Court authorized Park Avenue Group to appoint new members to the
Registrant's board of directors and the newly-appointed board of directors be authorized
to:</font></p>

<p><font size="2">(i) amend the Article of Incorporation to increase the number of
authorized shares to 100,000,000 shares; <br>
(ii) amend the Article of Incorporation to change the par value of the Registrant's common
and preferred stock to $0.0001;<br>
(iii) issue up to 30,000,000 shares of common stock, par value $0.0001 to the new
Management of the Registrant;<br>
(iv) implement a reverse split of the issued and outstanding shares in a ratio to be
determined by the board of directors; <br>
(v) cancel and extinguish all common share conversion rights of any kind, including
without limitation, warrants, options, convertible bonds, other convertible debt
instruments and convertible preferred stock; and <br>
(vi)cancel and extinguish all preferred shares of every series and accompanying conversion
rights of any kind.</font></p>

<p ALIGN="JUSTIFY"><font size="2" color="#000000"><u>Plan of Operation</u></font></p>

<p align="justify"><font size="2" color="#000000">We have no present operations or
revenues and our current activities are related to seeking new business opportunities,
including seeking an acquisition or merger with an operating company. If our board of
directors seeks to acquire another business or pursue a new business opportunity,
Management would have substantial flexibility in identifying and selecting a prospective
business. Registrant would not be obligated nor does Management intend to seek
pre-approval by our shareholders. Under the laws of the State of Delaware, the consent of
holders of a majority of the issued and outstanding shares, acting without a shareholders
meeting, can approve an acquisition.</font></p>

<p align="justify"><font size="2" color="#000000">The Registrant is entirely dependent on
the judgment of Management in connection with pursuing a new business opportunity or a
selection process for a target operating company. In evaluating a prospective new business
opportunity or an operating company, we would consider, among other factors, the
following: (i) costs associated with effecting a transaction; (ii) equity interest in and
opportunity to control the prospective candidate; (iii) growth potential of the target
business; (iv) experience and skill of management and availability of additional
personnel; (v) necessary capital requirements; (vi) the prospective candidate's
competitive position; (vii) stage of development of the business opportunity; (viii) the
market acceptance of the business its products or services; (ix) the availability of
audited financial statements of the potential business opportunity; and (x) the regulatory
environment that may be applicable to any prospective business opportunity. </font></p>

<p align="justify"><font size="2" color="#000000">The foregoing criteria are not intended
to be exhaustive and there may be other criteria that Management may deem relevant. In
connection with an evaluation of a prospective or potential business opportunity,
Management may be expected to conduct a due diligence review.</font></p>

<p align="justify"><font size="2" color="#000000">The Registrant intends to conduct its
activities so as to avoid being classified as an &quot;Investment Company&quot; under the
Investment Company Act of 1940, and therefore avoid application of the costly and
restrictive registration and other provisions of the Investment Company Act of 1940 and
the regulations promulgated thereunder.</font></p>

<p align="justify"><font size="2" color="#000000"><u>Liquidity and Capital Resources</u></font></p>

<p align="justify"><font size="2" color="#000000">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. At September 30, 2004, we had 16,245,623 shares of common stock
outstanding and we had no assets and no liabilities.</font></p>

<p align="justify"><font face="TIMES NEW ROMAN, TIMES, SERIF" size="2" color="#000000">In
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. </font></p>

<p align="justify"><font face="TIMES NEW ROMAN, TIMES, SERIF" size="2" color="#000000">There
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 and lack of operating history may make it difficult to
do 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.</font></p>

<p ALIGN="JUSTIFY"><font size="2"><a name="ITEM 3. CONTROLS AND PROCEDURES">ITEM 3.
CONTROLS AND PROCEDURES</a><b> </b></font><font size="1"><a href="#TABLE OF CONTENTS">Back
to Table of Contents</a></font></p>

<p style="text-align: justify"><font size="2">Evaluation of disclosure controls and
procedures. <font color="#000000">As of March 31, 2005, 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&nbsp; Exchange Act. Based upon the evaluation of these controls and
procedures, our president and chief financial officer concluded that our disclosure
controls and procedures were effective as of the end of the period ended March 31, 2005,
the period this quarterly report was prepared.</font></font></p>

<p style="text-align: justify"><font size="2">Changes in internal controls. <font
color="#000000">Management was appointed in October 2004. 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.</font></font></p>

<p ALIGN="center"><font size="2"><b>PART II - OTHER INFORMATION</b></font></p>

<p ALIGN="JUSTIFY"><font size="2"><a name="ITEM 1. LEGAL PROCEEDINGS">ITEM 1. LEGAL
PROCEEDINGS</a><b> </b></font><font size="1">&nbsp; <a href="#TABLE OF CONTENTS">Back to
Table of Contents</a></font></p>

<p ALIGN="JUSTIFY"><font color="#000000" size="2">The Registrant's officers and directors
are not aware of any threatened or pending litigation to which the Registrant is a party
or which any of its property is the subject and which would have any material, adverse
effect on the Registrant.</font></p>

<p ALIGN="JUSTIFY"><font size="2"><a name="ITEM 2. CHANGES IN SECURITIES">ITEM 2. CHANGES
IN SECURITIES</a> </font><font size="1"><a href="#TABLE OF CONTENTS">Back to Table of
Contents</a></font></p>

<p ALIGN="JUSTIFY"><font size="2">None.</font></p>

<p ALIGN="JUSTIFY"><font size="2"><a name="ITEM 3.&nbsp;DEFAULTS UPON SENIOR SECURITIES">ITEM
3.&nbsp;DEFAULTS UPON SENIOR SECURITIES</a><b> </b></font><font size="1"><a
href="#TABLE OF CONTENTS">Back to Table of Contents</a></font></p>

