-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BEj/2O4P0UOZQHuDTJGKn3h4vHMe9js5aJTyNvpJ4iJPnX/unR7CMD6kfTfZkFFM 6qzcjTJcdegRGALpzpM49Q== 0001010924-00-000042.txt : 20000516 0001010924-00-000042.hdr.sgml : 20000516 ACCESSION NUMBER: 0001010924-00-000042 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDIZONE INTERNATIONAL INC CENTRAL INDEX KEY: 0000753772 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 870412648 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 002-93277-D FILM NUMBER: 635493 BUSINESS ADDRESS: STREET 1: 144 BUENA VISTA CITY: STINSON BEACH STATE: CA ZIP: 94970 BUSINESS PHONE: 4158680300 MAIL ADDRESS: STREET 1: P.O. BOX 742 CITY: STINSON BEACH STATE: CA ZIP: 94970 FORMER COMPANY: FORMER CONFORMED NAME: MADISON FUNDING INC DATE OF NAME CHANGE: 19860413 10QSB 1 QUARTERLY REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) ___ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 __ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________ Commission File Number 2-93277-D MEDIZONE INTERNATIONAL, INC. (Exact name of small business issuer as specified in its charter) Nevada 87-0412648 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 144 Buena Vista P.O. Box 742 Stinson Beach, CA 94970 (Address of principal executive offices, Zip Code) (415) 868-0300 (Registrant's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes [X] No [ ] At May 10, 2000, there were 155,140,798 shares of the registrant's common stock issued and outstanding. Transitional Small Business Disclosure Format (Check one): Yes __ No X -- MEDIZONE INTERNATIONAL, INC. FORM 10-QSB INDEX March 31, 2000 Page Number Part I - Financial Information Item 1 - Financial Statements Consolidated Balance Sheet: -March 31, 2000 and December 31, 1999 3 Consolidated Statement of Operations: -For the Three Months Ended March 31, 2000 and 1999 4 Consolidated Statement of Cash Flow -For the Three Months Ended March 31, 2000 and 1999 5 Notes to Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis or Plan of Operation 7 Part II - Other Information Item 6 - Exhibits and Reports on Form 8-K 9 MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARY (A Development Stage Company) CONSOLIDATED BALANCE SHEET March 31, 2000 and December 31, 1999
March 31, December 31, 2000 1999 ------------------ ----------------- (Unaudited) Cash and cash equivalents $ 309,495 $ 4,388 ------------------ ----------------- Total Current Assets 309,495 4,388 ------------------ ----------------- 19,763 5,667 ------------------ ----------------- Receivable from affiliate - - ------------------ ----------------- Total Other Assets - - ------------------ ----------------- $ 329,258 $ 10,055 ================== ================= Accounts payable $ 234,681 $ 395,370 Accrued expenses 316,655 527,045 Current portion of long-term obligations 280,491 280,491 ------------------ ----------------- Total Current Liabilities 831,827 1,202,906 ------------------ ----------------- Common stock 155,616 149,888 Additional paid-in capital 13,163,754 12,676,882 Deficit accumulated the development stage (13,821,939) (14,019,621) ------------------ ----------------- Total Stockholders' Equity (Deficit) (502,569) (1,192,851) ------------------ ----------------- $ 329,258 $ 10,055 ================== =================
See accompanying notes. MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARY (A Development Stage Company) CONSOLIDATED STATEMENT OF OPERATIONS
Three Three Six Six Months Months Months Months Ended Ended Ended Ended 3/31/00 3/31/99 6/30/00 6/30/99 ------------ ------------ ----------- ---------- REVENUE $ - $ - $ - $ - COST OF SALES - - - - ------------ ------------ ----------- ---------- Gross Profit - - - - ------------ ------------ ----------- ---------- COSTS AND EXPENSES Research and development - - - - Depreciation and amortization 835 486 General and administrative 210,873 26,995 - - ------------ ------------ ----------- ---------- Total Costs and Expenses 211,708 27,481 - - ------------ ------------ ----------- ---------- LOSS BEFORE OTHER INCOME (EXPENSE) (211,708) (27,481) - - ------------ ------------ ----------- ---------- OTHER INCOME (EXPENSE) Restitution proceeds 415,000 - Interest expense (5,610) (5,610) - - Interest income - - - - ------------ ------------ ----------- ---------- Total Other Income(Expense)- net 409,390 (5,610) - - ------------ ------------ ----------- ---------- LOSS BEFORE INCOME TAXES 197,682 (33,091) - - INCOME TAX BENEFIT (PROVISION) - - - - ------------ ------------ ----------- ---------- NET INCOME (LOSS) $ 197,682 $ (33,091) $ - $ - ============ ============ =========== ========== NET INCOME (LOSS) PER COMMON SHARE Basic $ 0.00 $ (0.00) #DIV/0! #DIV/0! ============ ============ =========== ========== Diluted $ 0.00 $ (0.00) #DIV/0! #DIV/0! ============ ============ =========== ========== AVERAGE COMMON AND EQUIVALENT SHARES Basic 155,342,465 149,074,582 - - ============ ============ =========== ========== Diluted 181,203,014 149,074,582 - - ============ ============ =========== ========== Three Three Six Six Months Months Months Months Ended Ended Ended Ended 3/31/00 3/31/99 6/30/00 6/30/99 ------------ ------------ ----------- ---------- Net income (loss) available to common shareholders $ 197,682 $ (33,091) $ - $ - ============ ============ =========== ========== Weighted average shares 155,342,465 149,074,582 - - Effect of dilutive securities 25,860,549 - - - ------------ ------------ ----------- ---------- 181,203,014 149,074,582 - - ============ ============ =========== ========== Basic income (loss) per share (based on weighted average shares) $ 0.00 $ (0.00) #DIV/0! #DIV/0! ============ ============ =========== ========== Diluted income (loss) per share $ 0.00 $ (0.00) #DIV/0! #DIV/0! ============ ============ =========== ==========
