Registration No. 333-__________
2018
WASHINGTON,
UNDER
Medizone International, Inc. | ||||
(Exact name of registrant as specified in its charter) |
Nevada | 5122 | 87-0412648 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (IRS Employer Identification No.) |
144 Buena Vista, P.O. Box 742, Stinson Beach, California 94970 Telephone (415) 868-0300
Edwin G. Marshall
Chief
Vice President, General Counsel
144 Buena Vista
P.O. Box 742
Stinson Beach, California 94970
(415) 868-0300
to
C. Parkinson Lloyd,
S. Main Street, Suite 900
2400
Telephone:
Facsimile: (801) 415-3500
Large accelerated filer | Accelerated filer | |||||
Non-accelerated filer ☐(Do not check if a smaller reporting company) | Smaller reporting company | |||||
Emerging growth company ☐ |
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Title of each class of securities |
| Amount to be |
| Proposed maximum offering price per share (2) |
| Proposed maximum aggregate offering price(3) |
| Amount of fee |
Common stock, $0.001 par value per share |
| 66,666,667 |
| $0.20 |
| $13,333,334 |
| $1,548 |
Total: |
| 66,666,667 |
| N/A |
| $13,333,334 |
| $1,548 |
|
Title of each class of securities to be registered | Amount to be registered(1) | Proposed maximum offering price per share (2) | Proposed maximum aggregate offering price(3) | Amount of registration Fee (4) | ||||||||||||
Common Stock, $0.001, par value per share | 22,233,427 | $ | 0.01975 | $ | 439,110.18 | $ | 54.67 |
(1) |
| We are registering |
(2) |
| The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(c) of the Securities Act, based upon the average of the high and low sales prices for the registrant’s Common Stock as reported on The OTC Markets (“OTCQB”) on April 2, 2018. |
(3) | Based on the |
(4) |
|
|
2018
66,666,667
of Common Stock
The Stock Purchase Agreement with Mammoth provides that Mammoth is committed to purchase up to $10,000,000 of our Common Stock. We may draw on the Equity Line from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Purchase Agreement, we have the right to “put,” or sell, up to $10,000,000 worth of shares of our Common Stock to L2 and SBI over a period of 36 months. This arrangement is also sometimes referred to in this prospectus as the “Equity Line.” For more information about the Equity Line, see the discussion beginning on page 1 of this prospectus. This prospectus also relates to the resale by the selling stockholders of up to 8,174,386 shares of Common Stock (4,087,193 by each selling stockholder) that are currently issued and outstanding that we issued to the selling stockholders as a commitment fee (the “Commitment Shares”) with respect to their entering into the Purchase Agreement.
Mammoth is an “underwriter”
Distribution” beginning on page 36.
Equity Line.
5.
April , 2018.
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General
corporation, our subsidiary, Medizone wasCanada Inc., and the Canadian Foundation for Global Health, a non-profit organization that is affiliated with us.
New Business Direction
Early in 2008, we began to consider other applications ofdisinfection solutions that are our core technologies and new technologies with lower development costs with the objective of moving us to revenue production in the shortest period of time. We began to pursue an initiative in the field of hospital sterilization. This change in focus was motivated in part by a review of published data on hospital-derived infections, an area of rapidly growing concern in the medical community. We are building on our experience with ozone technologies and its bio-oxidative qualities in pursuing this initiative. We have shifted our near term efforts towards one of our founding tenets, namely that under the right conditions, ozone can be extremely effective at sterilizing biological fluids (blood, serum, and plasma and plasma fractionates) as well as biologically contaminated equipment and spaces.
The primary emphasis of this new effort has been the development of a highly portable, low-cost, ozone-based technology (“AsepticSure™”) specifically for the purpose of decontaminating and sterilizing hospital surgical suites, emergency rooms, and intensive care units. The development pathway will be based on independent peer-reviewed science and engineering excellence. A government variant of AsepticSure™ is being developed for bio-terrorism countermeasures.
In addition to the hospital sterilization initiative, we have developed an ozone-destruct unit which is used following sterilization of the treated infrastructure to reverse the ozone gas (O3) in the space, and turn it back into O2 in a short period of time. We have initially targeted the treatment of a typically sized surgical suite including sterilization followed by ozone destruct to habitable standards in two hours or less. This short turn-around period is considered of great importance relative to commercialization of the technology.
Risks Associated With Our Business
Our ability to execute our strategy and capitalize on our competitive strengths is subject to a number of risks more fully discussed in the “Risk Factors” section immediately following this summary. Before you invest in our shares, you should carefully consider all of the information in this prospectus, including matters set forth under the heading “Risk Factors,” such as:
·
our history of losses and the fact that we are a development stage company with significant accumulated deficits, and we can expect losses to continue for the foreseeable future;
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our net operating losses and our lack of revenues will require that we finance our operations through the sale of our securities for the foreseeable future;
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the commercialization of our technology;
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technological advances by our competitors;
·
changes to regulatory requirements relating to environmental approvals for the treatment of infectious medical waste, capital needs to fund any delays or extensions of development programs;
·
delays in the manufacture of new and existing products by us or third party contractors;
·
market acceptance of our technology and related system;
·
the loss of any key employees;
·
delays in obtaining federal, state or local regulatory clearance for new installations and operations;
current business.
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·
changes in governmental regulations; and
·
availability of capital on terms satisfactory to us.
Company Information
We are organized in the State of Nevada.
· | our history of losses and the fact that we have significant accumulated deficits, and that we can expect losses to continue for the foreseeable future; |
· | our net operating losses and our lack of revenues will require that we finance our operations through the sale of our securities for the foreseeable future; |
| the commercialization of our technology; |
· | technological advances by our competitors; |
· | changes to regulatory requirements relating to environmental approvals for the disinfection of health care facilities and the capital needs to fund any delays or extensions of development programs; |
· | delays in the manufacture of new and existing products by us or third-party contractors; |
· | market acceptance of the AsepticSure® system; |
· | the loss of any key employees; |
· | delays in obtaining federal, state or local regulatory clearance for the AsepticSure® system |
· | changes in governmental regulations; and |
· | the availability of capital on terms satisfactory to us. |
Common Stock offered by |
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Common Stock outstanding before the Offering |
| |
Common Stock outstanding after the Offering |
| |
Terms of the Offering | The | |
Termination of the Offering |
| |
Use of Proceeds | We will not receive any proceeds from the sale of the shares of Common Stock offered hereunder by the | |
Plan of Distribution | The selling stockholders may, from time to time, sell any or all of their shares of Common Stock on the stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. For further information, see “Plan of Distribution” beginning on page 36. | |
Risk Factors | The Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See, “Risk Factors” beginning on page | |
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(1)
The number of shares of Common Stock to be outstanding after the Offering excludes 7,750,000 shares issuable upon the exercise of stock options at a weighted average price of $0.17 per share, outstanding as of December 31, 2010.
The Stock Purchase Agreement
On November 17, 2010, we entered into a Common Stock Purchase Agreement, which we refer toRISK FACTORS
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would result in the beneficial ownership by Mammoth of more than 4.9 percent of the then outstanding shares of our Common Stock. These maximum share and beneficial ownership limitations may not be waived by the parties.
This prospectus, and the registration statement of which it is a part, registers the re-sale by Mammoth of 66,666,667 shares of our Common Stock, $0.001 par value per share, which we may require Mammoth to purchase pursuant to the terms of the Stock Purchase Agreement.
As of December 31, 2010, there were 259,262,171 shares of our Common Stock outstanding (217,902,044 shares held by non-affiliates) excluding the 66,666,667 shares offered by Mammoth pursuant to this prospectus, none of which we had issued as of December 31, 2010. Up to 66,666,667 shares are offered hereby consisting of shares that we may sell to Mammoth. If all of the 66,666,667 shares offered by Mammoth hereby were issued and outstanding as of December 31, 2010, such shares would represent approximately 21 percent of the total Common Stock outstanding or approximately 31 percent of the non-affiliate shares of Common Stock outstanding, as of the December 31, 2010. Additionally, the 66,666,667 shares represent approximately 26 percent of the shares of our Common Stock issued and outstanding as of December 31, 2010 (not including the 66,666,667 shares), or approximately 31 percent of shares currently held by non-affiliates.
Under the terms of the Stock Purchase Agreement, we have the opportunity for a two-year period, commencing on the date on which the SEC first declares effective the registration statement of which this prospectus is a part, to require Mammoth to purchase up to $10,000,000 in shares of our Common Stock. For each share of our Common Stock purchased under the Stock Purchase Agreement, Mammoth will pay to us a purchase price equal to 75 percent of the lowest closing bid price during the five consecutive trading day period (the “Draw Down Pricing Period”) preceding the date a draw down notice (the “Draw Down Notice”) is delivered by us to Mammoth (the “Draw Down Date”) in a manner provided by the Stock Purchase Agreement. Subject to the limitations outlined below, we may, at our sole discretion, issue a Draw Down Notice to Mammoth, and Mammoth will then be irrevocably bound to purchase such sha res.
Each Draw Down Notice must specify the lowest purchase price during the Draw Down Pricing Period at which we will sell the shares to Mammoth, which shall not be less than 75 percent of the lowest closing bid price during the Draw Down Pricing Period. The Draw Down Notice will also include the aggregate dollar amount of the Draw Down, which will not be less than $25,000 and not more than $500,000 in any Draw Down Notice. There must be a minimum of 15 trading days between each Draw Down Notice. Regardless of the maximum amount indicated in the Draw Down Notice, Mammoth will not be obligated to purchase shares under any Draw Down Notice in an amount which, when added to the number of shares of Common Stock then beneficially owned by Mammoth, will result in Mammoth owning more than 4.9 percent of the outstanding shares of our Common Stock.
In making sales of our Common Stock to Mammoth under the Stock Purchase Agreement, we are relying on an exemption from the registration requirements of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder. The transaction involves a private offering, Mammoth has represented that it is an “accredited investor” and Mammoth has access to information about us and its investment in our securities.
In connection with the Stock Purchase Agreement, we granted registration rights to Mammoth, and agreed to register the resale of shares issued to Mammoth in connection with Draw Downs made in connection with the Stock Purchase Agreement. Accordingly, we have filed this registration statement and prospectus to cover the resale by Mammoth of up to 66,666,667 shares of our Common Stock under the Stock Purchase Agreement.
As of December 28, 2010, the market price of our Common Stock was $0.20 per share. Using the formula set forth above to determine the purchase price under the Stock Purchase Agreement, we are registering the resale of that number of shares of Common Stock that would allow us to make Draw Downs for the full $10,000,000 available to us under the Equity Line. However, in the event that the market price for our shares declines, the number of shares of Common Stock covered by this registration statement will not change, and as such, we may not be able to access the full $10,000,000 without filing additional registration statements to register the resale of additional shares of Common Stock. We are not permitted to make Draw Downs under the Stock Purchase Agreement at any time there is not an effective registration statement registering the resale of shares of Common Stock by Mammoth.
Although we have registered the number of shares of Common Stock that would be issuable assuming the immediate Draw Down of the full $10,000,000 under the Stock Purchase Agreement, the provisions of the Stock Purchase Agreement limit the size and frequency of each Draw Down. In addition, the Stock Purchase Agreement limits the percentage of beneficial ownership of our Common Stock by Mammoth at any given time, as explained above and elsewhere in this prospectus. Any shares of Common Stock remaining unissued to Mammoth at the expiration of the Stock Purchase Agreement will be removed from registration and will not be offered for sale under this prospectus.
As of the date of this prospectus, we do not anticipate needing to draw the full amount of the Equity Line to implement our business plan and to develop and market our location sterilization technologies. We believe that we will need approximately $3,000,000 during the twelve months following the date of this prospectus for research, development, marketing, and related activities, as well as for general corporate purposes, including final product development and initiation
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of sales. Pursuant to the Stock Purchase Agreement with Mammoth, the frequency and amounts of draws are within our control. We are not obligated to make any draws, and we may draw any amount up to the full amount of the Equity Line, in our discretion. As of the date of this prospectus, we do not plan to draw more funds (and correspondingly put more shares to Mammoth) under the Equity Line than is necessary to implement our business plan.
Pursuant to the Stock Purchase Agreement, we may make draws during the 24 months following the effective date of this prospectus, with a minimum amount of $25,000 and a maximum amount of $500,000 per Draw Down, but we are not obligated to draw the full $10,000,000. If we draw less than the full amount, we will put fewer shares of Common Stock to Mammoth, which will result in less dilution to our existing stockholders.
Neither the Stock Purchase Agreement nor any rights or obligations of Mammoth under the Stock Purchase Agreement may be assigned or transferred to any other person without our express written consent.
There are substantial risks to investors as a result of the issuance of shares of our Common Stock under the Stock Purchase Agreement. These risks include dilution of stockholders, significant decline in our stock price and our inability to draw sufficient funds when needed. See, “Risk Factors,” following this section.
Mammoth will periodically purchase our shares of Common Stock under the Stock Purchase Agreement and will, in turn, sell such shares to investors in the market at the market price. This may cause our stock price to decline, which will require us to issue increasing numbers of shares of Common Stock to Mammoth to raise the same amount of funds, as our stock price declines.
The shares of our Common Stock being offered for resale by the Selling Stockholder are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested therein.risk. Before purchasing any of these securities, you should carefully consider the following factors relating to our business and prospects.prospects, as well as the other information in this prospectus, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, the trading price of our Common Stock could decline, and you may lose all or part of your investment.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Financial Condition
obtained in a timely manner or on terms that are acceptable to us. On January 31, 2018, we entered into certain financing arrangements that we believe will provide financing sufficient to fund our operations for the immediate future. However, there can be no assurance that we will be successful in accessing all of the capital contractually allocated under that arrangement due to limitations on our authorized capital, the market price of our Common Stock, volume limitations and other conditions imposed upon us, and many of which are outside our control.
· | make it more difficult for us to satisfy our obligations with respect to our obligations under the Notes with the Investors; |
· | increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; |
· | require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, and other general corporate purposes; |
· | limit our ability to obtain additional debt or equity financing due to applicable financial and restrictive covenants in our debt agreements, and |
· | place us at a competitive disadvantage compared to our competitors that have less debt. |
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others, both in the United States and in other countries. The patent positions of companies can be uncertain to some extent and involve complex legal and factual questions, and, therefore, the scope and enforceability of claims allowed in patents are not systematically predictable with absolute accuracy. Our license rights depend in part upon the breadth and scope of protection provided by theour patents and the validity of thethose patents. Any failure to maintain the issued patents also could adversely affect our business. We intend to file additional patent applications (both United StatesU.S. and foreign), when appropriate, relating to our technologies, improvements to the technologies and for specific products. There can be no assurance that any issued patents or pending patent applications will not be challenged, invalidated or circumvented. There can also be no assurance that the rights granted under patents will provide us with adequate proprietary pr otectionprotection or competitive advantages.
We also rely on secrecy to protect portions of our technology for which patent protection has not yet been pursued or which is not believed to be appropriate or obtainable in addition to any information of a confidential and proprietary nature relating to us, including but not limited to our know-how, trade secrets, methods of operation, names and information relating to existing or potential vendors or suppliers and customer names and addresses.
Many of the companies currently producing products or using disinfectant or sterilization techniques have significantly greater financial resources and expertise in research and development, marketing, manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals and marketing. Smaller companies may also prove to be significant competitors, particularly through collaborative arrangements with large third parties. Academic institutions, governmental agencies and public and private research organizations also conduct research, seek patent protection and establish collaborative arrangements for product and clinical development and marketing. Many of these competitors have products or techniques approved or in development and operate large, well-funded research and development programs. Moreover, these companies and institutions may be in the process of developing technology that could be developed more quickly or ultimately provedproven safer o ror more effective than our technology.
We may become subject to expensive liability claims and litigation.
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products. That liability may result from claims made directly by consumers or by regulatory agencies, companies or others selling such products. We currently have limited clinical trial insurance and no product liability insurance coverage. We anticipate obtaining and maintaining appropriate insurance coverage as products become readycontinue to be commercialized. There can be no assurance we will be able to obtain this insurance or, if we can obtain insurance,manufactured. We cannot assure that the insurance can be acquired at a reasonable cost or in sufficient amounts to protect us against all potential liability. The obligation to pay any product liability claim in excess of insurance coverage or the recall of any products incorporating our technology could have a material adverse effect on our business, financial condition and future prospects.
We have only a limited staff.
Mammoth
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stock price decreases, Mammoth may have a further incentive to sell theoutstanding shares of ourpreferred stock or Common Stock that it holds. These sales may have a further impact on our stock price.
Your ownership interest may be diluted and the value of our Common Stock may decline by exercising our right to require Mammoth to purchase shares pursuant to our Stock Purchase Agreement. Effective November 17, 2010, we entered into a $10,000,000 Stock Purchase Agreement with Mammoth. Pursuant to the Stock Purchase Agreement, when we deem it necessary, we may raise capital through the private sale of our Common Stock to Mammoth at a price equal to 75 percent of the lowest closing bid price of our Common Stock on any trading day during the five consecutive trading day period immediately preceding the date our notice is delivered to Mammoth. Because the purchase price to be paid by Mammoth is lower than the prevailing market price of our Common Stock, to the extent that we exercise our put right, your ownership interest may be diluted.
There can be no guarantee that the proceeds available to us under the Stock Purchase Agreement will be sufficient for us to achieve profitable operations or to pay our current liabilities, which could have a material adverse impact on our ability to continue operations. There is no assurance that the funds which are available to us under the Stock Purchase Agreement will be sufficient to allow us to continue our marketing and sales efforts to the point we achieve profitable operations.
Holders of our Common Stock are subject to the risk of additional and substantial dilution to their interests as a result of the issuances of Common Stock in connection with the Stock Purchase Agreement. The following table describes the number of shares of Common Stock that would be issuable, assuming that the full amount available under the Stock Purchase Agreement as of December 31, 2010, namely $10,000,000 had been put to Mammoth (irrespective of the availability of registered shares), and further assuming that the applicable conversion price at the time of such put were the following amounts:
Hypothetical Purchase Price Under Stock Purchase Agreement | Shares issuable upon Draw Downs aggregating $10,000,000 |
$0.05 | 200,000,000 |
$0.10 | 100,000,000 |
$0.15 | 66,666,667 |
$0.20 | 50,000,000 |
$0.25 | 40,000,000 |
Given the formulas for calculating the shares to be issued in connection with puts under the Stock Purchase Agreement, there effectively is no limitation on the number of shares of Common Stock which may be issued in connection with a Draw Down Notice under the Stock Purchase Agreement, except for the number of shares registered under the registration statement containing this prospectus covering the resale of shares issued in connection with the Stock Purchase Agreement. As such, stockholders are subject to the risk of substantial dilution to their interests as a result of our issuance of shares under the Stock Purchase Agreement.
For example, if the Company were to draw down an aggregate of $5,000,000 under the Stock Purchase Agreement, and the applicable purchase price paid to us by Mammoth were $0.15, the number of shares issuable to Mammoth would be approximately 33,333,333 shares. As of December 31, 2010, we had 259,262,171 shares of Common Stock issued and outstanding. An issuance of 33,333,333 shares would constitute an increase in the issued and outstanding Common Stock of approximately 13 percent. By way of information, during 2010, our stock price has ranged from $0.38 to $0.10 per share.
If all of the 66,666,667 shares offered by Mammoth hereby were issued and outstanding as of December 31, 2010, such shares would represent approximately 21 percent of the total Common Stock outstanding or approximately 31 percent of the non-affiliate shares of Common Stock outstanding as of December 31, 2010.
Our issuances of shares in connection with the Stock Purchase Agreementlikely will result in overall dilution to market value and relative voting power of previously issued Common Stock, which could result in substantial dilution to the value of shares held by stockholders. The issuance of Common Stock to Mammoth likely will result in substantial dilution to the equity interests of all holders of our Common Stock, except Mammoth. Specifically,Stock. Additionally, the issuance of a significant amountpreferred stock may have the effect of additional Common Stock will result in a decrease of the relative voting control of the Common Stock issued and outstanding prior to the issuance of Common Stock in connection with Draw Downs made under the Stock Purchase Agreement. Furthermore, public resales of Common Stock by Mammoth following the issuance of Common Stock in connection with Draw Downs under the Stock Purchase Agreement likely will depress the prevailing market price of the Common Stock. Even prior to the time of actual conversions, exercises, and public resales, the market “overhang” resulting from the mere existence of our obligation to honor such conversions or exercises could depress the market price of our Common Stock.
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Existing stockholders likely will experience decreases in market value of their Common Stock in relation to our issuances of shares in connection with Draw Downs made under the Stock Purchase Agreement.The formula for determining the number of shares of Common Stock to be issued in connection with Draw Downs made under the Stock Purchase Agreement is based, in part, ondecreasing the market price of the Common Stock and includes a discount fromreduce the market price equal to 75 percentlikelihood that common stockholders will receive dividend payments and payments upon liquidation. The issuance of additional shares of preferred stock may also adversely affect an acquisition or change in control of the lowest closing bid priceCompany.
There is an increased potential for short sales of the Common Stock due to the sales of shares sold to Mammoth in connection with the Stock Purchase Agreement, which could materiallyequity securities will dilute existing stockholders and may adversely affect the market price of the stock. Downward pressure on the market price of the Common Stock that likely will result from sales of the Common Stock by Mammoth issued under the Stock Purchase Agreement could encourage short sales of Common Stock by market participants other than Mammoth. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security's price. As we make Draw Downs pursuant to the Stock Purchase Agreement, we put shares to Mammoth, which Mammoth purchases and may then sell into the market. & nbsp;Such sales by Mammoth could have a tendency to depress the price of the stock, which could increase the potential for short sales. Significant amounts of such short selling could place further downward pressure on the market price of our Common Stock
Certain restrictions on the extent of Draw Downs may have little, if any, effect on the adverse impact of our issuance of shares under the Stock Purchase Agreement, and as such, Mammoth may sell a large number of shares, resulting in substantial dilution to the value of shares held by existing stockholders. We are prohibited from putting shares to Mammoth under the Stock Purchase Agreement if the sale of shares under such put would result in Mammoth’s holding more than 4.9 percent of the then-outstanding shares of Common Stock. These restrictions, however, do not prevent Mammoth from selling shares of Common Stock received in connection with a Draw Down, and then receiving additional shares of Common Stockour equity or debt securities convertible into equity securities. We expect to continue our efforts to acquire financing in connection with a subsequent Draw Down. In this way, Mammoth could sell more than 4.9 percentthe future to fund additional growth, product manufacturing and development expenses, and administrative expenses, among other expenses, which will result in future and possibly significant dilution to existing stockholders.
Becausesubstantial expenses.
Certain provisions of our articles of incorporation could discourage potential acquisition proposals or change in control. Our Board of Directors, without further stockholder approval, may issue Preferred Stock that would contain provisions that could have the effect of delaying or preventing a change in control or which may prevent or frustrate any attempt by stockholders to replace or remove the current management. The issuance of shares of Preferred Stock could also adversely affect the voting power of the holders of Common Stock, including the loss of voting control to others.
do so.
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that a broker or dealer approve a person's account for transactions in penny stocks; and
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· | that a broker or dealer approve a person’s account for transactions in penny stocks; and |
· | the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. |
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obtain financial information and investment experience objectives of the person; and
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make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
· | obtain financial information and investment experience objectives of the person; and |
· | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. |
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·
sets forth the basis on which the broker or dealer made the suitability determination; and
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that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
· | sets forth the basis on which the broker or dealer made the suitability determination; and |
· | states that the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Disclosure must also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have tomust be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Information included or incorporated by reference in this
Factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” contained in this prospectus. As a result We discuss many of these factors, we cannot assure you that the forward-looking statementsrisks in this prospectus will provein greater detail under the heading‚ “Risk Factors” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
· | Expected operating results, such as revenue growth and earnings; |
· | Current or future volatility in the credit markets and future market conditions; |
· | Our belief regarding expectations of necessary levels of liquidity to fund our business operations during the next 12 months; |
· | Strategy for commercialization, product development, regulatory compliance, market penetration, market position, financial results and reserves; and |
· | Strategy for risk management. |
As a development stage company, weWe have had only minimal revenues and we have never declared dividends or paid cash dividends on our Common Stock. In the future, if we become profitable, our Board of Directors has stated its intention to declare a dividend on our Common Stock from our surplus earnings. There is no assurance that we will ever become profitable or that we will have surplus earnings from which a dividend can be paid. The declaration of dividends will be at the discretion of the Board of Directors and will depend upon our earnings, financial position, general economic conditions and other pertinent factors.
MZEI. The following table sets forth the range of the high and low bid quotations offor the Common Stock for quarterly periods of the past two years, in the over-the-counter market, as reported by the OTC Bulletin Board.OTCQB (see www.otcmarkets.com). The quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.
