-----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, VzusbnH3UU1lG1Bi8Msm9x+u3je4Y1UF4RzTwhmJwiEBQtwmXf2Jd9+NWd13oKg0 xVHpLGZIbuT6f1to61z/AQ== 0001010924-01-500132.txt : 20020413 0001010924-01-500132.hdr.sgml : 20020413 ACCESSION NUMBER: 0001010924-01-500132 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011220 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: 1934 Act SEC FILE NUMBER: 002-93277-D FILM NUMBER: 1819304 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 f10-qsb.txt QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - ---- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001 __ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANITION 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 of incorporation or organization) (I.R.S. Employer Identification No.) 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 December 17, 2001, there were 155,338,019 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 September 30, 2001
Page Number Part I -- Financial Information Item 1 -- Financial Statements Condensed Consolidated Balance Sheet: September 30, 2001 (Unaudited) and December 31, 2000.................................3 Condensed Consolidated Statements of Operations (Unaudited): For the Three Months and Nine Months Ended September 30, 2001 and 2000...............4 Condensed Consolidated Statements of Cash Flow (Unaudited) For the Nine Months Ended September 30, 2001 and 2000................................5 Notes to Condensed Consolidated Financial Statements.............................6 Item 2--Management's Discussion and Analysis or Plan of Operation.............................7 Part II -- Other Information Item 2-- Changes in Securities and Use of Proceeds............................................9 Item 5-- Other Information....................................................................9
2 MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARY (A Development Stage Company) CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2001 and December 31, 2000 ASSETS
September 30, December 31, 2001 2000 ------------------ ------------------ (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 74 $ 2,368 ------------------ ------------------ Total Current Assets 74 2,368 ------------------ ------------------ PROPERTY AND EQUIPMENT (Net) 10,911 14,977 ------------------ ------------------ Total Assets $ 10,985 $ 17,345 ================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable $ 372,315 $ 339,774 Accrued expenses 641,789 371,651 Notes payable 303,491 280,491 ------------------ ------------------ Total Current Liabilities 1,317,595 991,916 ------------------ ------------------ Total Liabilities 1,317,595 991,916 ------------------ ------------------ STOCKHOLDERS' EQUITY (DEFICIT) Common stock; 250,000,000 shares authorized of $0.001 par value, 155,338,019 and 153,915,798 shares issued and outstanding, respectively 155,338 153,916 Additional paid-in capital 15,455,220 15,201,661 Deficit accumulated during the development stage (16,917,168) (16,330,148) ------------------ ------------------ Total Stockholders' Equity (Deficit) (1,306,610) (974,571) ------------------ ------------------ Total Liabilities and Stockholders' Equity (Deficit) $ 10,985 $ 17,345 ================== ==================
The accompanying notes are an integral part of these consolidated financial statements. MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARY (A Development Stage Company) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
From Inception on For the For the January 31, Three Months Ended Nine Months Ended 1986 Through September 30, September 30, September 30, ------------------------------- --------------------------------- 2001 2000 2001 2000 2001 -------------- --------------- --------------- ---------------- --------------- REVENUE $ - $ - $ - $ - $ 133,349 -------------- --------------- --------------- ---------------- --------------- EXPENSES Cost of sales - - - - 103,790 Research and development 42,738 7,585 109,833 88,393 2,687,686 General and administrative 125,914 144,181 455,929 512,059 12,572,411 Expense on extension of warrants - - - - 1,866,857 Bad debt expense - - - - 48,947 Depreciation and amortization 1,356 1,595 4,066 4,026 37,085 -------------- --------------- --------------- ---------------- --------------- Total Expenses 170,008 153,361 569,828 604,478 17,316,776 -------------- --------------- --------------- ---------------- --------------- Loss from Operations (170,008) (153,361) (569,828) (604,478) (17,183,427) -------------- --------------- --------------- ---------------- --------------- OTHER INCOME (EXPENSES) Minority interest in loss - - - - 26,091 Other income - - - - 19,780 Gain on sale of subsidiary - - - - 208,417 Interest expense (5,972) (5,610) (17,192) (16,830) (882,767) -------------- --------------- --------------- ---------------- --------------- Total Other Income (Expenses) (5,972) (5,610) (17,192) (16,830) (628,479) -------------- --------------- --------------- ---------------- --------------- LOSS BEFORE EXTRAORDINARY ITEMS (175,980) (158,971) (587,020) (621,308) (17,811,906) -------------- --------------- --------------- ---------------- --------------- EXTRAORDINARY ITEMS Lawsuit settlement - - - 415,000 415,000 Debt forgiveness - - - - 479,738 -------------- --------------- --------------- ---------------- --------------- Total Extraordinary Items - - - 415,000 894,738 -------------- --------------- --------------- ---------------- --------------- NET LOSS $ (175,980) $ (158,971) $ (587,020) $ (206,308) $ (16,917,168) -------------- =============== =============== ================ =============== BASIC INCOME (LOSS) PER SHARE Loss from operations $ (0.00) $ (0.00) $ (0.00) $ (0.00) Extraordinary items 0.00 0.00 0.00 0.00 -------------- --------------- --------------- ---------------- Basic Income (Loss) Per Share $ (0.00) $ (0.00) $ (0.00) $ (0.00) ============== =============== =============== ================ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 155,338,019 153,615,798 154,956,253 154,191,354 ============== =============== =============== ================
The accompanying notes are an integral part of these consolidated financial statements. 4 MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARY (A Development Stage Company) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2001 and 2000 (Unaudited)
From Inception on For the January 31, Nine Months Ended 1986 Through September 30, September 30, -------------------------------------- 2001 2000 2001 ------------------ ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (587,020) $ (206,308) $ (16,917,168) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 4,066 4,026 37,085 Stock issued for services - 272,600 3,015,916 Expense for extension of warrants below market value - - 1,866,857 Bad debt expense - - 48,947 Minority interest in loss - - (26,091) Loss on disposal of assets - - 693,752 Gain on settlement of debt - - (188,510) Gain on lawsuit settlement - - (415,000) Changes in assets and liabilities: (Increase) decrease in prepaid expenses and deposits - - (48,947) Increase (decrease) in accounts payable 32,541 (150,186) 747,395 Increase (decrease) in accrued expenses 270,138 (120,671) 1,044,811 ------------------ ------------------ ------------------ Net Cash Used by Operating Activities (280,275) (200,539) (10,140,953) ------------------ ------------------ ------------------ CASH FLOWS FROM INVESTING ACTIVITIES Organization costs - - (8,904) Purchase of fixed assets - (14,931) (39,090) ------------------ ------------------ ------------------ Net Cash Used by Investing Activities - (14,931) (47,994) ------------------ ------------------ ------------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from lawsuit settlement - - 415,000 Principal payments on notes payable - - (192,774) Cash received from notes payable 23,000 - 1,129,518 Capital contributions - - 421,847 Stock issuance costs - - (105,312) Increase in minority interest - - 14,470 Issuance of common stock for cash 254,981 220,000 8,506,272 ------------------ ------------------ ------------------ Net Cash Provided by Financing Activities 277,981 220,000 10,189,021 ------------------ ------------------ ------------------ NET INCREASE (DECREASE) IN CASH (2,294) 4,530 74 CASH AT BEGINNING OF PERIOD 2,368 4,388 - ------------------ ------------------ ------------------ CASH AT END OF PERIOD $ 74 $ 8,918 $ 74 ================== ================== ================== SUPPLEMENTAL CASH FLOW INFORMATION CASH PAID FOR: Interest $ - $ - $ 26,483 Income taxes $ - $ - $ - NON-CASH FINANCING ACTIVITIES Stock issued for services $ - $ 272,600 $ 3,015,916 Stock issued for conversion of debt $ - $ - $ 4,071,493 Stock issued for license agreement and patent $ - $ - $ 693,752
The accompanying notes are an integral part of these consolidated financial statements. 6 MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARY (A Development Stage Company) NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2001 and December 31, 2000 NOTE 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-KSB for the year ended December 31, 2000. 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 nine months ended September 30, 2001 and 2000 are not necessarily indicative of the results to be expected for the full year. NOTE 2 - LOSS PER SHARE Following is a reconciliation of the numerators of the basic and diluted loss per share for the three and nine months ended September 30, 2001 and 2000:
For the For the Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- --------------------------------- 2001 2000 2001 2000 ---------------- --------------- --------------- ---------------- Net loss available to common shareholders $ (175,980) $ (158,971) $ (587,020) $ (206,308) ================ =============== =============== ================ Weighted average shares 155,338,019 153,615,798 154,956,253 154,191,354 Effect of dilutive securities - - - - ---------------- --------------- --------------- ---------------- 155,338,019 153,615,798 154,956,253 154,191,354 ================ =============== =============== ================ Basic loss per share (based on weighted average shares) $ (0.00) $ (0.00) $ (0.00) $ (0.00) ================ =============== =============== ================
