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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549

FORM 10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002



Zaxis International Inc.(Name of Issuer as specified in its charter)

|                         |  |                          |  |                                  
|------------------------ |  | ------------------------ |  | ---------------------------------
|Delaware                 |  | 0-15476                  |  | 68-0080601                       
|(State of Incorporation) |  | (Commission File Number) |  | (IRS Employer Identification No.)
|                        

1890 Georgetown Road, Hudson Ohio 44236
(Address of principal executive office)



(330) 650-0444
(Registrants telephone number)

Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months and (2) has
been subject to such filings for the past 90 days. Yes [X] No [ ]

As of June 30, 2002, there were 16,230,623 shares of Common Stock and 170 shares
of Redeemable Convertible Preferred Shares (Preferred Stock) outstanding, this
latter Preferred Stock equivalent to an additional 1,700,000 shares of Common
Stock on conversion.

Transitional Small Business Disclosure Format (check one):

|     |  |  |  |       
|---- |  |  |  | ------
|Yes: |  |  |  | No:  X
|    





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TABLE OF CONTENTS



|                              |                                                      |                                                              |  |  |  |  |  | 
|----------------------------- | ---------------------------------------------------- | ------------------------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                        
|                              |                                                      | CONDENSED CONSOLIDATED BALANCE SHEETS                       
|                              |                                                      | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS             
|                              |                                                      | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS             
|                              |                                                      | CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIENCY
|                              |                                                      | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS             
|                              |                                                      | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        
|                              | Item 2. Managements Discussion and Analysis        
|PART II. OTHER INFORMATION   
|                              | Item 2(c). Changes in Securities and use of proceeds
|                              | Item 3. Default upon Senior Securities              
|                              | Item 5. Other Information                           
|                              | Item 6. Exhibits and Reports on Form 8-K            
|SIGNATURES                   



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ZAXIS INTERNATIONAL INC.
FORM 1O-QSB

INDEX

|                              |  |                                                                                                                                                                     |  |         
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|                              |  |                                                                                                                                                                     |  | Page No.
|                              |  |                                                                                                                                                                     |  |         
|PART I. FINANCIAL INFORMATION |  |                                                                                                                                                                    
|                             
|Item 1.                       |  | Financial Statements.                                                                                                                                               |  |         
|                             
|                              |  | Condensed Consolidated Balance Sheets
     as of June 30, 2002 and December 31, 2001                                                                                |  | 3       
|                             
|                              |  | Condensed Consolidated Statements of Operations:                                                                                                                   
|                              |  | Three Months
ended June 30, 2002 and 2001                                                                                                                           |  | 4       
|                              |  | Six Months ended June 30, 2002 and 2001                                                                                                                             |  | 5       
|                             
|                              |  | Condensed Consolidated Statement of Stockholders Deficiency
     for the three and six months ended June 30, 2002                                                  |  | 6       
|                             
|                              |  | Condensed Consolidated Statements of Cash Flows
     for the six months ended June 30, 2002 and 2001                                                                |  | 7       
|                             
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                                                                |  | 8  10  
|                             
|Item 2.                       |  | Managements
Discussion and Analysis of Financial Condition
     and Results of Operations for the three and six months ended
     June 30, 2002 and June 30, 2001. |  | 10  12 
|                             
|PART II. OTHER INFORMATION    |  |                                                                                                                                                                    
|                             
|                              |  | Item 2. (c) Changes in Securities and use of
proceedsRecent Issuances
     of Unregistered Securities                                                              |  | 12      
|                             
|                              |  | Item 3. Defaults upon Senior Securities                                                                                                                             |  | 12      
|                             
|                              |  | Item 5. Other Information                                                                                                                                           |  | 12      
|                             
|                              |  | Item 6. Exhibits and Reports on Form 8-K                                                                                                                            |  | 12      
|                             
|SIGNATURES                    |  | 13                                                                                                                                                                 

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ZAXIS INTERNATIONAL INC. AND
SUBSIDIARY