<p ALIGN="JUSTIFY"><font size="2">None.</font></p>

<p ALIGN="JUSTIFY"><font size="2"><a
name="ITEM 4.&nbsp;SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS">ITEM
4.&nbsp;SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</a> </font><font size="1"><a
href="#TABLE OF CONTENTS">Back to Table of Contents</a></font></p>

<p ALIGN="JUSTIFY"><font size="2">None.</font></p>

<p ALIGN="JUSTIFY"><font size="2"><a name="ITEM 5.&nbsp;OTHER INFORMATION">ITEM
5.&nbsp;OTHER INFORMATION</a><b> </b></font><font size="1"><a href="#TABLE OF CONTENTS">Back
to Table of Contents</a></font></p>

<p ALIGN="JUSTIFY"><font size="2">None.</font></p>

<p ALIGN="JUSTIFY"><font size="2"><a name="ITEM 6.&nbsp;EXHIBITS AND REPORTS ON FORM 8-K">ITEM
6.&nbsp;EXHIBITS AND REPORTS ON FORM 8-K</a><b> </b></font><font size="1"><a
href="#TABLE OF CONTENTS">Back to Table of Contents</a></font></p>

<p ALIGN="JUSTIFY"><font size="2">(a) The following documents are filed as exhibits to
this report on Form 10-QSB or incorporated by reference herein. Any document incorporated
by reference is identified by a parenthetical reference to the SEC filing that included
such document.</font></p>

<table ALIGN="CENTER" CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%" height="1">
  <tr VALIGN="BOTTOM">
    <th nowrap height="1" bgcolor="#00FFFF" width="8%"><p align="left"><font size="1">Exhibit
    No.</font></th>
    <th nowrap ALIGN="LEFT" height="1" bgcolor="#00FFFF" width="92%"><font size="1">Description</font></th>
  </tr>
  <tr>
    <td width="8%" bgcolor="#FFFFFF" height="0%"><font size="1">31.1</font></td>
    <td width="92%" bgcolor="#FFFFFF" height="0%"><font size="1">Certification of President
    and 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.</font></td>
  </tr>
  <tr>
    <td width="8%" bgcolor="#FFFFFF" height="0%"><font size="1">32.2</font></td>
    <td width="92%" bgcolor="#FFFFFF" height="0%"><font size="1">Certification of President
    and CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.</font></td>
  </tr>
</table>

<p><font size="2">(b)&nbsp;Reports on Form 8-K during the quarter covered by this report:</font></p>

<p><font size="2">The Registrant did not filed a Form 8-K during the quarter ended
September 30, 2004.</font></p>

<p align="center"><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">SIGNATURES</font></p>

<p ALIGN="JUSTIFY"><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the date
indicated.</font></p>

<table ALIGN="CENTER" CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
  <tr VALIGN="TOP" BGCOLOR="#66FFFF">
    <td ALIGN="LEFT" WIDTH="47%"><div STYLE="MARGIN-LEFT: 11px; TEXT-INDENT: -10px"><p><font
    FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2"><u>/s/ Ivo Heiden</u><br>
    Ivo Heiden<br>
    &nbsp;&nbsp; <em>President, CFO and Chairman</em><br>
    <i>&nbsp;&nbsp; Dated: May 17, 2005</i></font></p>
    </div></td>
    <td WIDTH="3%"><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td WIDTH="3%"><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td><font FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
</table>
</div>

<p><br clear="all" style="page-break-before:always; mso-break-type:section-break">
</p>
<div>

<p align="center"><font size="2"><a name="Unaudited Interim Financial Statements"><strong>Unaudited
Interim Financial Statements</strong></a> </font><a href="#TABLE OF CONTENTS"><font
size="1">Back to Table of Contents</font></a></p>