See accompanying notes. MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARY (A Development Stage Company) CONSOLIDATED STATEMENT OF CASH FLOWS For the Three months Ended March 31, 2000 and 1999
March 31, March 31, 2000 1999 ----------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 197,682 $ (33,091) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization 835 486 Issuance of stock for services 272,600 - Interest expense 5,610 5,610 Change in operating assets and liablilites Prepaid expenses and deposits - - Accounts payable and other liabilities (376,689) 4,303 ----------------- --------------- 100,038 (22,692) ----------------- --------------- CASH FROM INVESTING ACTIVITIES Acquisition of property and equipment (14,931) - ----------------- --------------- ----------------- --------------- (14,931) - ----------------- --------------- CASH FROM FINANCING ACTIVITIES Proceeds from issuance of common stock 220,000 15,556 ----------------- --------------- 220,000 15,556 ----------------- --------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 305,107 (7,136) CASH AND CASH EQUIVALENTS Beginning of period 4,388 7,643 ----------------- --------------- End of period $ 309,495 $ 507 ================= =============== SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the period for: Interest $ - $ - ================= =============== Income taxes $ - $ - ================= =============== NON-CASH INVESTING AND FINANCING ACTIVITIES Issuance of common stock for services $ 272,600 $ - ================= ===============
See accompanying notes. MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARY (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 - Basis of Presentation The financial information included herein is unaudited and has been prepared consistent with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, these financial statements do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. These statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999. In the opinion of management, these financial statements contain all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim period presented. The results of operations for the three-month periods ended March 31, 2000 and 1999 are not necessarily indicative of the results to be expected for the full year. 2 - Income (Loss) Per Share Following is a reconciliation of the numerators of the basic and diluted income (loss) per share for the three months ended March 31, 2000 and 1999: Three Three Months Months Ended Ended 3/31/00 3/31/99 ------------ ------------ Net income (loss) available to common shareholders $ 197,682 $ (33,091) ============ ============ Weighted average shares 155,342,465 149,074,582 Effect of dilutive securities 25,860,549 - ------------ ------------ 181,203,014 149,074,582 ============ ============ Basic income (loss) per share (based on weighted average shares) $ 0.00 $ (0.00) ============ ============ Diluted income (loss) per share $ 0.00 $ (0.00) ============ ============ 3 - Capital Stock During the quarter ended March 31, 2000, the Company issued 3,142,857 common shares from the exercise of warrants at $0.07 per share. The Company also issued 2,115,000 shares and 470,000 shares for services at $0.09 per share and $0.175 per share, respectively. Item 2 - Management's Discussion and Analysis or Plan of Operation The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited Consolidated Financial Statements and Notes thereto appearing elsewhere in this Quarterly Report on Form 10-QSB. The Company is a development stage company, primarily engaged in research and development of ozone based treatment for diseases and health problems caused by lipid enveloped viruses, including, for example, Acquired Immune Deficiency Syndrome (AIDS), Hepatitis B, Hepatitis C and Herpes, and in the development of technology for the decontamination of blood, blood products and veterinarian serum products. The Company is also pursuing the development of external applications of its technology for medical purposes. The Company has not generated, and cannot predict when or if it will generate, significant revenues or sufficient cash flow to fund its continuing operations. It has funded its operations to date primarily through the sale of its securities. The technology and its uses are subject to regulations of the U.S. Food and Drug Administration ("FDA") and its counterparts in foreign countries. The Company does not intend to sell equipment or supplies for ozone-generating purposes until it receives required government approvals. Testing and trials can be conducted on a limited basis for research purposes and to establish efficacy of machines and applications, in order to support applications for government approvals. In November of 1997, Dr. Sunnen, the Director of Research (who later was appointed president of the Company on April 15, 1998) was instrumental in establishing a protocol for Phase II research to be performed at several leading Italian university research facility under the auspices of the European Union. It has now been determined, based on information regarding the low toxicity levels demonstrated in earlier research, that European Union health authorities will accept completion of a small-scale Phase I clinical study with 8-10 patients prior to starting the Phase II trial. The Company is currently preparing submission papers for a study designed to meet