NOTE 3 - GOING CONCERN The Company's consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has historically incurred significant losses which have resulted in an accumulated deficit of $16,330,148 at December 31, 2000 which raises substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. 6 Item 2 - Management's Discussion and Analysis or Plan of Operation The following discussion and analysis of financial condition and results of operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes thereto appearing elsewhere in this Quarterly Report on Form 10-QSB. Medizone International 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. We are also pursuing the development of external applications of its technology for medical purposes. The Company has never generated, and cannot predict when or if it will generate, significant revenues or sufficient cash flow to fund continuing operations. The Company has funded operations to date primarily through the sale of its securities. The Company's 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 in a particular jurisdiction until it receives required government approvals for that jurisdiction. According to data provided to the Company by Dr. William Hitt, 40 patients were treated at his clinic in Tijuana, Mexico during 1998 through 2000 using major autohemotherapy, a blood therapy treatment protocol, on an outpatient basis with the following results. The average treatment period was 30 days. Viral load testing (detecting the levels of the virus present), as well as standardized SGOT and SGPT tests of liver enzyme levels were conducted before the start of the treatment, immediately following treatment, and nine months after treatment without any further medical intervention during the post-treatment period. No adverse side effects were observed or reported in any of the participants. SGOT and SGPT scores returned to normal ranges and viral load reductions averaged 5 log or 99.9% reduction. In the six-month post-treatment follow up testing, Dr. Hitt reported that 38 of the 40 patients tested at inactive viral levels for hepatitis C virus, indicating the possibility that the disease had been cleared by the ozone therapy they received. He also reported that two of the patients had increased viral levels at the end of the treatment test period; however, even those patients enjoyed significantly reduced viral load levels when compared to pre-treatment test results. Dr. Hitt's trials were not conducted as a blind study as required by the FDA and the Company regards these results only as anecdotal information. Further studies are needed to verify the effectiveness of the science. The Company has entered into a research agreement with the national research center of a foreign country to proceed with a Phase I/II human hepatitis C trial. The protocols for the proposed testing are designed with the intention of producing a peer-reviewed, journal-published article on our ozone therapy for the hepatitis C virus. The trial will be blind and the data produced will be shared by the country of origin and laboratories in Canada. The Company intends to pursue future research initiatives in Canada and this proposed trial is considered a major step toward that objective. There will be substantial collaborative efforts made to share information with appropriate regulatory bodies in both countries. The Company will not be able to pursue this additional testing without additional financing. Although the Company has continued to pursue several financing opportunities, the Company cannot predict when or if sufficient additional financing will be obtained. Results of Operations General From its inception in January 1986, Medizone International has been a development stage company primarily engaged in research into the medical uses of ozone. The Company has never generated, and cannot predict when or if it will generate revenues or sufficient cash flow to fund continuing operations and planned research or clinical trials. Three Months Ended September 30, 2001 compared to the Three Months Ended September 30, 2000 There were no sales during the quarters ended September 30, 2001, or 2000. The Company made expenditures for research and development of $42,738 in the third quarter of 2001, compared to $7,585 during the third quarter of 2000. Since inception the Company has spent a total of $2,687,686 for research and development. General and administrative expenses in the third quarter of 2001 were $125,914 compared to $144,181 during the third quarter of 2000. These expenses include professional fees, payroll, insurance costs and travel expenses. 7 Interest expense accrued during the three months ended September 30, 2001 was $5,972 compared to $5,610 in the three months ended September 30, 2000. Nine Months Ended September 30, 2001 compared to the Nine Months Ended September 30, 2000: There were no sales during the nine months ended September 30, 2001, or 2000. Cash of $415,000 was provided during the first quarter of 2000 by receipt of a restitution payment received from a former officer and director. The Company made expenditures for research and development of $109,833 in the nine months ended September 30, 2001, compared to $88,393 during the nine months ended September 30, 2000. The primary source of funds for research and development and for operations during 2000 was the cash received in the restitution payment described above and from the sale of stock. General and administrative expenses in the first nine months of 2001 were $455,929 compared to $512,059 during the first nine months of 2000. These expenses include professional fees, payroll, insurance