<table style="BORDER-BOTTOM: rgb(0,0,0) 1px" height="0%" cellSpacing="0" cellPadding="0"
width="100%" border="0">
  <tr>
    <td vAlign="middle" width="100%" height="0%" colspan="5" align="center" bgcolor="#00FFFF"><font
    size="2"><b>Zaxis International Inc.</b></font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="1">&nbsp;&nbsp; </font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="1">&nbsp;&nbsp; </font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"><font size="1">September 30,
    2004</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"><font size="1">December 31, 2003</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%">&nbsp; </td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="1">(Unaudited)</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"
    style="border-bottom: 1px solid rgb(0,0,0)">&nbsp; </td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><p align="center"><font size="2">ASSETS</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">Current assets:</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">Cash</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"><font size="2">$</font></td>
    <td vAlign="middle" align="right" width="13%" height="0%"><font size="2">0</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"><font size="2">$</font></td>
    <td vAlign="middle" align="right" width="13%" height="0%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%">&nbsp; </td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">Other assets</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"
    style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%" bgcolor="#00FFFF"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    Total Assets</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%" bgcolor="#00FFFF"><font size="2">$</font></td>
    <td vAlign="middle" align="right" width="13%" height="0%" bgcolor="#00FFFF"
    style="border-bottom: 2px double rgb(0,0,0)"><font size="2">0</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%" bgcolor="#00FFFF"
    style="border-bottom: 2px none rgb(0,0,0)"><font size="2">$</font></td>
    <td vAlign="middle" align="right" width="13%" height="0%" bgcolor="#00FFFF"
    style="border-bottom: 2px double rgb(0,0,0)"><font size="2">0</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">&nbsp; </font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><p align="center"><font size="2">LIABILITIES
    AND STOCKHOLDERS' EQUITY</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">Current liabilities:</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"><font size="2">$</font></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
    <td vAlign="middle" align="right" width="2%" height="0%"><font size="2">$</font></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">Accounts payable-trade</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%" bgcolor="#00FFFF"><font size="2">&nbsp;&nbsp;
    Total current liabilities</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%" bgcolor="#00FFFF"></td>
    <td vAlign="middle" align="right" width="13%" height="0%" bgcolor="#00FFFF"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%" bgcolor="#00FFFF"
    style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td vAlign="middle" align="right" width="13%" height="0%" bgcolor="#00FFFF"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">&nbsp; </font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">Stockholders' equity:</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">&nbsp;&nbsp; Common stock, $.01
    par value; 20,000,000 shares authorized; </font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
    16,245,623 issued and outstanding</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"><font size="2">162,456</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"><font size="2">162,456</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">&nbsp;&nbsp; Additional paid in
    capital</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"><font size="2">(162,456)</font></td>
    <td vAlign="middle" align="right" width="2%" height="0%"></td>
    <td vAlign="middle" align="right" width="13%" height="0%"><font size="2">(162,456)</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">&nbsp;&nbsp; Accumulated
    deficit</font></td>
    <td style="BORDER-BOTTOM: rgb(0,0,0) 1px" vAlign="middle" align="right" width="2%"
    height="0%"></td>
    <td style="border-bottom: 1px solid rgb(0,0,0)" vAlign="middle" align="right" width="13%"
    height="0%"><font size="2">0</font></td>
    <td style="border-bottom: 1px none rgb(0,0,0)" vAlign="middle" align="right" width="2%"
    height="0%"></td>
    <td style="border-bottom: 1px solid rgb(0,0,0)" vAlign="middle" align="right" width="13%"
    height="0%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Total
    equity</font></td>
    <td style="BORDER-BOTTOM: rgb(0,0,0) 1px" vAlign="middle" align="right" width="2%"
    height="0%"></td>
    <td style="border-bottom: 1px none rgb(0,0,0)" vAlign="middle" align="right" width="13%"
    height="0%"><font size="2">0</font></td>
    <td style="border-bottom: 1px none rgb(0,0,0)" vAlign="middle" align="right" width="2%"
    height="0%"></td>
    <td style="border-bottom: 1px none rgb(0,0,0)" vAlign="middle" align="right" width="13%"
    height="0%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%"><font size="2">&nbsp; </font></td>
    <td style="BORDER-BOTTOM: rgb(0,0,0) 1px" vAlign="middle" align="right" width="2%"
    height="0%"></td>
    <td style="border-bottom: 1px solid rgb(0,0,0)" vAlign="middle" align="right" width="13%"
    height="0%"></td>
    <td style="border-bottom: 1px none rgb(0,0,0)" vAlign="middle" align="right" width="2%"
    height="0%"></td>
    <td style="border-bottom: 1px solid rgb(0,0,0)" vAlign="middle" align="right" width="13%"
    height="0%"></td>
  </tr>
  <tr>
    <td vAlign="middle" width="70%" height="0%" bgcolor="#00FFFF"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    Total Liabilities and Equity</font></td>
    <td style="BORDER-BOTTOM: rgb(0,0,0) 2px" vAlign="middle" align="right" width="2%"
    height="0%" bgcolor="#00FFFF"><font size="2">$</font></td>
    <td style="border-bottom: 2px double rgb(0,0,0)" vAlign="middle" align="right" width="13%"
    height="0%" bgcolor="#00FFFF"><font size="2">0</font></td>
    <td style="border-bottom: 2px none rgb(0,0,0)" vAlign="middle" align="right" width="2%"
    height="0%" bgcolor="#00FFFF"><font size="2">$</font></td>
    <td style="border-bottom: 2px double rgb(0,0,0)" vAlign="middle" align="right" width="13%"
    height="0%" bgcolor="#00FFFF"><font size="2">0</font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="100%" height="0%" bgcolor="#FFFFFF" colspan="5"><font size="2">&nbsp;
    </font></td>
  </tr>
  <tr>
    <td vAlign="middle" width="100%" height="0%" bgcolor="#FFFFFF" colspan="5"><font size="2">See
    notes to unaudited interim financial statements</font></td>
  </tr>
</table>
</div>

<p><br clear="all" style="page-break-before:always; mso-break-type:section-break">
</p>
<div>

