United
States
Securities
and Exchange Commission
Washington,
D. C. 20549
FORM
10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the
quarterly period ended March 31, 2008
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the quarterly period ended March 31, 2008
Commission
File No. 000-53014
Z-II,
INC.
(Exact
Name of Registrant as specified in its charter)
Delaware
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26-0612552
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(State
or other jurisdiction of
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(IRS
Employer
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incorporation
or organization)
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Identification
No.)
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244
East
32nd St. Suite B, New York, NY 10016
(Address
of principal executive offices)
(212)
576-1515
(Registrant's
telephone number, including area code)
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 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. Yesx
Noo
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check
one):
Large
Accelerated Filer o
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Accelerated Filer o
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Non-Accelerated Filer o (Do not check if a smaller reporting company)
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Smaller Reporting Company x
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes x
No o
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
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Outstanding at May 12, 2008
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CLASS
A
Common
stock $.01 Par Value
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0
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CLASS
B
Common
stock $.01 Par Value
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40,000
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Part
I
- FINANCIAL
INFORMATION
Item
1
- Financial
Statements
Z-II,
Inc.
A
Development Stage Company
Balance
Sheets
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March
31,
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2008
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June
30,
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(Unaudited)
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2007
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ASSETS
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Current
Assets
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Cash
and Cash Equivalents
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$
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560,041
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-
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TOTAL
CURRENT ASSETS, representing total assets
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$
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560,041
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$
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-
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LIABILITIES
& EQUITY
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Liabilities
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Current
Liabilities
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Amounts
Due for Expenses Paid on Behalf of the Company by
Officer/Stockholder
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$
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8,988
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$
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13,534
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Interest
Payable on Notes Payable to Officers/Stockholders
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15,611
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-
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Total
Current Liabilities
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24,599
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13,534
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Long
Term Liabilities
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Notes
payable to officers/stockholders
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580,000
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-
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Total
Liabilities
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604,599
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13,534
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Stockholders'
Deficit
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Preferred
Stock $.01 par value
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10,000,000
shares authorized, none
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issued
and outstanding
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-
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-
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Class
A Common Stock $.01 par value
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45,000,000
shares authorized, none
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issued
and outstanding
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-
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-
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Class
B Common Stock par value $.01
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5,000,000
shares authorized,
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40,000
shares issued and outstanding
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400
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400
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Additional
Paid-In Capital
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19,600
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19,600
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Stock
Subcriptions Receivable
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-
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(20,000
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)
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Deficit
accumulated in the development stage
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(64,558
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)
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(13,534
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)
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Total
Stockholders' Deficit
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(44,558
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)
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(13,534
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)
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TOTAL
LIABILITIES & STOCKHOLDERS' DEFICIT
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$
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560,041
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$
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-
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The
accompanying notes are an integral part of
these
financial statements.
Z-II,
Inc.
A
Development Stage Company
Statements
of Operations
(Unaudited)
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Cumulative
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Three Months
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Nine Months
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March 20, 2007
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March 20, 2007
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Ended
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Ended
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(Inception) to
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(Inception) to
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March 31, 2008
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March 31, 2008
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June 30, 2007
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March 31, 2008
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General
and Administrative Expenses
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Professional
Fees
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$
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20,271
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$
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38,919
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$
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13,534
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$
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52,453
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General
and Administrative Expense
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92
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92
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-
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92
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Loss
from Operations
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(20,363
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)
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(39,011
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)
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(13,534
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)
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(52,545
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)
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Other
Income (Expense)
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Interest
Income
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8,616
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46,141
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46,141
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Interest
Expense
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(15,611
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)
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(57,136
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)
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-
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(57,136
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)
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Total
Other Income (Expense)
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(6,995
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)
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(10,995
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)
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-
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(10,995
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)
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Loss
before provision for income taxes
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(27,358
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)
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(50,006
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)
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(13,534
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)
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(63,540
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)
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Provision
for income taxes
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(1,018
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)
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(1,018
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)
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-
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(1,018
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)
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Net
Loss
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$
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(28,376
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)
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$
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(51,024
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)
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$
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(13,534
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)
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$
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(64,558
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)
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Primary
and fully diluted earnings per share
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Weighted
average shares outstanding
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40,000
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35,200
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-
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25,608
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Loss
per share
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$
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(0.71
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)
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$
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(1.45
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)
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$
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-
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$
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(2.52
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)
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The
accompanying notes are an integral part of these financial
statements.