costs and travel expenses. Interest expense accrued during the nine months ended September 30, 2001 was $17,192, compared to $16,830 in the nine months ended September 30, 2000. Liquidity and Capital Resources At September 30, 2001, the Company had a working capital deficiency of $1,317,521 and stockholders' deficiency of $1,306,610. At December 31, 2000, the Company had a working capital deficiency of $989,548 and stockholders' deficiency of $974,571. Net cash used in operating activities was $280,275 for the nine months ended September 30, 2001. Cash of $254,981 was provided during the first nine months of 2001 from the sale and issuance of common stock. During the nine months ended September 30, 2000, net cash used in operating activities was $200,539. Cash of $220,000 was provided in the first nine months of 2000 by the sale of common stock through the exercise of outstanding stock purchase warrants. Given the Company's current negative cash flows, it will be difficult for the Company to continue as a going concern without an influx of capital. While management has continued to aggressively pursue potential financing opportunities, those efforts have to date produced only minimal results. As mentioned in our audited financial statements included with our Form 10-KSB, our audited consolidated financial statements have been prepared on the assumption that we will continue as a going concern. To date it has been necessary to rely upon financing from the sale of our equity securities to sustain operations. Additional financing will be required if we are to continue as a going concern. If additional financing cannot be obtained, we may be required to discontinue operations. Even if additional financing is available there can be no assurance that it will be on terms favorable to us. In any event, this additional financing will result in immediate and possibly substantial dilution to existing shareholders. Forward-Looking Statements and Risks 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 the words or phrases "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 or Plan of Operation regarding financial performance, revenue and expense levels in the future and the sufficiency of 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-KSB for the year ended December 31, 2000 under the headings "Description of Business" and "Risk Factors." The fact that some of the risk factors may be the same or similar to 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 its SEC filings are part of doing business in the industry in which it 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 8 differ from those projected in such forward-looking statements. Among others, risks and uncertainties that may affect the Company's business, financial condition, performance, development, and results of operations include: o Rigorous government scrutiny and regulation of our products and planned products; o Potential effects of adverse publicity regarding ozone and related technologies or industries; o Failure to sustain or manage growth including the failure to continue to develop new products; and o The ability to obtain needed financing. Part II--Other Information Item 2. - Changes in Securities and Use of Proceeds During the nine months ended September 30, 2001, the Company sold 1,422,221 common shares for $254,981 at prices ranging from $0.15 to $0.19 per share. The purchasers of these securities were accredited investors as that term is defined under the Securities Act of 1933 and the securities were sold in a private transaction pursuant to an exemption from the registration requirements under the Securities Act, specifically the exemption under Section 4(2) of the Securities Act applicable to offers and sales made to accredited investors only and offers and sales that are not made in a public offering. Item 5. -- Other Information. Subsequent Events This report is filed late due in large part to delays resulting from the travel schedule and other commitments of the Company's former Chief Financial Officer, who was out of the country and unavailable to assist with the completion of the financial report of the Company from mid-November through December 5, 2001. On December 13, the Company terminated the services of Kevin Andersen as Chief Financial Officer and named Steve Hanni as acting Principal Accounting Officer. Mr. Hanni is a certified public accountant engaged in private practice with the firm of Stayner & Company, Certified Public Accountants, in Salt Lake City, Utah. Mr. Hanni was previously a partner with the firm of HJ& Associates, the public accounting firm that acts as the Company's independent public accountant in connection with the audit of its annual reports and review of the quarterly financial reports of the Company. On December 18, 2001, Gerard V. Sunnen resigned as Director and as the Company's President and Director of Research, citing personal reasons. Under the bylaws of the Company, the remaining members of the Board of Directors may appoint a successor to fill Dr. Sunnen's vacated seat on the Board until the next annual meeting of shareholders. As of the date of this report the Board had not yet appointed a successor to Dr. Sunnen. 9 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) December 20, 2001 -----END PRIVACY-ENHANCED MESSAGE-----