<table height="0%" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="100%" height="0%" colspan="9" align="center" bgcolor="#00FFFF"><font size="2"><b>Zaxis
    International Inc.</b></font></td>
  </tr>
  <tr>
    <td width="100%" height="0%" colspan="9" align="center"><font size="2">Statement of
    Operations</font></td>
  </tr>
  <tr>
    <td width="100%" height="0%" colspan="9"><font size="1">&nbsp; </font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">Three Months</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="1">Three Months</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">Nine Months</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">Nine Months</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">Ended</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="1">Ended</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">Ended</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">Ended</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">September 30, 2004</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="1">September 30, 2003</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">September 30, 2004</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">September 30, 2003</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="1">(Unaudited)</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="1">(Unaudited)</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" align="right" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="1">(Unaudited)</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" align="right" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="1">(Unaudited)</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="1">Successor Company</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="1">Successor Company</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" align="right" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="1">Successor Company</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" align="right" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="1">Successor Company</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%" bgcolor="#00FFFF"><font size="2">Revenue</font></td>
    <td width="2%" height="0%" bgcolor="#00FFFF" align="right"><font size="2">$</font></td>
    <td width="13%" bgcolor="#00FFFF" align="right" height="0%"><font size="2">0</font></td>
    <td width="2%" height="0%" bgcolor="#00FFFF" align="right"><font size="2">$</font></td>
    <td width="13%" height="0%" bgcolor="#00FFFF" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" bgcolor="#00FFFF" align="right"><font size="2">$</font></td>
    <td width="13%" height="0%" bgcolor="#00FFFF" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" bgcolor="#00FFFF" align="right"><font size="2">$</font></td>
    <td width="13%" height="0%" bgcolor="#00FFFF" align="right"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">&nbsp;&nbsp; General and administrative</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">&nbsp;&nbsp; Other</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">Total costs and expenses</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">&nbsp; </font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">Loss from continuing operations before income
    taxes,</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">&nbsp;&nbsp; extraordinary gain and
    discontinued operations</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%" bgcolor="#FFFFFF"><font size="2">Extraordinary gain from
    extinguishment of debt</font></td>
    <td width="2%" height="0%" bgcolor="#FFFFFF" align="right"></td>
    <td width="13%" bgcolor="#FFFFFF" align="right"
    style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font size="2">0</font></td>
    <td width="2%" height="0%" bgcolor="#FFFFFF" align="right"></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%" bgcolor="#FFFFFF"><font size="2">Loss from continuing
    operations</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#FFFFFF"></td>
    <td width="13%" align="right" bgcolor="#FFFFFF" height="0%"></td>
    <td width="2%" height="0%" align="right" bgcolor="#FFFFFF"></td>
    <td width="13%" height="0%" align="right" bgcolor="#FFFFFF"></td>
    <td width="2%" height="0%" align="right" bgcolor="#FFFFFF"></td>
    <td width="13%" height="0%" align="right" bgcolor="#FFFFFF"></td>
    <td width="2%" height="0%" align="right" bgcolor="#FFFFFF"></td>
    <td width="13%" height="0%" align="right" bgcolor="#FFFFFF"></td>
  </tr>
  <tr>
    <td width="40%" height="0%" bgcolor="#00FFFF"><font size="2">before discontinued
    operations</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"></td>
    <td width="13%" align="right" bgcolor="#00FFFF" height="0%"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">&nbsp; </font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">Discontinued operations:</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">&nbsp;&nbsp; Loss from discontinued operation
    (net of taxes)</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">&nbsp;&nbsp; Gain on disposal of assets used in
    </font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
  </tr>
  <tr>
    <td width="40%" height="0%" bgcolor="#FFFFFF"><font size="2">&nbsp;&nbsp; discontinued
    operations</font></td>
    <td width="2%" height="0%" bgcolor="#FFFFFF" align="right"></td>
    <td width="13%" bgcolor="#FFFFFF" align="right"
    style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font size="2">0</font></td>
    <td width="2%" height="0%" bgcolor="#FFFFFF" align="right"></td>
    <td width="13%" height="0%" bgcolor="#FFFFFF" align="right"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td width="2%" height="0%" bgcolor="#FFFFFF" align="right"
    style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" height="0%" bgcolor="#FFFFFF" align="right"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td width="2%" height="0%" bgcolor="#FFFFFF" align="right"
    style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" height="0%" bgcolor="#FFFFFF" align="right"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%" bgcolor="#00FFFF"><font size="2">Income (loss) from
    discontinued operations</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"></td>
    <td width="13%" align="right" bgcolor="#00FFFF" height="0%"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 1px none rgb(0,0,0)"></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">&nbsp; </font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
  </tr>
  <tr>
    <td width="40%" height="0%" bgcolor="#00FFFF"><font size="2">Net income (loss)</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"><font size="2">$</font></td>
    <td width="13%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px double rgb(0,0,0)" height="0%"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"><font size="2">$</font></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px double rgb(0,0,0)"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px none rgb(0,0,0)"><font size="2">$</font></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px double rgb(0,0,0)"><font size="2">0</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px none rgb(0,0,0)"><font size="2">$</font></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px double rgb(0,0,0)"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">&nbsp; </font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">Basic and diluted per share amount:</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">Continuing operations</font></td>
    <td width="2%" height="0%" align="right"><font size="2">$</font></td>
    <td width="13%" align="right" height="0%"><font size="2">0.00</font></td>
    <td width="2%" height="0%" align="right"><font size="2">$</font></td>
    <td width="13%" height="0%" align="right"><font size="2">0.00</font></td>
    <td width="2%" height="0%" align="right"><font size="2">$</font></td>
    <td width="13%" height="0%" align="right"><font size="2">0.00</font></td>
    <td width="2%" height="0%" align="right"><font size="2">$</font></td>
    <td width="13%" height="0%" align="right"><font size="2">0.00</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">Discontinued operations</font></td>
    <td width="2%" height="0%" align="right"><font size="2">$</font></td>
    <td width="13%" align="right" height="0%" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0.00</font></td>
    <td width="2%" height="0%" align="right"><font size="2">$</font></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0.00</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 1px none rgb(0,0,0)"><font
    size="2">$</font></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0.00</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 1px none rgb(0,0,0)"><font
    size="2">$</font></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0.00</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">Basic and diluted net loss</font></td>
    <td width="2%" height="0%" align="right"><font size="2">$</font></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 2px double rgb(0,0,0)"><font
    size="2">0.00</font></td>
    <td width="2%" height="0%" align="right"><font size="2">$</font></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 2px double rgb(0,0,0)"><font
    size="2">0.00</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 2px none rgb(0,0,0)"><font
    size="2">$</font></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 2px double rgb(0,0,0)"><font
    size="2">0.00</font></td>
    <td width="2%" height="0%" align="right" style="border-bottom: 2px none rgb(0,0,0)"><font
    size="2">$</font></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 2px double rgb(0,0,0)"><font
    size="2">0.00</font></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">&nbsp; </font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
  </tr>
  <tr>
    <td width="40%" height="0%"><font size="2">Weighted average shares </font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"></td>
  </tr>
  <tr>
    <td width="40%" height="0%" bgcolor="#00FFFF"><font size="2">outstanding (basic and
    diluted)</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"></td>
    <td width="13%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px double rgb(0,0,0)" height="0%"><font size="2">16,245,623</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px double rgb(0,0,0)"><font size="2">16,245,623</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px none rgb(0,0,0)"></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px double rgb(0,0,0)"><font size="2">16,245,623</font></td>
    <td width="2%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px none rgb(0,0,0)"></td>
    <td width="13%" height="0%" align="right" bgcolor="#00FFFF"
    style="border-bottom: 2px double rgb(0,0,0)"><font size="2">16,245,623</font></td>
  </tr>
  <tr>
    <td width="100%" height="0%" bgcolor="#FFFFFF" colspan="9"><font size="2">&nbsp;&nbsp; </font></td>
  </tr>
  <tr>
    <td width="100%" height="0%" bgcolor="#FFFFFF" colspan="9"><font size="2">See notes to
    unaudited interim financial statements</font></td>
  </tr>
</table>
</div>