these criteria. The Company also has recently conducted trial treatment studies on eight patients infected with Hepatitis C. This study was conducted through the guidance of Dr. William Hitt, a member of the Company's board of directors. The tests indicated significant reductions in enzyme levels as measured by SGOT and SGPT standard test procedures of the patients participating in the study. Enrollment has begun for a new 10-12 patients study of Hepatitis C, with clinical data analyzed by an independent facility in Los Angeles, California. Testing will be conducted prior to, during and following the completion of treatment and a six-week convalescence follow-up. In March 2000, the Company received notification that it had been granted a patent by the US Patent and Trademark Office on its application for a patent covering the external applications of ozone for medical purposes. The patent application, no. 09/126,504, had been filed on July 30, 1998. Problems that might be addressed by such uses would include treatment of severe burns, infections of ulcerations of the skin (such as those that might be caused by advanced stages of diabetes) or other wounds. In connection with this use of ozone, the Company has been granted a US Patent titled External Use of Ozone/Oxygen for Pathogenic Conditions. Foreign applications are being processed. In addition, the Company owns patents covering its ozone decontamination technology filed in the United States (no. 4,632,980, December 30, 1986 and no. 5,052,382, October 1, 1991), and related patents granted in several foreign countries. These patents form the basis for the Company's technology used in the studies described above. The Company has also been active in pursuing veterinary trials investigating the effectiveness of ozone in deactivation of viruses in serum products. The Phase I trial on healthy serum products was concluded in October 1999 and was deemed successful by the Company's researchers. Dr. Sunnen expects that a Phase II trial should also be successful based on the results of the first round. The Phase II trial commenced in November and will investigate the deactivation rates of seven different viruses and is expected to be completed in 12 to 18 months. If the results are satisfactory, the Company believes its technology can be used in the veterinary medicine field to form the basis for the creation of a line of safer and more effective vaccines. There is no assurance that the results of such tests and studies will be favorable to the Company or that regulatory approval will be received based on such results. Results of Operations General From its inception (January 1986), the Company has been a development stage company primarily engaged in research into the medical uses of ozone. The Company has not generated, and cannot predict when or if it will generate, revenues or sufficient cash flow to fund its continuing operations. Three Months Ended March 31, 2000 compared to the Three Months Ended March 31, 1999: There were no sales during the quarters ended March 31, 2000 or 1999. Cash of $415,000 was provided in the first three months of 2000 by the receipt of restitution payments from a former officer and director. The Company made no expenditures for research and development in either period. General and administrative expenses in the first quarter of 2000 were $211,708 compared to $27,481 during the first quarter of 1999. These expenses include professional fees, payroll, insurance costs and travel expenses. Interest expense accrued during the three months ended March 31, 2000 was $5,610, compared to $5,610 in the three months ended March 31, 1999. Liquidity and Capital Resources At March 31, 2000, the Company had a working capital deficiency of $522,332 and stockholders' deficiency of $502,569. At December 31, 1999, the Company had a working capital deficiency of $1,198,518 and stockholders' deficiency of $1,192,851. Net cash provided from operating activities was $100,038 for the three months ended March 31, 2000. During the three months ended March 31, 1999, the Company used $22,692 in operating activities. Cash of $415,000 was provided in the first three months of 2000 by the receipt of restitution payments from a former officer and director and $220,000 was provided by the sale of the Company's securities through the exercise of outstanding stock purchase warrants. During the quarter ended March 31, 2000, the Company issued stock and paid cash to settle outstanding liabilities. These transactions include the following: 1. Payment of $27,500 to former legal counsel of the Company to retire an outstanding obligation totaling $69,392; 2. Payment of $15,000 and issuance of 20,000 shares of common stock of the Company to settle an obligation totaling $39,824 to a former legal counsel for the Company; and 3. Payment of $40,000 and issuance of 100,000 shares of common stock to the Company's patent counsel to settle an outstanding bill of $102,000. The Company will continue to require additional funding to enable it to fund research necessary to make the appropriate regulatory application and continue operations. It is expected that these funds will be provided by the sale of the Company's securities. The Company has developed a strategy, which it believes will enable it to fund requisite research necessary to gain regulatory approvals and continue operations. This strategy depends upon the sale of the Company's common stock or other securities to certain accredited investors. The Company has also structured and recently implemented a cohesive scientific plan encompassing a number of