ASSETS

| |                         |                                                 |                      |        |          |             |         |              |          |         |  | 
| | ----------------------- | ----------------------------------------------- | -------------------- | ------ | -------- | ----------- | ------- | ------------ | -------- | ------- |  | 
| |                         |                                                 |                      |        |          | June 30,    |         | December 31,
| |                         |                                                 |                      |        |          | 2002        |         | 2001        
| |                         |                                                 |                      |        |          |             |         |             
| |                         |                                                 |                      |        |          | (Unaudited) |         | (Audited)   
| |                         |                                                 |                      |        |          |             |         |             
| | Current
assets:         |                                                 |                      |        |          |             |         |              |         
| |                         | Cash                                            |                      | $      | 7,008    |             |         | $            | 24,726   |        
| |                         | Accounts receivable, net of allowance of $2,500 |                      |        | 76,599   |             |         |              | 41,056   |        
| |                         | Inventory                                       |                      |        | 37,292   |             |         |              | 52,575   |        
| |                         | Prepaid expenses                                |                      |        | 5,572    |             |         |              | 5,572    |        
| |                         |                                                 |                      |        |          |             |         |             
| |                         |                                                 | Total current assets |        |          | 126,472     |         |              |          | 123,929 | 
| | Property
and equipment: |                                                 |                      |        |          |             |         |              |         
| |                         | Machinery and equipment                         |                      |        | 263,856  |             |         |              | 263,855  |        
| |                         | Office equipment                                |                      |        | 118,366  |             |         |              | 118,366  |        
| |                         | Leasehold improvements                          |                      |        | 50,270   |             |         |              | 50,271   |        
| |                         |                                                 |                      |        |          |             |         |             
| |                         |                                                 | 432,492              |        |          |             | 432,492 |             
| |                         | Less accumulated depreciation                   |                      |        | (410,077 | )           |         |              | (398,872 | )      
| |                         |                                                 |                      |        |          |             |         |             
| |                         |                                                 | 22,415               |        |          |             | 33,620  |             
| | Other
assets            |                                                 |                      | 29,012 |          |             |         | 32,130       |         
| |                         |                                                 |                      |        |          |             |         |             
| |                         |                                                 | Total
assets         |        | $        | 177,899     |         |              | $        | 189,679 | 
| |                         |                                                 |                      |        |          |             |         |             

LIABILITIES AND STOCKHOLDERS DEFICIENCY

|                          |                                        |                                                                                                                                                                                                      |                                                |   |             |            |   |   |             |          |   | 
|------------------------- | -------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | - | ----------- | ---------- | - | - | ----------- | -------- | - | 
|                          | Current
liabilities:                   |                                                                                                                                                                                                      |                                                |   |             |            |   |   |            
|                          |                                        | Current portion of lease obligations                                                                                                                                                                 |                                                | $ |            |            |   | $ | 1,328       |         
|                          |                                        | Notes payable to related parties                                                                                                                                                                     |                                                |   | 454,252     |            |   |   | 299,252     |         
|                          |                                        | Notes payable-other                                                                                                                                                                                  |                                                |   | 25,000      |            |   |   | 15,000      |         
|                          |                                        | Accounts payable                                                                                                                                                                                     |                                                |   | 356,734     |            |   |   | 240,848     |         
|                          |                                        | Accrued interest                                                                                                                                                                                     |                                                |   | 62,830      |            |   |   | 44,949      |         
|                          |                                        | Other accrued expenses                                                                                                                                                                               |                                                |   | 64,007      |            |   |   | 62,902      |         
|                          |                                        | Customer deposits prepaid                                                                                                                                                                            |                                                |   | 11,646      |            |   |   |            |         
|                          |                                        | Deferred revenue                                                                                                                                                                                     |                                                |   | 127,088     |            |   |   | 174,116     |         
|                          |                                        |                                                                                                                                                                                                      |                                                |   |             |            |   |  
|                          |                                        |                                                                                                                                                                                                      | Total current liabilities                      |   |             | 1,101,557  |   |   |             | 838,395  |  
|                          | Long
term liabilities:                 |                                                                                                                                                                                                      |                                                |  |             |            |   |  |            
|                          |                                        |                                                                                                                                                                                                      | Total long term liabilities                    |   |             |           |   |   |             |         |  
|                          | Redeemable
convertible preferred stock |                                                                                                                                                                                                      |                                                |   |             |            |   |   |            
|                          |                                        | $.01 par value, 10,000,000 shares authorized, 170 and 0
shares of Series 01-A issued and outstanding at December 31,
2001 and 2000, respectively (redemption value of $178,500
at December 31, 2001) |                                                |   | 131,803     |            |   |   | 131,803     |         
|Stockholders
deficiency: |                                        |                                                                                                                                                                                                      |                                                |   |             |            |   |  
|                          |                                        | Common stock  $.01 par value, 20,000,000 shares authorized,
16,230,623 shares issued and outstanding at June 30, 2002,
16,215,623 shares issued and outstanding at December 31, 2001                |                                                |   | 162,172     |            |   |   | 162,156     |         
|                          |                                        | Additional paid-in capital                                                                                                                                                                           |                                                |   | 11,057,048  |            |   |   | 11,055,415  |         
|                          |                                        | Accumulated deficit                                                                                                                                                                                  |                                                |   | (12,274,682 | )          |   |   | (11,998,090 | )       
|                          |                                        |                                                                                                                                                                                                      |                                                |   |             |            |   |  
|                          |                                        |                                                                                                                                                                                                      | Total stockholders deficiency                 |   |             | (1,055,462 | ) |   |             | (780,519 | )
|                          |                                        |                                                                                                                                                                                                      |                                                |   |             |            |   |  
|                          |                                        |                                                                                                                                                                                                      | Total
liabilities and stockholders deficiency |   | $           | 177,899    |   |   | $           | 189,679  |  
|                          |                                        |                                                                                                                                                                                                      |                                                |   |             |            |   |  