<p><br clear="all" style="page-break-before:always; mso-break-type:section-break">
</p>
<div>

<table cellSpacing="0" cellPadding="0" width="100%" border="0" height="0%">
  <tr>
    <td width="101%" height="0" colspan="5" align="center" bgcolor="#00FFFF"><font size="2"><b>Zaxis
    International Inc.</b></font></td>
  </tr>
  <tr>
    <td width="101%" height="0" colspan="5" align="center"><font size="2">Statement of Cash
    Flows</font></td>
  </tr>
  <tr>
    <td width="101%" height="0" colspan="5" align="center"><p align="left"><font size="2">&nbsp;&nbsp;
    &nbsp; </font></td>
  </tr>
  <tr>
    <td width="70%" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">Nine Months</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="1">Nine Months</font></td>
  </tr>
  <tr>
    <td width="70%" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">Ended</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="1">Ended</font></td>
  </tr>
  <tr>
    <td width="70%" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" height="0%"><font size="1">September 30, 2004</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right"><font size="1">September 30, 2003</font></td>
  </tr>
  <tr>
    <td width="70%" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="1">(Unaudited)</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="1">(Unaudited)</font></td>
  </tr>
  <tr>
    <td width="70%" height="0%"></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" align="right" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="1">Successor Company</font></td>
    <td width="2%" height="0%" align="right"></td>
    <td width="13%" height="0%" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="1">Successor Company</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">Cash flows from operating activities:</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td width="70%" height="0" bgcolor="#00FFFF"><font size="2">Net income (loss)</font></td>
    <td width="2%" height="0" align="right" bgcolor="#00FFFF"><font size="2">$</font></td>
    <td width="13%" height="0" align="right" bgcolor="#00FFFF"><font size="2">0</font></td>
    <td align="right" width="2%" height="0" bgcolor="#00FFFF"><font size="2">$</font></td>
    <td align="right" width="13%" height="0%" bgcolor="#00FFFF"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">Adjustments to reconcile net loss to net cash
    used in operating activities:</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp;&nbsp; Depreciation and amortization</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"><font size="2">0</font></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp;&nbsp; Expenses paid by issuance of common
    stock</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"><font size="2">0</font></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">Changes in operating assets and liabilities:</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp;&nbsp; Extraordinary gain from
    extinguishment of debt</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"><font size="2">0</font></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp;&nbsp; Gain/loss from discontinued
    operations</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"><font size="2">0</font></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp;&nbsp; (Increase) decrease in current
    assets</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"><font size="2">0</font></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp;&nbsp; Increase (decrease) in accounts
    payable and accrued expenses</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0" bgcolor="#00FFFF"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Cash
    flows used by operating activities</font></td>
    <td width="2%" height="0" bgcolor="#00FFFF" align="right"></td>
    <td width="13%" height="0" bgcolor="#00FFFF" align="right"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td style="BORDER-BOTTOM: rgb(0,0,0) 1px" align="right" width="2%" height="0"
    bgcolor="#00FFFF"></td>
    <td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" align="right" width="13%" height="0%"
    bgcolor="#00FFFF"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp; </font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td width="70%" height="0" bgcolor="#FFFFFF"><font size="2">Cash flows from investing
    activities:</font></td>
    <td width="2%" height="0" bgcolor="#FFFFFF" align="right"></td>
    <td width="13%" height="0" bgcolor="#FFFFFF" align="right"></td>
    <td align="right" width="2%" height="0" bgcolor="#FFFFFF"></td>
    <td align="right" width="13%" height="0%" bgcolor="#FFFFFF"></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp;&nbsp; Purchase of equipment</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0" bgcolor="#00FFFF"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Cash
    used in investing activities</font></td>
    <td width="2%" height="0" bgcolor="#00FFFF" align="right"></td>
    <td width="13%" height="0" bgcolor="#00FFFF" align="right"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td align="right" width="2%" height="0" bgcolor="#00FFFF"></td>
    <td align="right" width="13%" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"
    bgcolor="#00FFFF"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp;&nbsp; </font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">Cash flows from financing activities:</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td width="70%" height="0" bgcolor="#FFFFFF"><font size="2">&nbsp;&nbsp; Proceeds from
    notes payable</font></td>
    <td width="2%" height="0" bgcolor="#FFFFFF" align="right"></td>
    <td width="13%" height="0" bgcolor="#FFFFFF" align="right"><font size="2">0</font></td>
    <td align="right" width="2%" height="0" bgcolor="#FFFFFF"></td>
    <td align="right" width="13%" height="0%" bgcolor="#FFFFFF"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp;&nbsp; Payments on capital lease
    obligations</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"><font
    size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0" bgcolor="#00FFFF"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Cash
    generated by financing activities</font></td>
    <td width="2%" height="0" bgcolor="#00FFFF" align="right"></td>
    <td width="13%" height="0" bgcolor="#00FFFF" align="right"
    style="border-bottom: 1px solid rgb(0,0,0)"><font size="2">0</font></td>
    <td align="right" width="2%" height="0" bgcolor="#00FFFF"></td>
    <td align="right" width="13%" style="border-bottom: 1px solid rgb(0,0,0)" height="0%"
    bgcolor="#00FFFF"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp; </font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Change in cash</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right"><font size="2">0</font></td>
    <td align="right" width="2%" height="0"></td>
    <td align="right" width="13%" height="0%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0"><font size="2">Cash - beginning of period</font></td>
    <td width="2%" height="0" align="right"></td>
    <td width="13%" height="0" align="right" style="border-bottom: 1px solid rgb(0,0,0)"><font
    size="2">0</font></td>
    <td align="right" width="2%" height="0"></td>
    <td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" align="right" width="13%" height="0%"><font
    size="2">0</font></td>
  </tr>
  <tr>
    <td width="70%" height="0" bgcolor="#00FFFF"><font size="2">Cash - end of period</font></td>
    <td width="2%" height="0" bgcolor="#00FFFF" align="right"><font size="2">$</font></td>
    <td width="13%" height="0" bgcolor="#00FFFF" align="right"
    style="border-bottom: 2px double rgb(0,0,0)"><font size="2">0</font></td>
    <td style="BORDER-BOTTOM: rgb(0,0,0) 2px" align="right" width="2%" height="0"
    bgcolor="#00FFFF"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: rgb(0,0,0) 2px double" align="right" width="13%" height="0%"
    bgcolor="#00FFFF"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="100%" height="0" bgcolor="#FFFFFF" colspan="5"><font size="2">&nbsp; </font></td>
  </tr>
  <tr>
    <td width="100%" height="0" bgcolor="#FFFFFF" colspan="5"><font size="2">See notes to
    unaudited interim financial statements</font></td>
  </tr>
</table>
</div>