research initiatives, which it believes may enable it to successfully achieve its primary goals. Those goals include the submission of appropriate research data to the FDA Center for Drugs and Biologics for the approval of its blood decontamination process and to the FDA Division of Antiviral Drug Products for approval of Phase I human clinical trial status for the treatment of AIDS and Hepatitis. There can be no assurance that either the funding strategy or the scientific plan will be successful. Failure to obtain requisite funding would have a materially adverse effect on the Company and its financial condition. The Company recognizes that, if it is unable to raise additional capital, it may find it necessary to substantially reduce, or cease operations. Forward-Looking Statements and Risks Affecting the Company The statements contained in this Report on Form 10-QSB that are not purely historical are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act. These statements regard the Company's expectations, hopes, beliefs, anticipations, commitments, intentions and strategies regarding the future. They may be identified by the use of words or phrases such as "believes," "expects," "anticipates," "should," "plans," "estimates," and "potential," among others. Forward-looking statements include, but are not limited to, statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations regarding the Company's financial performance, revenue and expense levels in the future and the sufficiency of its existing assets to fund future operations and capital spending needs. Actual results could differ materially from the anticipated results or other expectations expressed in such forward-looking statements for the reasons detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 under the headings "Description of Business" and "Risk Factors." The fact that some of the risk factors may be the same or similar to the Company's past reports filed with the Securities and Exchange Commission means only that the risks are present in multiple periods. The Company believes that many of the risks detailed here and in the Company's SEC filings are part of doing business in the industry in which the Company operates and competes and will likely be present in all periods reported. The fact that certain risks are endemic to the industry does not lessen their significance. The forward-looking statements contained in this report are made as of the date of this Report and the Company assumes no obligation to update them or to update the reasons why actual results could differ from those projected in such forward-looking statements. Among others, risks and uncertainties that may affect the business, financial condition, performance, development, and results of operations of the Company include: |X| rigorous government scrutiny and regulation of the products and planned products of the Company; |X| potential effects of adverse publicity regarding ozone and related technologies or industries; |X| failure of the Company to sustain or manage growth including the failure to continue to develop new products; and |X| the ability of the Company to obtain needed financing. Part II - Other Information Item 1 - Legal Proceedings On December 3, 1999, the Company filed a complaint in the Third Judicial District Court of Salt Lake County, Utah (Civil No. 990912073) against its former Chief Financial Officer, Arthur P. Bergeron. Among other things, the complaint filed by the Company sought a declaration from the court regarding the enforceability of Mr. Bergeron's employment contract, the right of the Company to terminate his employment and other relief. On April 14, 2000, the parties entered into a settlement agreement, under the terms of which the Company agreed to withdraw its complaint with prejudice and paid Mr. Bergeron $35,000. Mr. Bergeron waived any further claim for wages or other compensation under his employment agreement and consented to the cancellation of 2,000,000 shares of common stock issued to him during the tenure of the Company's former President and CEO, Joseph R. Latino. Both parties executed mutual releases of all claims against each other. Following the takeover and management change of June 12, 1997, new management learned that there had been serious irregularities and possible fraud perpetrated upon the Company by the former President & CEO, Mr. Latino. As the seriousness of those past events became more evident, management presented the information it had gathered to the New York District Attorney's Office. That office commenced a criminal investigation that ultimately resulted in charges being brought against Mr. Latino. On January 25, 2000, Mr. Latino was sentenced to serve 1.5 to 4.5 years and pay restitution in the amount of $415,869 to Medizone under a plea bargain that dropped all felony charges except for one count of Grand Larceny in the Second Degree. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description 27 Financial Data Schedule 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. MEDIZONE INTERNATIONAL, INC. (Registrant) /s/ Edwin G. Marshall --------------------- Edwin G. Marshall, Chairman and Chief Executive Officer (Principal Executive Officer) /s/ Kevin R. Andersen --------------------- Kevin R. Andersen, Chief Financial Officer(Principal Accounting Officer) May 12, 2000 EX-27 2 FDS --
5 3-MOS Dec-31-2000 Jan-1-2000 Mar-31-2000 309,495 0 0 0 0 309,495 25,556 5,793 329,258 831,827 280,491 0 0 155,616 (658,185) (502,569) 0 0 0 0 211,708 0 5,610 197,682 0 197,682 0 0 0 197,682 0 0
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