Z-II,
Inc.
A
Development Stage Company
Statements
of Cash Flows (Unaudited)
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Cumulative
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Nine Months
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March 20, 2007
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March 20, 2007
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Ended
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(Inception) to
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(Inception) to
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March 31, 2008
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June 30, 2007
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March 31, 2008
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OPERATING
ACTIVITIES
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Net
Loss
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$
|
(51,024
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)
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$
|
(13,534
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)
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$
|
(64,558
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)
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Adjustments
to reconcile Net Loss to net cash provided by operations:
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Increases
in (Reimbursement for) Expenses Paid on Behalf of the Company by
Officer/Stockholder
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(4,546
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)
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13,534
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8,988
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Net
cash used by Operating Activities
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(55,570
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)
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-
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(55,570
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)
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FINANCING
ACTIVITIES
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Proceeds
received from Issuance of Notes
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Payable
to Officers/Stockholders
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1,980,000
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-
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1,980,000
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Repayments
of Notes Payable to Officers/Stockholders
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(1,400,000
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)
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-
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(1,400,000
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)
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Increase
in interest payable on Notes
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Payable
to Officers/Stockholders
|
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|
15,611
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-
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15,611
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Proceeds
received on Issuance of Class B Common Stock to Founders
|
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20,000
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-
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20,000
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Net
cash provided by Financing Activities
|
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|
615,611
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|
-
|
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615,611
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|
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|
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|
Net
increase in cash & cash equivalents
|
|
|
560,041
|
|
|
-
|
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560,041
|
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|
|
|
|
|
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Cash
and cash equivalents at beginning of period
|
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|
-
|
|
|
-
|
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|
-
|
|
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|
|
|
|
|
|
|
|
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|
Cash
and cash equivalents at end of period
|
|
$
|
560,041
|
|
$
|
-
|
|
$
|
560,041
|
|
The
accompanying notes are an integral part of these financial
statements.
ZII,
INC.
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
Nine
Months Ended March 31, 2008
Note
1. Organization
and Basis of Presentation:
Z-II,
Inc. (the “Company”) was incorporated in the State of Delaware on March 20,
2007. The Company's fiscal year ends in June. Since inception it has been
engaged in organizational efforts and securing initial financing. The Company
was formed as a vehicle to pursue one or more business combination transactions,
such as mergers or acquisitions (of assets or stock) of operating businesses
and
to date, has made no efforts to identify any possible business combination.
As a
result, it has not conducted negotiations or entered into a letter of intent
concerning any business combination transaction. The Company's business purpose
is to seek business combination transactions with one or more existing
companies.
Based
on
its proposed business activities, Z-II is a “blank check” company. The
Securities and Exchange Commission (the “SEC”) defines those companies as “any
development stage company that is issuing a penny stock, within the meaning
of
Section 3 (a)(51) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and that has no specific business plan or purpose, or has
indicated that its business plan is to merge with an unidentified company
or
companies.” Under SEC Rule 12b-2 under the Securities Act of 1933, as amended
(the “Securities Act”), the Company also qualifies as a “shell company,” because
it has no or nominal assets (other than cash) and no or nominal operations.
Many
states have enacted statutes, rules and regulations limiting the sale of
securities of “blank check” companies in their respective jurisdictions.
Management does not intend to undertake any efforts to cause a market to
develop
in the Company's securities, either debt or equity, until it has successfully
concluded a business combination. The Company intends to comply with the
periodic reporting requirements of the Exchange Act for so long as it is
subject
to those requirements.