<p><br clear="all" style="page-break-before:always; mso-break-type:section-break">
</p>
<div><font size="2"><b>

<p ALIGN="center">ZAXIS INTERNATIONAL INC.<br>
</b>Notes to Unaudited Interim Financial Statements</p>
</font><font FACE="Courier New" SIZE="2">

<p ALIGN="JUSTIFY"></font><font size="2"><b>1. Basis of Presentation</b></font></p>

<p ALIGN="JUSTIFY"><font size="2">The consolidated financial statements include the
accounts of Zaxis International Inc., a Delaware corporation.</font></p>

<p ALIGN="JUSTIFY"><font size="2">The Financial Statements presented herein have been
prepared by us in accordance with the accounting policies described in our December 31,
2003 Annual Report on Form 10-KSB and should be read in conjunction with the Notes to
Consolidated Financial Statements which appear in that report.</font></p>

<p ALIGN="JUSTIFY"><font size="2">The preparation of these financial statements in
conformity with accounting principles generally accepted in the United States requires us
to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities. On an
on going basis, we evaluate our estimates, including those related intangible assets,
income taxes, insurance obligations and contingencies and litigation. We base our
estimates on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily
apparent from other resources. Actual results may differ from these estimates under
different assumptions or conditions.</font></p>

<p ALIGN="JUSTIFY"><font size="2">In the opinion of management, the information furnished
in this Form 10-QSB reflects all adjustments necessary for a fair statement of the
financial position and results of operations and cash flows as of and for the three month
periods ended September 30, 2004 and 2003. All such adjustments are of a normal recurring
nature. The Consolidated Financial Statements have been prepared in accordance with the
instructions to Form 10-QSB and therefore do not include some information and notes
necessary to conform with annual reporting requirements</font></p>

<p ALIGN="JUSTIFY"><font size="2"><b>&quot;Fresh Start&quot; Accounting: </b>On November 6,
2002 all assets were transferred to the chapter 7 trustee in settlement of all outstanding
corporate obligations. We adopted &quot;fresh-start&quot; accounting as of November 7,
2002 in accordance with procedures specified by AICPA Statement of Position
(&quot;SOP&quot;) No. 90-7, &quot;Financial Reporting by Entities in Reorganization under
the Bankruptcy Code.&quot;</font></p>

<p ALIGN="JUSTIFY"><font size="2">All results for periods subsequent to November 7, 2002
are referred to as those of the &quot;Successor Company&quot;.</font></p>

<p ALIGN="JUSTIFY"><font size="2">In accordance with SOP No. 90-7, the reorganized value
of the Company was allocated to the Company's assets based on procedures specified by SFAS
No. 141, &quot;Business Combinations&quot;. Each liability existing at the plan sale date,
other than deferred taxes, was stated at the present value of the amounts to be paid at
appropriate market rates. It was determined that the Company's reorganization value
computed immediately before November 6, 2002 was $0. We adopted &quot;fresh-start&quot;
accounting because holders of existing voting shares immediately before filing and
confirmation of the sale received less than 50% of the voting shares of the emerging
entity and its reorganization value is less than its post-petition liabilities and allowed
claims. </font></p>
<b>

<p ALIGN="JUSTIFY"><font size="2">2. Bankruptcy Proceedings</font></b></p>

<p ALIGN="JUSTIFY"><font size="2">On November 6, 2002, the Registrant filed a voluntary
Chapter 7 petition under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court Northern
District of Ohio (case no. 02-55160). On October 13, 2004, the Bankruptcy Court approved
an Order confirming the sale of debtor's interest in personal property to Park Avenue
Group Inc. The material terms of the transaction confirmed by Bankruptcy Court authorized
Park Avenue Group to appoint new members to the Registrant's board of directors and
authorized those newly-appointed board of directors be to:</font></p>