See notes to consolidated financial statements.

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ZAXIS INTERNATIONAL INC. AND
SUBSIDIARY




|                                                                  |                                              |                              |            |                    |          |      |           |         |          |  
|----------------------------------------------------------------- | -------------------------------------------- | ---------------------------- | ---------- | ------------------ | -------- | ---- | --------- | ------- | -------- | -
|                                                                  |                                              |                              |            | Three Months Ended
|                                                                  |                                              |                              |            | June 30           
|                                                                  |                                              |                              |            |                   
|                                                                  |                                              |                              |            | 2002               |          | 2001
|                                                                  |                                              |                              |            |                    |          |     
|Gross sales:                                                      |                                              | $                            | 241,180    |                    |          | $    | 183,757   |        
|                                                                  | Less discounts and allowances                |                              |            | (3,583             | )        |      |           |        |         
|                                                                  | Less freight on sales                        |                              |            | (11,898            | )        |      |           | (7,577  | )       
|                                                                  |                                              |                              |            |                    |          |      |           |        
|Net sales:                                                        |                                              |                              | 225,698    |                    |          |      | 176,180   |        
|Operating Costs:                                                  |                                              |                              |            |                    |          |      |           |        
|                                                                  | Cost of goods sold                           |                              |            | 191,615            |          |      |           | 149,935 |         
|                                                                  | Selling, general and administrative expenses |                              |            | 160,701            |          |      |           | 232,225 |         
|                                                                  |                                              |                              |            |                    |          |      |           |        
|                                                                  |                                              |                              | 352,316    |                    |          |      | 382,160   |        
|                                                                  |                                              |                              |            |                    |          |      |           |        
|                                                                  |                                              | Loss from operations         |            |                    | (126,617 | )    |           |         | (205,980 | )
|Other income (expense):                                           |                                              |                              |            |                    |          |      |           |        
|                                                                  | Interest expense                             |                              |            | (10,381            | )        |      |           | (45,030 | )       
|                                                                  | Extraordinary Income                         |                              |            | 18,024             |          |      |           |        |         
|                                                                  | Other, net                                   |                              |            | 61                 |          |      |           | 11,778  |         
|                                                                  |                                              |                              |            |                    |          |      |           |        
|                                                                  |                                              | Total other income (expense) |            |                    | 7,704    |      |           |         | (33,252  | )
|                                                                  |                                              |                              |            |                    |          |      |           |        
|Net Loss                                                          |                                              | $                            | (118,913   | )                  |          | $    | (239,232  | )      
|                                                                  |                                              |                              |            |                    |          |      |           |        
|Net loss per common share  Basic and Diluted                     |                                              | $                            | (0.01      | )                  |          | $    | (0.02     | )      
|                                                                  |                                              |                              |            |                    |          |      |           |        
|Weighted average number of shares outstanding  Basic and Diluted |                                              |                              | 16,230,623 |                    |          |      | 9,988,106 |        
|                                                                  |                                              |                              |            |                    |          |      |           |        

See notes to consolidated financial statements.