The
Company was organized as a vehicle to investigate and, if such investigation
warrants, acquire one or more operating companies or businesses whose owners
are
seeking liquidity and the potential for capital appreciation. Its principal
business objective for the next 12 months and beyond such time will be to
achieve long-term growth potential through one or more combinations with
operating businesses rather than immediate, short-term earnings. The Company
will not restrict its search for potential candidates to companies engaged
in
any specific business, industry or geographical location and, thus, may acquire
any type of business.
The
accompanying interim financial statements have been prepared by the Company
without audit, in accordance with the instructions for Form 10-Q pursuant
to the
rules and regulations of the Securities and Exchange Commission (“SEC”) and
therefore do not include all information and notes normally provided in the
annual financial statements and should be read in conjunction with the audited
financial statements and the notes thereto included in Form 10 Registration
of
Securities as amended filed with the SEC on March 14, 2008.
In
the
opinion of management, the accompanying unaudited financial statements contain
all adjustments (which consist of normal and recurring adjustments) necessary
for a fair presentation of the financial statements. The results of operations
for the three months ended March 31, 2008 and from inception through March
31,
2008 are not necessarily indicative of the results to be expected for the
full
year.
Liquidity
At
March
31, 2008 the Company had $560,041 in cash and cash equivalents and total
liabilities of $604,599, of which $24,599 was current and the balance, $580,000
consisted of long term notes payable. It had a working capital surplus of
$535,442.
Until
such time as it acquires an operating company, management believes its liquidity
will provide sufficient working capital for its needs. If and when an operating
company is acquired, the Company's liquidity needs will be re-evaluated and
it
may seek to supplement its primary capital, as necessary, with one or more
lines
of credit or other debt accommodations with one or more financial institutions
or lenders. At March 31, 2008, other than loans from its founders (see Note
5)
the Company had no such lines of credit or other outstanding debt obligations.
Note
2. Summary
of Significant Accounting Policies
Development
Stage Entity Status
Currently,
the Company earns revenue only from the investment of its cash and cash
equivalent assets. It has no operating revenues.
Use
of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America generally requires management
to make estimates and assumptions that affect the reported amounts of assets
and
liabilities and disclosures of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenue and expenses
during
the reporting period. Actual results could differ from those estimates.
If
and
when one or more operating companies is acquired, management will be required
to
make estimates and such estimates may include, but are not limited to, revenue
recognition on fixed fee contracts, allowance for doubtful accounts, impairment
of goodwill and intangibles, depreciation and amortization, the fair value
of
equity securities underlying stock-based compensation, the fair value of
acquired assets, purchase price allocations and the realize-ability of deferred
tax assets and liabilities.
Fair
Value of Financial Instruments
The
Company's short-term financial instruments as of March 31, 2008 consisted
of
cash and cash equivalents, interest payable on notes payable to
officers/stockholders and amounts due to officer/stockholder for expenses
paid
on behalf of the Company. The carrying amounts of all short-term financial
instruments at March 31, 2008 were their actual values.
The
Company's long-term financial instruments as of March 31, 2008 consisted
of long
term notes payable (see Note 5). The carrying amounts of all long-term financial
instruments at March 31, 2008 were equivalent to the face amount of such
instruments.
Revenue
Recognition
Currently,
the Company earns revenue only from the investment of its cash and cash
equivalent assets. It has no operating revenues. For the period March 20,
2007
(inception) through March 31, 2008, the Company had no other revenues.
Cash
Equivalents
The
Company considers all highly liquid investments with maturities of three
months
or less when purchased to be cash equivalents.
Income
Taxes
The
Company used the asset and liability method to calculate deferred tax assets
and
liabilities. Deferred taxes are recognized based on the differences between
financial reporting and income tax bases of assets and liabilities using
enacted
income tax rates. Deferred tax assets and liabilities are measured using
enacted
tax rates in effect for the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that
includes the enactment date.
Loss
Per
Share
Basic
(loss) per share excludes dilution and is computed by dividing net (loss)
available to common shareholders by the weighted average number of shares
of
Common Stock outstanding for the period.
Diluted
earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding
for the
period, adjusted to reflect potentially dilutive securities. During the period
from March 20, 2007 (Inception) to March 31, 2008, there were no potentially
dilutive securities.