Fiscal Year 2009 | High | Low |
First Quarter Ended March 31 | $0.03 | $0.01 |
Second Quarter Ended June 30 | $0.15 | $0.02 |
Third Quarter Ended September 30 | $0.15 | $0.07 |
Fourth Quarter Ended December 31 | $0.42 | $0.06 |
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Fiscal Year 2010 |
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First Quarter Ended March 31 | $0.38 | $0.10 |
Second Quarter Ended June 30 | $0.33 | $0.16 |
Third Quarter Ended September 30 | $0.32 | $0.18 |
Fourth Quarter Ended December 31 | $0.32 | $0.16 |
Fiscal Year 2016 | High | Low | ||||||
First Quarter Ended March 31 | $ | 0.10 | $ | 0.04 | ||||
Second Quarter Ended June 30 | $ | 0.07 | $ | 0.04 | ||||
Third Quarter Ended September 30 | $ | 0.10 | $ | 0.05 | ||||
Fourth Quarter Ended December 31 | $ | 0.15 | $ | 0.07 |
Fiscal Year 2017 | High | Low | ||||||
First Quarter Ended March 31 | $ | 0.15 | $ | 0.08 | ||||
Second Quarter Ended June 30 | $ | 0.11 | $ | 0.06 | ||||
Third Quarter Ended September 30 | $ | 0.10 | $ | 0.06 | ||||
Fourth Quarter Ended December 31 | $ | 0.06 | $ | 0.03 |
As a development stage company, we
12.
Two Years
We were incorporated in January 1986. We are a development stage company primarily engaged in research into the medical uses of ozone. Our current work is in the field of hospital sterilization, not human therapies. We have not generated, and cannot predict when or if we will generate, revenues or sufficient cash flow2017 Compared to fund continuing or planned operations. If we fail to obtain additional funding, we will be forced to suspend or permanently cease operations, and may need to seek protection under United States bankruptcy laws.
DuringYear Ended December 31, 2016
In 2008, we incurred $43,333 inAsepticSure® units during 2016. Research and development costs include payroll, consultant fees, development costs, and supplies. We anticipate our research and development costs principally consulting fees. In 2009, however,will increase marginally as we incurred $510,668 in research and development costs, as a result of prototype development costs, consulting, and other research activities. Since inception through December 31, 2009, we have spent a total of $3,239,789for research and developmentconduct additional testing related to our ozone technologysubmission to the FDA for 510(k) clearance.
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General and administrative expensesHedging Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), are classified as liabilities. We record these derivative financial instruments as liabilities in 2009 were $769,130 compared to $550,289our balance sheet at an estimate of fair value. We record changes in fair value of such instruments as non-cash gains or losses in the year endedconsolidated statements of operations. In October 2016, we recorded a warrant liability of $938,051 related to the issuance of warrants for up to $1,000,000, for which the number of shares was to be determined based on a 20-day average stock price prior to the date of exercise with the exercise price discounted to the market at 40%. As of December 31, 2008.2017, we recorded a gain of $294,655 from the change in the fair value of the warrant liability. The increase in 2009 as compared to 2008 was related to additional payroll and consulting fees incurred, valuationwarrants expired, unexercised, on January 30, 2018.
We also recorded debt forgiveness
Three Months Ended September 30, 20102017, and 2009
There were no sales during$1,617,881 as of December 31, 2016. We made the quarters ended September 30, 2010 or 2009. Forfirst payments due under the three months ended September 30, 2010, we had a net lossnotes in the first quarter of $1,681,826, compared with a net loss for the three months ended September 30, 2009 of $472,994. Our primary expense is payroll and consulting fees, research and development costs, office expenses, together with interest expense and additional expense recorded as2017, but have been in default under both notes since April 2017. As a result, interest is now accruing on the unpaid obligations under these notes at an annual rate of options granted to consultants, and the extension of certain stock purchase warrants outstanding. The reason for the significant increase in the net loss for the three months ended September 30, 2010 over the prior year is the result of certain issuances of restricted Common Stock and Common Stock options as discussed in the following paragraph.
During the three months ended September 30, 2010, we incurred an additional expense of $840,000 as a result of the issuance of a total of 4,000,000 shares of Common Stock to certain directors, officers, and employees for board service and performance bonuses. An additional expense of $203,022 was incurred during the three months ended September 30, 2010, as a result of the valuation of 1,000,000 Common Stock options granted to a board member in lieu of the share issuance described in the preceding sentence. We also incurred an additional expense of $270,000 for the three months ended September 30, 2010, as a result of the issuance of 1,000,000 shares of Common Stock to a consultant as bonus compensation for extending his consulting agreement through September 1, 2011.
For the three months ended September 30, 2010 and 2009, we incurred $485,011 and $165,237, respectively, in research and development costs as a result of prototype development costs, consulting, and other research activities. Since inception, we have spent a total of $4,015,823for research and development related to our ozone technology and related apparatus. Research and development expenses include consultant fees, interface development costs, prototypes, and research stage ozone generator and instrument development.
General and administrative expenses in the quarter ended September 30, 2010, were $1,187,936 compared to $301,149 during the same period in 2009. The majority of these costs include payroll and consulting fees, professional fees, director fees, and performance bonuses, as previously discussed. The remaining general and administrative expenses include rent, office expenses and travel expenses.
Principal amounts owed on notes payable totaled $285,302 and $283,211 at September 30, 2010 and December 31, 2009, respectively.5%. Interest expense on these obligations during the three months ended September 30, 2010totaled $55,889 for 2017 and 2009, was $5,995 and $5,990, respectively.
Nine Months Ended September 30, 2010 and 2009
There were no sales during the nine months ended September 30, 2010 or 2009. For the nine months ended September 30, 2010, we had a net loss of $2,379,787, compared with a net loss$0 for the nine months ended September 30, 2009, of $986,389. Our primary expense is payroll and consulting fees, research and development costs, office expenses, together with interest expense and additional expense recorded as a result of options granted to consultants, and the extension of certain stock purchase warrants outstanding. The reason for the significant increase in the net loss for the nine months ended September 30, 2010, over the prior year is the result of certain issuances of restricted Common Stock and Common Stock options as previously discussed.
For the nine months ended September 30, 2010 and 2009, we incurred $776,034 and $305,883, respectively, in research and development costs as a result of prototype development costs, consulting, and other research activities. Since inception, we have spent a total of $4,015,823for research and development related to our ozone technology and related apparatus. Research and development expenses include consultant fees, interface development costs, prototypes, and research stage ozone generator and instrument development.
General and administrative expenses in the nine months ended September 30, 2010, were $1,580,634 compared to $617,377 during the same period in 2009. The majority of these costs include payroll and consulting fees, professional fees,
2016.
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director fees, and performance bonuses, as previously discussed. The remaining general and administrative expenses include rent, office expenses and travel expenses.
Principal amounts owed on notes payable totaled $285,302 and $283,211 at September 30, 2010, and December 31, 2009, respectively. Interest expense on these obligations during the nine months ended September 30, 2010 and 2009, was $17,867 and $17,818, respectively.
We recorded debt forgiveness of $61,514 from a professional service firm during the nine months ended September 30, 2009.
At September 30, 2010,
As a development stage company,2016.
As of the date of this prospectus, we do not anticipate needing to draw the full amount of the Equity Line to implement our business plan and to develop and market our location sterilization technologies. We believe that we will need approximately $3,000,000$1,500,000 during the twelvenext 12 months following the date of this prospectus for continued production manufacturing, research, development, marketing, and relatedmarketing activities, as well as for general corporate purposes. Pursuant to the Stock Purchase Agreement with Mammoth, the frequency and amounts
Pursuant to the Stock Purchase Agreement, we may make draws during the 24 months following the effective date of this prospectus, with a minimum amount of $25,000 and a maximum amount of $500,000 per Draw Down, but we are not obligated to draw the full $10,000,000. If we draw less than the full amount, we will put fewer shares to Mammoth, which will result in less dilution to our existing stockholders.
Our audited and unaudited consolidated financial statements included in this prospectus have been prepared on the assumption that the Company will continue as a going concern. Since inception, it has been necessary to rely upon financing from$675,000 through the sale of our equity securities to sustain operations as indicated above. Additional financing will be required if we are to continue as11,833,334 shares of Common Stock at a going concern. If we do not obtain additional financing in the near future, either through the Stock Purchase Agreement or otherwise, we may be required to curtail or discontinue operations or possibly to seek protection under the bankruptcy laws.
weighted average price of $0.06 per share.
the performance condition.
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Recent
In June 2009, we
Effective July 1, 2009, we adopted the position or cash flow.
In October 2009, the FASB issued ASU No. 2009-13,Revenue Recognition(Topic 605) — Multiple-Deliverable Revenue Arrangementsthat amends ASC Subtopic 605-25,Multiple-Element Arrangementsto separate consideration in multiple-deliverable arrangements and significantly expand disclosure requirements. ASU No. 2009-13 establishes the accounting and reporting guidance for arrangements under which the vendor will perform multiple revenue generating activities. Vendors often provide multiple products or services to their customers. Those deliverables often are provided at different points in time or over different time periods. Specifically, this Subtopic addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. The amendments in this guidance will affect the accounting and reporting for all vendors that enter into multiple- deliverable arrangements with their customers when those arrangements are within the scope of this Subtopic. This new accounting standard is effective for fiscal years beginning on or after June 15, 2010. Earlier adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity will apply the amendments under this Subtopic retrospectively from the beginning of the entity’s fiscal year. The presentation and disclosure requirements are to be applied retrospectively for all periods presented. As we have not yet generated any revenues, this standard is not yet applicable, but will be adopted once revenues are generated.
OUR BUSINESS
General
Prior to 2008 we were dedicated to (i) seeking regulatory approval of a precise mixture of ozone and oxygen, and our process of inactivating lipid-enveloped viruses for the intended purpose of decontaminating blood and blood products and assisting
in the EU each year. In the developed world, nosocomial infections are estimated to affect patients at a rate of 3.5% to 12% of hospital admissions. Approximately 20% to 30% of these infections are considered preventable through intensive hygiene and control programs, while the other 70% to 80% are preventable through more involved measures, including hospital architecture, hospital air sanitation and use of disposable equipment and supplies.
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Research and Development Activity
Early in 2008, we began to consider other applications of our core technologies and new technologies with lower development costs withtesting of the objectiveefficacy of moving us to revenue productionthe AsepticSure® system as a means of controlling them. The efficacy data in the shortest periodtable refer to “log reduction.” “Log” stands for logarithm, which is the exponent of time.
Beginning10. Log reduction stands for a 10-fold (one decimal) or 90% reduction in 2008, management re-positioned the Company to pursue an initiative in the field of hospital sterilization. Following laboratory results withBacillus subtilis, an internationally recognized surrogate for anthrax, that produced 7 log reductions (sterilization), we have expanded our research and business plan to include bio-terrorism countermeasures as well as hospital sterilization and critical infrastructure de-contamination.
By way of explanation, “Log reduction” is a mathematical term (as is “log increase”) used to show the relative numbernumbers of live microbes eliminated from a surface by disinfecting or cleaning.bacteria. For example, a “5-log reduction” means lowering the number of microorganisms by 100,000-fold, that is, if a surface has 100,000 pathogenic microbes on it, a 5-log reduction would reduce the number of microorganisms to one1.
This change in focus was based, in part, on a review of published data on hospital-derived infections, an area of rapidly growing concern in the medical community. We identified an opportunity to build on our experience with ozone technologies and its bio-oxidative qualities in pursuing this initiative and shifted our near term efforts towards one of our founding tenets, namely that under the right conditions, ozone can be extremely effective at sterilizing biological fluids (blood, serum, and plasma and plasma fractionates) as well as biologically contaminated equipment and spaces.
We expect our unique ozone generating technologies will play a vital role in addressing what public health officials and surgeons world-wide are beginning to recognize as "the silent epidemic" (American Academy of Orthopedic Surgeons, May 2008, copy on file with the Company (“AAOS Study”)), a reference to MRSA (Methicillin-resistant Staphylococcus aureus) infection. This is a strain ofStaphylococcus aureus bacteria (“staph”) that is resistant to the broad-spectrum antibiotics commonly used to treat it. MRSA can be fatal. According to the AAOS Study, “the number of hospital admissions for MRSA has exploded in the past decade. By 2005, admissions were triple the number in 2000 and 10-fold higher than in 1995. In 2005, in the United States alone, 368,600 hospital admissions for MRSA — including 94,000 invasive infections — resulted in 18,650 deaths. The num ber of MRSA fatalities in 2005 surpassed the number of fatalities from hurricane Katrina and AIDS combined and is substantially higher than fatalities at the peak of the U.S. polio epidemic.” Indeed, biological contamination of medical treatment areas such as hospitals and chronic care facilities has recently been identified by several world renowned public health institutions, including the Centers for Disease Control or “CDC” (CDC Report, 17 Oct, 2007, copy on file with the Company), as one of the greatest threats to public health and safety in the industrial world. This concern was reflected in an article published in the journalScience (18 July 2008, Vol 321, pp 356-361, copy on file with the Company) which estimated that hospital-based infections in 2006 accounted for almost 100,000 deaths in the United States alone.
In response to this situation, we are developing a highly portable, low-cost, ozone-based technology (“AsepticSure™”) specifically for the purpose of decontaminating and sterilizing hospital surgical suites, emergency rooms, and intensive care units. Since this technology is not considered a medical treatment or a diagnostic, its development pathway is not subject to a stringent and expensive regulatory review process. We anticipate that the development pathway will be based on independent peer-reviewed science and engineering excellence.one. A government variant of AsepticSure™ is being developed for bio-terrorism countermeasures.
To aid in this project, in 2008, we entered into a five-year agreement with BiOzone Corporation (“BiOzone”) to jointly develop equipment for specialized laboratory trials, a prototype AsepticSure™ system for hospital beta-testing and ozone destruct technology. The agreement also covers initial exclusive product manufacturing by BiOzone on our behalf. Under this agreement, we also retain the right to outsource additional manufacturing capacity.
During May 2009, we commenced the first of a series of trials designed to confirm that our AsepticSure™ Hospital Sterilization System can rapidly eliminate hospital-based bacterial pathogens known to be responsible for the growing number of deaths and serious infections currently plaguing the healthcare system worldwide. We engaged an internationally recognized expert in medical microbiology and hospital infections to lead these trials.
____________________________
(1)Explanation of Log Reductions
-
1 log6-log reduction means the number of germspathogenic microorganisms is 101,000,000 times smaller
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2 log and a 7-log reduction means the number of germs is 100 times smaller
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3 log reduction means the number of germs is 1000 times smaller
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4 log reduction means the number of germs is 10,000 times smaller
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5 log reduction means the number of germs is 100,000 times smaller
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6 log reduction means the number of germs is 1,000,000 times smaller
-
7 log reduction means the number of germs is 10,000,000 times smaller
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We commencedsmaller. Disinfection is considered to involve a second seriesbio-burden reduction of laboratory trials in early June 2009, after99.99% (4-logs) and up to 99.999% (5-log reduction) or destruction of 999,990 out of 1,000,000 organisms, leaving behind very few, but still some, viable organisms. Sterilization is the first series produced results that our researchers deemed to have demonstrated significant bactericidal effects againstC. difficile, E. coli, Pseudomonas aeruginosa, MRSAstatistical destruction of all microorganisms andVanocomycin-resistant Enterococci (“VRE”), the main causative agents of hospital derived nosocomial infections. This second series of laboratory trials resulted in what are estimated to be levels of bactericidal action necessary to achieve our commercial objectives.
In October 2009, we began their spores. It is defined as 6-log or a third series of laboratory trials to establish the precise protocols necessary to obtain maximum bactericidal action in combination with minimum turn-around times in keeping with normal hospital flow patterns. This third series of laboratory trials was completed during January 2010 and demonstrated predictably greater than 6 logs (99.9999%) of bacterial “kill” across the full spectrum of hospital contaminants including MRSA,C difficile, E coli, Pseudomonas aeruginosa and VRE in addition to the internationally99.9999% reduction. Statistically, this definition is accepted surrogate for anthrax,Bacillus subtilis. as zero viable organisms surviving.
In connection with our trials described above, we also designed and produced a development prototype whichteam has demonstrated that it can reach botheven a 3-log (99.9%) bactericidal kill is not enough to stop bactericidal regeneration. Yet a 3-log kill exceeds the charge timeresults of most current cleaning practices and saturation requirements of its design criteria.technologies. In January 2010,our laboratories, we started mock-up trials for both public (hospital) and government (bio-terrorism countermeasures) applications of our system. Results obtained during early February 2010have demonstrated that every full-scale test run completed in our hospital room mock-up facility had resulted in the total eliminationremaining 0.1% of all bacteria present in the room. Additional testing was designedfollowing a 3-log kill begin to confirmregenerate in a more realistic hospital setting these laboratory findings indicating extremely high antibacterial efficacy for our novel technology (6-7.2 log reductions) againstfew hours and in five days will return to full strength. That is the primary causative agentsreason most current cleaning methods and systems have failed to break the reinfection cycle in health care facilities.
We started hospital beta-testingAsepticSureÒ System on Specified Bacteria
Organism | Log10 Reduction |
MRSA | 6.43 |
VRE | 6.08 |
E. coli | 6.02 |
C. difficile | 5.75 |
B. Subtilis | 6.37 |
Additional in-hospital beta testing is anticipated® system has application in a wide variety of settings, including medical facilities (hospitals, clinics, physician’s offices, outpatient surgical centers, long-term care facilities), bio-safety labs, athletic facilities (gyms and locker rooms) and sports equipment, mortuaries, bio-defense and response to continue into 2011. Our goal ispandemics, building remediation, tissue labs, and clean rooms. These potential markets are discussed in greater detail below.
research staff assessed the risk of microbiological contamination in routinely used sports equipment, in this case ice hockey equipment, by taking samples from the surface of the equipment. The samples, which were plated and incubated in our research laboratory, showed significant bacterial growth on all sports equipment items, with no one organism being predominant. The equipment was then placed in a treatment room with one AsepticSure® machine where it was treated for 60 minutes at a relative humidity of 90%, with an 80-ppm concentration of ozone and a concentration of hydrogen peroxide at 1.4%. Post-treatment assessment showed no bacterial growth on all locations sampled after 24 hours. Based on the success of this test, we intend to market routine cleaning of athletic facilities and sports equipment using the AsepticSure® system as a means of reducing the transmission of infectious disease among athletes.
In addition, work completed by the Company at Queen’s University demonstrated that the AsepticSure™ system can reliably eliminate in excess of 7 logs (99.99999%) reductions of Listeria monocytogenes and Salmonella typhium with 30-minute exposurenot yet contributed meaningfully to our uniqueoperating results. We are in discussions with other potential distributors for other jurisdictions.
Once the trial programmaintain proprietary protection for the AsepticSure™ hospital sterilization system is concluded, we expect to out-source the manufacturing of the product and to partner with large, well established companies that are already fully embedded in our sector of business as suppliers, such as medical device manufacturers or service companies.
Additionally, we possibly may partner with several such companies, perhaps covering different geographical markets such as North America, Asia, and Europe. The same may prove to be true for the outsourcing of additional manufacturing capacity. By developing relationships with multiple corporate partners, management believes that we will be able to better
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maintain control over our products and obtain moretechnologies. We protect our technology and products by, among other means, obtaining United States and foreign patents. There can be no assurance, however, that any patent will provide adequate protection for the technology, system, product, service or process it covers. In addition, the process of obtaining and protecting patents can be long and expensive. We also rely upon trade secrets, technical know-how, and continuing technological innovation to develop and maintain our competitive returns. position.
· | United States: |
§ | Patent No. 5,052,382 – Apparatus for the Controlled Generation and Administration of Ozone |
§ | Patent No. 6,073,627 – External Application of Ozone/Oxygen for Pathogenic Conditions, a process patent for the treatment of external afflictions. This patent also describes equipment evolutions and treatment envelope design for external medical applications. |
§ | Provisional Patent Application serial no. 10/002943, for Method and Apparatus for Ozone Decontamination of Biological Liquids. This application deals with protocols for biological liquid decontamination as well as the devices for conducting decontamination. |
§ | Patent No. 8,551,399 – Healthcare Facility Disinfecting System (Oct 2013). |
§ | Patent No. 8,636,951 – Bio-terrorism Counteraction Using Ozone and Hydrogen Peroxide (Jan 2014). |
§ | Patent No. 8,992,829 – Sports Equipment and Facility Disinfection. |
§ | Patent No. 13/821,483 – Food Handling Disinfection Treatment covering the use of AsepticSure® in food processing plants and related facilities for the sterilization of food-borne pathogens such as Listeria, Salmonella, and other human harmful, food-poisoning-causing bacteria. |
· | Europe: |
§ | Patent No. 252583B - Bio-Terrorism Counter Measures Using Ozone and Hydrogen Peroxide (June 2016). Healthcare Facility Disinfection System (Aug 2016) |
· | Canada: |
§ | Patent No. 2735739 – Healthcare Facility Disinfection Process and System with Oxygen/Ozone (Nov. 2011) |
§ | Patent No. 2846256 – Sports Equipment and Facility Disinfection |
· | China: |
§ | Patent No. ZL 201080030657.2 - Healthcare Facility Disinfection System (Nov 2015) |
· | Singapore: |
§ | Patent No.176977 – Healthcare Facility Disinfecting Process and System with Oxygen/Ozone Mixture (Feb 2013) |
· | Mexico: |
§ | Patent (allowed, but awaiting issuance) Healthcare Facility Disinfecting Process and System With Oxygen/Ozone Mixture (Nov 2016) |
Canadian Foundation for Global Health – Consolidated Variable Interest Entity
In 2005, we assistedcould prevent, delay, revoke, or result in the formationrejection of the Canadian Foundation for Global Health (“CFGH”), a not-for-profit foundation based in Ottawa, Canada. We helped establish CFGH for two primary purposes: (1) to establish an independent not-for-profit foundation intended to have a continuing working relationship with us for research purposes that is best positioned to attract the finest scientific, medical and academic professionals possible to work on projects deemed to be of social benefit; and (2) to provide a means for us to use a tiered pricing structure for services and products in emerging economies and extend the reachregulatory clearance of our technology to as many in need as possible.
The CFGH may not contract for research or other servicesproducts. We cannot predict the effect on our behalf without our prior approval. In addition, our understandingoperations resulting from current or future governmental regulation or the interpretation or application of these regulations. For more information about the risks we face regarding regulatory requirements, see “Risk Factors”.
The CFGH is registered as a not-for-profit corporation under Canadian Federal Charter. Dr. Michael E. Shannon M.A., M.Sc., M.D. is President of CFGH and maintains offices at CFGH. Dr. Shannon is also a member of our Board of Directors and is our Director of Medical Affairs. Mr. Brad Goble, President of TDVGlobal, Inc., is also a board member of CFGH and serves as the Secretary-Treasurer for that organization. According to its website, TDVGlobal, Inc. “is a strategic management consulting company” focusing on the public sector. It is based in Ottawa, Ontario, Canada. Other members of the CFGH board are Edwin G. Marshall (our Chief Executive Officer and Chairman), Daniel D. Hoyt (one of our directors), Dr. Jill C. Marshall, NMD, (Mr. Marshall’s wife and a former corporate officer of the Company), and Dr. Ron St. John.
We follow the accounting standard which requires a variable interest entity (“VIE”) to be consolidated by a company if that company absorbs a majority of the VIE’s expected losses and/or receives a majority of the entity’s expected residual returns as a result of holding variable interests, which are the ownership, contractual, or other financial interests in the entity. In addition, a legal entityEPA because it is considered to be a VIE, if itpesticide applicator within the meaning of the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”). FIFRA defines as a pesticide any substance or mixture of substances intended for preventing, destroying, repelling or mitigating any pest. A pest is defined by FIFRA to include any virus, bacteria or other microorganisms (except those organisms on or in living man or animals). However, the term pesticide does not include liquid chemical sterilant products (including any sterilant or subordinate disinfectant claims on such products) for use on a critical or semi-critical medical device. In other words, the EPA would have sufficient equity at riskjurisdiction over viruses, bacteria or other microorganisms on inanimate surfaces as long as the surfaces are not considered semi-critical or critical medical devices. The FDA asserts jurisdiction over products intended for use on critical or semi-critical medical devices.
Government Regulation
The U.S. Environmental Protection Agency (“EPA”) allows use of ozonepursuing approval, with no reporting or record keeping. The U.S. Food and Drug Administration (“FDA”) approved ozone in bottled water in 1982 and granted a petition for use with fruits, vegetables, meat and poultry in June 2000. The U.S. Department of Agriculture (“USDA”) approved ozone as organic under the USDA Organic Rule in 2000.