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ZAXIS INTERNATIONAL INC. AND SUBSIDIARY




|                                                                  |                                              |                                 |            |                  |          |      |           |         |          |  
|----------------------------------------------------------------- | -------------------------------------------- | ------------------------------- | ---------- | ---------------- | -------- | ---- | --------- | ------- | -------- | -
|                                                                  |                                              |                                 |            | Six Months Ended
|                                                                  |                                              |                                 |            | June 30         
|                                                                  |                                              |                                 |            |                 
|                                                                  |                                              |                                 |            | 2002             |          | 2001
|                                                                  |                                              |                                 |            |                  |          |     
|Gross Sales:                                                      |                                              | $                               | 453,999    |                  |          | $    | 345,667   |        
|                                                                  | Less discounts and allowances                |                                 |            | (6,172           | )        |      |           |        |         
|                                                                  | Less freight on sales                        |                                 |            | (20,389          | )        |      |           | (16,720 | )       
|                                                                  |                                              |                                 |            |                  |          |      |           |        
|Net sales                                                         |                                              |                                 | 427,438    |                  |          |      | 328,947   |        
|Operating Costs:                                                  |                                              |                                 |            |                  |          |      |           |        
|                                                                  | Cost of goods sold                           |                                 |            | 369,525          |          |      |           | 279,928 |         
|                                                                  | Selling, general and administrative expenses |                                 |            | 334,840          |          |      |           | 456,114 |         
|                                                                  |                                              |                                 |            |                  |          |      |           |        
|                                                                  |                                              |                                 | 704,365    |                  |          |      | 736,042   |        
|                                                                  |                                              |                                 |            |                  |          |      |           |        
|                                                                  |                                              | Loss from operations            |            |                  | (276,928 | )    |           |         | (407,095 | )
|Other income (expense):                                           |                                              |                                 |            |                  |          |      |           |        
|                                                                  | Interest expense                             |                                 |            | (17,898          | )        |      |           | (88,195 | )       
|                                                                  | Other, net                                   |                                 |            | 18,158           |          |      |           | 12,132  |         
|                                                                  |                                              |                                 |            |                  |          |      |           |        
|                                                                  |                                              | Total other income (expense)    |            |                  | 260      |      |           |         | (76,063  | )
|                                                                  |                                              |                                 |            |                  |          |      |           |        
|                                                                  |                                              | Loss from continuing operations |            |                  | (276,668 | )    |           |         | (483,158 | )
|Net Loss                                                          |                                              | $                               | (276,668   | )                |          | $    | (483,158  | )      
|                                                                  |                                              |                                 |            |                  |          |      |           |        
|Net loss per share from continuing operations  Basic and Diluted |                                              | $                               | (0.02      | )                |          | $    | (0.05     | )      
|Net loss per common share  Basic and Diluted                     |                                              | $                               | (0.02      | )                |          | $    | (0.05     | )      
|                                                                  |                                              |                                 |            |                  |          |      |           |        
|Weighted average number of shares outstanding  Basic and Diluted |                                              |                                 | 16,230,623 |                  |          |      | 9,983,022 |        
|                                                                  |                                              |                                 |            |                  |          |      |           |        

See notes to consolidated financial statements.

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ZAXIS INTERNATIONAL INC. AND SUBSIDIARY




|                           |                                      |  |              |        |            |   |         |    |             |   |            |       |  |   |             |          |   |   |            |          |  
|-------------------------- | ------------------------------------ |  | ------------ | ------ | ---------- | - | ------- | -- | ----------- | - | ---------- | ----- |  | - | ----------- | -------- | - | - | ---------- | -------- | -
|                           |                                      |  | Common Stock |        |            |   |         |    |             |   |            |       |  |   |            
|                           |                                      |  |              |        | Additional |   |         |    |             |   |            |       | 
|                           |                                      |  | Number of    |        | Stated or  |   | Paid-In |    | Accumulated |   |            |       | 
|                           |                                      |  | Shares       |        | Par Value  |   | Capital |    | Deficit     |   | Total     
|                           |                                      |  |              |        |            |   |         |    |             |   |           
|Balance
at January 1, 2002 |                                      |  | 16,215,623   |        |            | $ | 162,156 |    |             | $ | 11,055,415 |       |  | $ | (11,998,014 | )        |   | $ | (780,443   | )       
|                           | Shares issued on exercise of options |  |              |       |            |   |         |   |             |   |            |      |  |   |             |         |   |   |            |         |  
|                           | Warrants issued for services         |  |              |        |            |   |         |   |             |   |            |      |  |   |             |         |   |   |            |         |  
|                           | Shares issued for services           |  |              | 15,000 |            |   |         | 16 |             |   |            | 1,633 |  |   |             |         |   |   |            | 1,649    |  
|                           | Net Loss                             |  |              |       |            |   |         |   |             |   |            |      |  |   |             | (157,755 | ) |   |            | (157,755 | )
|                           |                                      |  |              |        |            |   |         |    |             |   |            |       |  |   |             |          |   |   |            |         
|Balance
at March 31, 2002  |                                      |  | 16,230,623   |        |            | $ | 162,306 |    |             | $ | 11,057,048 |       |  | $ | (12,155,769 | )        |   | $ | (936,549   | )       
|                           |                                      |  |              |        |            |   |         |    |             |   |            |       |  |   |             |          |   |   |            |         
|                           | Shares issued on exercise of options |  |              |       |            |   |         |   |             |   |            |      |  |   |             |         |   |   |            |         |  
|                           | Warrants issued for services         |  |              |        |            |   |         |   |             |   |            |      |  |   |             |         |   |   |            |         |  
|                           | Shares issued for services           |  |              |       |            |   |         |   |             |   |            |      |  |   |             |         |   |   |            |         |  
|                           | Net Loss                             |  |              |       |            |   |         |   |             |   |            |      |  |   |             | (118,913 | ) |   |            | (118,913 | )
|                           |                                      |  |              |        |            |   |         |    |             |   |            |       |  |   |             |          |   |   |            |         
|Balance
at June 30, 2002   |                                      |  | 16,230,623   |        |            | $ | 162,306 |    |             | $ | 11,057,048 |       |  | $ | (12,274,682 | )        |   | $ | (1,055,462 | )       
|                           |                                      |  |              |        |            |   |         |    |             |   |            |       |  |   |             |          |   |   |            |         