Note
3.
Recently
Issued Accounting Pronouncements:
In
December 2007, the Financial Accounting Standards Board (“FASB”) simultaneously
issued SFAS No. 141R, “Business Combinations (2007 Amendment),” and SFAS 160,
Noncontrolling Interests in Consolidated Financial Statements, an Amendment
of
ARB 51.” Both standards update United States guidance on accounting for
“noncontrolling interests,” sometimes referred to as minority interests, which
interests represent a portion of a subsidiary not attributable, directly
or
indirectly, to a parent. FASB and the International Accounting Standards
Board
(“IASB”) have been working together to promote international convergence of
accounting standards. Prior to promulgation of these new standards there
were
specific areas in accounting for business acquisitions in which conversion
was
not achieved. The objective of both standards is to improve the relevance,
comparability, and transparency of the financial information that a reporting
entity provides in “business combinations” and consolidated financial statements
by establishing accounting and reporting standards. In business combinations
it
is accomplished by establishing principles and requirements concerning how
an
“acquirer” recognizes and measures identifiable assets acquired, liabilities
assumed, and noncontrolling interest in the acquiree, as well as goodwill
acquired in the combination or gain from a bargain purchase; and determines
information to be disclosed to enable users to evaluate the nature and effects
of business combinations. In consolidated financial statements the standards
require: identification of ownership interests held in subsidiaries by parties
other than the parent be clearly identified, labeled and presented in
consolidated financial position within equity (rather than “mezzanine” between
liabilities and equity) separately from amounts attributed to the parent,
with
net income attributable to the parent and to the minority interest clearly
identified and presented on the face of consolidated statements of income.
The
standards also provide guidance in situations where the parent’s ownership
interest in a subsidiary changes while the parent retains its controlling
financial interest. The standard also provides guidance on recording a gain
or
loss based on fair value in situations involving deconsolidation of a
subsidiary. Entities must provide sufficient disclosures that distinguish
between interests of the parent and that of the noncontrolling interest.
Both
standards are effective for fiscal years and interims beginning on or after
December 15, 2008 (that is January 1, 2009) for entities with calendar years.
Earlier adoption is prohibited. The standards shall be applied prospectively
as
of the beginning of the fiscal year in which initially applied, except for
the
presentation and disclosure requirements, which shall be applied retrospectively
for all periods presented. The Company does not anticipate that the adoption
of
SFAS No. 141R and No. 160 will have an impact on the Company's overall results
of operations or financial position, unless the Company makes a business
acquisition in which there is a noncontrolling interest.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 clarifies the
definition of fair value, establishes a framework for measuring fair value,
and
expands on required disclosures about fair value measurement. SFAS 157 will
be
effective for the Company on January 1, 2008 and will be applied prospectively.
The Company is currently assessing whether adoption of SFAS 157 will have
an
impact on our financial statements but does not believe the adoption of SFAS
157
will have a material impact on the Company’s financial position, cash flows, or
results of operations.
In
June,
2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, an Interpretation of FASB Statement No. 109, Accounting for
Income
Taxes (FIN48), to create a single model to address accounting for uncertainty
in
tax positions. FIN 48 clarifies the accounting for income taxes by prescribing
a
minimum recognition threshold a tax position is required to meet before being
recognized in the financial statements. FIN 48 also provides guidance on
derecognition, measurement, classification, interest, and penalties, accounting
in interim periods, disclosure and transition. The Company adopted FIN 48
as of
January 1, 2007 and the adoption did not have a material impact to the Company's
consolidated financial statements or effective tax rate and did not result
in
any unrecognized tax benefits.
Interest
costs and penalties related to income taxes are classified as interest expense
and general and administrative costs, respectively, in the Company's
consolidated financial statements. For the period from March 20, 2007
(inception) to March 31, 2008, the Company did not recognize any interest
or
penalty expense related to income taxes. The Company is currently subject
to a
three year statue of limitations by major tax jurisdictions. The Company
expects
to file income tax returns in the U.S. federal jurisdiction, New York State
and
New York City.