Ozone can damage the lungs if it is inhaled. Inhaling ozone may cause respiratory problems in healthy individuals and may worsen chronic respiratory diseases. Because of these risks, it is important to follow proper procedures when using ozone technology. Along with technology development and scientific testingassistance of our sterilization system, we are developing protocols for room sealing during the treatment period, followed by ozone-destruct to habitable standards prior to re-entry and returning the space to service. We utilize appropriate detection equipment and have taken countermeasures in design and in the test lab environment to reduce the risk of exposure to these substances in levels that would be harmful to personnel employing the technology. The correct use of our equipment should not expose a human to any toxic gas levels that are not within EPA standards.
We are working with outside regulatory consultants to determine the application of government regulation on our technology and its use. In connection with our assessment of applicable regulations we have determined that our ozone-based technology will be assesseddistributors, by the EPA. In certain applications, it may be considered a pesticide used for decontamination (as would be the caseappropriate authorities in anti-terrorism applications). In that event, submission of safety and effectiveness data may be required. The precedent technology is vaporized hydrogen peroxide. The EPA may be most interested in bactericidal and sporicidal activity and ozone destruction and residual ozone levels. According to our data, residual ozone levels achieved are a safe level of <0.02 ppm. As a result, we do not anticipate any EPA-related regulatory issues.
In addition, our ozone-based technology is considered a Class I medical device by the FDA (Code LRJ, Class I Disinfectant, Medical Devices; covered under 880.6890 General Purpose Disinfectants). This is the lowest and safest medical device class. According to FDA 21 CFR Parts 862-892, the technology is exempted from pre-market authorization, so FDA
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approval need only be sought when the technology is mature, validated and market-ready. The standard FDA Class I device marketing application will apply. As a result, we do not anticipate any FDA-related regulatory issues.
other countries. The manufacturing and marketing of ourthe AsepticSure™® system is subject to the standards of Good Manufacturing Practices. We dohave not anticipatehad any difficulty or unreasonable expense in meeting these standards.
For the foreseeable future, we have suspended our efforts to seek FDA approval
Patents and Trademarks
We have filed an application for registration of the mark AsepticSure™ as a trademark for the system with the U.S. Patent and Trademark Office. The mark is used to describe a portable decontamination and sterilization system for hospitals, government buildings, schools and other functionally critical environments that might currently require, or need to be prepared for countermeasures capability from contamination by infectious biological agents such asC. difficile, E. coli, Pseudomonas aeruginosa, MRSA and VRE.
On July 6, 2009, we filed U.S. patent application 61/223,219 titled “Healthcare Facility Disinfecting System” for the AsepticSure™ technology. The patent covers disinfection for rooms and their contents within all healthcare facilities, mobile or stationary, and other critical infrastructure such as schools and government buildings.
During the third round of trials, additional technologies were added to the AsepticSure™ system, each having their own antimicrobial effects, which in combination, were shown not to be additive, but multiplicative. The unprecedented results obtained of 6-log reductions or greater with all HAI associated pathogens provided us with valuable inventive information that resulted in a second patent filing made on January 20, 2010.
This second patent filing (U.S. patent application 61/295,851) was filed to protect improvements in our basic procedure and protocol achieved by combining it with another procedure, resulting in a significant increase in disinfecting capabilities demonstrated during the third round of laboratory trials against a wide variety of bacteria and on a range of different surfaces commonly found in healthcare and other essential facilities. Both patent applications currently afford international protection for this technology, and can be expanded into full international patent applications, in countries of our choice.
On July 7, 2010, we filed an international patent application under the auspices of the Patent Co-operation Treaty (“PCT”) to secure international patent protection for its AsepticSure™ technology. The international patent application consolidates the two previously filed patent applications as described above and expands the technical evidence, both laboratory scale and practical scale, supporting the effectiveness of the technology in clearing healthcare and other critical infrastructure of bacterial infections such asC. difficile, E. coli, Pseudomonas aeruginosa, MRSA and VRE down to complete sterilization standards. After the international patent application has been searched and examined by the International Patent Office authorities, we can register it in any or all countries of the world that have ratified the PCT (over 140 countries, which include all major industrialized countries), and secure grant of patents on the application in countries of our choice.
During September 2010, we filed an additional international patent application covering recent developments in our variant of AsepticSure™, designed for government use in bio-terrorism countermeasures. The application, filed under the Patent Co-operation Treaty, extends coverage to over 120 countries, including all major industrialized countries for this government variant. An additional U.S. provisional patent application was filed covering the use of AsepticSure™ in food processing plants and related facilities for the sterilization of food-borne pathogens such as Listeria, Salmonella, and other human harmful, food-poisoning-causing bacteria.
Also during September 2010, we filed an additional U.S. provisional patent application covering the use of AsepticSure™ for disinfecting sports equipment and training facilities included those associated with professional, college and high school level teams. Recent investigations indicate a broad range of bacteria at high concentration actually resides within unclean sports equipment which tend to be covered in mucus, sweat, dead skin, and occasionally blood; ideal culture media for bacteria, fungi and mold.have. We believe that these recent filings will provide significant enhancement ofthe principal factors affecting competition in our intellectual property protection for these specific applications.
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During late September 2010, we filed a fourth U.S. provisional patent application involving “Advanced Oxidative Sterilization Processes.” In conjunction with this filing, we are now exploring a new developmentmarkets include name recognition and the ability to receive referrals based on client confidence in the fielddisinfection system or service. Apart from governmental regulatory activities, there are no significant barriers of oxidative chemistry which we estimate will have a significant impact on our future technology andentry that could keep potential competitors from offering disinfection systems that compete with the ease with which we can effectively decontaminate hospitals, chronic care facilities, veterinary facilities, hotels, cruise ships, sports facilities and the equipment thereon.AsepticSure® system. Our researchability to date demonstrates that the combination of modest levels of ozone and low concentrations of peroxide, properly delivered at the right temperature and humidity, will reliably eliminate bacteria loads of at least 6 logs (sterilization standard) on a broad range of surface materials. Research is now underway at our laboratories on a parallel track with our hospital beta-testing program to eva luate the merits of a multifactorial decontamination system which appears to further increase the potency of our AsepticSure™ technology, while dramatically reducing the exposure time, both of which are believed to have significant implications for certain applications.
In addition to the patents filed in connection with our AscepticSure system, in prior years we filed patent applications related to our original ozone technologies, as follows:
·
U.S. equipment patent (U.S. Patent No. 5,052,382) entitled “Apparatus for the Controlled Generation and Administration of Ozone” (“Patent No. 1”);
·
U.S. patent (U.S. Patent No. 6073627) entitled “External Application of Ozone/Oxygen For Pathogenic Conditions, a process patent for the treatment of external afflictions.” This patent also describes equipment evolutions and treatment envelope design for external medical applications (“Patent No. 2”);
·
U.S. Provisional Patent Application serial no. 10/002943, for “Method and Apparatus for Ozone Decontamination of Biological Liquids.” This application deals with protocols for biological liquid decontamination as well as the devices for conducting decontamination; and
·
Process U.S. patent (U.S. Patent No. 4,632,980) entitled “Ozone Decontamination of Blood and Blood Products,” covering a procedure for ozone decontamination of blood and blood products through the treatment of blood and blood components. This patent expired in February 2003. Many of the claims and primary aspects of the technology covered by this patent are assumed by or incorporated in Patent Nos. 1 and 2 described above.
International Activities
Medizone Canada Limited
We own all of the issued and outstanding stock of MCL Medizone Canada, Ltd., a Canadian corporation (“MedCan”). MedCan was a participantcompete successfully in the Canadian Blood Forces Program’s SIV Study, but is not currently engagedindustry will depend, in any business activity.
Medizone New Zealand Limited
On June 22, 1995, we entered into a series of contracts which resulted in the formation of a joint venture subsidiary incorporated in New Zealand, Medizone New Zealand Limited (MNZ). Priorlarge part, upon our ability to the termination of this joint venture on December 14, 2009 as described below, MNZ was a privately held corporation equally owned by usmarket and Solwin Investments Limited (Solwin), a New Zealand corporation,sell our indoor decontamination and was a development stage company whose objective was to obtain regulatory approval for the distribution of our patented technology in New Zealand, Australia, South East Asiainfectious disease control products and the South Pacific Islands. The principal of MNZ was Richard G. Solomon, who is also a member of our Board of Directors.
Originally, we had purchased 100% of MNZ from Mr. Solomon, a New Zealand citizen, who became a director of Medizone in January 1996 and who had caused the formation of MNZ on June 22, 1995. Contemporaneously with this transaction, we sold 50% of MNZ to Solwin, a corporation owned by Mr. Solomon, for $150,000, of which we thereupon loaned $50,000 to MNZ, repayable on demand.
We also entered into a Licensing Agreement with MNZ (the “MNZ Licensing Agreement”) and a Managing Agent Agreement (the “Managing Agent Agreement”).
Pursuant to entering into the MNZ Licensing Agreement, we granted an exclusive license to MNZ for its process and equipment patents and trademark in New Zealand. MNZ had agreed to apply for corresponding patent protection for the patents in New Zealand and to use its best effort to exploit the rights granted in the agreement. The MNZ License Agreement was to terminate on the date of the expiration of the last to expire of any patent obtained in New Zealand, or, if no such patents were obtained, on June 22, 2010.
Pursuant to the Managing Agent Agreement, MNZ was to act as our agent in the finding of other licensees of our patents and trademark in the following countries: Australia (including Australia and New Zealand), the South Pacific Islands, and South East Asia (including the Philippines, Indonesia and Vietnam). The Managing Agent Agreement was to expire on the termination or expiration of the last of the licenses obtained pursuant thereto, subject to earlier termination by us upon an occurrence of certain events.
20
Until the joint venture was terminated during December 2009 as described in the following paragraph, the investment in the joint venture had been recorded under the equity method of accounting as we did not have ultimate control of the joint venture.
Effective December 14, 2009, in an effort to unwind the joint venture and reconvey to us all global marketing rights of our intellectual property, we entered into a Termination Agreement (the Termination Agreement) pursuant to which we issued a total of 312,500 shares of Common Stock (valued at $0.40 per share, an approximate 4.0% increase over the market value of the shares on the date the agreement was entered into) to Solwin as consideration for the early termination of the MNZ Licensing Agreement and the Managing Agent Agreement, and to retain all rights and licenses originally granted to MNZ. Also as part of the Termination Agreement, we assigned to Solwin our ownership rights and shares in MNZ. For the year ended December 31, 2009, we recorded a loss of $125,000, as we were unable to determine the future value of the licensing rights acquired pursuant to the Termination Agreement. As part of the Termination Agreement, Solwin will not use the name “Medizone New Zealand Limited” moving forward.
Competition
The market for hospital sterilization in which we intend to do business is extremely competitive. We are aware of one company, for example, that has commenced research into the use of ozone as a sterilization product for the food industry that might eventually compete with us in the sterilization market for hospitals and other medical infrastructure. Other companies, foundations, research laboratories or institutions may alsoservices. There can be conducting similar investigations into the use of ozone for this application of which we are not aware. Unless patent protection is obtainable, we should expect significant competition once we have proven the science. There is no assurance that patentswe will issue underbe able to compete successfully in the remediation industry, or that future competition will not have a material adverse effect on our applications.
business, operating results and financial condition.
administrative activities. Our relationship with our employees is good.
We estimate that our current facilities are sufficient to meet our needs until we begin to have revenues from operations.
The lease term is June 2016 through June 2018 with a lease payment of $3,550 Canadian Dollars plus the applicable goods and services tax.
Several years ago, a former consultant brought an action against the Company styledRakas vs. Medizone International, Inc.,in the Supreme Court of New York, Westchester County (Index No. 08798/00) claiming we had failed to pay consulting fees under a consulting agreement. We deny that we owe any fees to the consultant. In September 2001, the parties agreed to settle the matter for $25,000. Our lack of funds prevented us from consummating the settlement, and the plaintiff moved the court to enter a default judgment in the amount of $143,000 in January 2002. On May 8, 2002, the court vacated the default judgment and ordered that we post a bond of $25,000 to cover the settlement previously entered into by the parties. We have not posted this bond, and we have accrued as an expense the entire amount of the judgment, plus fees of $21,308.
21
Name | Age | Position | ||
David A. Esposito | ||||
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| Chairman of the Board | ||
David A. Dodd | 68 | Director, Chief Executive Officer | ||
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Michael E. Shannon |
| 70 | Director, | |
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| 67 | Director | |
Stephen F. Meyer | 59 | Director | ||
Stephanie L. Sorensen | 48 | Chief Financial Officer | ||
Philip A. Theodore | 64 | Executive Vice President, Operations and Administration, General Counsel and Corporate Secretary | ||
Jude P. Dinges | 59 | Executive Vice President, Chief Commercial Officer |
Edwin G. Marshall
Richard G. Solomonis a director. Mr. Solomon has been oneJanuary 2011, chairman of our stockholders since 1992. He was a director in 1996 and 1997 and was reappointed to the Board of Directors in May 2000. Mr. Solomon receivedof GeoVax Labs, Inc. (OTC: GOVX), a Bachelor of Commerce degree (University of Otago, NZ),publicly-traded vaccine development company. From April 2013 to July 2017, he also served as President and Chief Executive Officer, and as a Diploma of Business and Industrial Administration (University of Auckland). He is an Associate Chartered Accountant. Mr. Solomon’s career has been in business and investment. For 20 years he developed and operated a private hospital operating company, Haven Care Hospitals Limited. He was a long-standing board member and president of the New Zealand Hospitals Association and heBoard of Directors, of Aeterna Zentaris Inc. (Nasdaq: AEZS), a publicly-traded drug development company. He was instrumental in the establishment of the New Zealand Council of Healthcare Standards, Inc., now known as Quality Health New Zealand. He has been retired from active business since 1996.
Daniel D. Hoytbecame a director in January 2002. Mr. Hoyt is a graduate of the University of Indiana, where he received a Bachelor of Science degree in Business Administration. Over the past 25 years, he has become a recognized leader in the life insurance industry, working as a career agent for American United Life Insurance Company. Mr. Hoyt’s clients have ranged from large public companies to small private businesses. In recent years he has spent most of his time in public speaking and relationship building in the insurance industry. His previous work experience includes seven years with Merrill Lynch as well as serving as the Chief Executive for the Chamber of Commerce in three Indiana communities. From June 1996 until June 2010, Mr. Hoyt was the Chairman of the Board of Biological Systems,Directors of Aeterna Zentaris Inc., from May 2014 to May 2016. Mr. Dodd continues to serve as a privately held corporation involved with bio-cleansing remediation systems for animal fats and oil-based materials. He also serves on the Development Boardmember of the Indiana University Simon Cancer Center (since January 2000) and on the Board of Directors of Aeterna Zentaris Inc. He is also the St. Vincent FoundationChief Executive Officer of RiversEdge BioVentures, an investment and advisory firm focused on the life sciences and pharmaceuticals industries, which he founded in Indianapolis, Indiana.
2009. From December 2007 to June 2009, Mr. Dodd was President, Chief Executive Officer and Chairman of BioReliance Corporation, a privately-owned organization that provided biological safety testing, viral clearance testing, genetic and mammalian technology testing and laboratory animal diagnostic services testing. From October 2006 to April 2009, he served as non-executive chairman of Stem Cell Sciences Plc., a publicly-traded research products company. Before that, Mr. Dodd served as President, Chief Executive Officer and Director of Serologicals Corporation (Nasdaq: SERO) before it was sold to Millipore Corporation in July 2006 for $1.5 billion. For five years prior to his employment by Serologicals Corporation, Mr. Dodd served as President and Chief Executive Officer of Solvay Pharmaceuticals, Inc. and Chairman of its subsidiary Unimed Pharmaceuticals, Inc. He has more than 35 years of executive experience in the healthcare industry.
22
responsible for the first human clinical trial to have ever been approved in North America which examined the efficacy of O3O3 delivered via minor autohemotherapy in the treatment of AIDS. He was also responsible for several primate studies utilizing O3 O3 involving scientists from various departments within the Canadian Federal Government, as well as senior investigators from the Company and Cornell University. Dr. Shannon has
Thomas (Tommy) E. Auger joined us as ourUniversity of Rochester, New York.
with the exception of Mr. Caponi, who participated in 58 percent of the meetings.
The Board of Directors and Committees
Currently, only Mr. Hoyt is an independent director as defined by the rules of any securities exchange or inter-dealer quotation system.
Audit Committee
Asdirectors, or provide definitions of independence. In accordance with the rules of the dateSEC, we determine the independence of our directors by reference to the rules of The Nasdaq Stock Market (“NASDAQ”). In accordance with such rules, the Board has determined that have three independent directors, Mr. Esposito, Mr. Caponi and Mr. Meyer. There were no transactions, relationships or arrangements not disclosed under the caption “Certain Relationships and Related Transactions” of this prospectus we do not have a standing that were considered by the Board of Directors under the applicable independence definitions in determining that Messrs. Esposito, Caponi and Meyer are independent.
Compensation Committee
Exchange Act. As of the date of this prospectus, we do not have a standing report, the members of the Audit Committee are Mr. Esposito (Chairman), Mr. Meyer and Mr. Caponi. The Board has determined that Mr. Meyer and Mr. Caponi are each considered to be an “audit committee financial expert,” as defined by the applicable regulations promulgated by the SEC under the Exchange Act. The Board also believes that each member of the Audit Committee meets stock exchange requirements regarding financial literacy. The Audit Committee’s responsibilities include: (i) appointing our independent registered public accounting firm, (ii) reviewing, approving and monitoring the scope and cost of any proposed audit and non-audit services that are provided by, as well as the qualifications and independence of, the independent registered public accounting firm, (iii) reviewing and monitoring with the independent registered public accounting firm, and any internal audit staff, the results of audits, any recommendations from the independent registered public accounting firm and the status of management’s actions for implementing such recommendations, as well as the quality and adequacy of our internal financial controls and any internal audit staff, and (iv) reviewing and monitoring our annual and quarterly financial statements and the status of material pending litigation and regulatory proceedings. The Audit Committee met one time in 2017.
met one time in 2017.
Committee.
As of the date of this prospectus, we do not have a standing Nominating and Corporate Governance Committee. We intend to establish a Nominating and Corporate Governance Committee of the Board of Directors in the future to assist in the selection of director nominees, approve director nominations to be presented for stockholder approval at23
stockholders, and fill any vacancies on our Board of Directors, consider any nominations of director candidates validly made by stockholders, and review and consider developments in corporate governance practices.
Committee. Copies of the Audit Committee Charter and the Compensation Committee Charter are available, free of charge, on the Company’s website at http://medizoneint.com under the “Corporate Governance” tab. The information contained on the website is not incorporated by reference in, or considered part of, this prospectus.
Name and principal position |
| Year |
| Salary |
| Stock awards |
| Option awards |
| Total |
(a) |
| (b) |
| (c) |
| (d) |
| (e) |
| (f) |
Edwin G. Marshall (1) (2) Chairman and Chief Executive Officer |
| 2010 2009 |
| $170,000 $170,000 |
| $210,000 $ 0 |
| $ 0 $ 0 |
| $380,000 $170,000 |
Michael E. Shannon (3) Director of Medical Affairs |
| 2010 2009 |
| $234,633 $212,485 |
| $ 0 $ 0 |
| $ 203,022 $ 0 |
| $437,655 $212,485 |
Tommy E. Auger(4) |
| 2010 |
| $ 3,000 |
| $ 0 |
| $ 0 |
| $ 3,000 |
Name and principal position | Year | Salary ($) | Stock awards ($) | Option awards ($) | Other ($) | Total ($) | ||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||||||||||||
Edwin G. Marshall (1) Former Chairman and Chief Executive Officer | 2017 | 32,500 | -- | 74,147 | -- | 106,647 | ||||||||||||||||
2016 | 195,000 | -- | -- | -- | 195,000 | |||||||||||||||||
David A. Esposito (2) Chairman and Former Interim Chief Executive Officer | 2017 | 123,750 | 150,000 | 74,147 | 6,800 | 354,697 | ||||||||||||||||
2016 | -- | -- | -- | -- | -- | |||||||||||||||||
David A. Dodd (3) Chief Executive Officer | 2017 | 72,197 | 60,000 | -- | -- | 132,197 | ||||||||||||||||
2016 | -- | -- | -- | -- | ||||||||||||||||||
Michael E. Shannon (4) President | 2017 | 184,704 | -- | 74,147 | -- | 258,851 | ||||||||||||||||
2016 | 175,922 | -- | -- | -- | 175,922 | |||||||||||||||||
Stephanie L. Sorensen (5) Chief Financial Officer | 2017 | 60,000 | -- | 18,537 | -- | 78,537 | ||||||||||||||||
2016 | 15,000 | -- | -- | -- | 15,000 |
No On February 28, 2017, Mr. Marshall retired from his position as Chairman of the Board and Chief Executive Officer. Upon termination, Mr. Marshall entered into a Separation and Release Agreement (the “Ed Marshall Severance Agreement”), which sets forth a payment schedule related to certain promissory notes previously issued to Mr. Marshall with respect to unpaid cash compensation owing to him for prior periods and certain modifications to equity awards previously granted to him under our 2014 Equity Incentive Plan. Among other cash payments were made orthings, the changes modify the exercise period of the grants from three weeks to three years following the termination of his employment. We are currently in arrears in our obligations under the Ed Marshall Severance Agreement, as well as under a similar agreement entered into with his wife, Dr. Jill Marshall, whose employment also terminated in February 2017.
(2)
Aggregate accrued and unpaid wages owedUnited States; provided, however, that all such shares will vest immediately in the event of a change of control. On January 3, 2018, Mr. Marshall for prior periods at December 31, 2010, totaled $1,088,505. Aggregated accrued and unpaid wages and consulting fees owedDodd voluntarily surrendered all rights to Dr. Jill Marshall for prior periods at December 31, 2010, totaled $441,583.
(3)
the 1,000,000 shares of Common Stock scheduled to vest on March 18, 2018.
(4)
Mr. Auger
October 1, 2016. We do notentered into an employment agreement with Ms. Sorensen that provides for an initial base salary of $60,000 per year. We also entered into a change of control agreement with Ms. Sorensen, pursuant to which she will receive severance compensation in the event her employment is terminated without cause or for good reason (as defined in the agreement) following a change of control. On February 2, 2017, Ms. Sorensen was granted an option to purchase 250,000 shares of Common Stock. Ms. Sorensen voluntarily surrendered this option on January 3, 2018.
· | “Change of Control” means the occurrence of any of the following: |
(ii) |
(iii) |
(iv) | the complete liquidation of us or the sale or other disposition by us of all or substantially all of our assets. |
(v) | a change in the executive’s position that materially diminishes his or her duties, responsibilities, or authority; |
(vi) | a material diminution of the executive’s base salary; |
(vii) | any requirement that the executive relocate or any assignment of duties that would be materially adverse to the maintenance of the principal residence the executive had immediately prior to the Change of Control; |
(viii) | our material breach of the executive’s employment or Change of Control Agreement; or |
(ix) | our failure to secure the written assumption of our material obligations under executive’s employment or Change of Control Agreement from any successor to us. |
Control.
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Name | Fees earned or paid in cash | Stock awards | Option awards | Non-equity incentive plan | Nonqualified deferred | All other compensation | Total |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) |
Richard G. Solomon(1) | $0 | $210,000 | $ 0 | $0 | $0 | $0 | $210,000 |
Daniel D. Hoyt (1) | $0 | $210,000 | $ 0 | $0 | $0 | $0 | $210,000 |
Michael E. Shannon (2) | $0 | $ 0 | $203,022 | $0 | $0 | $0 | $203,022 |
Edwin G. Marshall(3) | $0 | $210,000 | $ 0 | $0 | $0 | $0 | $210,000 |
2017.
Name | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | Non-equity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | |||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | |||||||||||||||||||||
Vincent C. Caponi(1) | -- | -- | 74,147 | -- | -- | -- | 74,147 | |||||||||||||||||||||
Stephen F. Meyer(2) | -- | -- | 11,250 | -- | -- | -- | 11,250 | |||||||||||||||||||||
Dwayne Montgomery(3) | -- | -- | 18,644 | -- | -- | -- | 18,644 | |||||||||||||||||||||
Daniel Hoyt(4) | -- | -- | 74,147 | -- | -- | -- | 74,147 |
During July 2010, As of December 31, 2017, Mr. Solomon and Mr. Hoyt each received 1,000,000 shares of restricted Common Stock as compensation for their services as a director. The shares were valued at $0.21 per share, the market value of the shares of the date of issuance.
(2)
Dr. Shannon is also our Director of Medical Affairs and is the President of the CFGH. In lieu of a restricted stock grant such as that made to Mr. Solomon and Mr. Hoyt (described in Note (1), above), Mr. Shannon was grantedCaponi had options to purchase a total of 1,000,0002,750,000 shares of Common Stock, exercisable at a priceStock. Mr. Caponi voluntarily surrendered all of $0.20 per share for a periodhis outstanding options on February 16, 2018.