See notes to the consolidated financial statements.

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ZAXIS INTERNATIONAL INC. AND SUBSIDIARY




|                            |                                                                         |                       |                                           |                                              |   |                  |          |                  |   |         |          |  
|--------------------------- | ----------------------------------------------------------------------- | --------------------- | ----------------------------------------- | -------------------------------------------- | - | ---------------- | -------- | ---------------- | - | ------- | -------- | -
|                            |                                                                         |                       |                                           |                                              |   | Six Months Ended |          | Six Months Ended
|                            |                                                                         |                       |                                           |                                              |   | June 30,         |          | June 30,        
|                            |                                                                         |                       |                                           |                                              |   | 2002             |          | 2001            
|                            |                                                                         |                       |                                           |                                              |   |                  |          |                 
|                            | Operating activities:                                                   |                       |                                           |                                              |   |                  |          |                  |  
|                            | Net loss                                                                |                       | $                                         | (276,668                                     | ) |                  | $        | (483,158         | )
|                            | Adjustments to reconcile net loss to cash
used in operating activities: |                       |                                           |                                              |   |                  |          |                  |  
|                            |                                                                         |                       |                                           | Depreciation and amortization                |   |                  | 14,323   |                  |   |         | 29,387   |  
|                            |                                                                         |                       |                                           | Shares and warrants issued for services      |   |                  | 1,650    |                  |   |         | 21,754   |  
|                            |                                                                         |                       |                                           | Changes in operating assets and liabilities: |   |                  |          |                  |   |         |          |  
|                            |                                                                         |                       |                                           | Accounts receivable                          |   |                  | (35,543  | )                |   |         | (46,087  | )
|                            |                                                                         |                       |                                           | Inventory                                    |   |                  | 15,358   |                  |   |         | 2,277    |  
|                            |                                                                         |                       |                                           | Accounts payable and accrued expenses        |   |                  | 146,518  |                  |   |         | 79,159   |  
|                            |                                                                         |                       |                                           | Deferred revenue                             |   |                  | (47,027  | )                |   |         | 281,085  |  
|                            |                                                                         |                       |                                           |                                              |   |                  |          |                 
|                            |                                                                         |                       |                                           | Net cash used in operating activities        |   |                  | (181,389 | )                |   |         | (115,583 | )
|                            |                                                                         | Investing activities: |                                           |                                              |   |                  |          |                  |   |        
|                            |                                                                         |                       | Purchases of property and equipment       |                                              |   |                 |          |                  |   |        |         
|                            |                                                                         |                       |                                           |                                              |   |                  |          |                 
|                            |                                                                         |                       |                                           | Net cash used in investing activities        |   |                  |         |                  |   |         |         |  
|                            | Financing activities:                                                   |                       |                                           |                                              |   |                  |          |                  |  
|                            |                                                                         |                       | Proceeds from exercise of stock options   |                                              |   |                 |          |                  |   | 19,000  |         
|                            |                                                                         |                       | Proceeds from sale of common stock        |                                              |   |                 |          |                  |   |        |         
|                            |                                                                         |                       | Proceeds from issuance of preferred stock |                                              |   |                 |          |                  |   | 140,000 |         
|                            |                                                                         |                       | Payments on notes payable                 |                                              |   |                 |          |                  |   | (52,715 | )       
|                            |                                                                         |                       | Proceeds from notes payable               |                                              |   | 165,000          |          |                  |   | 314,500 |         
|                            |                                                                         |                       | Payments on capital lease obligations     |                                              |   | (1,328           | )        |                  |   | (5,211  | )       
|                            |                                                                         |                       |                                           |                                              |   |                  |          |                 
|                            |                                                                         |                       |                                           | Net cash provided by financing activities    |   |                  | 163,672  |                  |   |         | 415,574  |  
|                            |                                                                         |                       |                                           |                                              |   |                  |          |                 
|Increase (Decrease) in cash |                                                                         |                       | (17,718                                   | )                                            |   |                  | 299,991  |                 
|Cash at beginning of period |                                                                         |                       | 24,726                                    |                                              |   |                  | 1,827    |                 
|                            |                                                                         |                       |                                           |                                              |   |                  |          |                 
|Cash at end of period       |                                                                         | $                     | 7,008                                     |                                              |   | $                | 301,818  |                 
|                            |                                                                         |                       |                                           |                                              |   |                  |          |                 