Note
4. Property
and Equipment
As
of
March 31, 2008, the Company had no depreciable property and
equipment.
Note
5. Notes
Payable to Officers/Stockholders
On
August
2, 2007 the Company borrowed $1,980,000 from two stockholders in the amounts
of
$1,485,000 and $495,000, respectively. In connection with this borrowing,
the
Company issued notes representing unsecured obligations of the Company. The
notes bear interest at 5 per cent per annum, payable quarterly beginning
September 30, 2007, with principal due at maturity on December 31, 2012.
On
February 12, 2008, $1,050,000 was repaid to Further Lane Trust, LLC and $350,000
was repaid to Jack M. Rapport for an aggregate $1,400,000. The repayment
of the
loans was effectuated by a direct transfer of funds to The Birkhill Group,
LLC,
an entity substantially controlled directly or indirectly by David M. McCarthy,
Further Lane Trust, LLC and Jack M. Rapport. As of March 31, 2008 $15,611
was
due an payable on the two notes. This interest was subsequently paid to the
note
holders on April 8, 2008. Interest expense incurred on the notes amounted
to
$15,611 and $57,136 for the three months and nine months ended March 31,
2008,
respectively, and $57,136 for the period from inception (March 20, 2007)
to
March 31, 2008.
Note
6. Common
Stock
The
total
number of shares of stock which the Corporation has authority to issue is
60,000,000 shares, divided into 45,000,000 shares of Class A Common Stock,
par
value $0.01 per share, 5,000,000 shares of Class B Common Stock, par value
$0.01
per share, and 10,000,000 shares of Preferred Stock, par value $0.01 per
share.
The powers, designations, preferences and relative, participating, optional
or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
are as described in the Company's Charter. In particular, Holders of Class
B
Common Stock have the right to convert their shares into Class A Common Stock.
The Company’s Certificate of Incorporation also contains provision for the
maintenance of the relative relationship between Class A and Class B holdings
in
the event of issuance of options or warrants, mergers or other such
transactions. Holders of Class A Common Stock shall be entitled to one (1)
vote
per share, while holders of Class B Common Stock shall be entitled to ten
(10)
votes per share. Transfers of Class B Common Stock are restricted to certain
specified transferees.
On
August
2, 2007 the Company issued 40,000 shares of Class B Common Stock to the two
shareholders described in the preceding paragraph. The aggregate sum paid
for
these shares was $20,000 as shown in the following table.
|
|
Further Lane
Trust, LLC
|
|
Jack M. Rapport
|
|
Total
|
|
Class B Common Stock, $.01 par value
|
|
$
|
300
|
|
$
|
100
|
|
$
|
400
|
|
Additional
Paid-in Capital
|
|
$
|
14,700
|
|
$
|
4,900
|
|
$
|
19,600
|
|
Total
|
|
$
|
15,000
|
|
$
|
5,000
|
|
$
|
20,000
|
|
At
March
31, 2008, the 40,000 shares continue to be the only shares outstanding.
Note
7. Employee
Benefit Plans
As
of
March 31, 2008 the Company had no employee benefit plans.
Note
8. Commitments
and Contingencies
The
Company may, from time to time, enter into agreements that contain
indemnification provisions in the normal course of business for which the
risks
are considered nominal and impracticable to estimate. Historically, the Company
has not incurred any significant costs related to performance under these
indemnities.
Note
9. Credit
Risk
The
only
financial instruments that potentially subject the Company to credit risk
are
cash and cash equivalents. The Company places its excess cash in money-market
instruments with institutions of high credit quality and therefore we believe
we
have minimal credit risk. However, these balances may, from time to time,
exceed
the Federal depository insurance coverage. Cash and cash equivalents held
in one
bank, JPMorgan Chase Bank, exceed federally insured limits by approximately
$404,091 at March 31, 2008.
Note
10. Income
Taxes
The
Company incurred New York State and New York City income taxes of $1,018
for the
three month and nine month ended periods ended March 31, 2008, as well as
the
period from inception (March 20, 2007) to March 31, 2008. As of March 31,
2008
no amounts have been accrued for taxes that will be payable on June 30, 2008
with the state and local returns due by the Company for the year ended June
30,
2008..