<ul>
  <li><font size="2">amend the Article of Incorporation to increase the number of authorized
    shares to 100,000,000 shares;</font></li>
  <li><font size="2">amend the Article of Incorporation to change the par value of our common
    and preferred stock to $0.0001;</font></li>
  <li><font size="2">issue up to 30,000,000 shares of common stock, par value $0.0001 to the
    new management which management was appointed by the newly-constituted board of directors;</font></li>
  <li><font size="2">implement a reverse split of the issued and outstanding shares in a ratio
    to be determined by the board of directors;</font></li>
  <li><font size="2">cancel and extinguish all common share conversion rights of any kind,
    including without limitation, warrants, options, convertible bonds, other convertible debt
    instruments and convertible preferred stock; and</font></li>
  <li><font size="2">cancel and extinguish all preferred shares of every series and
    accompanying conversion rights of any kind.</font></li>
</ul>

<p ALIGN="JUSTIFY"><font size="2">The accounts of the former subsidiaries were not
included in the sale and have not been carried forward. </font></p>

<p ALIGN="JUSTIFY"><b><font size="2">Change in Control</font></b></p>

<p ALIGN="JUSTIFY"><font size="2">In connection with the Order confirming the sale of
debtor's interest in certain intangible personal property to Park Avenue Group Inc.
approved by the U.S. Bankruptcy Court Northern District of Ohio on October 13, 2004, the
Court authorized a change in control pursuant to which Ivo Heiden became our sole director
on October 13, 2004, and was appointed president by the new board of directors on October
19, 2004. The Court order further provided that the sale was free and clear of liens,
claims and interests of others and that the sale was free and clear of any and all other
real or personal property interests, including any interests in Zaxis's subsidiaries. The
Bankruptcy Court Order provided that the existing officers and directors were deemed
removed from office and also authorized the appointment of new members to the board of
directors. </font></p>

<p ALIGN="JUSTIFY"><font size="2">On November 30, 2004 the board of directors approved and
authorized an amendment of our Article of Incorporation to establish a series B
convertible preferred stock, par value $0.0001 (&quot;Series B Convertible Preferred
Stock&quot;). The holders of the Series B Convertible Preferred Stock shall be entitled to
20 (twenty) votes on all matters submitted to a vote of the stockholders of the
Registrant. The holders of Series B Convertible Preferred Stock shall have the right to
convert each share into 20 (twenty) shares of common stock upon their written request at
any time. On December 7, 2004, the board of directors authorized 2,000,000 shares of
Series B Convertible Preferred Stock and issued 840,000 Series B Convertible Preferred
Stock that resulted in a change in control.</font></p>
<b>

<p ALIGN="JUSTIFY"><font size="2">3. Earnings/Loss Per Share</font></b></p>

<p ALIGN="JUSTIFY"><font size="2">Basic earnings per share is computed by dividing income
available to common shareholders (the numerator) by the weighted-average number of common
shares outstanding (the denominator) for the period. Diluted earnings per share assume
that any dilutive convertible securities outstanding were converted, with related
preferred stock dividend requirements and outstanding common shares adjusted accordingly.
It also assumes that outstanding common shares were increased by shares issuable upon
exercise of those stock options for which market price exceeds the exercise price, less
shares which could have been purchased by us with the related proceeds. In periods of
losses, diluted loss per share is computed on the same basis as basic loss per share as
the inclusion of any other potential shares outstanding would be anti-dilutive.</font></p>
<b>

<p ALIGN="JUSTIFY"><font size="2">4. New Accounting Standards</font></b></p>

<p ALIGN="JUSTIFY"><font size="2">In November 2003, FASB issued FASB Staff Position No.
150-3 (&quot;FSS 150-3&quot;) which deferred the effective dates for applying certain
provisions of SFAS 150 related to mandatorily redeemable financial instruments of certain
non-public entities and certain mandatorily redeemable non-controlling interests for
public and non-public companies. For public entities, SFAS 150 is effective for
mandatorily redeemable financial instruments entered into or modified after May 31, 2003
and is effective for all other financial instruments as of the first interim period
beginning after June 15, 2003. For mandatorily redeemable non-controlling interests that
would not have to be classified as liabilities by a subsidiary under the exception in
paragraph 9 of SFAS 150, but would be classified as liabilities by the parent, the
classification and measurement provisions of SFAS 150 are deferred indefinitely. The
measurement provisions of SFAS 150 are also deferred indefinitely for other mandatorily
redeemable non-controlling interests that were issued before November 4, 2003. For those
instruments, the measurement guidance for redeemable shares and non-controlling interests
in other literature shall apply during the deferral period. The Company adopted the
provisions of SFAS 150 effective June 30, 2003 and such adoption did not have a material
impact on its financial statements.</font></p>

<p ALIGN="JUSTIFY"><font size="2">In December 2003, the FASB released a revised version of
Interpretation No. 46, &quot;Consolidation of Variable Interest Entities&quot; (&quot;FIN
46&quot;) called FIN 46R, which clarifies certain aspects of FIN 46 and provides certain
entities with exemptions from requirements of FIN 46. FIN 46R only slightly modified the
variable interest model from that contained in FIN 46 and did change guidance in many
other areas. We adopted FIN 46 during 2003. FIN 46R was adopted and implemented in the
first quarter of fiscal 2004 and had no impact on the Company&#146;s financial position or
results of operations.</font></p>