See notes to consolidated financial statements.

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ZAXIS INTERNATIONAL INC. AND SUBSIDIARY




NOTE 1  BASIS OF PRESENTATION

The financial statements present the consolidated financial position and results
of operations of Zaxis International Inc. and its wholly owned subsidiary, Zaxis
Inc. (collectively, the Company). All intercompany transactions and balances
have been eliminated.

The Company manufactures and sells products for use in electrophoresis, an
electrochemical process used to analyze genetic materials such as proteins and
DNA. The Company also sells electrophoresis equipment produced in-house or
manufactured to its specifications. The Companys products are sold directly
to institutions operating research laboratories and to distributors who market
these products under the Zaxis name or their own private labels.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-B. These interim financial statements include all adjustments,
consisting of normal recurring adjustments, which are in the opinion of
management necessary for a fair presentation. However, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. Operating results for the
three-month and six-month periods ended June 30, 2002 are not necessarily
indicative of the results that may be expected for the full year ending December
31, 2002.

For further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys annual report on Form 10-KSB for the
year ended December 31, 2001.

NOTE 2  GOING CONCERN

The Company has incurred substantial losses in 2001 and 2002 and incurred a net
loss of $118,913 for the 2nd quarter period ending June 30, 2002 and a net loss
of $236,861 for the six-month period ended June 30, 2002. The Company does not
expect to generate sufficient sales volume with its existing customer base to
support its cost of operations through 2002 and, accordingly, will need to raise
additional funds through borrowings or equity funding. The Company is actively
pursuing additional funds through the issuance of either debt or equity
instruments. However, such funds may not be available on favorable terms or at
all. These factors raise substantial doubts about the Companys ability to
continue as a going concern and the auditors report contained in the Companys
2001 annual report on Form 10-KSB filed with the U.S. Securities and Exchange
Commission contains an explanatory paragraph with respect to this matter.

NOTE 3  DEFERRED REVENUE

In June 2001, the Company received $281,855 from one of its customers in
accordance with an agreement to develop, manufacture and deliver a new product
to the customer. The Company recognizes revenue under this agreement based upon
shipment of the product to the customer or,

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ZAXIS INTERNATIONAL INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)  (UNAUDITED)

NOTE 3  DEFERRED REVENUE  (CONTINUED)

with respect to product development costs, as such costs are incurred. As of
June 30, 2002, the remaining deferred revenue amount was $127,088.

NOTE 4  NOTES PAYABLE

During the second quarter of 2002 the Company did not issue any notes payable.
During the first quarter of 2002 the Company issued various notes aggregating
$165,000 ($155,000 to related parties) with stated annual interest rates ranging
from 4.25% to 7.5%. The notes mature at various dates through January 20, 2003
with $125,000 payable on demand.

At June 30, 2002, the Company was delinquent on principal and interest payments
of approximately $15,000 and $6,213 respectively. The Company is working with
the holders of these notes and is attempting to receive additional time to work
out payments.

At June 30, 2002, amounts due to directors and former directors represents a
bonus payable to a former officer/director payable in July 2002.

NOTE 5  COMMON STOCK

During the second quarter ending June 30, 2002, the Company issued 38,500 stock
options to employees under the Employee Stock Option Plan at a rate of $.11 per
share. During this same period, 3,750 options were terminated and 32,040
expired. Stock options and warrants were excluded in the computation of diluted
loss per share for the periods presented since their effect would have been
antidilutive. There were no stock options issued during the first quarter ending
March 31, 2002.