(3)
Our Chiefoutstanding equity awards held by our Named Executive Officer, Edwin G. Marshall is also a director.Officers as of December 31, 2017:
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities underlying unexercised options (#) exercisable | Number of Securities underlying unexercised options (#) unexercisable | Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) | Option exercise price | Option expiration date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($) | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($) | |||||||||||||||||||||||||||
Edwin G. Marshall Former Chairman and Chief Executive Officer | 250,000 1,500,000 1,000,000 | -- -- -- | -- -- -- | $ $ $ | 0.163 0.0877 0.10 | 4/30/2019 2/28/2020 2/28/2020 | -- -- -- | -- -- -- | -- -- -- | -- -- -- | ||||||||||||||||||||||||||
David A. Esposito(1) Chairman and Interim Chief Executive Officer | 1,000,000 750,000 1,000,000 | -- -- -- | -- -- -- | $ $ $ | 0.1095 0.0877 0.10 | 2/26/2019 8/18/2020 2/2/2027 | -- -- -- | -- -- -- | -- -- -- | -- -- -- | ||||||||||||||||||||||||||
David A. Dodd(2) Chief Executive Officer | -- | -- | -- | -- | -- | -- | -- | 1,000,000 | 40,000 | |||||||||||||||||||||||||||
Michael E. Shannon(3) President | 650,000 1,500,000 1,000,000 | -- -- -- | -- -- -- | $ $ $ | 0.13 0.0877 0.10 | 8/15/2019 8/18/2020 2/2/2027 | -- -- -- | -- -- -- | -- -- -- | -- -- -- | ||||||||||||||||||||||||||
Stephanie Sorensen(4) Chief Financial Officer | 250,000 | -- | -- | $ | .010 | 02/2/2027 | -- | -- | -- | -- |
Except We are not aware of any person who beneficially owns five percent or more of our Common Stock as of the Table Date.
| Name and Address of beneficial owner(1) | Amount and nature of beneficial ownership | Percentage of class |
Common Stock | Edwin G. Marshall, Director and Chief Executive Officer(2) | 16,743,009 | 6.5% |
Common Stock | Richard G. Solomon, Director (3) | 11,602,345 | 4.5% |
Common Stock | Daniel D. Hoyt, Director (4) | 8,030,773 | 3.1% |
Common Stock | Michael E. Shannon, Director(5) | 4,984,000 | 1.9% |
Common Stock | Tommy E. Auger, CFO | - | * |
Common Stock | All Officers and Directors As a Group (5 persons)(6) | 41,360,127 | 16.0% |
owned.
Title of class | Name and Address of beneficial owner (1) | Amount and nature of beneficial ownership | Percentage of class (2) | |||||||
Common Stock | Vincent C. Caponi, Director | - | - | |||||||
Common Stock | David A. Dodd, Director and Chief Executive Officer | 2,000,000 | * | |||||||
Common Stock | David A. Esposito, Chairman of the Board | 9,773,334 | 2.35 | |||||||
Common Stock | Stephen F. Meyer, Director(3) | 750,000 | * | |||||||
Common Stock | Michael E. Shannon, Director and President(4) | 3,388,048 | * | |||||||
Common Stock | Stephanie L. Sorensen, Chief Financial Officer | - | - | |||||||
Common Stock | All Officers and Directors as a Group (8 persons) | 15,911,382 | 3.81 | % |
Except as otherwise indicated, the address of the stockholder is: c/o Medizone International, Inc., 144 Buena Vista P.O. Box 742 Stinson Beach, California 94970.
350 East Michigan Avenue, Suite 500, Kalamazoo, MI 49007.
Amount indicated includes (i) 2,770,000 shares owned of record by Mr. Marshall’s wife, (ii) 13,920,141 shares owned directly by Mr. Marshall, and (iii) 52,868 shares held by Mr. and Mrs. Marshall as joint tenants. Does not include 1,250,000 shares subject to purchase under options that had not vested and would not vest within 60 days of December 31, 2010, which are held in the names of Mr. Marshall and his wife, Dr. Jill Marshall.
(3)
Amount indicated includes (i) 4,133,844 shares held directly by Mr. Solomon, (ii) 42,000 shares hold by immediate family members of Mr. Solomon, and (iii) 7,426,501 shares held by Solwin Investments, Ltd., an entity of which Mr. Solomon is an officer and director.
(4)
Does not include 500,000 shares subject to purchase under options that had not vested as of the date of this prospectus and that would not vest within 60 days thereof..
(5)
Includes options to purchase 2,000,000 shares of Common Stock (1,000,000 exercisable at $0.20 per share and 1,000,000 exercisable at $0.10 per share) that vested at the time of grant, and 2,984,000 shares owned of record. Amount indicated does not include 1,500,000 shares subject to purchase under options that had not vested as of the date of December 31, 2010 and that would not vest within 60 days thereof.
(6) Based on a total of 259,262,171415,191,788 shares outstanding at December 31, 2010. This amount also includes currently exercisable options for the purchaseoutstanding.
which Mr. Meyer is a managing partner, and 250,000 shares that are subject to vested options.
We owe
Any future transactions
Our administrative and executive office functions are performed from space provided at the home of our Chief Executive Officer, Edwin G. Marshall. We do not pay rent for the small amount of space required for these services.
Director Independence
We have one independent director as defined by the rules of any securities exchange or inter-dealer quotation system. Our Common Stock is currently traded on the OTC Bulletin Board, which does not impose standards relating to director independence or the makeup of committees with independent directors, or provide definitions of independence.
Our Board of Directors has determined during the year ended December 31, 2010 that Daniel Hoyt, a director, was “independent” in accordance with standards for independence set forth in the Sarbanes-Oxley Act of 2002 (“SOX”). There were no transactions, relationships or arrangements not disclosed pursuant to Item 404(a) that were considered by the Board of Directors under the applicable independence definitions in determining that Mr. Hoyt is independent.
The Company is
·
259,262,171April 2, 2018, 415,191,788 shares of Common Stock were issued and
·
7,750,000 outstanding. We have not designated or issued any series or shares issuable pursuant to options for the purchase of Common Stock.
Preferred Stock, and no Preferred Stock is issued or outstanding.
26
Preferred Stock with voting and/or conversion rights may adversely affect the voting power of the holders of the Common Stock, including the loss of voting control to others. There are presently no shares of Preferred Stock issued and outstanding.
Committed Equity Line Financing Facility with Mammoth Corporation
On November 17, 2010, we entered into a Common Stock Purchase Agreement, which we refer to in thisSTOCKHOLDERS
From time to time over the term of the Stock Purchase Agreement and in our sole discretion, we may present Mammoth with Draw Down Notices requiring Mammoth to purchase a specified dollar amount of shares of our Common Stock at a purchase price based on the price per share over five consecutive trading days (the “Draw Down Pricing Period”), with the total dollar amount of each Draw Down subject to certain agreed-upon limitations described elsewhere in this prospectus, based on the market price of our Common Stock at the time of the Draw Down (which may not be waived or modified). We are allowed to present Mammoth with Draw Down Notices during the term of the Stock Purchase Agreement up to the maximum offering of $10,000,000, with only one such Draw Down Notice allowed per Draw Down Pricing Period and a minimum of fifteen trading days required between each Draw Down Notice.
Once presented with a Draw Down Notice, Mammoth is required to purchase the shares. The per share purchase price for these shares equals 75 percent of the lowest closing bid price of the Company’s Common Stock (as reported by the Market or quotation service on which the Company’s shares trade) during the Draw Down Pricing Period. The obligations of Mammoth under the Stock Purchase Agreement to purchase shares of our common stock may not be transferred to any other party.
Mammoth has agreed that during the term of the Stock Purchase Agreement, neither Mammoth nor any of its affiliates will, directly or indirectly, engage in any short sales involving our securities or grant any option to purchase, or acquire any right to dispose of or otherwise dispose for value of, any shares of our Common Stock or any securities convertible into or exercisable or exchangeable for any shares of our Common Stock, provided that Mammoth will not be prohibited from engaging in certain transactions relating to any of thean additional 4,087,193 shares of our Common Stock that it owns or that it is obligatedwere issued to purchaseeach selling stockholder as Commitment Shares under a pending Draw Down Notice.
The Stock Purchase Agreement contains customary representations, warranties and covenants by, among and for the benefit of the parties. Before Mammoth is obligated to purchase any shares of our Common Stock pursuant to a Draw Down Notice, certain conditions specified in the Stock Purchase Agreement, none of which are in Mammoth’s control, must be satisfied, including the following:
•
Each of our representations and warranties in the Stock Purchase Agreement must be true and correct in all material respects.
•
We must have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required to be performed, satisfied or complied with by us.
•
The registration statement of which this prospectus forms a part must be effective under the Securities Act.
•
We must not have knowledge of any event that could reasonably be expected to have the effect of causing the suspension of the effectiveness of the registration statement of which this prospectus forms a part or the prohibition or suspension of the use of this prospectus.
•
Trading in securities generally as reported on the principal market for our shares shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported on the principal market unless the general suspension or limitation shall have been terminated prior to the delivery of such Draw Down Notice.
•
No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against Mammoth or the Company or any subsidiary, or any of the officers, directors or affiliates of the Company or
27
any subsidiary seeking to restrain, prevent or change the transactions contemplated by the Stock Purchase Agreement, or seeking damages in connection with such transactions.
•
No material adverse effect and no consolidation event (as defined in the Stock Purchase Agreement) where the successor entity has not agreed to perform the Company’s obligations shall have occurred.
There is no guarantee that we will be able to meet the foregoing conditions or any of the other conditions in the Stock Purchase Agreement or that we will be able to draw down any portion of the amounts available under the Equity Line with Mammoth.
The Stock Purchase Agreement may be terminated at any time by the mutual written consent of the parties. Unless earlier terminated, the Stock Purchase Agreement will terminate automatically on the 24-month anniversary of the effective date of the registration statement of which this prospectus forms a part (which term may not be extended by the parties). We may terminate the Stock Purchase Agreement on one trading day’s prior written notice to Mammoth, subject to certain conditions. Mammoth may terminate the Stock Purchase Agreement effective upon one trading day’s prior written notice to us if Mammoth has cancelled more than three Draw Downs for failure by the Company or its transfer agent to make timely delivery of the Draw Down Shares.
The Stock Purchase Agreement provides that no termination of the Stock Purchase Agreement will limit, alter, modify, change or otherwise affect any of the parties’ rights or obligations with respect to any pending Draw Down Notice, and that the parties must fully perform their respective obligations with respect to any such pending Draw Down Notice under the Stock Purchase Agreement, provided all of the conditions to the settlement thereof are timely satisfied. The Stock Purchase Agreement also provides for indemnification of Mammoth and its affiliates in the event that Mammoth incurs losses, liabilities, obligations, claims, contingencies, damages, costs and expenses related to a breach by us of any of our representations and warranties under the Stock Purchase Agreement or the other related transaction documents or any action instituted against Mammoth or its affiliates due to the transactions contemplated by the Stoc k Purchase Agreement or other transaction documents, subject to certain limitations.
We agreed to pay up to $5,000 of reasonable attorneys’ fees and expenses (exclusive of disbursements and out-of-pocket expenses) incurred by Mammoth in connection with the preparation, negotiation, execution and delivery of the Stock Purchase Agreement and related transaction documentation. Further, if we issue a Draw Down Notice and fail to deliver the shares to Mammoth on the applicable settlement date, and such failure continues for 10 trading days, we agreed to pay Mammoth, in addition to all other remedies available to Mammoth under the Stock Purchase Agreement, an amount in cash equal to $100 for each $5,000 of the Draw Down Amount for the first ten (10) days such delivery is late, and $350 for each $5,000 of the Draw Down Amount for each trading day beyond 10 trading days that such delivery is late.
In connection with the Stock Purchase Agreement, on November 17, 2010, we also entered into a registration rights agreement with Mammoth, which we refer to in this prospectus as the Registration Rights Agreement, pursuant to which we granted to Mammoth certain registration rights related to the shares issuable under the Stock Purchase Agreement. Pursuant to the Registration Rights Agreement, we have filed with the SEC a registration statement, of which this prospectus is a part, relating to the Selling Stockholder’s resale of any shares of Common Stock purchased by it under the Stock Purchase Agreement. The effectiveness of this registration statement is a condition precedent to our ability to sell Common Stock to Mammoth under the Stock Purchase Agreement.
The foregoing description of the Stock Purchase Agreement and the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Stock Purchase Agreement and the Registration Rights Agreement, copies of which have been filed or incorporated by reference as exhibits to the registration statement of which this prospectus is a part.
We are relying on an exemption from the registration requirements of the Securities Act for the private placement of our securities under the Stock Purchase Agreement to Mammoth, pursuant to Section 4(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder. The transaction does not involve a public offering, Mammoth is an “accredited investor” and has access to information about us and its investment.
There are substantial risks to investors as a result of the issuance of shares of our Common Stock under the Stock Purchase Agreement. These risks include dilution ofselling stockholders significant decline in our stock price and our ability to draw sufficient funds under the Stock Purchase Agreement when needed.
Mammoth will periodically purchase shares of our Common Stock under the Stock Purchase Agreement and will in turn, sell such shares to investors in the market at the prevailing market price. This may cause our stock price to decline, which will require us to issue increasing numbers of shares to Mammoth to raise the same amount of funds, as our stock price declines.
Mammoth and any participating broker-dealers are “underwriters” within the meaning of the Securities Act. All expenses incurred with respect to the registration of the Common Stock will be borne by us, but we will not be obligated to pay
28
any underwriting fees, discounts, commission or other expenses incurred by the Selling StockholderAct in connection with the saletheir resale of such shares.
Neither the Selling Stockholder norour Common Stock pursuant to this prospectus. The selling stockholders have not had any of its associatesposition or affiliates has held any position, office, or other material relationship with us inor any of our affiliates over the past three years.
The following table sets forth certain information regarding the name of the Selling Stockholder, the numberbeneficial ownership of shares of Common Stock beneficially owned by the Selling Stockholderselling stockholders as of the date hereofApril 2, 2018 and the number of shares of Common Stock being offered bypursuant to this prospectus.
Number of shares to be beneficially owned and percentage of beneficial ownership after the offering (1)(3) | ||||||||||||||||
Name of selling stockholder | Shares beneficially owned as of the date of this prospectus (1)(2) | Number of shares being offered | Number of shares | Percentage of class (4) | ||||||||||||
L2 Capital LLC (5) | 9,970,361 | 11,116,714 | 5,883,168 | 1.42 | % | |||||||||||
SBI Investments, LLC 2014-I (6) | 9,970,361 | 11,116,714 | 5,883,168 | 1.42 | % |
Name of Selling Stockholder | Shares of Common Stock Owned by Selling Stock-holder Prior to Offering | Shares of Common Stock Issued or Issuable to Selling Stockholder In Connection with Offering | Percentage of Common Stock Issued or Issuable to Selling Stockholder In Connection with the Offering (1) | Number of Shares of Common Stock Registered Hereunder (2) | Number of Shares of Common Stock Owned After Offering | Percentage of Common Stock Beneficially Owned After the Offering |
Mammoth Corporation | 0 | 66,666,667(3) | 100% | 66,666,667 | 0(4) | 0% (4) |
_____________
(1)
MammothPurchase Agreement is prohibited bysubject to certain agreed upon threshold limitations set forth therein. Also, under the terms of the Stock Purchase Agreement, from purchasing shares of Common Stock under the Stock Purchase Agreement to the extent that such purchase of shares would result in Mammoth beneficially owning more than 4.9 percent of the then outstandingwe may not issue shares of our Common Stock following such purchase. Prior to our putting shares to Mammoth in connection with the Stock Purchase Agreement, to the bestselling stockholders to the extent that the selling stockholders would, at any time, beneficially own more than 9.99% of our knowledge Mammoth held no shares of our Common Stock. The percentages set forth are not determinative of Mammoth’s beneficial ownership of ouroutstanding Common Stock pursuant to Rule 13d-3 or any other provision under the Exchange Act.
as determined in accordance with SEC rules.
(2)
this prospectus.
(3)
Includes 66,666,667
(4)
Assumes a hypothetical Draw Down of the full $10,000,000 available under the Stock Purchase Agreementselling stockholders are counted as of December 31, 2010, and the sale by Mammoth of all shares of Common Stock put to it in connection with that hypothetical Draw Down. There is no assurance that Mammoth will sell any or all of the shares of Common Stock offered hereby. However, Mammoth is contractually prohibited from holding shares, and we are contractually prohibited from putting shares to Mammoth that would cause Mammoth to hold shares, in excess of 4.9 percent of the then-issued and shares of our Common Stock. The number of shares of Common
29
Stock andoutstanding for computing the percentage indicated in the table may change based on Mammoth’s decision to sell or hold the shares.
beneficial ownership of such selling stockholders.
This prospectus relates to the resale of up to 66,666,667 shares issued pursuant to the Stock Purchase Agreement held by the Selling Stockholder.
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
·
block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
broker-dealers may agree with the Selling Stockholder to sell a specified number of such shares at a stipulated price per share;
·
through the writing of options on the shares;
·
a combination of any such methods of sale; and
·
any other method permitted pursuant to applicable law.
· | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
· | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
· | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
· | an exchange distribution in accordance with the rules of the applicable exchange; |
· | privately negotiated transactions; |
· | in transactions through broker-dealers that agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; |
· | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
· | a combination of any such methods of sale; or |
· | any other method permitted pursuant to applicable law. |
Discounts, concessions, commissions and similar selling expenses, if any, attributable to Because the sale of shares will be borne by the Selling Stockholder. The Selling Stockholder may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilitiesInvestors are imposed on that person under the Securities Act.
The Selling Stockholder may from time to time pledge or grant a security interest in some or all of the shares of Common Stock owned by it and, if it defaults in the performance of its secured obligations, the pledgee or secured parties may offer and sell the shares of Common Stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or any other applicable provision of the Securities Act amending the list of Selling Stockholder to include the pledgee, transferee or other successors in interest as a Selling Stockholder under this prospectus.
The Selling Stockholder also may transfer the shares of Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of Common Stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of Selling Stockholder to include the pledgee, transferee or other successors in interest as a Selling Stockholder under this prospectus.
As noted above, Mammoth is an “underwriter”underwriters within the meaning of the Securities Act, in connection with the sale of our Common Stock under this prospectus. We will pay all expenses incident to the registration, offering and sale of the shares of our Common Stock to the public hereunder other than commissions, fees and discounts of underwriters, brokers, dealers and agents. If any of these other expenses exists, we expect Mammoth to pay these expenses.
30
The Selling Stockholder acquired the securities offered hereby in the ordinary course of business and has advised us that it has not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of its shares of Common Stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of Common Stock by the Selling Stockholder. We will file a supplement to this prospectus if the Selling Stockholder enters into a material arrangement with a broker-dealer for sale of Common Stock being registered. If the Selling Stockholder uses this prospectus for any sale of the shares of Common Stock, itthey will be subject to the prospectus delivery requirements of the Securities Act.
The anti-manipulationshares.
There can be no assurance that the selling stockholders will sell any or all of the shares of Common Stock registered pursuant to the registration statement, of which this prospectus forms a part.
The Nevada Revised Statutes provide thatCOUNSEL
This provisionsecurities being offered pursuant to this prospectus or upon other legal matters in connection with the registration or offering such securities was employed for such purpose on a contingency basis. Also at the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is intended to afford directors and officers protection against and to limit their potential liability for monetary damages resulting from suits allegingreceive, in connection with the offering, a breach of the duty of care by a directorsubstantial interest, direct or officer. As a consequence of this provision, stockholders of our Company will be unable to recover monetary damages against directors or officers for action taken by them that may constitute negligence or gross negligenceindirect, in performance of their duties unless such conduct meets the requirements of Nevada law to impose such liability. The provision, however, does not alter the applicable standards governing a director’s or officer’s fiduciary duty and does not eliminate or limit the right of our company or any stockholder to obtain an injunctionof its parents or subsidiaries. Nor was any such person connected with our company or any other type of non-monetary reliefits parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
their terms and conditions.
Additionally, a corporation may indemnify a director, officer, employee or agent with respect to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor, if such person (a) is not liable for a breach of fiduciary duty involving intentional misconduct, fraud or a knowing violation of law or such greater standard imposed by the corporation’s articles of incorporation; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, however, indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court to be liable to the corporation or for amounts
31
paid in settlement to the corporation, unless the court determines that the person is fairly and reasonably entitled to indemnity for such expensesNevada, as the court deems proper. same exists or may hereafter be amended. In certain cases, we may advance expenses incurred in defending any such proceeding.
Our bylaws provide, among other things, that a director, officer, employee or agent of the Company will be indemnified against all expense, liability, and loss (including attorneys’ fees, judgments, fines, taxes, penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered in connection with any threatened, pending, or completed action suit, or proceeding, whether civil, criminal, administrative, or investigative provided that he or she either is not liable pursuant to Nevada Revised Statutes 78.138 (relating to liability of directors and officers to the corporation in certain instances) or acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Companyour company pursuant to the foregoing provisions, the Company haswe have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
AVAILABLE INFORMATION
We have filed If a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of our company in the successful defense of any action, suit or proceeding) is asserted by any of our directors, officers or controlling persons in connection with the SECsecurities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a registration statement on Form S-1 undercourt of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act with respect toand will be governed by the Common Stock offered hereby. This prospectus, which constitutes partfinal adjudication of the registration statement, does not contain allthat issue.
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F-6 |
F-1
The
and Stockholders
(A Development Stage Company)
Stinson Beach, California
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
In our opinion,
We were not engaged to examine management’s assessment of the effectiveness of Medizone International, Inc.’s internal control over financial reporting as of December 31, 2009 included in the accompanying Form 10-K and, accordingly, we do not express an opinion thereon.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 11 to the consolidated financial statements, the Company has incurred significant recurring losses which have resulted in an accumulated deficit and a deficit in stockholders’ equity. This raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 11. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
3, 2012.