Note
11. Other
Comments
The
Company presently occupies office space provided by a relative of the Chief
Executive Officer of the Company on a rent free basis.
Item
2 -
Management's Discussion and Analysis and Plan of Operation
This
report contains certain forward-looking statements and information relating
to
Z-II, Inc. ("Z-II" or the "Company") that are based on assumptions made by
management and on information currently available. When used in this report,
the
words "anticipate", "believe", "estimate", "expect", "intend", "plan" and
similar expressions, as they relate to the Company or its management, are
intended to identify forward-looking statements. These statements reflect
management's current view of the Company concerning future events and are
subject to certain risks, uncertainties and assumptions, including among
many
others: a general economic downturn; a downturn in the securities markets;
federal or state laws or regulations having an adverse effect on the Company;
and other risks and uncertainties including those identified in the “Risk
Factors” section of the Company’s, Registration Statement on Form 10/A dated
March 14, 2008. Should any of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described in this report as anticipated, estimated
or
expected.
The
following discussion should be read in conjunction with Z-II's audited Financial
Statements and related Notes thereto included in its Registration on Form
10/A
dated March 14, 2008, as filed with the Securities and Exchange
Commission.
On
February 4, 2008 the Securities and Exchange Commission adopted Release No.
33-8876 "Smaller Reporting Company Regulatory Relief and Simplification,” (Dec.
19, 2007), a new system of disclosure rules for smaller companies filing
periodic reports and registration statements with the SEC. They replace the
disclosure requirements formerly in the SEC’s Regulation S-B, which applied to
“small business issuers,” under which definition the Company falls. Under the
new system, smaller reporting companies will prepare and file their SEC reports
and registration statements using the same forms as other SEC reporting
companies, though the information required to be disclosed may differ.
Eventually, there will be no special “small business” forms. Instead, smaller
reporting companies will use standard forms like Forms 10-K and S-1 used
by
other companies. Under the new rules, the Company has the option to file
its
next annual report on Form 10-KSB or the standard Form 10-K and quarterly
reports due before this annual report on Form 10-QSB or Form 10-Q. After
the
next annual report, all future annual and quarterly reports must be on the
standard forms instead of the “SB” forms. The Company has elected to begin using
Forms 10Q and 10-K from this report forward.
Plan
of
Operation
Z-II,
Inc, (“Z-II”, or the “Company”) was incorporated as a vehicle to investigate
and, if such investigation warrants, acquire one or more operating companies
or
businesses whose owners are seeking liquidity and the potential for capital
appreciation. The Company's principal business objective for the next 12
months
and beyond will be to achieve long-term growth potential through one or more
combinations with one or more operating companies (individually, a "Target
Company" and collectively, "Target Companies"). The Company does not intend
to
restrict its search for potential candidates to companies engaged in any
specific business, industry or geographical location and, thus, may acquire
any
type of business. Investors in this offering will have an economic interest
in
the Company, however, they will not have any decision-making rights, including
whether or not the Company should acquire a Target Company, as control of
the
Company will be in the hands of Z-II's founders.
Z-II
will
seek to add value to a Target Company by providing leadership and management,
contribute and help raise additional capital and establish such controls,
procedures and practices as will allow the combined entity to realize its
potential and maximize shareholder value.
The
analysis of new business opportunities has and will be undertaken by or under
the supervision of the Company's officers and directors. They have unrestricted
flexibility in seeking, analyzing and participating in potential business
opportunities. In their efforts to analyze potential Target Companies or
businesses, they will consider, among others, the following factors:
(i)
potential
for growth, indicated by new technology, anticipated market expansion or
new
products;
(ii)
competitive
position as compared to other firms of similar size and experience within
the
relevant industry segment as well as within the industry as a whole;
(iii)
strength
and diversity of management, either in place or scheduled for recruitment;
(iv)
capital
requirements and anticipated availability of required funds, to be provided
by
us or from operations, through the sale of additional securities, through
joint
ventures or similar arrangements or from other sources;
(v)
the
cost
of participation by Z-II as compared to the perceived tangible and intangible
values;
(vi)
the
extent to which the business opportunities can be advanced;
(vii)
the
accessibility of required management expertise, personnel, raw materials,
services, professional assistance and other required items; and
(viii) other
relevant factors that the Company may identify.