There were no common stocks issued during the second quarter ending June 30,
2002. During the first quarter ending March 31, 2002, the Company issued, in a
transaction exempt from registration under the Securities Act of 1933, 15,000
shares of common stock for services.

NOTE 6  CONVERTIBLE-REDEEMABLE PREFERED STOCK

During the second quarter ending June 30, 2002 there were no
convertible-redeemable preferred shares issued nor were any issued during the
first quarter ending March 31, 2002.

NOTE 7  STOCKHOLDERS DEFICIENCY

During the six months ended June 30, 2002, The Company Issued 15,000 shares of
common stock for services. Stock options and warrants were excluded in the
computation of diluted loss per share for the periods presented since their
effect would have been antidilutive.

NOTE 8  CONTINGENCY

On or about March 15, 2001, the Company entered into a Plan and Agreement of
Merger (the Merger Agreement) with Online Testing Center, Inc. (OTC)
relating to the proposed acquisition of OTC through a merger of OTC with and
into the Company. Consummation of the Merger

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ZAXIS INTERNATIONAL INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)  (UNAUDITED)

NOTE 8  CONTINGENCY   (CONTINUED)

Agreement was subject to a number of conditions and provided for certain
termination rights. The company notified OTC that it was terminating the Merger
Agreement on April 6, 2001. OTC has alleged that the termination was invalid and
that it intended to pursue its rights to enforce the Merger Agreement. To date,
the Company is not aware that any action has commenced. Management of the
Company believes that it had sufficient legal grounds to terminate the Merger
Agreement and has no liability in any asserted action.

On August 12, 2002, the Company received notification of possible litigation
involving a former employee with respect to a bonus payment note issued to the
employee by the Company. This notification has been forwarded to legal counsel
for review

NOTE 9  DISCLOSURE

As of this date, an Independent Auditors review of the financial statements
included in this filing has not been performed. If the review is completed at a
later date, the quarterly report will be amended to remove this disclosure.




Item 2. Managements Discussion and Analysis

Managements Discussion and Analysis of Financial Condition and Results of
Operations for the Three Months and Six Months Ended June 30, 2002.

This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, as amended including, without limitation, statements regarding the
Companys expectations, beliefs, intentions or future strategies that are
signified by such words as expects, anticipates, intends, believes, or
similar language. All forward-looking statements included in this document are
based on information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward-looking statements.
Actual results could differ materially from those projected in the
forward-looking statements. In evaluating the Companys business, the Company
cautions prospective investors that its business and financial performance are
subject to substantial risks and uncertainties. A more detailed discussion of
these material risks are contained in the Companys annual 2001 10KSB report.

Results of Operations

Gross sales for the second quarter of 2002 were $241,180 an increase of 31%
compared with gross sales of $183,757 for the second quarter of 2001. Gross
sales for the six months ended June 30, 2002 were $453,999 an increase of 31% as
compared with sales of $345,667 for the same period in 2001. Sales gains were
due to improved market penetration by the Companys pre-cast 2D, protein and DNA
gels, increased sales to Visible Genetics as they rolled out their new HIV
diagnostic kit and the increased effectiveness of third party OEM and
international distributor sales

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Item 2. Managements Discussion and Analysis (Continued)

Results of Operations  Continued

Cost of goods sold for the three months ended June 30, 2002 of $191,615
represented a 28% increase from cost of goods sold of $149,935 for the same
three-month period in 2001. The gross margin for the second quarter of 2002
increased to 16% from a 15% gross margin for the same period in 2001.

For the six months ending June 30, 2002, cost of goods sold of $369,525
represents an increase of 32% from the cost of goods sold for the six months
ending June 30, 2001. The gross margin for the six months ending June 30, 2002
was 14% compared to 15% for the six months ending June 30 2001. The decline in
the 6-month gross margin year to year is a result of a reclassification of
certain Selling, General and Administrative costs to Manufacturing Overhead.
This change took place beginning in January 2002. Had this reclassification been
made in 2001 as well, the reported gross margin for the first six months of 2001
would have been reduced to approximately 5%. These reclassifications
have no effect on the reported profit or loss for either year.

Selling, general and administrative expenses for the second quarter ending June
30, 2002 were $160,701, a reduction of 31% as compared with selling, general
and administrative costs of $232,225 for the same period in 2001. Selling,
general and administrative expenses for the six months ended June 30, 2002 were
$334,840 a reduction of 29% as compared with selling, general and administrative
costs of $456,114 for the first six months of 2001. The reduced selling, general
and administrative expenses occurred due primarily to a reduction in general
staffing and the reduced use of consultants along with reclassification of
certain of these costs to Manufacturing Overhead beginning in January 2002.