HJ Associates & Consultants, LLP
Tanner LLC
20, 2018
ASSETS | ||||||||
December 31, | ||||||||
2017 | 2016 | |||||||
Current assets: | ||||||||
Cash | $ | 29,623 | $ | 398,290 | ||||
Inventory | 290,057 | 109,573 | ||||||
Prepaid expenses | 23,303 | 81,666 | ||||||
Total current assets | 342,983 | 589,529 | ||||||
Other assets: | ||||||||
Trademark and patents, net | 117,616 | 151,444 | ||||||
Lease deposit | 2,823 | 4,272 | ||||||
Total other assets | 120,439 | 155,716 | ||||||
Total assets | $ | 463,422 | $ | 745,245 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 637,557 | $ | 459,654 | ||||
Accounts payable – related parties | 40,415 | - | ||||||
Accrued expenses | 630,899 | 592,621 | ||||||
Accrued expenses – related parties | 780,044 | 538,887 | ||||||
Other payables | 224,852 | 224,852 | ||||||
Notes payable | 362,223 | 297,332 | ||||||
Notes payable – related parties | 1,643,578 | 1,617,881 | ||||||
Warrant liability | 690,508 | 985,163 | ||||||
Total current liabilities | 5,010,076 | 4,716,390 | ||||||
Notes payable, net of current portion | - | 75,000 | ||||||
Total liabilities | 5,010,076 | 4,791,390 | ||||||
Commitments and contingencies (Notes 5,6,10 and 12) | ||||||||
Stockholders’ deficit: | ||||||||
Preferred stock, $0.00001 par value: 50,000,000 authorized; no shares outstanding | - | - | ||||||
Common stock, $0.001 par value: 500,000,000 authorized; 408,317,402 and 393,934,068 shares issued and outstanding, respectively | 408,317 | 393,934 | ||||||
Additional paid-in capital | 35,185,874 | 33,680,146 | ||||||
Accumulated other comprehensive loss | (54,864 | ) | (48,043 | ) | ||||
Accumulated deficit | (40,085,981 | ) | (38,072,182 | ) | ||||
Total stockholders’ deficit | (4,546,654 | ) | (4,046,145 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 463,422 | $ | 745,245 |
F-2
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MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||
(A Development Stage Company) | |||||||
Consolidated Balance Sheets | |||||||
|
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|
ASSETS | |||||||
|
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|
|
| December 31, | ||
|
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|
| 2009 |
| 2008 |
|
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|
CURRENT ASSETS |
|
|
|
|
| ||
| Cash |
| $ | 359,891 | $ | 12,272 | |
| Prepaid expenses |
|
| 6,786 |
| - | |
| Deferred consulting fees (Note 6) |
|
| 21,211 |
| 72,000 | |
|
| Total Current Assets |
|
| 387,888 |
| 84,272 |
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT (Net) (Notes 1 and 2) |
|
| 3,041 |
| 3,597 | ||
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|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
| ||
| Trademark and patents, net (Notes 1 and 3) |
|
| 19,440 |
| - | |
| Lease deposit |
|
| 1,122 |
| - | |
|
| Total Other Assets |
|
| 20,562 |
| - |
|
|
|
|
|
|
|
|
|
| TOTAL ASSETS |
| $ | 411,491 | $ | 87,869 |
|
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|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||
|
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|
CURRENT LIABILITIES |
|
|
|
|
| ||
| Accounts payable |
| $ | 699,026 | $ | 758,378 | |
| Due to stockholders (Note 8) |
|
| 7,000 |
| 7,000 | |
| Accrued expenses (Note 4) |
|
| 2,470,904 |
| 2,432,474 | |
| Notes payable (Note 9) |
|
| 283,211 |
| 280,491 | |
|
| Total Current Liabilities |
|
| 3,460,141 |
| 3,478,343 |
|
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|
|
|
|
|
|
CONTINGENT LIABILITIES (Note 5) |
|
| 224,852 |
| 224,852 | ||
|
|
|
|
|
|
|
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| Total Liabilities |
|
| 3,684,993 |
| 3,703,195 |
|
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STOCKHOLDERS' EQUITY (DEFICIT) |
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| ||
| Preferred stock, 50,000,000 shares authorized of $0.00001 |
|
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| |||
| par value, no shares issued or outstanding |
|
| - |
| - | |
| Common stock, 395,000,000 shares authorized of $0.001 |
|
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| |
| par value, 241,701,432 and 199,926,128 shares issued |
|
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|
|
| |
| and outstanding, respectively |
|
| 241,701 |
| 199,926 | |
| Additional paid-in capital |
|
| 18,533,363 |
| 16,754,988 | |
| Other comprehensive loss |
|
| (3,611) |
| - | |
| Deficit accumulated during the development stage |
| (22,044,955) |
| (20,570,240) | ||
|
| Total Stockholders' Equity (Deficit) |
|
| (3,273,502) |
| (3,615,326) |
|
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| TOTAL LIABILITIES AND STOCKHOLDERS' |
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| |
|
| EQUITY (DEFICIT) |
| $ | 411,491 | $ | 87,869 |
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F-3
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MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES | ||||||||
(A Development Stage Company) | ||||||||
Consolidated Statements of Operations and Other Comprehensive Loss | ||||||||
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| From Inception |
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| on January 31, | ||
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| For the Years Ended |
| 1986 Through | ||
|
|
|
| December 31, |
| December 31, | ||
|
|
|
| 2009 |
| 2008 |
| 2009 |
REVENUES |
| $ - |
| $ - |
| $ 133,349 | ||
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
| ||
| Cost of revenues |
| - |
| - |
| 103,790 | |
| General and administrative |
| 769,130 |
| 550,289 |
| 16,610,667 | |
| Research and development |
| 510,668 |
| 43,333 |
| 3,239,789 | |
| Expense on extension of warrants (Note 7) |
| 105,393 |
| 86,572 |
| 2,092,315 | |
| Bad debt expense |
| - |
| - |
| 48,947 | |
| Depreciation and amortization |
| 2,227 |
| 468 |
| 50,691 | |
|
| Total Expenses |
| 1,387,418 |
| 680,662 |
| 22,146,199 |
|
| Loss from Operations |
| (1,387,418) |
| (680,662) |
| (22,012,850) |
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES) |
|
|
|
|
|
| ||
| Non-controlling interest in loss |
| - |
| - |
| 26,091 | |
| Other income |
| - |
| - |
| 19,780 | |
| Gains on sales of subsidiaries (Note 1) |
| - |
| - |
| 208,417 | |
| Debt forgiveness (Note 10) |
| 61,514 |
| - |
| 61,514 | |
| Loss on termination of license agreement (Notes 1 and 6) |
| (125,000) |
| - |
| (125,000) | |
| Interest expense |
| (23,811) |
| (26,880) |
| (1,117,645) | |
|
| Total Other Income (Expenses) |
| (87,297) |
| (26,880) |
| (926,843) |
|
|
|
|
|
|
|
|
|
LOSS BEFORE EXTRAORDINARY ITEMS |
| (1,474,715) |
| (707,542) |
| (22,939,693) | ||
|
|
|
|
|
|
|
|
|
EXTRAORDINARY ITEMS |
|
|
|
|
|
| ||
| Lawsuit settlement |
| - |
| - |
| 415,000 | |
| Debt forgiveness |
| - |
| - |
| 479,738 | |
|
| Total Extraordinary Items |
| - |
| - |
| 894,738 |
|
|
|
|
|
|
|
|
|
NET LOSS |
| (1,474,715) |
| (707,542) |
| (22,044,955) | ||
|
|
|
|
|
|
| ||
OTHER COMPREHENSIVE LOSS |
|
|
|
|
|
| ||
| Loss on foreign currency translation |
| (3,611) |
| - |
| (3,611) | |
|
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE LOSS |
| $ (1,478,326) |
| $ (707,542) |
| $ (22,048,566) | ||
|
|
|
|
|
|
|
|
|
BASIC LOSS PER SHARE |
| $ (0.01) |
| $ (0.00) |
|
| ||
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF |
|
|
|
|
|
| ||
COMMON SHARES OUTSTANDING |
| 221,713,284 |
| 180,484,971 |
|
|
Comprehensive Loss
For the Years Ended December 31, | ||||||||
2017 | 2016 | |||||||
Revenues | $ | - | $ | 237,000 | ||||
Operating expenses: | ||||||||
Cost of revenues | - | 203,460 | ||||||
General and administrative | 1,909,046 | 2,068,391 | ||||||
Research and development | 257,312 | 501,734 | ||||||
Depreciation and amortization | 52,442 | 56,311 | ||||||
Total operating expenses | 2,218,800 | 2,829,896 | ||||||
Loss from operations | (2,218,800 | ) | (2,592,896 | ) | ||||
Gain (loss) on warrant liability | 294,655 | (47,212 | ) | |||||
Interest expense | (89,685 | ) | (33,850 | ) | ||||
Interest income | 31 | 122 | ||||||
Net loss | (2,013,799 | ) | (2,673,836 | ) | ||||
Other comprehensive loss: | ||||||||
Loss on foreign currency translation | (6,821 | ) | (11,075 | ) | ||||
Total comprehensive loss | $ | (2,020,620 | ) | $ | (2,684,911 | ) | ||
Basic and diluted net loss per common share | $ | (0.01 | ) | $ | (0.01 | ) | ||
Weighted average number of common shares outstanding | 400,207,813 | 375,118,494 |
Accumulated | ||||||||||||||||||||||||
Common Stock | Additional Paid-in | Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||
Shares | Amount | Capital | Loss | Deficit | Deficit | |||||||||||||||||||
Balance, December 31, 2015 | 369,434,068 | $ | 369,434 | $ | 32,496,646 | $ | (36,968 | ) | $ | (35,398,346 | ) | $ | (2,569,234 | ) | ||||||||||
Common stock issued for services at $0.096 per share | 500,000 | 500 | 47,500 | - | - | 48,000 | ||||||||||||||||||
Common stock for cash ranging from $0.04 to $0.05 per share | 24,000,000 | 24,000 | 1,136,000 | - | - | 1,160,000 | ||||||||||||||||||
Loss on foreign currency translation | - | - | - | (11,075 | ) | - | (11,075 | ) | ||||||||||||||||
Net loss | - | - | - | - | (2,673,836 | ) | (2,673,836 | ) | ||||||||||||||||
Balance, December 31, 2016 | 393,934,068 | 393,934 | 33,680,146 | (48,043 | ) | (38,072,182 | ) | (4,046,145 | ) | |||||||||||||||
Common stock issued for services at $0.07 per share | 250,000 | 250 | 17,250 | - | - | 17,500 | ||||||||||||||||||
Common stock issued for cash ranging from $0.05 to $0.06 per share | 11,833,334 | 11,833 | 663,167 | - | �� | - | 675,000 | |||||||||||||||||
Restricted stock awards | 2,300,000 | 2,300 | 225,700 | - | - | 228,000 | ||||||||||||||||||
Warrant to purchase common stock issued for services | - | - | 33,960 | - | - | 33,960 | ||||||||||||||||||
Stock based compensation | - | - | 565,651 | - | - | 565,651 | ||||||||||||||||||
Loss on foreign currency translation | - | - | - | (6,821 | ) | - | (6,821 | ) | ||||||||||||||||
Net loss | - | - | - | - | (2,013,799 | ) | (2,013,799 | ) | ||||||||||||||||
Balance, December 31, 2017 | 408,317,402 | $ | 408,317 | $ | 35,185,874 | $ | (54,864 | ) | (40,085,981 | ) | $ | (4,546,654 | ) |
F-4
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|
|
|
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|
|
| |
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||||||
(A Development Stage Company) Consolidated Statements of Stockholders' Equity (Deficit) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit | |
|
|
|
|
|
|
|
|
| Other |
| Accumulated | |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the | |
| Common Stock |
| Paid-in |
| hensive |
| Development | |||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage | |
Balance, January 31, 1986 (inception) | - |
| $ - |
| $ - |
| $ - |
| $ - |
| $ - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Initial capitalization of Medizone |
|
|
|
|
|
|
|
|
|
|
| |
Nevada at $0.03 per share (Note 6) | 5,500,000 |
| 5,500 |
| - |
| 150,128 |
| - |
| - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Common shares issued in acquisition |
|
|
|
|
|
|
|
|
|
|
| |
of Medizone - Delaware (Notes 1 and 6) | 37,500,000 |
| 37,500 |
| - |
| (37,500) |
| - |
| - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
| |
rendered in July 1986 at $0.10 |
|
|
|
|
|
|
|
|
|
|
| |
per share (Note 6) | 50,000 |
| 50 |
| - |
| 4,950 |
| - |
| - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Common stock issued in conversion |
|
|
|
|
|
|
|
|
|
|
| |
of warrants during 1986 at $0.10 |
|
|
|
|
|
|
|
|
|
|
| |
per share (Note 6) | 7,814,600 |
| 7,815 |
| - |
| 773,645 |
| - |
| - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Stock issuance costs | - |
| - |
| - |
| (105,312) |
| - |
| - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
| |
December 31, 1986 | - |
| - |
| - |
| - |
| - |
| (796,068) | |
Balance, December 31, 1986 | 50,864,600 |
| 50,865 |
| - |
| 785,911 |
| - |
| (796,068) | |
|
|
|
|
|
|
|
|
|
|
|
| |
Common stock issued upon exercise |
|
|
|
|
|
|
|
|
|
|
| |
of warrants in January 1987 at $0.10 |
|
|
|
|
|
|
|
|
|
|
| |
per share (Note 6) | 2,600 |
| 2 |
| - |
| 257 |
| - |
| - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Common stock issued for patent in |
|
|
|
|
|
|
|
|
|
|
| |
March 1987 at $0.69 per share | 1,000,000 |
| 1,000 |
| - |
| 692,750 |
| - |
| - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Common stock issued for cash in |
|
|
|
|
|
|
|
|
|
|
| |
June 1987 at an average price of |
|
|
|
|
|
|
|
|
|
|
| |
$0.16 per share | 950,000 |
| 950 |
| - |
| 149,050 |
| - |
| - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
| |
in June and July 1987 at an |
|
|
|
|
|
|
|
|
|
|
| |
average price of $0.12 per share (Note 6) | 203,167 |
| 203 |
| - |
| 24,314 |
| - |
| - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Common stock issued through |
|
|
|
|
|
|
|
|
|
|
| |
exercise of options in August 1987 |
|
|
|
|
|
|
|
|
|
|
| |
at $1.75 per share (Note 6) | 250,000 |
| 250 |
| - |
| 437,250 |
| - |
| - | |
|
|
|
|
|
|
|
|
|
|
|
| |
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
| |
December 31, 1987 | - |
| - |
| - |
| - |
| - |
| (2,749,400) | |
|
|
|
|
|
|
|
|
|
|
|
| |
Balance, December 31, 1987 | 53,270,367 |
| $ 53,270 |
| $ - |
| $ 2,089,532 |
| $ - |
| $ (3,545,468) | |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
For the Years Ended December 31, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (2,013,799 | ) | $ | (2,673,836 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Stock-based compensation | 565,651 | - | ||||||
Stock issued for compensation | 228,000 | - | ||||||
Depreciation and amortization | 52,442 | 56,311 | ||||||
Fair value of warrants issued for services | 33,960 | 937,951 | ||||||
Stock issued for services | 17,500 | 48,000 | ||||||
Change in warrant liability | (294,655 | ) | 47,212 | |||||
Changes in operating assets and liabilities: | ||||||||
Inventory | (180,484 | ) | 168,250 | |||||
Prepaid expenses | 96,503 | 17,075 | ||||||
Lease deposits | 1,449 | - | ||||||
Accounts payable and accounts payable – related parties | 218,318 | (36,389 | ) | |||||
Accrued expenses and accrued expenses – related parties | 279,435 | 37,787 | ||||||
Net cash used in operating activities | (995,680 | ) | (1,397,639 | ) | ||||
Cash flows from investing activities: | ||||||||
Expenditures for trademark and patents | (18,613 | ) | (31,255 | ) | ||||
Net cash used in investing activities | (18,613 | ) | (31,255 | ) | ||||
Cash flows from financing activities: | ||||||||
Principal payments on notes payable | (22,553 | ) | (66,819 | ) | ||||
Issuance of common stock for cash | 675,000 | 1,160,000 | ||||||
Net cash provided by financing activities | 652,447 | 1,093,181 | ||||||
Effects of foreign currency exchanges rates on cash | (6,821 | ) | (11,075 | ) | ||||
Net decrease in cash | (368,667 | ) | (346,788 | ) | ||||
Cash as of beginning of the year | 398,290 | 745,078 | ||||||
Cash as of end of the year | $ | 29,623 | $ | 398,290 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 5,728 | $ | 12,956 | ||||
Supplemental disclosure of non-cash financing activities: | ||||||||
Financing of insurance premiums | $ | 38,141 | $ | 66,755 | ||||
Settlement of accounts payable and accrued expenses with notes payable – related party | $ | - | $ | 1,617,881 |
F-5
|
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|
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|
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|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1987 | 53,270,367 |
| $ 53,270 |
| $ - |
| $ 2,089,532 |
| $ - |
| $ (3,545,468) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued through exercise |
|
|
|
|
|
|
|
|
|
| |
of options in January 1988 at $0.50 per share (Note 6) | 200,000 |
| 200 |
| - |
| 99,800 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash in |
|
|
|
|
|
|
|
|
|
|
|
September 1988 at $0.08 per share (Note 6) | 1,000,000 |
| 1,000 |
| - |
| 79,000 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
at an average price of $0.23 |
|
|
|
|
|
|
|
|
|
|
|
per share (Note 6) | 35,000 |
| 35 |
| - |
| 7,965 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Additional capital contributed | - |
| - |
| - |
| 174,126 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1988 | - |
| - |
| - |
| - |
| - |
| (714,347) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1988 | 54,505,367 |
| 54,505 |
| - |
| 2,450,423 |
| - |
| (4,259,815) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
at an average price of $0.18 per |
|
|
|
|
|
|
|
|
|
|
|
Share (Note 6) | 261,889 |
| 262 |
| - |
| 46,363 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at |
|
|
|
|
|
|
|
|
|
|
|
an average price of $0.05 per share (Note 6) | 5,790,000 |
| 5,790 |
| - |
| 285,710 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
and in lieu of outstanding debt at |
|
|
|
|
|
|
|
|
|
|
|
an average price of $0.12 per share | 4,749,532 |
| 4,750 |
| - |
| 578,978 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon exercise of options at $0.16 per share | 375,000 |
| 375 |
| - |
| 59,125 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1989 | - |
| - |
| - |
| - |
| - |
| (862,051) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1989 | 65,681,788 |
| $ 65,682 |
| $ - |
| $ 3,420,599 |
| $ - |
| $ (5,121,866) |
|
|
|
|
|
|
|
|
|
|
|
|
F-6
|
|
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1989 | 65,681,788 |
| $ 65,682 |
| $ - |
| $ 3,420,599 |
| $ - |
| $ (5,121,866) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
at $0.10 per share | 880,000 |
| 880 |
| - |
| 87,120 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at an average price of $0.04 per share | 4,250,000 |
| 4,250 |
| - |
| 175,250 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
and in lieu of outstanding debt at |
|
|
|
|
|
|
|
|
|
|
|
an average price of $0.06 per share | 2,422,727 |
| 2,423 |
| - |
| 137,577 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Additional capital contributed | - |
| - |
| - |
| 100,000 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1990 | - |
| - |
| - |
| - |
| - |
| (606,309) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1990 | 73,234,515 |
| 73,235 |
| - |
| 3,920,546 |
| - |
| (5,728,175) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at an average price of $0.07 per share | 4,366,667 |
| 4,366 |
| - |
| 305,634 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
at an average price of $0.17 per share | 425,000 |
| 425 |
| - |
| 72,075 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued through |
|
|
|
|
|
|
|
|
|
|
|
exercise of options at an average |
|
|
|
|
|
|
|
|
|
|
|
price of $0.45 per share | 450,000 |
| 450 |
| - |
| 204,050 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Additional capital contributed | - |
| - |
| - |
| 5,000 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1991 | - |
| - |
| - |
| - |
| - |
| (1,220,152) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1991 | 78,476,182 |
| $ 78,476 |
| $ - |
| $ 4,507,305 |
| $ - |
| $ (6,948,327) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
F-7
|
|
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1991 | 78,476,182 |
| $ 78,476 |
| $ - |
| $ 4,507,305 |
| $ - |
| $ (6,948,327) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at $0.20 per share | 151,500 |
| 152 |
| - |
| 30,148 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in lieu of |
|
|
|
|
|
|
|
|
|
|
|
debt at $0.15 per share | 250,000 |
| 250 |
| - |
| 37,250 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at |
|
|
|
|
|
|
|
|
|
|
|
an average price of $0.16 per share | 2,702,335 |
| 2,702 |
| - |
| 427,648 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued through |
|
|
|
|
|
|
|
|
|
|
|
exercise of options at $0.50 |
|
|
|
|
|
|
|
|
|
|
|
per share | 250,000 |
| 250 |
| - |
| 124,750 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Additional capital contributed | - |
| - |
| - |
| 81,100 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1992 | - |
| - |
| - |
| - |
| - |
| (649,941) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1992 | 81,830,017 |
| 81,830 |
| - |
| 5,208,201 |
| - |
| (7,598,268) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at an average price of $0.10 per share | 5,347,219 |
| 5,347 |
| - |
| 542,859 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at |
|
|
|
|
|
|
|
|
|
|
|
an average price of $0.18 per share | 1,471,666 |
| 1,472 |
| - |
| 269,528 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares subscribed for |
|
|
|
|
|
|
|
|
|
|
|
at $0.10 per share | - |
| - |
| 2,619 |
| 259,296 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1993 | - |
| - |
| - |
| - |
| - |
| (1,598,342) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1993 | 88,648,902 |
| $ 88,649 |
| $ 2,619 |
| $ 6,279,884 |
| $ - |
| $ (9,196,610) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-8
|
|
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1993 | 88,648,902 |
| $ 88,649 |
| $ 2,619 |
| $ 6,279,884 |
| $ - |
| $ (9,196,610) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at $0.10 per share | 1,431,590 |
| 1,431 |
| - |
| 141,727 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares subscribed for at |
|
|
|
|
|
|
|
|
|
|
|
$0.10 per share | - |
| - |
| 9,552 |
| 945,682 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares subscribed for as cancellations of indebtedness |
|
|
|
|
|
|
|
|
|
|
|
at $0.10 per share | - |
| - |
| 417 |
| 41,234 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares subscribed for as cancellation of indebtedness |
|
|
|
|
|
|
|
|
|
|
|
at $0.18 per share | - |
| - |
| 11,250 |
| 2,022,379 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of subscribed stock | 10,384,900 |
| 10,385 |
| (10,385) |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares in recognition |
|
|
|
|
|
|
|
|
|
|
|
of disparity in purchase price in |
|
|
|
|
|
|
|
|
|
|
|
Offering | 1,125,834 |
| 1,126 |
| - |
| (1,126) |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Prior period adjustment | - |
| - |
| - |
| - |
| - |
| 219,422 |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1994 | - |
| - |
| - |
| - |
| - |
| (1,126,315) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1994 | 101,591,226 |
| $ 101,591 |
| $ 13,453 |
| $ 9,429,780 |
| $ - |
| $ (10,103,503) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-9
|
|
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1994 | 101,591,226 |
| $ 101,591 |
| $13,453 |
| $ 9,429,780 |
| $ - |
| $ (10,103,503) |
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable common shares |
|
|
|
|
|
|
|
|
|
|
|
converted to Common Stock | 200,000 |
| 200 |
| - |
| 39,800 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at $0.10 per share | 2,050,000 |
| 2,050 |
| - |
| 202,950 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of subscribed stock | 17,524,860 |
| 17,524 |
| (17,524) |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of common shares | (1,242,727) |
| (1,242) |
| - |
| (70,563) |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares subscribed for at $0.10 per share | - |
| - |
| 9,118 |
| 902,707 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Prior period adjustment | - |
| - |
| - |
| - |
| - |
| 71,806 |
|
|
|
|
|
|
|
|
|
|
|
|
Additional capital contributed | - |
| - |
| - |
| 50,000 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1995 | - |
| - |
| - |
| - |
| - |
| (1,081,027) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1995 | 120,123,359 |
| 120,123 |
| 5,047 |
| 10,554,674 |
| - |
| (11,112,724) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash |
|
|
|
|
|
|
|
|
|
|
|
at $0.10 per share | 100,000 |
| 100 |
| - |
| 9,900 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at $0.10 per share | 1,415,875 |
| 1,416 |
| - |
| 140,171 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of subscribed stock | 8,412,379 |
| 8,413 |
| (8,413) |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares subscribed for |
|
|
|
|
|
|
|
|
|
|
|
at $0.11 per share | - |
| - |
| 6,456 |
| 718,991 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1996 | - |
| - |
| - |
| - |
| - |
| (1,329,395) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1996 | 130,051,613 |
| $ 130,052 |
| $ 3,090 |
| $ 11,423,736 |
| $ - |
| $ (12,442,119) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-10
|
|
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
Balance, December 31, 1996 | 130,051,613 |
| $ 130,052 |
| $ 3,090 |
| $ 11,423,736 |
| $ - |
| $ (12,442,119) |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of subscribed stock | 3,089,680 |
| 3,090 |
| (3,090) |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares subscribed for |
|
|
|
|
|
|
|
|
|
|
|
at $0.07 per share | - |
| - |
| 5,714 |
| 394,287 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at $0.10 per share | 3,746,336 |
| 3,746 |
| - |
| 370,886 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1997 | - |
| - |
| - |
| - |
| - |
| (775,559) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1997 | 136,887,629 |
| 136,888 |
| 5,714 |
| 12,188,909 |
| - |
| (13,217,678) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued through |
|
|
|
|
|
|
|
|
|
|
|
exercise of warrants at $0.07 |
|
|
|
|
|
|
|
|
|
|
|
per share | 857,142 |
| 857 |
| - |
| 59,143 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in lieu of |
|
|
|
|
|
|
|
|
|
|
|
debt at $0.05 per share | 864,747 |
| 865 |
| - |
| 42,372 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of subscribed stock | 5,714,286 |
| 5,714 |
| (5,714) |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of common shares | (630,000) |
| (630) |
| - |
| 630 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at $0.05 per share | 3,465,000 |
| 3,465 |
| - |
| 169,786 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at $0.09 per share | 750,000 |
| 750 |
| - |
| 63,785 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in lieu of |
|
|
|
|
|
|
|
|
|
|
|
debt at $0.09 per share | 967,630 |
| 967 |
| - |
| 82,214 |
| - |
| �� - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at $0.08 per share | 50,000 |
| 50 |
| - |
| 3,700 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1998 | - |
| - |
| - |
| - |
| - |
| (565,761) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 1998 | 148,926,434 |
| $ 148,926 |
| $ - |
| $ 12,610,539 |
| $ - |
| $ (13,783,439) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-11
|
|
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
Balance, December 31, 1998 | 148,926,434 |
| $ 148,926 |
| $ - |
| $ 12,610,539 |
| $ - |
| $ (13,783,439) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