<p><font size="2">In September&nbsp;2004, the EITF reached a consensus regarding Issue
No.&nbsp;04-1, &quot;Accounting for Preexisting Relationships Between the Parties to a
Business Combination&quot; (&quot;EITF 04-1&quot;). EITF 04-1 requires an acquirer in a
business combination to evaluate any preexisting relationship with the acquiree to
determine if the business combination in effect contains a settlement of the preexisting
relationship. A business combination between parties with a preexisting relationship
should be viewed as a multiple element transaction. EITF 04-1 is effective for business
combinations after October&nbsp;13, 2004, but requires goodwill resulting from prior
business combinations involving parties with a preexisting relationship to be tested for
impairment by applying the guidance in the consensus. We will apply EITF 04-1 to
acquisitions subsequent to the effective date and in our future goodwill impairment
testing.</font></p>
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<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>2
<FILENAME>exh31_1.htm
<TEXT>
<html>

<head>
<title>Exhibit 31.1</title>
</head>

<body>

<h3 align="center"><font size="2">CERTIFICATIONS</font></h3>

<p><font size="2">I, Ivo Heiden, certify that:<br>
</font></p>

<blockquote>
  <p><font size="2">(1) I have reviewed this Quarterly Report of Zaxis International Inc.; </font></p>
  <p><font size="2">(2) Based on my knowledge, this report does not contain any untrue
  statement of a material fact or omit to state a material fact necessary to make the
  statements made, in light of the circumstances under which such statements were made, not
  misleading with respect to the period covered by this report; </font></p>
  <p><font size="2">(3) Based on my knowledge, the financial statements, and other financial
  information included in this report, fairly present in all material respects the financial
  condition, results of operations and cash flows of the small business issuer as of, and
  for, the periods presented in this report; </font></p>
  <p><font size="2">(4) I am responsible for establishing and maintaining disclosure
  controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
  internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
  15d-15(f)) for the small business issuer and have: </font></p>
  <blockquote>
    <p><font size="2">(a) Designed such disclosure controls and procedures, or caused such
    disclosure controls and procedures to be designed under our supervision, to ensure that
    material information relating to the small business issuer, including its consolidated
    subsidiaries, is made known to us by others within those entities, particularly during the
    period in which this report is being prepared; </font></p>
    <p><font size="2">(b) Designed such internal control over financial reporting, or caused
    such internal control over financial reporting to be designed under our supervision, to
    provide reasonable assurance regarding the reliability of financial reporting and the
    preparation of financial statements for external purposes in accordance with generally
    accepted accounting principles; </font></p>
    <p><font size="2">(c) Evaluated the effectiveness of the small business issuer's
    disclosure controls and procedures and presented in this report our conclusions about the
    effectiveness of the disclosure controls and procedures, as of the end of the period
    covered by this report based on such evaluation; and </font></p>
    <p><font size="2">(d) Disclosed in this report any change in the small business issuer's
    internal control over financial reporting that occurred during the small business issuer's
    most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case
    of an Quarterly report) that has materially affected, or is reasonably likely to
    materially affect, the small business issuer's internal control over financial reporting;
    and </font></p>
  </blockquote>
  <p><font size="2">(5) I have disclosed, based on our most recent evaluation of internal
  control over financial reporting, to the small business issuer's auditors and the audit
  committee of the small business issuer's board of directors (or persons performing the
  equivalent functions): </font></p>
  <blockquote>
    <p><font size="2">(a) All significant deficiencies and material weaknesses in the design
    or operation of internal control over financial reporting which are reasonably likely to
    adversely affect the small business issuer's ability to record, process, summarize and
    report financial information; and </font></p>
    <p><font size="2">(b) Any fraud, whether or not material, that involves management or
    other employees who have a significant role in the small business issuer's internal
    control over financial reporting. </font></p>
  </blockquote>
</blockquote>

<p><font size="2">Date: May 17, 2005 <br>
</font></p>

<p><font size="2"><u>/s/ Ivo Heiden<br>
</u>[Signature] <br>
President, CFO and Chairman<br>
[Title] </font></p>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>3
<FILENAME>exh32_1.htm
<TEXT>
<html>

<head>
<title>Exhibit 32.1</title>
</head>

<body>

<p align="left"><font face="TIMES NEW ROMAN, TIMES, SERIF" size="2">Exhibit 32.1</font></p>

<p align="center"><font face="TIMES NEW ROMAN, TIMES, SERIF" size="2">CERTIFICATION
PURSUANT TO<br>
18 U.S.C. SECTION 1350,<br>
AS ADOPTED PURSUANT TO SECTION 906<br>
OF THE SARBANES-OXLEY ACT OF 2002</font></p>

<p style="text-align: justify"><font face="TIMES NEW ROMAN, TIMES, SERIF" size="2">In
connection with the Quarterly Report of Zaxis International Inc. (the &#147;Company&#148;)
on Form 10-QSB for the period ended September 30, 2004 (the &#147;Report&#148;), as filed
with the Securities and Exchange Commission on the date hereof, I, Ivo Heiden, President,
CFO and Chairman of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:</font></p>

<p style="text-align: justify"><font face="TIMES NEW ROMAN, TIMES, SERIF" size="2">1. The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and</font></p>

<p style="text-align: justify"><font face="TIMES NEW ROMAN, TIMES, SERIF" size="2">2. The
information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.</font></p>

<p>&nbsp;</p>

<p><font face="TIMES NEW ROMAN, TIMES, SERIF" size="2">/s/ Ivo Heiden</font></p>

<p align="left"><font face="TIMES NEW ROMAN, TIMES, SERIF" size="2">Ivo Heiden <br>
President, CFO and Chairman<br>
Dated: May 17, 2005</font></p>

<p><font face="TIMES NEW ROMAN, TIMES, SERIF" size="2">A signed original of this written
statement required by Section 906 has been provided to Zaxis International Inc. and will
be retained by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.</font></p>
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