Interest expense for the second quarter ending June 30, 2002 of $10,381
decreased by 77% compared to the interest expense for the second quarter ending
June 30 2001 of $45,030. Interest expense for the six-month period ending June
30, 2002 of $17,898 decreased by 80% compared to interest expense for the
six-month period ending June 30, 2001 of $88,195. Elimination and conversion of
debt (primarily Progen notes) at the end of the third quarter of 2001 accounted
for the major reduction in interest expense noted for both the second quarter
and 6-month periods.

Extraordinary income of $18,024 in the second quarter ending June 30, 2002
resulted from premium pricing to one of our major customers in excess of their
contracted pricing to provide accelerated deliveries of their product. The
amount of sales dollars in excess of the contracted pricing was accounted for as
extraordinary income.

The net loss for the second quarter ending June 30, 2002 was ($118,913), a 50%
reduction from the second quarter ending June 30, 2001 loss of ($239,232). Total
net loss for the first six months ending June 30, 2002 was ($276,668), a 42%
reduction from the comparable six-month period ending June 30 2001 loss of
($483,158).

Cash used for operations amounted to $181,389 for the six months ended June 30,
2002 as compared to $115,583 of cash used in the first six months of 2001. We
had no property and equipment expenditures for the quarter. Net cash provided
from financing activities totaled $163,672 for the six months ended June 30,
2002 primarily due to the issuance of notes payable

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Item 2. Managements Discussion and Analysis (Continued)

Financial Condition and Liquidity  Continued

of $165,000. To support its anticipated cash needs, the Company will be required
to raise additional capital through borrowings or equity financing. There can be
no assurance that his will be achieved. The Company is working in 2002 to
maintain steady relations with creditors while it strives to improve sales and
cash flow.

The Company will continue to be reliant upon investor funding sources until the
unit sales volumes generates sufficient revenue to support the Companys
operations. There can be no assurance that the Company will continue to receive
investor funding or that the Company will be able to generate the sales volume
required to meet or exceed the cost of operations.




PART II. OTHER INFORMATION




Item 2(c). Changes in Securities and use of proceeds

No stock was issued during the second quarter ending June 30, 2002. During the
first quarter ending March 31, 2002 Zaxis International Inc. issued 15,000
shares of Common Stock, in a transaction exempt from regulations under the
Securities Act of 1933, for services valued at $1,650.




Item 3. Default upon Senior Securities

At June 30, 2002, the Company was delinquent on note principal payments of
approximately $15,000 and interest payments of $6,213. The Company is attempting
to work with its note holders to extend the timing of payments.




Item 5. Other Information

On or about March 15, 2001, the Company entered into a Plan and Agreement of
Merger (the Merger Agreement) with Online Testing Center, Inc. (OTC)
relating to a proposed acquisition of OTC through a merger of OTC with and into
the Company. Consummation of the Merger Agreement was subject to a number of
conditions and provided for certain termination rights. The Company notified OTC
that it was terminating the Merger Agreement on April 6, 2001. OTC has alleged
that the termination was invalid and that it intended to pursue its rights to
enforce the Merger Agreement. To date, the Company is not aware that any action
has commenced. Management of the Company believes that it had sufficient legal
grounds to terminate the Merger Agreement and has no liability in any asserted
action.

On August 12, 2002, the Company received notification of possible litigation
involving a former employee respect to a bonus payment note issued to the
employee by the Company. This notification has been forwarded to legal counsel
for review




Item 6. Exhibits and Reports on Form 8-K

None

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

|                |  |                                                                                                                   
|--------------- |  | ------------------------------------------------------------------------------------------------------------------
|                |  | Zaxis International Inc.
(Registrant)                                                                             
|               
|August 19, 2002 |  | BY: S/S
Leonard P. TannenLeonard P. Tannen, President &
Chief Executive Officer and Acting Chief
Financial Officer
|               
|               

CEO/CFO CERTIFICATION

The undersigned CEO and Acting CFO hereby certifies that this periodic report
containing the financial statements of Zaxis International, Inc. fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934 and that the information contained in this report fairly presents, in
all material respects, the financial condition and result of operations of the
Company.

|                                                                                                                                          |  |       |  |                
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | ---------------
|BY: S/S Leonard P.
Tannen
Leonard P. Tannen
President & Chief Executive Officer,
Acting Chief Financial Officer
Zaxis International, Inc. |  | Date: |  | August 19, 2002

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