at $0.07 per share | 25,000 |
| 25 |
| - |
| 1,725 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued through exercise |
|
|
|
|
|
|
|
|
|
| |
of warrants at $0.07 per share | 936,507 |
| 937 |
| - |
| 64,618 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Additional expense for extension of warrants below market value | - |
| - |
| - |
| 123,389 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 1999 | - |
| - |
| - |
| - |
| - |
| (359,571) |
Balance, December 31, 1999 | 149,887,941 |
| 149,888 |
| - |
| 12,800,271 |
| - |
| (14,143,010) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued through |
|
|
|
|
|
|
|
|
|
|
|
exercise of warrants at $0.07 per share | 3,142,857 |
| 3,143 |
| - |
| 216,857 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for debt at |
|
|
|
|
|
|
|
|
|
|
|
$0.11 per share | 2,020,000 |
| 2,020 |
| - |
| 220,180 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for debt at |
|
|
|
|
|
|
|
|
|
|
|
$0.147 per share | 95,000 |
| 95 |
| - |
| 13,905 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
at $0.175 per share | 350,000 |
| 350 |
| - |
| 60,900 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for debt at |
|
|
|
|
|
|
|
|
|
|
|
$0.20 per share | 20,000 |
| 20 |
| - |
| 3,980 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for debt at |
|
|
|
|
|
|
|
|
|
|
|
$0.55 per share | 100,000 |
| 100 |
| - |
| 54,900 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of Common Stock | (2,000,000) |
| (2,000) |
| - |
| 2,000 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
at $0.285 per share | 300,000 |
| 300 |
| - |
| 85,200 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Additional expense for extension of warrants below market value | - |
| - |
| - |
| 1,743,468 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2000 | - |
| - |
| - |
| - |
| - |
| (2,187,138) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2000 | 153,915,798 |
| $ 153,916 |
| $ - |
| $ 15,201,661 |
| $ - |
| $ (16,330,148) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-12
|
|
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2000 | 153,915,798 |
| $ 153,916 |
| $ - |
| $ 15,201,661 |
| $ - |
| $ (16,330,148) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants issued for cash at $0.20 per share | 500,000 |
| 500 |
| - |
| 99,500 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants issued for cash at $0.15 per share | 200,000 |
| 200 |
| - |
| 29,800 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants issued for cash at $0.15 per share | 166,666 |
| 167 |
| - |
| 24,818 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants issued for cash at $0.18 per share | 555,555 |
| 555 |
| - |
| 99,441 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2001 | - |
| - |
| - |
| - |
| - |
| (716,054) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2001 | 155,338,019 |
| 155,338 |
| - |
| 15,455,220 |
| - |
| (17,046,202) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants issued for cash at $0.10 per share | 1,000,000 |
| 1,000 |
| - |
| 99,000 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at $0.10 per share | 230,000 |
| 230 |
| - |
| 22,770 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for debt |
|
|
|
|
|
|
|
|
|
|
|
at $0.10 per share | 447,368 |
| 447 |
| - |
| 44,290 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants issued for cash at $0.10 per share | 250,000 |
| 250 |
| - |
| 24,750 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services at $0.10 per share | 480,000 |
| 480 |
| - |
| 47,520 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2002 | - |
| - |
| - |
| - |
| - |
| (687,273) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2002 | 157,745,387 |
| $ 157,745 |
| $ - |
| $ 15,693,550 |
| $ - |
| $ (17,733,475) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-13
|
|
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2002 | 157,745,387 |
| $ 157,745 |
| $ - |
| $ 15,693,550 |
| $ - |
| $ (17,733,475) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in lieu of notes payable at $0.05 per share | 460,000 |
| 460 |
| - |
| 22,540 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants issued for cash at $0.05 per share | 500,000 |
| 500 |
| - |
| 24,500 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
at $0.05 per share | 100,000 |
| 100 |
| - |
| 4,900 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants issued for cash at $0.05 per share | 165,000 |
| 165 |
| - |
| 8,085 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants issued for cash at $0.05 per share | 200,000 |
| 200 |
| - |
| 9,800 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants issued for services at $0.02 |
|
|
|
|
|
|
|
|
|
|
|
per share | 2,000,000 |
| 2,000 |
| - |
| 38,000 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2003 | - |
| - |
| - |
| - |
| - |
| (522,796) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2003 | 161,170,387 |
| 161,170 |
| - |
| 15,801,375 |
| - |
| (18,256,271) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | - |
| - |
| - |
| - |
| - |
| (371,395) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2004 | 161,170,387 |
| 161,170 |
| - |
| 15,801,375 |
| - |
| (18,627,666) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 | - |
| - |
| - |
| - |
| - |
| (326,153) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2005 | 161,170,387 |
| 161,170 |
| - |
| 15,801,375 |
| - |
| (18,953,819) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrants granted | - |
| - |
| - |
| 2,756 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Additional capital contributed | - |
| - |
| - |
| 1,356 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 | - |
| - |
| - |
| - |
| - |
| (356,430) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006 | 161,170,387 |
| $ 161,170 |
| $ - |
| $ 15,805,487 |
| $ - |
| $ (19,310,249) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-14
|
|
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006 | 161,170,387 |
| $ 161,170 |
| $ - |
| $ 15,805,487 |
| $ - |
| $ (19,310,249) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrants granted | - |
| - |
| - |
| 30,737 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007 | - |
| - |
| - |
| - |
| - |
| (552,449) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007 | 161,170,387 |
| 161,170 |
| - |
| 15,836,224 |
| - |
| (19,862,698) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at $0.01 per share | 8,000,000 |
| 8,000 |
| - |
| 72,000 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to officers, |
|
|
|
|
|
|
|
|
|
|
|
directors and consultants in lieu of outstanding debt at |
|
|
|
|
|
|
|
|
|
|
|
$0.02 per share | 11,250,000 |
| 11,250 |
| - |
| 213,750 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to a director in lieu of debt at $0.02 per share | 409,075 |
| 409 |
| - |
| 7,772 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to directors for stock deposits previously |
|
|
|
|
|
|
|
|
|
|
|
received at $0.02 per share | 5,463,333 |
| 5,463 |
| - |
| 104,637 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at $0.03 per share | 3,300,000 |
| 3,300 |
| - |
| 95,700 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services and services to be rendered |
|
|
|
|
|
|
|
|
|
|
|
at prices from $0.03 to $0.042 |
|
|
|
|
|
|
|
|
|
|
|
per share (Note 6) | 7,000,000 |
| 7,000 |
| - |
| 225,000 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at $0.03 per share | 3,333,333 |
| 3,334 |
| - |
| 96,666 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrants |
|
|
|
|
|
|
|
|
|
|
|
granted (Note 7) | - |
| - |
| - |
| 86,572 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Additional capital contributed (Note 6) | - |
| - |
| - |
| 16,667 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 | - |
| - |
| - |
| - |
| - |
| (707,542) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008 | 199,926,128 |
| $ 199,926 |
| $ - |
| $ 16,754,988 |
| $ - |
| $ (20,570,240) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-15
|
|
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) (Continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Other |
| Accumulated |
|
|
|
|
|
|
| Additional |
| Compre- |
| During the |
| Common Stock |
| Paid-in |
| hensive |
| Development | ||||
| Shares |
| Amount |
| Subscribed |
| Capital |
| Loss |
| Stage |
Balance, December 31, 2008 | 199,926,128 |
| $ 199,926 |
| $ - |
| $ 16,754,988 |
| $ - |
| $ (20,570,240) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at $0.02 per share | 6,000,000 |
| 6,000 |
| - |
| 114,000 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at $0.03 per share | 21,599,999 |
| 21,600 |
| - |
| 626,400 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at $0.06 per share | 4,459,999 |
| 4,460 |
| - |
| 263,140 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at $0.10 per share | 1,324,400 |
| 1,324 |
| - |
| 131,116 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at $0.15 per share | 66,667 |
| 67 |
| - |
| 9,933 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash at $0.25 per share | 340,000 |
| 340 |
| - |
| 84,660 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services and for services to be rendered at |
|
|
|
|
|
|
|
|
|
|
|
$0.036 to $0.10 per share |
|
|
|
|
|
|
|
|
|
|
|
(Note 6) | 2,495,474 |
| 2,495 |
| - |
| 163,375 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for patent legal work performed at |
|
|
|
|
|
|
|
|
|
|
|
$0.295 per share | 50,000 |
| 50 |
| - |
| 14,700 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to directors in lieu of exercise of cashless |
|
|
|
|
|
|
|
|
|
|
|
warrants (Note 6) | 5,126,265 |
| 5,126 |
| - |
| (5,126) |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to a related |
|
|
|
|
|
|
|
|
|
|
|
company in relation to the early |
|
|
|
|
|
|
|
|
|
|
|
termination of a marketing rights |
|
|
|
|
|
|
|
|
|
|
|
agreement and the termination of a joint venture agreement at |
|
|
|
|
|
|
|
|
|
|
|
$0.40 per share (Notes 1 and 6) | 312,500 |
| 313 |
| - |
| 124,687 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrants (Note 7) | - |
| - |
| - |
| 105,393 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Stock options granted to a consultant and a director for services rendered (Note 7) | - |
| - |
| - |
| 146,097 |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on foreign currency translation | - |
| - |
| - |
| - |
| (3,611) |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 | - |
| - |
| - |
| �� - |
| - |
| (1,474,715) |
Balance, December 31, 2009 | 241,701,432 |
| $ 241,701 |
| $ - |
| $ 18,533,363 |
| $(3,611) |
| $ (22,044,955) |
The accompanying notes are an integral part of these consolidated financial statements.
F-16
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||
(A Development Stage Company) | |||||||||
Consolidated Statements of Cash Flows (Continued) | |||||||||
|
|
|
|
|
|
|
|
| From Inception |
|
|
|
|
|
|
|
|
| on January 31, |
|
|
|
|
| For the Years Ended |
| 1986 Through | ||
|
|
|
|
| December 31, |
| December 31, | ||
|
|
|
|
| 2009 |
| 2008 |
| 2009 |
SUPPLEMENTAL CASH FLOW INFORMATION |
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR: |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
| Interest |
|
| $ 155 |
| $ 3,225 |
| $ 29,863 |
|
|
|
|
|
|
|
|
|
|
NON-CASH FINANCING ACTIVITIES |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
| Stock issued for services |
|
| $ 98,982 |
| $ 160,000 |
| $ 3,390,898 |
|
| Stock issued for prepaid consulting fees |
|
| $ 65,388 |
| $ 172,500 |
| $ 237,888 |
|
| Stock issued for conversion of debt |
|
| $ 1,500 |
| $ 233,182 |
| $ 4,373,912 |
|
| Stock issued for license agreement | $ - |
| $ - |
| $ 693,752 | ||
|
| Stock issued for patent costs | $ 14,750 |
| $ - |
| $ 14,750 | ||
|
| Stock issued for early termination of marketing |
|
|
|
|
| ||
|
| rights agreement and joint venture agreement |
|
| $ 125,000 |
| $ - |
| $ 125,000 |
The accompanying notes are an integral part of these consolidated financial statements.
F-18
Contents
(A Development Stage Company)
AFFILIATE
2016
Medizone-Delaware was incorporated on January 31, 1986 under the state laws of Delaware. At the time of the acquisition of Medizone-Delaware, Medizone-Nevada was essentially inactive, with no operations and minimal assets. Additionally, the exchange of Medizone-Nevada’s Common Stock for the Common Stock of Medizone-Delaware resulted in the former stockholders of Medizone-Delaware obtaining control of Medizone-Nevada. Accordingly, Medizone-Delaware became the continuing entity for accounting purposes, and the transaction was accounted for as a recapitalization of Medizone-Delaware with no adjustment to the basis of Medizone-Delaware’s assets acquired or liabilities assumed. For legal purposes, Medizone-Nevada was the surviving entity.
On November 18, 1987, MedCan was incorporated under the laws of the Province of British Columbia. Shortly thereafter, MedCan entered into a license agreement with the Company wherein the Company transferred to MedCan the licenses and rights necessary to permit MedCan to hold substantially the same rights with respect to the medical applications of ozone in Canada as the Company does in the United States. As consideration for the transfer, the Company received 3,000,000 shares of MedCan and, in addition, purchased 1 share for the sum of $1.00. Under a separate agreement among the Company, MedCan and Australian Gold Mines Corporation (AGMC), (which later changed its name to International Blue Sun Resource Corporation), AGMC purchased 130,000 shares of MedCan for $100,000. On December 23, 1988, MedCan was recapitalized in a transaction in which the majority of its shares were exchanged for shares of KPC Investments (KPC). Following this transacti on, the Company owned 25,029,921 shares of KPC, representing 72% of the outstanding shares. KPC then changed its name to Medizone Canada, Ltd. (MCL). MedCan acquired all of the assets of MCL, consisting solely of cash in the amount of approximately $89,000.
In June 1998, the Company sold its interest in MCL for $125,000 cash and debt assumed of $8,417 less fees of $25,000 in a private transaction which resulted in a gain of $108,417 for the year ended December 31, 1998. The Company retained ownership, however, of all of the issued and outstanding stock of MedCan, the Canadian subsidiary.
In
F-19
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes2017 and 2016. The noncontrolling interest portion of net assets and net loss not attributable, directly or indirectly, to the Consolidated Financial Statements
December 31, 2009 and 2008
Medizone International, Inc. is considered immaterial.
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
On June 22, 1995, the Company entered into a series of contracts which resulted in the formation of a joint venture subsidiary incorporated in New Zealand, Medizone New Zealand Limited (MNZ). Prior to the cancellation of this joint venture on December 14, 2009 as described below, MNZ was a privately held corporation equally owned by the Company and Solwin Investments Limited (Solwin), a New Zealand corporation, and was a research and development stage company whose objective was to obtain regulatory approval for the distribution of the Company’s patented technology in New Zealand, Australia, South East Asia and the South Pacific Islands. The principal of MNZ was Richard G. Solomon (Solomon), who is also a board member of the Company.
Originally, the Company had purchased 100% of MNZ from Solomon, a New Zealand citizen, who became a director of the Company in January 1996 and who caused the formation of MNZ on June 22, 1995. Contemporaneously with this transaction, the Company sold 50% of MNZ to Solwin, a corporation owned by Solomon, for $150,000, of which the Company thereupon loaned $50,000 to MNZ on a demand basis. The Company recognized a $100,000 gain on the sale of MNZ to Solwin.
Contemporaneous with the creation of the above share structure, the Company and MNZ entered into a Licensing Agreement (the Licensing Agreement) and a Managing Agent Agreement (the Managing Agent Agreement). Pursuant to the Licensing Agreement, the Company granted an exclusive license to MNZ for its process and equipment patents and trademark in New Zealand. MNZ has agreed to apply for corresponding patent protection for the patents in New Zealand and to use its best effort to exploit the rights granted in the agreement. The License Agreement was to terminate on the date of the expiration of the last to expire of any patent obtained in New Zealand, or, if no such patents are obtained, on June 22, 2010.
Pursuant to the Managing Agent Agreement, MNZ was to act as the Company’s agent in the finding of other licensees of the Company’s patents and trademark in the following countries: Australia (including Australia and New Zealand), the South Pacific Islands, and South East Asia (including the Philippines, Indonesia and Vietnam). The Managing Agent Agreement was to expire on the termination or expiration of the last of the licenses obtained pursuant thereto, subject to earlier termination by the Company upon an occurrence of certain events.
Until the joint venture was terminated during December 2009 as described in the following paragraph, the investment in the joint venture had been recorded under the equity method of accounting as the Company did not have ultimate control of the joint venture.
Effective December 14, 2009, the Company’s Board of Directors, in an effort to unwind the joint venture and reconvey to the Company all global marketing rights of the Company’s intellectual property, entered into a Termination Agreement (the Termination Agreement) whereby the Company issued a total of 312,500 shares of Common Stock (valued at $0.40 per share, an approximate 4.0% increase over the market value of the shares on the date the agreement was entered into) to Solwin as consideration for the early termination of the Licensing Agreement and the Managing Agent Agreement, and to retain all rights and licenses originally granted to MNZ. Also as part of the Termination Agreement, the Company assigned its ownership rights and shares in MNZ back to Solwin. For the year ended December 31, 2009, the Company recorded a loss of $125,000, as the Company was unable to determine the future value of the licensing rights acquired pursuant to the Termination A greement.
c.
The Company’s current objective is to pursue an initiative in the field of hospital sterilization.
d. Accounting Methods
The Company’s consolidated financial statements are prepared using the accrual method of accounting.disinfection systems. The Company has electedinvented the AsepticSure® system to provide a December 31 year end.
F-20
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2009superior means of disinfecting non-porous surfaces in a variety of settings including hospitals, other healthcare facilities, and 2008
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Cashnon- hospital/healthcare facilities. The AsepticSure® system utilizes hydrogen peroxide vapor and Cash Equivalents
ozone in a patented process.
Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.
f.
For the Years Ended December 31, | ||||||||
2017 | 2016 | |||||||
Numerator (net loss) | $ | (2,013,799 | ) | $ | (2,673,836 | ) | ||
Denominator (weighted average number of common shares outstanding – basic and diluted) | 400,207,813 | 375,118,494 | ||||||
Basic and diluted net loss per common share | $ | (0.01 | ) | $ | (0.01 | ) |
|
|
|
|
| For the Years Ended December 31, | ||
| 2009 |
| 2008 |
Numerator |
|
|
|
- Loss before extraordinary items | $ (1,474,715) |
| $ (707,542) |
- Extraordinary items | - |
| - |
|
|
|
|
Denominator (weighted average number of shares outstanding) | 221,713,284 |
| 180,484,971 |
|
|
|
|
Basic loss per share |
|
|
|
- Before extraordinary items | $ (0.01) |
| $ (0.00) |
- Extraordinary items | 0.00 |
| 0.00 |
|
|
|
|
Basic Loss Per Share | $ (0.01) |
| $ (0.00) |
|
|
|
|
CommonDecember 31, 2017, common stock equivalents, consisting of 18,087,500 options, warrants to purchase 1,750,000 shares of common stock, and options,warrants to purchase up to $1,000,000 of common stock with the number of shares determined based on a 20-day average stock price prior to the date of exercise, have not been included in the calculation, as their effect is antidilutive for the periods presented.
year ended December 31, 2017. As of December 31, 2016, common stock equivalents, consisting of 20,715,000 options and warrants to purchase up to $1,000,000 of common stock with the number of shares to be determined based on similar terms as in 2017, have not been included in the calculation, as the effect is antidilutive for the year ended December 31, 2016.
g.
years for office equipment and furniture.
h.
As part of the process of preparing financial statements, the
At
F-21
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Provision for Taxes (Continued)
Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. If the Company were to determine that it would be able to realize its deferred income tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase net income or decrease net loss in the period such determination was made.
comprehensive loss. The Company has elected to present revenues net of any tax collected.
|
|
|
|
| 2009 |
| 2008 |
|
|
|
|
Net operating loss carryforwards | $ 2,511,000 |
| $ 2,587,000 |
Accrued expenses | 1,048,900 |
| 1,037,600 |
Depreciation | (200) |
| (100) |
Valuation allowance | (3,559,700) |
| (3,624,500) |
|
|
|
|
| $ - |
| $ - |
|
|
|
|
2017 | 2016 | |||||||
Net operating loss carryforwards | $ | 3,514,700 | $ | 4,959,900 | ||||
Related party accruals | 980,100 | 1,564,700 | ||||||
Valuation allowance | (4,494,800 | ) | (6,524,600 | ) | ||||
$ | - | $ | - |
|
|
|
|
| For the Years Ended December 31, | ||
| 2009 |
| 2008 |
|
|
|
|
Book loss | $ (575,100) |
| $ (275,900) |
Stock for Expenses | 230,800 |
| 102,700 |
Other | 3,700 |
| - |
Change in valuation allowance | 340,600 |
| 173,200 |
|
|
|
|
| $ - |
| $ - |
|
|
|
|
On January 1, 2007, the Company adopted the provisions of Accounting Standards Codification 740,Income Taxes (ASC 740), (formerly FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes). ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the consolidated financial statements. As a result of the implementation of ASC 740, the Company performed a review of its material tax positions in accordance with and measurement standards established by ASC 740. At the adoption date of January 1, 2007, the
2017 | 2016 | |||||||
Income tax benefit based on U.S. statutory rate of 34% | $ | (684,700 | ) | $ | (909,100 | ) | ||
Effect of change in deferred tax rates (39.834% to 24.95%) | 2,681,404 | - | ||||||
Other | 33,096 | (40,800 | ) | |||||
Change in valuation allowance | (2,029,800 | ) | 949,900 | |||||
$ | - | $ | - |
2017, and 2016. The Company files income tax returns in the U.S. Federalfederal, California and CaliforniaMichigan jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal,US federal, state and local tax authoritiesexaminations for years before 2002.
2014.
F-22
(A Development Stage Company)
AFFILIATE
2016
(continued)
i.
VIE. All material intercompany accounts and transactions have been eliminated.
j.
k.
l. Stock Options and Warrants
Prior to 2005, the Company applied the provisions of “Accounting for Stock Issued to Employees”, and related interpretations in accounting for all stock option plans. Under this standard, compensation cost was recognized for stock options and warrants granted to employees when the option/warrant price was less than the market price of the underlying Common Stock on the date of grant.
The standards also require the Company to provide proforma information regarding net loss and net loss per share as if compensation costs for the Company’s stock option plans and other stock awards had been determined in accordance with the fair value based method. The Company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model.
In December 2004, a new standard was adopted, “Share-Based Payment”. This new standard requires that compensation cost related to share-based employee compensation transactions be recognized in the consolidated financial statements. In March 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to this new standard. The Company adopted the revised standard during fiscal year 2005, but had no share-based employee compensation during the year ended December 31, 2005.
During 2009, 2008, 2007 and 2006, however, the Company extended the maturity date on various Common Stock warrants to certain directors and outside consultants (Note 7). Stock based compensationdid not incur any advertising expense for the years ended December 31, 20092017 and 2008 was $105,3932016.
liability. The fair value of the warrants to purchase common stock is estimated using the Black-Scholes valuation model. The significant assumptions used in estimating the fair value of warrant liabilities include the exercise price, volatility of the stock underlying the warrant, risk-free interest rate, estimated fair value of the stock underlying the warrant and the estimated life of the warrant.
m.
Patents
F-23
(A Development Stage Company)
AFFILIATE
2016
(continued)
the fair value hierarchy are as follows:
· | Level 1 measurements are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
· | Level 2 measurements are inputs other than quoted prices included in Level 1 that are observable either directly or indirectly. |
· | Level 3 measurements are unobservable inputs. |
Effective July 1, 2009,
position, results of operations and liquidity.
statement presentation.
position, results of operations and liquidity.
Company’s consolidated financial statement presentation.
F-24
(A Development Stage Company)
AFFILIATE
2016
– INVENTORY
Property
Company’s commercial strategy.
|
|
|
| 2009 | 2008 |
Office equipment | $ 19,249 | $ 19,249 |
Computers and software | 5,092 | 4,065 |
Furniture | 6,307 | 6,307 |
| 30,648 | 29,621 |
Accumulated depreciation | (27,607) | (26,024) |
Property and equipment, net | $ 3,041 | $ 3,597 |
|
|
|
Depreciation expense for the years ended December 31, 2009 and 2008 was $1,588 and $468, respectively.
2016:
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
2017 | 2016 | |||||||
Patent costs | $ | 433,865 | $ | 415,251 | ||||
Trademark | 770 | 770 | ||||||
434,635 | 416,021 | |||||||
Accumulated amortization | (317,019 | ) | (264,577 | ) | ||||
Trademark and patents, net | $ | 117,616 | $ | 151,444 |
The future amortization as of December 31, 2017, is as follows: 2018-$41,409; 2019-$27,745; 2020-$20,203; 2021-$12,956; 2022-$8,412 and thereafter-$6,891.