In
applying the foregoing criteria, no one of which will be controlling, Z-II's
management will attempt to analyze all factors and circumstances and make
a
determination based upon reasonable investigative measures and available
data.
Potentially available business opportunities may occur in many different
industries, and at various stages of development, all of which will make
the
task of comparative investigation and analysis of such business opportunities
extremely difficult and complex. Due to the Company's limited capital it
may not
discover or adequately evaluate adverse facts about any opportunity evaluated
or, ultimately, any transaction consummated.
During
the three month period ended March 31, 2008 the Company's officers participated
in discussions with potential Target Companies but did not enter into any
contract or memorandum of understanding with respect to a transaction.
The
manner in which the Company participates in an opportunity will depend upon
the
nature of the opportunity, the Company's respective needs and desires and
the
promoters of the opportunity, and the Company's relative negotiating strength
and that of such promoters.
It
is
anticipated that the investigation of specific business opportunities and
the
negotiation, drafting and execution of relevant agreements, disclosure documents
and other instruments will require substantial management time and attention
and
substantial costs for third party professionals, accountants, attorneys and
others. If a decision is made not to participate in a specific business
opportunity, these costs theretofore incurred in the related investigation
would
not be recoverable. Furthermore, even if an agreement is reached for the
participation in a specific business opportunity, the failure to consummate
that
transaction may result in the loss of the related costs incurred.
Based
on
our proposed business activities, Z-II is a “blank check” company. The
Securities and Exchange Commission defines those companies as “any development
stage company that is issuing a penny stock, within the meaning of Section
3(a)(51) of the Exchange Act, as amended, and that has no specific business
plan
or purpose, or has indicated that its business plan is to merge with an
unidentified company or companies.” Under Rule 12b-2 under the Securities Act,
the Company also qualifies as a “shell company,” because it has no or nominal
assets (other than cash) and no or nominal operations. Many states have enacted
statutes, rules and regulations limiting the sale of securities of “blank check”
companies in their respective jurisdictions. Management does not intend to
undertake any efforts to cause a market to develop in the Company's securities,
either debt or equity, until it has successfully concluded a business
combination transaction. Z-II intends to comply with the periodic reporting
requirements of the Exchange Act for so long as it is subject to those
requirements.
Results
of Operations
The
Company was founded on March 20, 2007 and at March 31, 2007 had no operations,
assets, liabilities or capital. A comparison of the results of the three
months
ended March 31, 2008 with the period from inception through March 31, 2007
would
therefore not be meaningful and has thus been omitted from this
report.
For
the
three months ended March 31, 2008 the Company had no operating revenues and
incurred $20,363 in professional fees and administrative expenses, resulting
in
a loss from operations of $20,363. The Company incurred interest expense
of
$15,611 which was offset partially by interest income of $8,616 resulting
in net
interest expense of $6,995. The Company paid $1,018 in Federal and State
Income
taxes in the quarter. Thus, the Company had a net loss for the three months
ended March 31, 2008 of $28,376.
For
the
nine months ended March 31, 2008, the Company had no operating revenues and
incurred $39,011 in professional fees and administrative expenses resulting
in a
loss from operations of $39,011. The Company incurred interest expense of
$46,141 which was offset partially by interest income of $57,136 resulting
in
net interest expense of $10,995. The Company paid $1,018 in Federal and State
Income taxes during the period. Thus, the Company had a net loss for the
nine
months ended March 31, 2008 of $51,024.
Summary
of Critical Accounting Policies; Significant Judgments and
Estimates
There
were no other changes to our critical accounting policies, which are described
in Registration Statement on Form 10 submitted to the SEC on January 15,
2008,
as amended, during the three months ended March 31, 2008. There were no items
presented in the Company's financial statements that required the significant
use of management estimates.