2017 | 2016 | |||||||
Accrued interest | $ | 577,978 | $ | 549,909 | ||||
Other accruals | 52,921 | 42,712 | ||||||
Total | $ | 630,899 | $ | 592,621 |
2017 | 2016 | |||||||
Accrued payroll and consulting – related parties | $ | 648,167 | $ | 422,334 | ||||
Accrued payroll taxes – related parties | 131,877 | 116,553 | ||||||
Total | $ | 780,044 | $ | 538,887 |
2017 | 2016 | |||||||
Unsecured notes payable to former directors and a family member of a former director, due at various dates in 1995, 1996 and 1997, interest at 8%. The Company has the right to repay the loans with restricted stock at $0.10 per share if alternative financings do not occur. These notes payable are in default. | $ | 182,676 | $ | 182,676 | ||||
Unsecured notes payable to a third party in the amount of $50,000, due on September 8, 2018, interest at 12%. Accrued interest due semi-annually, January 5 and July 5 of each year. The note holder has the right to convert 20% of the then outstanding principal into common shares at $0.10 per share. | 50,000 | 50,000 | ||||||
Unsecured notes payable to 10 stockholders, due on demand, interest at 10%. The Company is obligated to accept the principal at face value plus accrued interest as partial payment for shares the lenders may purchase from the Company upon exercise of the lenders’ option to acquire shares from the Company. | 60,815 | 60,815 | ||||||
Unsecured notes payable to a third party in the amount of $25,000, due on September 17, 2018, interest at 12%. Accrued interest due semi-annually, January 5 and July 5 of each year. The note holder has the right to convert 20% of the then outstanding principal into common shares at $0.10 per share. | 25,000 | 25,000 | ||||||
Unsecured notes payable to directors totaling $28,000 and a note payable to a third party in the amount of $9,000, due on April 22, 1995, interest at 8%. Each lender has the right to convert any portion of the principal and interest into common stock at a price per share equal to the price per share under a prior private placement transaction. These notes payable are in default. | 37,000 | 37,000 | ||||||
Unsecured notes payable to a financing company, payable in nine monthly installments, interest ranging from 5.1% to 7.3%, maturing in April, July and October 2018. | 6,732 | 16,841 | ||||||
Total notes payable | 362,223 | 372,332 | ||||||
Less notes payable current portion | (362,223 | ) | (297,332 | ) | ||||
Total notes payable long term, net of current portion | $ | - | $ | 75,000 |
executives of the Company. The three notes have similar terms and specify payment terms, trigger events and a default rate of 5% per annum. During 2017, the Company made total payments towards the principal of $23,202 The Company is currently in default with the terms of the promissory notes and is accruing interest at 5% per annum on the outstanding balance, with any payments made to be applied towards interest first. As of December 31, 2017, the Company owes $48,899 in accrued interest related to these notes (see Note 10).
|
|
|
| 2009 | 2008 |
Accrued payroll and consulting | $ 1,940,421 | $ 1,916,255 |
Accrued interest | 383,991 | 360,335 |
Accrued payroll taxes | 127,409 | 137,601 |
Other accruals | 19,083 | 18,283 |
Total | $ 2,470,904 | $ 2,432,474 |
|
|
|
Input | December 31, 2017 | December 31, 2016 | ||||||
Risk-free interest rate | 1.28 | % | .85 | % | ||||
Expected life in years | 1 month | 1 year | ||||||
Dividend yield | — | — | ||||||
Volatility | 136.3 | % | 120.0 | % | ||||
Stock price | $ | 0.04 | $ | 0.11 |
Contingent Liabilities
Asconsolidated financial position, results of December 31, 2009 and 2008, the Company has recorded contingent liabilities totaling $224,852 related to certain past due payables for which the Company has not received invoicesoperations, or demands for over ten years. Although management of the Company does not believe that the amounts will ever be paid, the amounts are being recorded as contingent liabilities until such time as the Company is certain that no liability exists and until the statute of limitations has expired.
cash flows.
F-25
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)
Operating Leases
Effective July 1, 2009, the Company entered into a lease agreement and established its own certified laboratory located at Innovation Park, Queen’s University in Kingston, Ontario, Canada, which will provide a primary research and development platform for the Company as it proceeds towards commercialization of its products. The lease term goes through June 30, 2010 and includes a monthly lease payment of $1,300 Canadian Dollars plus the applicable Goods and Services Tax (GST). Additional space was rented during December 2009, that includes a monthly lease payment of $1,200 Canadian Dollars plus the applicable GST. Total remaining commitments on this lease for 2010 are $7,427.
Litigation
COMMITMENTS AND CONTINGENCIES (Continued)
Unless otherwise stated, all transactions shown below were with unrelated parties and the securities issued were restricted.
Medizone-Nevada initially issued 5,500,000 shares in a private transaction.
On March 26, 1986, Medizone-Nevada issued 37,500,000 shares of Common Stock, representing 87.2% of the then outstanding shares, to the stockholders of Medizone-Delaware, including two officers and directors, in exchange for all of the shares of Medizone-Delaware. The costs of the transactions were offset against paid-in capital.
During$1,617,881. The principal amounts of the period from August 1986 through October 31, 1986, the final expiration date for exercise, warrants to purchase 7,814,600 shares together with cash totaling $781,460promissory notes issued were received by the Company which then issued 7,814,600 shares of new Common Stock. In January 1987, an additional 2,600 shares$1,065,189; $444,583 and $111,109, respectively. The promissory notes were issued in exchange for warrants and cashsettlement of $259.
In March 1987, the Company issued 1,000,000 shares of Common Stock in exchange for a patent.
In June 1987, the Company issued 950,000 sharesour liability to individuals in private transaction for aggregate proceeds of $150,000.
During the period from June 1987 through July 1987, the Company issued 203,167 shares of Common Stock to various vendors andthese three individuals for services renderedaccrued and unpaid compensation owed for periods prior to December 31, 2009. Payment of the amounts owning under the terms of the notes is due upon the earlier to occur of (a) a change in 1986 and 1987.
On August 26, 1987, an officercontrol of the Company exercised options to purchase 250,000 shares(as defined in the notes), (b) the executive’s death or (c) the executive’s disability as (defined in the notes or in the respective executive’s written employment agreement). In addition, in the case of Common Stock. In January 1988, two holders exercised their options and acquired an aggregate of 200,000 shares of Common Stock.
On September 26, 1988, the Company sold, in a private placement, 1,000,000 shares of Common Stock at $0.08 per share to an individual.
F-26
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 6 - EQUITY TRANSACTIONS (Continued)
During 1988, the Company issued a total of 35,000 shares of Common Stock for services.
During 1989, the Company issued 261,889 shares of Common Stock to various vendors and individuals for services rendered in 1988 and 1989. The Company also issued 5,790,000 shares to individuals in private transactions for aggregate proceeds of $291,500.
Also during 1989, the Company satisfied obligations for notes payable to and accrued interest due to unrelated individuals totaling $377,539our former executives, payment of the notes would be triggered by the issuanceCompany’s failure to pay the executive’s base salary in accordance with the terms and conditions of 3,899,532 sharesthe executive’s employment agreement because of Common Stock. The Company issued 250,000 sharesdisability.
During 1990, the following equity transactions occurred: The Companypromissory notes we previously issued 4,250,000 shares to individuals in private transactions for aggregate proceeds of $179,500; the Company satisfied obligations totaling $125,000 to the former vice president, secretaryMarshalls (collectively, the “Marshall Notes”) to require monthly principal payments to Mr. Marshall of $14,000 and treasurerto Dr. Marshall of $6,900 and to waive interest except in the event of a default. We made the first payments under the Marshall Notes, but have been in default under the Marshall Notes since April 2017, and as well as director by issuing 2,272,727 shares of Common Stock at $0.06 per share;December 31, 2017, we owed principal of owe principal payments for approximately nine months totaling $122,500 to Mr. Marshall and to Dr. Marshall totaling $58,600. In addition, under the Company satisfied an outstanding account payable to an unrelated individual totaling $15,000 byterms of the issuance of 150,000 shares of Common Stock at $0.10 per share; and the Company issued to an employee and four other unrelated persons as compensation or payment a total of 880,000 shares of Common Stock to which it ascribed a value of $88,000.
During 1991, the following equity transactions occurred: The Company issued 4,366,667 shares to individuals in private transactions for aggregate proceeds of $310,000; the Company issued a total of 425,000 shares of Common Stock for services and accrued liabilities of which an aggregate of 100,000 shares were issued to two directors; and three holders exercised their options and acquired an aggregate of 450,000 shares of Common Stock.
During 1992, the following equity transactions occurred: The Company issued 2,702,335 shares to individuals in private transactions for aggregate proceeds of $430,350; the Company issued a total of 401,500 shares of Common Stock for services and accrued liabilities; holders exercised options and acquired an aggregate of 250,000 shares of common s tock.
During 1993, the following equity transactions occurred: The Company issued 1,471,666 shares to individuals in private transactions for aggregate proceeds of $271,000; the Company issued a total of 5,347,219 shares of Common Stock for services. Also, during 1993, a total of $261,915 was received in cash for 2,619,150 shares subscribedMarshall Notes, as a result of a private placement offering. The offering commenced as of November 26, 1993, with a maximum of $700,000 to be raised in gross proceeds fromour default, the sale of up to 7,000,000 shares.
During 1994, the following equity transactions occurred: The Company issued a total of 1,431,590 shares of Common Stock for services; the Company issued a total of 1,125,834 shares of Common Stock to certain prior purchasers of Common Stock in recognition of disparity in purchase in contemporaneous offerings. Also during 1994, a total of $680,040 was received in cash for 6,800,499 shares subscribed as a resultMarshall Notes now accrue default until payment of the offering. Subsequent todefault amounts at the offering, an additional $316,860 was received in cash from foreign investors subscribing to 3,168,600 sharesrate of Common Stock. On December 28, 1994, the Company settled a dispute regarding the validity of notes payable to former management in the amount of $2,033,629 by agreeing to issue 11,250,000 common shares (recorded as shares subscribed) in satisfaction5% of the total amount of the debt.
notes.
Also in 1994, $40,000
During 1995,restricted stock; (4) an additional 1,000,000 shares of restricted stock that will vest upon successful commercialization of the following equity transactions occurred:AsepticSure® system in the US market; and (5) benefits as offered to other executive employees. Mr. Dodd voluntarily surrendered the 1,000,000 restricted shares he received as a signing bonus on January 2, 2018. The Company issuedalso agreed to a totalchange of 2,050,000control agreement that will pay severance compensation to Mr. Dodd in the event his employment is terminated by the Company without cause or by Mr. Dodd for good reason, as defined in the agreement.
F-27
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notescleaning, deodorizing and disinfecting products. Innovasource has agreed to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 6 - EQUITY TRANSACTIONS (Continued)
During 1996,supply the Company received stock subscription agreements forwith its custom-formulated disinfectant product and has granted the purchase of 7,254,470 shares ofCompany an exclusive, non-transferable limited license to use its Common Stock, together with proceeds totaling $725,447 from sales of its securities to non-United States investors, outside ofintellectual property in the United States pursuant to Regulation S promulgated under the Securities Act. Approximately $635,447 of these proceeds were from themarketing and sale of the Company’s Common Stock atAsepticSure® system in the US. The supply agreement has a per share pricefive-year term that automatically renews for two-year terms unless either party provides notice of $0.10 (including $37,500 for 375,000 shares from Richard G. Solomon, atnon-renewal prior to the time a directorexpiration of the Company). The remaining $90,000 were from the sale of 900,000 units, each unit consisting of one share of the Company’s Common Stock at a per share price of $0.10 to a director pursuant to the non-public offering exemption from registration under the Securities Act. current term.
During 1997,market development by the distributor. On October 25, 2017, the Company issued 3,089,680 previously subscribed sharesentered into an exclusive distribution agreement with Aglon a/s for the countries of its Common StockNorway, Sweden, Finland, Denmark, and also issued 3,746,336 sharesIceland.
During 1998,which the Company issued 5,714,286 previously subscribed shareshas not received invoices or demands for over 10 years. The statute of its Common Stock and also issued a total of 4,265,000 shares of its Common Stock to various individuals for services rendered. Also in 1998, the Company issued 857,142 shares of Common Stock through exercise of outstanding warrants at $0.07 per share for a total of $60,000, and issued 1,832,377 shares in lieu of outstanding debt of $126,418. The Company also canceled 630,000 shares for services that were never performed.
During 1999, the Company issued 25,000 shares of its Common Stock to an individual for services rendered valued at $1,750. In addition, the Company issued 936,507 shares of its Common Stock through the exercise of outstanding warrants at $0.07 per share for a total of $65,555.
During 2000, the Company issued 3,142,857 shares of Common Stock through the exercise of outstanding warrants at $0.07 per share for a total of $220,000. The Company issued Common Stock for services in two different instances during the year. One issuance was of 350,000 shares of Common Stock for a total of $61,250. The other issuance was for 300,000 shares of Common Stock for a total of $85,500. The Company issued Common Stock for debt in four separate instances. The first one being 2,020,000 shares of Common Stock issued for a total of $222,200. The second issuance was 95,000 shares of Common Stock for a total of $14,000. The third issuance was 20,000 shares of Common Stock for a total of $4,000. The fourth issuance was 100,000 shares of Common Stock for a total of $55,000. The Company also canceled 2,000,000 shares of Common Stock pursuant to the settlement agreement with the Company’s former C.F.O. The Company also recognized an additional expense of $1,743,468 for the extension of warrants below market value.
During 2001, the Company issued a total of 1,422,221 shares of Common Stock at prices ranging from $0.15 to $0.20 per share for total proceeds of $254,981. Pursuantlimitations relating to these stock issuances, the Company granted warrants to purchase 2,122,221 shares of Common Stock at exercise prices of $0.15 to $0.20 per share. 25,000,000 warrants previously outstanding also expired during 2001, unexercised.
During 2002, the Company issued a total of 1,250,000 shares of Common Stock at $0.10 per share for total proceeds of $125,000. The Company also granted the investors warrants to purchase 1,250,000 shares of Common Stock at $0.10 per share, exercisable over a two-year term. The market price of the Common Stock was $0.10 per share on the date of the issuance of the shares and grant of the warrants.
Also during the year ended December 31, 2002, the Company issued a total of 677,368 shares of Common Stock for services rendered and repayment of outstanding debt at $0.10 per share for a total of $67,737. The Company also issued a total of 480,000 shares of Common Stock, pursuant to an S-8 registration, for services rendered at $0.10 per share for a total of $48,000.
F-28
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 6 - EQUITY TRANSACTIONS (Continued)
During 2003, the Company issued a total of 865,000 shares of Common Stock at $0.05 per share for total proceeds of $43,250. The Company also granted the investors warrants to purchase 865,000 shares of Common Stock at $0.05 per share, exercisable over a two-year term. The market price of the Common Stock was $0.05 per share on the date of the issuance of the shares and grant of the warrants.
Also during the year ended December 31, 2003, the Company issued 460,000 shares of Common Stock at $0.05 per share in lieu of a note payable totaling $23,000 and 100,000 shares of Common Stock to an officerpayables has passed. Although management of the Company for services rendered valued at $0.05 per share for a total value of $5,000.
does not believe that the amounts will be paid, the amounts have been recorded as other payables until such time as the Company is certain that no liability exists.
approximately $1,000.
During 2007, the Company’s Board of Directors approved various stock issuances to the Company’s directors, officers and outside consultants for a total of 11,250,000 shares of Common Stock, valued at $0.02 per share or $225,000, the market value of the shares on the date that the shares were approved to be issued. These shares were eventually issued during May 2008.
During May 2008, the Company issued 8,000,000 shares of Common Stock for cash proceeds received during March and April 2008 totaling $80,000, or $0.01 per share.
In addition, during May 2008, a total of 5,463,333 shares of restricted Common Stock were issued for cash proceeds previously received during 2004, 2005 and 2006 (previously recorded as stock deposits) totaling $110,100. An additional 409,075 shares of Common Stock were issued to a Company director in repayment of a $8,181 loan previously received by the Company in a prior year.
During July and September 2008, the Company issued an additional 3,300,000 shares of Common Stock for cash proceeds of $99,000, or $0.03 per share.
Effective September 2, 2008, the Company’s Board of Directors approved the issuance of a total of 1,000,000 restricted shares to a public relations firm, for public relations and corporate communications services to be rendered valued at $42,000, or $0.042 per share, which represented the market value of the shares on the date that the shares were approved to be issued. The consulting agreement is based on a one-year term, the shares will vest in equal increments, and the consulting expense will be recognized over the same period. $14,000 of the $42,000 consulting expense was recognized during the year ended December 31, 2008, with the remaining $28,000 recognized during the year ended December 31, 2009.
Effective September 15, 2008, the Company’s Board of Directors approved the issuance of a total of 1,000,000 restricted shares to a strategic management consulting firm for services rendered valued at $40,000, or $0.04 per share, which represented the market value of the shares on the date that the shares were approved to be issued.
Effective September 19, 2008, the Company’s Board of Directors approved the issuance of a total of 4,000,000 free-trading shares to two individuals for management consulting services to be rendered valued at $120,000, or $0.03 per share, which represented the market value of the shares on the date that the shares were approved to be issued. The consulting agreements are based on a four-month term, the shares vest in equal increments, and the consulting expense is recognized over the same period. $96,000 of the $120,000 consulting expense was recognized during the year ended December 31, 2008, with the remaining $24,000 recognized during the year ended December 31, 2009.
F-29
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
Effective November 5, 2008,
During December 2008, the Company issued 3,333,333 shares of Common Stock for cash proceeds received totaling $100,000, or $0.03 per share. Also during 2008, a director contributed services valued at $16,667.
During April 2009, the Company’s Board of Directors approved the issuance of 700,000 (350,000 restricted and 350,000 free-trading) shares to a consultant valued at $25,200, or $0.036 per share, which represented the market value of the shares on the date that the shares were approved to be issued. The consulting agreement was based on a one-year term, the shares vest in equal increments, and the consulting expense is to be recognized over the same period. $16,800 of the $25,200 was recognized during the year ended December 31, 2009, with the remaining $8,400 recorded as deferred consulting fees, to be recognized during 2010 over the remaining four month period at $2,100 per month.
During May 2009, the Company’s Board of Directors approved the issuance of 500,000 restricted shares of Common Stock to a consultant valued at $19,500, or $0.039 per share, which represented the market value of the shares on the date that the shares were approved to be issued. The consulting agreement was based on a one-year term, the shares vested in equal increments, and the consulting expense was recognized over the same period. $11,911 of the $19,500 was recognized during the year ended December 31, 2009. The remaining $7,589 will be recognized during 2010.
During June 2009, pursuant to a consulting agreement that included a cash payment of $7,200, the Company’s Board of Directors approved the issuance of 200,000 shares of Common Stock to a consultant valued at $8,400, or $0.042 per share, which represented the market value of the shares on the date that the shares were approved to be issued. The consulting agreement was based on a three-and-one-half month term, the shares vested in equal increments, and the total consulting expense was recognized during the year ended December 31, 2009.
During September 2009, the Company’s Board of Directors approved the issuance of 250,000 shares of Common Stock to a consultant valued at $25,000, or $0.10 per share, which represented the market value of the shares on the date that the shares were approved to be issued. 15,000 of the shares issued were issued in lieu of outstanding debt owed to the consultant, totaling $1,500. ��The remaining 235,000 shares issued were based on a consulting agreement expiring on January 31, 2010, the shares vest in equal increments, and the $23,500 consulting expense is to be recognized over the same period. $18,278 of the $23,500 was recognized for the year ended December 31, 2009, with the remaining $5,222 recorded as deferred consulting fees, to be recognized during January 2010.
Total deferred consulting fees related to the above mentioned agreements as of December 31, 2009 was $21,211 which will be recognized over the subsequent periods as previously discussed.
Effective May 27, 2009, the Company’s Board of Directors approved the issuance of a total of 100,000 shares of Common Stock to a consultant for medical research services rendered valued at $3,900, or $0.039 per share, which represented the market value of the shares on the date that the shares were approved to be issued.
Effective June 12, 2009, the Company’s Board of Directors approved the issuance of a total of 203,497 shares of Common Stock to a consultant for medical research services rendered valued at $20,350, or $0.10 per share, which represented the market value of the shares on the date that the shares were approved to be issued.
F-30
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 6 - EQUITY TRANSACTIONS (Continued)
On August 5, 2009, warrants held by two separate directors of the Company for a total of 6,487,408 shares were exercised, using the cashless exercise provision within the warrant agreements, resulting in the issuance of 5,126,265 shares of Common Stock with no cash proceeds received.
Effective October 13, 2009, the Company’s Board of Directors approved the issuance of a total of 453,569 shares of Common Stock to two separate consultants for medical research and website design services rendered valued at $29,483, or $0.065 per share, which represented the market value of the shares on the date that the shares were approved to be issued.
Effective November 30, 2009, the Company’s Board of Directors approved the issuance of a total of 50,000 shares of Common Stock to a patent attorney for patent legal services rendered valued at $14,750, or $0.295 per share, which represented the market value of the shares on the date that the shares were approved to be issued.
Effective December 15, 2009, the Company’s Board of Directors approved the issuance of a total of 88,408 shares of Common Stock to a consultant for medical research services rendered valued at $34,037, or $0.0385 per share, which represented the market value of the shares on the date that the shares were approved to be issued.
During the year ended December 31, 2009, the Company issued a total of 33,791,065 shares of Common Stock for cash proceeds received totaling $1,263,040, at prices ranging from $0.02 to $0.25 per share.
As previously discussed in Note 1, effective December 14, 2009, the Company’s Board of Directors approved the issuance of a total of 312,500 restricted shares of Common Stock to Solwin Investments Limited (Solwin), a New Zealand corporation controlled by Richard Solomon, a director of the Company, pursuant to a Termination Agreement. The shares were valued at $0.40 per share, which represented an approximate 4.0% increase over the market value of the shares on the date of the agreement. The shares were issued as full consideration for the early termination of a Licensing Agreement and a Managing Agent Agreement, and to retain all rights and licenses originally granted to Medizone New Zealand, Limited (MNZ), a New Zealand corporation. Also as part of the Termination Agreement, the Company assignedmodify its ownership rights and shares in MNZ back to Solwin. For the year ended December 31, 2009, the Company recorded a loss of $125,000, as the Company w as unable to determine the future value of the licensing rights acquired pursuant to the Termination Agreement.
Recapitalization
Effective August 26, 2009, authorized by the stockholders pursuant to Proposal 4 at the Company’s annual stockholder’s meeting, the Company’s Articles of Incorporation werewith the State of Nevada on January 4, 2017, which was approved by the Secretary of State on January 24, 2017.
Directors.
The Articles of Incorporation were also amended to increase
NOTE 7 - OUTSTANDING WARRANTS AND OPTIONS
Warrants
On various dates overof common stock for net proceeds of $675,000 and an average price of $0.06 per share as part of a private offering to accredited investors, which included the past several years upCompany’s Chairman and Interim CEO, its current CEO, Executive Vice President, Administration and Operations, Executive Vice President, Chief Commercial Officer and an independent director.
F-31
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 7 - OUTSTANDING WARRANTS AND OPTIONS (Continued)
The Company estimated the fair value of the stock warrants at the date of the maturity extension, based on the following weighted average assumptions during 2009:
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As previously discussed, on August 5, 2009, warrants held by two separate directors of the Company for a total of 6,487,408 shares were exercised, using the cashless exercise provision within the warrant agreements, resulting in the issuance of 5,126,265 shares of Common Stock with no cash proceeds received. On August 19, 2009, all remaining warrants expired unexercised.
A summary of the status of the Company’s outstanding warrants as of December 31, 2009 and changes during the year then ended is presented below:
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|
|
| Shares | Weighted Average Exercise Price |
Outstanding, beginning of period | 10,109,629 | $0.08 |
Granted (extension of terms) | 20,219,258 | $0.08 |
Expired/Canceled | (23,841,479) | $(0.09) |
Exercised | (6,487,408) | $(0.02) |
Outstanding, end of period | - | n/a |
Exercisable | - | n/a |
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Options
On August 26, 2009, the Company granted a total of 1,000,000 options to a Company director with an exercise price of $0.10 per share, exercisable for up to five years. On the same date, the Company granted an additional 1,500,000 options to an outside consultant for services rendered, with an exercise price of $0.10 per share, exercisable for up to five years, but including vesting provisions as follows: i) 500,000 of the options vested immediately on the date of grant, ii) 500,000 options will vest on the date certified by the Company as the date the Company’s hospital sterilization program completes its beta-testing, and iii) the remaining 500,000 options will vest on the date certified by the Company as the date that the Company’s process has been commercialized and a minimum of fifty units or devices have been sold to third parties by the Company. As of December 31, 2009, 1,000,000 of the 1,500,000 options granted to this consultant had not yet ve sted.
As previously discussed, the Company estimates the fair value of each stock award by using the Black-Scholes option pricing model, which model requires the use of exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate, and the weighted average expected life of the options. Because the Company does not pay dividends, the dividend rate variable used in the Black-Scholes option-pricing model is zero. Under the provisions of this accounting standard, additional expenseASU 2016-09, the Company has elected to recognize forfeitures as they occur to determine the amount of $146,097 was recorded forcompensation cost to be recognized in each period. For the year ended December 31, 2009 under2017 and 2016, the Black-Scholes option pricing modelCompany recorded stock-based compensation of $565,651 $ and $0, respectively, of which $89,064 related to the modification of vesting relating to 750,000 options issued in 2014 to Mr. Esposito. As of December 31, 2017, the Company had outstanding unvested options for these options granted on August 26, 2009. Additionala total of 325,000 shares with related unrecognized expense of $97,398approximately $19,760 and weighted average remaining life of 7.59 years. The Company will be recorded inrecognize this expense over the future asservice period or when the additional vesting requirements are met.
achievement of the required milestones becomes probable.