Liquidity
and Capital Resources
As
of
March 31, 2007 and for the period from March 20, 2007 (inception) through
March
31, 2007, the Company had no assets or liabilities and no cash flows from
any
source.
As
of
March 31, 2008, the Company had cash and cash equivalents of $560,041 and
a
working capital surplus of $535,442. For the nine months ended March 31,
2008,
the Company used $55,570 of cash for operations.
At
March
31, 2008, the Company had no long-term debt other than the notes payable
to
Officers/Stockholders. The Company has no off-balance sheet arrangements
and has
not entered into any transactions involving unconsolidated, limited purpose
entities or commodity contracts. The sources of liquidity and capital resources
are loans from stockholders and cash in banks.
On
February 12, 2008 we repaid $1,050,000 to Further Lane Trust, LLC and $350,000
to Jack M. Rapport for an aggregate $1,400,000. The repayments on these loans
were effectuated by a direct transfer of funds to The Birkhill Group, LLC,
an
entity controlled directly or indirectly by David M. McCarthy, Further Lane
Trust, LLC and Jack M. Rapport. These repayments notwithstanding, during
the
next 12 months, despite anticipated costs related to the filing of Exchange
Act
reports, and consummating one or more business combination transactions,
we
believe we will be able to meet our funding requirements through use of funds
in
our treasury and additional amounts, as necessary, to be loaned by or invested
in us by our stockholders, management or other investors.
Item
4T – Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
We
maintain a set of disclosure controls and procedures, as defined in Section
13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), that are designed to ensure that information required to be disclosed
by
us in the reports filed by us under the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”) is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms. We carried out
an evaluation, under the supervision and with the participation of our Chief
Executive Officer and our Chief Financial Officer, of the effectiveness of
the
design and operation of our disclosure controls and procedures pursuant to
Rule
13a-15(b) of the Exchange Act. Based on that evaluation, our Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls
and procedures were effective as of the end of the period covered by this
report.
Notwithstanding
the foregoing, there can be no assurance that the Company’s disclosure controls
and procedures will detect or uncover all failures of persons within the
Company
to disclose material information otherwise required to be set forth in the
Company’s periodic reports. There are inherent limitations to the effectiveness
of any system of disclosure controls and procedures, including the possibility
of human error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and procedures
can
only provide reasonable, not absolute, assurance of achieving their control
objectives.
Changes
in Internal Controls Over Financial Reporting
An
evaluation was performed under the supervision of the Company’s management,
including the CEO and CFO, as required under Exchange Act Rule 13a-15(d)
and
15d-15(d) of whether any change in the Company’s internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred
during the fiscal quarter ended March 31, 2008. Based on that evaluation,
the
Company’s management, including the CEO and CFO, concluded that no change in the
Company’s internal controls over financial reporting occurred during the fiscal
quarter ended March 31, 2008 that has materially affected or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting.
PART
II
OTHER INFORMATION
Item
1.
Legal Proceedings
None
Item
2.
Unregistered Sales of Equity Securities and Use of Proceeds
None
Item
3.
Defaults upon Senior Securities
Not
applicable.
Item
4.
Submission of Matters to a Vote of Security Holders
None
Item
5.
Other Information
None
Item
6.
Exhibits
Exhibit
31.1 Certification of Chief Executive Officer as required by Rule 13a-14
or
15d-14 of the Securities Exchange Act of 1934, as adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Exhibit
31.2 Certification of Chief Financial Officer as required by Rule 13a-14
or
15d-14 of the Securities Exchange Act of 1934, as adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Exhibit
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act 0f of
2002.
Exhibit
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act 0f of
2002.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
Z-II,
INC.
|
|
|
Dated:
May 13, 2008
|
/s/
David M. McCarthy
|
|
David
M. McCarthy, Chief Executive Officer
|
|
(Principal
Executive Officer)
|
|
|
Dated:
May 13, 2008
|
/s/
Jack M. Rapport
|
|
Jack
M. Rapport, Chief Financial Officer
|
|
(Principal
Accounting and Financial
Officer)
|