The
Risk-free interest rate |
| 1.36% to 1.99 | % | |
Expected life | 5 years | |||
Expected volatility |
| 98.38% to 101.86 | % | |
Dividend yield |
| 0.00 | % |
F-32
(A Development Stage Company)
AFFILIATE
2016
A
| Shares | Weighted Average Exercise Price |
Outstanding, beginning of period | - | n/a |
Granted | 2,500,000 | $0.10 |
Expired/Canceled | - | n/a |
Exercised | - | n/a |
Outstanding, end of period | 2,500,000 | $0.10 |
Exercisable | 1,500,000 | $0.10 |
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NOTE 8 - DUE TO STOCKHOLDERS
ended:
During various prior years, certain
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
As of December 31, 2016 | 20,715,000 | $ | 0.143 | 2.08 | $ | 261,220 | ||||||||||
Granted | 6,900,000 | 0.097 | ||||||||||||||
Forfeited | (7,550,000 | ) | 0.202 | |||||||||||||
Surrendered | (1,977,500 | ) | 0.128 | |||||||||||||
As of December 31, 2017 | 18,087,500 | 0.102 | 3.72 | - | ||||||||||||
Exercisable | 17,762,500 | 0.103 | 3.79 | - |
NOTE 9 - NOTES PAYABLE
Notes payable consistedaggregate intrinsic value of the following at December 31, 2009 and 2008:
2009 2008
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Notes payable to ten stockholders, due on demand, plus interest at 10% per annum (in arrears). The Company is obligated to accept the rate at face value plus accrued interest as partial payment for shares the lenders may purchase from the Company upon exercise of the lenders’ option to acquire shares from the Company. | $ 60,815 | $ 60,815 |
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Notes payable to directors totaling $28,000 and a note payable to a third party in the amount of $9,000, due on April 22, 1995 (principal and accrued interest in arrears as of report date), plus interest at 8% per annum. Each lender has the right to convert any portion of the principal and interest into Common Stock at a price per share equal to the price per share under the most recent private placement transaction. | 37,000 | 37,000 |
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Notes payable to former directors and a family member of a former director, due at various dates in 1995, 1996 and 1997 (principal and accrued interest in arrears as of report date), plus interest at 8% per annum. The Company has the right to repay the loans with restricted stock at $0.10 per share if alternative financings do not occur. | 182,676 | 182,676 |
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Note payable to a financing company, payable in nine monthly installments of $691, interest at 7.75% per annum, matures on March 31, 2010. | 2,720 | - |
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Total Notes Payable | 283,211 | 280,491 |
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Less: Current Portion | (283,211) | (280,491) |
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Long-Term Notes Payable | $ - | $ - |
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outstanding vested options was $0. No shares were exercised in 2017.
F-33
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 9 - NOTES PAYABLE (Continued)
The aggregate principal maturitiessummary of notes payable are as follows:
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NOTE 10 - DEBT FORGIVENESS
Duringunvested stock option activity for the year ended December 31, 2009, an outside attorney of2017 is presented below:
Number of Shares | Weighted Average Grant Date Fair Value | |||||||
Non-vested balance as of December 31, 2016 | 1,075,000 | $ | 0.11 | |||||
Awarded | 1,000,000 | 0.08 | ||||||
Vested | (250,000 | ) | 0.06 | |||||
Forfeited | (500,000 | ) | 0.10 | |||||
Surrendered | (1,000,000 | ) | 0.1095 | |||||
Non-vested balance as of December 31, 2017 | 325,000 | 0.08 |
January 30, 2018.
Over the past two years, the Company has raised a total of $1,542,040 through the sale of 48,424,398 restricted shares of Common Stock at prices ranging from $0.01 to $0.25 per share, which funds have been used to bring the Company current in its reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and to pay certain other corporate obligations including the initial costs of development for its hospital sterilization initiative. As discussed in Note 12, an additional $125,000 has been raised subsequent to December 31, 2009 through the sale of 500,000 restricted shares of Common Stock, at $0.25 per share. However, the Company will need to raise additional capital in the near future in order to sustain operations and to fund additional research. The Company believes that it will be able to raise these additional needed funds from some of the same investors who have purchased shares during 2008 and 2009, although there is no guarantee that these investors will purchase additional shares. However, these investors have verbally committed to continue to fund the Company’s projects on a monthly basis, as needed. If the Company is unsuccessful in finalizing this or otherobtaining the necessary additional funding, it will most likely be forced to substantially reduce or cease operations.
During 2009, the Company began pursuing the development of a novel ozone-based technology (“AsepticSure™ technology”) which will offer a safe, inexpensive means of disinfecting medical facilities of all bacteria, fungi and viruses known to cause hospital derived infections. Since this technology is not considered a medical treatment or a diagnostic, its developmental pathway will not be subject to regulatory review or the requirement of a lengthy clinical trial process. The Company has recently completed a third series of laboratory trials of this hospital sterilization technology at Innovation Park, Queen’s University, Ontario, Canada, which has enabled the Company to establish the precise protocols necessary in order to obtain maximum bacteri cidal action in combination with minimum turn-around times in keeping with normal hospital flow patterns. Most recently, the Company research has shown that the technology can now achieve a level of bacterial decontamination heretofore unseen in open space settings using conventional means.
F-34
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 11 - GOING CONCERN (Continued)
In addition, the Company’s full scale development prototype has been completed and demonstrated in bacteria-free runs that it can reach both the charge time and saturation requirements of its design criteria. Hospital beta testing of the AsepticSure™ hospital sterilization prototype system is scheduled to begin during early 2010 for both public and government applications. Assuming successful hospital beta testing, commercialization of the system with first product deliveries is expected during 2010, which the Company believes will provide the necessary revenue to fund additional advanced efforts with this technology for bio-terrorism counter measures, as well as other projects.
for general corporate purposes.
The management
sufficient shares outstanding available for sale (see Note 13).
this uncertainty.
Subsequent
F-35
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||
(A Development Stage Company) | |||||||
Consolidated Balance Sheets | |||||||
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ASSETS | |||||||
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| September 30, |
| December 31, |
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| 2010 |
| 2009 |
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| (Unaudited) |
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CURRENT ASSETS |
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| Cash |
| $ | 634,852 | $ | 359,891 | |
| Prepaid expenses |
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| 12,050 |
| 6,786 | |
| Deferred consulting fees |
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| 70,303 |
| 21,211 | |
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| Total Current Assets |
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| 717,205 |
| 387,888 |
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PROPERTY AND EQUIPMENT (Net) |
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| 1,768 |
| 3,041 | ||
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OTHER ASSETS |
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| Trademark and patents, net |
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| 110,691 |
| 19,440 | |
| Deferred stock offering costs |
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| 52,500 |
| - | |
| Lease deposit |
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| 1,122 |
| 1,122 | |
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| Total Other Assets |
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| 164,313 |
| 20,562 |
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| TOTAL ASSETS |
| $ | 883,286 | $ | 411,491 |
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||
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CURRENT LIABILITIES |
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| Accounts payable |
| $ | 637,857 | $ | 699,026 | |
| Due to stockholders |
|
| 7,000 |
| 7,000 | |
| Accrued expenses |
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| 2,491,804 |
| 2,470,904 | |
| Notes payable |
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| 285,302 |
| 283,211 | |
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| Total Current Liabilities |
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| 3,421,963 |
| 3,460,141 |
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CONTINGENT LIABILITIES |
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| 224,852 |
| 224,852 | ||
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| Total Liabilities |
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| 3,646,815 |
| 3,684,993 |
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STOCKHOLDERS' EQUITY (DEFICIT) |
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| Preferred stock, 50,000,000 shares authorized of $0.00001 |
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| par value, no shares issued or outstanding |
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| - |
| - | |
| Common stock, 395,000,000 shares authorized of $0.001 |
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| par value, 257,664,949 and 241,701,432 shares issued |
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| and outstanding, respectively |
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| 257,665 |
| 241,701 | |
| Additional paid-in capital |
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| 21,413,395 |
| 18,533,363 | |
| Other comprehensive loss |
|
| (9,847) |
| (3,611) | |
| Deficit accumulated during the development stage |
| (24,424,742) |
| (22,044,955) | ||
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| Total Stockholders' Equity (Deficit) |
|
| (2,763,529) |
| (3,273,502) |
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| TOTAL LIABILITIES AND STOCKHOLDERS' |
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| |
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| EQUITY (DEFICIT) |
| $ | 883,286 | $ | 411,491 |
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The accompanying notes are an integral partshare, subject to adjustment upon the occurrence of these consolidated financial statements.
F-36
The accompanying notes are an integral partcertain events of these consolidated financial statements.
default with respect to the notes.
F-37
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MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES | ||||||||||
(A Development Stage Company) | ||||||||||
Consolidated Statements of Other Comprehensive Loss | ||||||||||
(Unaudited) | ||||||||||
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| From Inception |
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| For the |
| For the |
| on January 31, 1986 | ||||
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| Three Months Ended |
| Nine Months Ended |
| Through | ||||
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| September 30, |
| September 30, |
| Sept. 30, | ||||
|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
| 2010 |
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NET LOSS | $ | (1,681,826) | $ | (472,994) | $ | (2,379,787) | $ | (986,389) | $ | (24,424,742) |
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OTHER COMPREHENSIVE LOSS |
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(Gain) Loss on foreign currency translation |
| 63 |
| 371 |
| (6,236) |
| 5 |
| (9,847) |
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TOTAL COMPREHENSIVE LOSS | $ | (1,681,763) | $ | (472,623) | $ | (2,386,023) | $ | (986,384) | $ | (24,434,589) |
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The accompanying notes are an integral part
F-38
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MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||
(A Development Stage Company) | |||||||||
Consolidated Statements of Cash Flows | |||||||||
(Unaudited) | |||||||||
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| From Inception |
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| on January 31, |
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| For the Nine Months Ended |
| 1986 Through | ||
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| September 30, |
| September 30, | ||
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| 2010 |
| 2009 |
| 2010 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
| ||
Net loss |
| $ | (2,379,787) | $ | (986,389) | $ | (24,424,742) | ||
Adjustments to reconcile net loss to net cash |
|
|
|
|
|
|
| ||
used in operating activities: |
|
|
|
|
|
|
| ||
| Depreciation and amortization |
|
| 5,197 |
| 1,432 |
| 55,888 | |
| Stock issued for services |
|
| 1,268,213 |
| 35,462 |
| 4,659,111 | |
| Stock issued for early termination of a marketing rights agreement and a joint venture agreement |
|
| - |
| - |
| 125,000 | |
| Amortization of deferred consulting fees |
|
| 21,211 |
| 89,335 |
| 137,388 | |
| Expense for extension of warrants below |
|
|
|
|
|
|
| |
| market value |
|
| - |
| 105,393 |
| 2,092,315 | |
| Value of stock options granted |
|
| 249,115 |
| 146,097 |
| 395,212 | |
| Bad debt expense |
|
| - |
| - |
| 48,947 | |
| Non-controlling interest in loss |
|
| - |
| - |
| (26,091) | |
| Loss on disposal of assets |
|
| - |
| - |
| 693,752 | |
| Gain on settlement of debt and lawsuit settlements |
|
| - |
| (61,514) |
| (603,510) | |
Changes in assets and liabilities: |
|
|
|
|
|
|
| ||
| Prepaid expenses and deposits |
|
| 882 |
| (6,149) |
| (49,949) | |
| Accounts payable |
|
| (61,169) |
| (1,788) |
| 1,258,734 | |
| Accrued expenses |
|
| 20,900 |
| 52,127 |
| 3,139,827 | |
|
| Net Cash Used by Operating Activities |
|
| (875,438) |
| (625,994) |
| (12,498,118) |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
| ||
| Trademark and patents |
|
| (27,710) |
| (5,329) |
| (41,943) | |
| Purchase of property and equipment |
|
| - |
| (1,027) |
| (44,182) | |
|
| Net Cash Used by Investing Activities |
|
| (27,710) |
| (6,356) |
| (86,125) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
| ||
| Proceeds from lawsuit settlement |
|
| - |
| - |
| 415,000 | |
| Principal payments on notes payable |
|
| (4,055) |
| (1,309) |
| (200,133) | |
| Cash received from notes payable |
|
| - |
| - |
| 1,129,518 | |
| Advances from stockholders |
|
| - |
| - |
| 44,658 | |
| Payment on stockholder advances |
|
| - |
| - |
| (24,191) | |
| Capital contributions |
|
| - |
| - |
| 439,870 | |
| Stock issuance costs |
|
| (10,000) |
| - |
| (115,312) | |
| Increase in non-controlling interest |
|
| - |
| - |
| 14,470 | |
| Issuance of Common Stock for cash |
|
| 1,198,400 |
| 768,000 |
| 11,525,062 | |
|
| Net Cash Provided by Financing Activities |
|
| 1,184,345 |
| 766,691 |
| 13,228,942 |
EFFECT ON CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
|
| (6,236) |
| 5 |
| (9,847) | ||
NET INCREASE IN CASH |
|
| 274,961 |
| 134,346 |
| 634,852 | ||
CASH AT BEGINNING OF PERIOD |
|
| 359,891 |
| 12,272 |
| - | ||
CASH AT END OF PERIOD |
| $ | 634,852 | $ | 146,618 | $ | 634,852 |
The accompanying notes are an integral part of these consolidated financial statements.
F-39
The accompanying notes are an integral part of these consolidated financial statements.
F-40
(A Development Stage Company)
AFFILIATE
September 30, 2010 and
2017 and 2016
SUBSEQUENT EVENTS (Continued)
The financial information included herein is unaudited and has been prepared consistent with generally accepted accounting principles (GAAP) for interim consolidated financial information and
The results of operations for the three months and nine months ended September 30, 2010 are not necessarily indicative of the results to be expected for the full year.
Recently Adopted Accounting Pronouncements
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2009-13 for Revenue Recognition – Multiple Deliverable Revenue Arrangements (Subtopic 605-25) “Subtopic”. This accounting standard update establishes the accounting and reporting guidance for arrangements under which the vendor will perform multiple revenue generating activities. Vendors often provide multiple products or services to their customers. Those deliverables often are provided at different points in time or over different time periods. Specifically, this Subtopic addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. The amendments in this guidance will affect the accounting and reporting for all vendors that enter into multiple-deliverable arrangements with their customers when those arrangements are within the scope of this Subtopic.
This new accounting standard is effective for fiscal years beginning on or after June 15, 2010. Earlier adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity will apply the amendments under this Subtopic retrospectively from the beginning of the entity’s fiscal year. The presentation and disclosure requirements shall be applied retrospectively for all periods presented. As2018, the Company has not yet generated any revenues, this standardissued to each Investor 4,087,193 shares of common stock (the “Commitment Shares”) as a commitment fee. The Company’s right to issue and sell shares of common stock under the Equity Purchase Agreement to the investors is not yet applicable, but will be adopted once revenues are generated.
NOTE 2 - CANADIAN FOUNDATION FOR GLOBAL HEALTH
The Company assisted insubject to the formationsatisfaction of the Canadian Foundation for Global Health (“CFGH”), a not-for-profit foundation based in Ottawa, Canada. The Company helped establish CFGH for two primary purposes: (1) to establish an independent not-for-profit foundation intended to have a continuing working relationship with the Company for research purposes that is best positioned to attract the finest scientific, medical and academic professionals possible to work on projects deemed to be of social benefit; and (2) to provide a means for the Company to use a tiered pricing structure for future services and products in emerging economies and extend the reach of the Company’s technology to as many in need as possible.
The CFGH is specifically not authorized to contract for research or other services on behalf of the Company without prior approval. All intellectual property,certain conditions, including, but not limited to, scientific results, patentsan effective registration statement for resale of such shares by the investors. On February 12, 2018, the Company filed a Registration Statement with the Securities and trademarksExchange Commission on Form S-1 to register 22,233,427 shares of common stock that are derived from work done onmay be issued under the Equity Purchase Agreement for resale by the investors. The Securities and Exchange Commission is reviewing the Registration Statement.
The Company follows the accounting standard regarding variable interest entities (“VIE’s), whereby a VIE is required to be consolidated by a company if that company absorbs a majority of the VIE’s expected losses and/or receives a majority of the entity’s expected residual returns as a result of holding variable interests, which are the ownership, contractual, or other financial interests in the entity. In addition, a legal entity is considered to be a VIE, if it does not have sufficient equity at risk to finance its own activities without relying on financial support from other parties. If the legal entity is a VIE, then the reporting entity determined to be the primary beneficiary of the VIE must consolidate it.
F-41
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements (Unaudited)
September 30, 2010current directors, executives, employees and December 31, 2009
NOTE 2 - CANADIAN FOUNDATION FOR GLOBAL HEALTH (Continued)
The Company has determined that CFGH meets the requirements of a VIE, effective upon the first advance to CFGH on February 12, 2009. Accordingly, the financial position and operations of CFGH are being consolidated with the Company as of September 30, 2010 and December 31, 2009, andconsultants voluntarily surrendered restricted stock awards for the three and nine months ended September 30, 2010 and 2009.
NOTE 3 - BASIC LOSS PER SHARE
The computations of basic loss per share of Common Stock are based on the weighted average number of common shares outstanding during the period of the consolidated financial statements as follows:
|
|
|
|
| For the Three Months Ended September 30, | ||
| 2010 |
| 2009 |
Numerator |
|
|
|
- Loss before extraordinary items | $ (1,681,826) |
| $ (472,994) |
- Extraordinary items | - |
| - |
|
|
|
|
Denominator (weighted average number of shares outstanding) | 250,143,347 |
| 231,947,675 |
|
|
|
|
Basic loss per share |
|
|
|
- Before extraordinary items | $ (0.01) |
| $ (0.00) |
- Extraordinary items | 0.00 |
| 0.00 |
|
|
|
|
Basic Loss Per Share | $ (0.01) |
| $ (0.00) |
|
|
|
|
|
|
|
|
| For the Nine Months Ended September 30, | ||
| 2010 |
| 2009 |
Numerator |
|
|
|
- Loss before extraordinary items | $ (2,379,787) |
| $ (986,389) |
- Extraordinary items | - |
| - |
|
|
|
|
Denominator (weighted average number of shares outstanding) | 246,780,162 |
| 215,911,398 |
|
|
|
|
Basic loss per share |
|
|
|
- Before extraordinary items | $ (0.01) |
| $ (0.00) |
- Extraordinary items | 0.00 |
| 0.00 |
|
|
|
|
Basic Loss Per Share | $ (0.01) |
| $ (0.00) |
|
|
|
|
Common stock equivalents, consisting of warrants and options, have not been included in the calculation as their effect is antidilutive for the periods presented.
NOTE 4 - GOING CONCERN
The Company’s consolidated financial statements are prepared using GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred significant losses from its inception through September 30, 2010, which have resulted in an accumulated deficit of $24,424,742 at September 30, 2010. The Company currently does not have an established source of funds sufficient to cover its operating costs beyond the next five or six months, has a working capital deficit of approximately $2,705,000, and has relied exclusively on debt and equity financing. Accordingly, there is substantial doubt about its ability to continue as a going concern.
F-42
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements (Unaudited)
September 30, 2010 and December 31, 2009
NOTE 4 - GOING CONCERN (Continued)
Continuation of the Company as a going concern is dependent upon obtaining additional capital and ultimately, upon the Company’s attaining profitable operations. The Company will require a substantial amount of additional funds to complete the development of its products, hospital beta testing, commercialization, and to fund additional losses, until revenues are sufficient to cover the Company’s operating expenses.
Over the past several years, the Company has raised approximately $2,730,000 through the sale of nearly 58,000,000 restricted shares of Common Stock at prices ranging from $0.01 to $0.25 per share, which funds have been used to pay certain corporate obligations, including the initial costs of development for its hospital sterilization initiative. The Company will need to raise additional capital during early 2011 in order to sustain operations and to fund additional research. The Company believes that it will be able to raise these additional needed funds from some of the same investors who have purchased shares over the past several years, although there is no guarantee that these investors will purchase additional shares. However, these investors have verbally committed to continue to fund the Company’s projects, as needed. If the Company is unsuccessful in finalizing this or other additional funding, it will most likely be forced to substant ially reduce or cease operations.
During 2009, the Company began pursuing the development of a novel ozone-based technology (“AsepticSure™ technology”) which will offer a safe, inexpensive means of disinfecting medical facilities of all bacteria, fungi and viruses known to cause hospital derived infections. Since this technology is not considered a medical treatment or a diagnostic, its developmental pathway will not be subject to regulatory review or the requirement of a lengthy clinical trial process. The Company completed a third series of laboratory trials of this hospital sterilization technology at Innovation Park, Queen’s University, O ntario, Canada, during January 2010 which has enabled the Company to establish the precise protocols necessary in order to obtain maximum bactericidal action in combination with minimum turn-around times in keeping with normal hospital flow patterns. Most recently, the Company research has shown that the technology can now achieve a level of bacterial decontamination heretofore unseen in open space settings using conventional means. Additional test results have demonstrated that the AsepticSure™ technology is successful on Porcelain and Formica, as well as stainless surfaces, which surfaces represent the majority of all hospital surfaces. An in-hospital beta test at Hospital Hotel Dieu, associated with Queen’s University in Kingston, Ontario, Canada, completed in October 2010 demonstrated that carpet samples commonly associated with use in hospitals and contaminated withC. difficile and MRSA also were sterilized using the AsepticSure™ technology. Additional in-hospital beta testing is anticipated later this year and continuing into 2011.
Recent research has shown that the AsepticSure™ technology is successful on Listeria monocytogenes and Salmonella thphium with thirty-minute exposure to the patented gas mixture, thus reducing food-borne illnesses. The Company believes that these recent developments will significantly expand the utility for the AsepticSure™ technology, and also greatly reduce the time required for the thorough sterilization of a hospital room, and the return of the hospital room back into service.
In addition, the Company’s full-scale development prototype has been completed and demonstrated in bacteria-free runs that it can reach both the charge time and saturation requirements of its design criteria. Additional full-scale prototypes have subsequently been developed utilizing a slightly different technology than the original technology. The Company’s goal is to demonstrate an actual and significant reduction in the rate of re-infection for hospital acquired infections by institutions utilizing the Company’s system.
The management of the Company intends to seek additional funding which will be utilized to fund additional research and continue operations. The Company recognizes that if it is unable to raise additional capital, it may find it necessary to substantially reduce or cease operations.
The ability of the Company to continue as a going concern is dependent on its ability to successfully accomplish the plan described in the preceding paragraphs and eventually attain profitable operations. The 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 these uncertainties.
F-43
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements (Unaudited)
September 30, 2010 and December 31, 2009
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company is subject to certain claims and lawsuits arising in the normal course of business. In the opinion of management, uninsured losses, if any, resulting from the ultimate resolution of these matters will not have a material effect on the Company’s financial position, results of operations, or cash flows.
Effective July 1, 2009, the Company entered into a lease agreement and established its own certified laboratory located at Innovation Park, Queen’s University in Kingston, Ontario, Canada, which will provide a primary research and development platform for the Company as it proceeds towards commercialization of its products. The lease term has been extended through June 30, 2011 and includes a monthly lease payment of $1,300 Canadian Dollars plus the applicable Goods and Services Tax (GST). A second laboratory space for full scale room testing was rented during December 2009 that includes a monthly lease payment of $1,200 Canadian Dollars, plus the applicable GST, through June 30, 2011.
NOTE 6 - OUTSTANDING WARRANTS AND OPTIONS
Warrants
On various dates over the past several years, the Board of Directors of the Company agreed to extend the expiration date on certain outstanding warrants to purchase Common Stock. The Company estimates the fair value of each stock award or expiration extension at the grant date or extension date by using the Black-Scholes option pricing model, which model requires the use of exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate, and the weighted average expected life of the warrants. Because the Company does not pay dividends, the dividend rate variable in the Black-Scholes model is zero. Under the provisions of this accounting standard, additional expense of $-0- and $105,393 was recorded for the nine months ended September 30, 2010 and 2009, respectively, under the Black-Scholes option pricing model for these warrant extensions.
The Company estimated the fair value of the stock warrants at the date of the maturity extension, based on the following weighted average assumptions:
|
|
|
|
|
|
|
|
All outstanding warrants were either exercised or expired unexercised prior to the end of the year ended December 31, 2009, thus there are no warrants outstanding as of September 30, 2010.
Options
On August 26, 2009, the Company granted a total of 1,000,000 options to a Company director with an exercise price of $0.10 per share, exercisable for up to five years. On the same date, the Company granted an additional 1,500,000 options to an outside consultant for services rendered, with an exercise price of $0.10 per share, exercisable for up to five years, but including vesting provisions as follows: i) 500,000 of the options vested immediately on the date of grant, ii) 500,000 options will vest on the date certified by the Company as the date the Company’s hospital sterilization program completes its beta-testing, and iii) the remaining 500,000 options will vest on the date certified by the Company as the date that the Company’s process has been commercialized and a minimum of fifty units or devices have been sold to third parties by the Company. As of September 30, 2010, 1,000,000 of the 1,500,000 options granted to this consultant had not yet v ested. Additional expense of $97,398 will be recorded in the future as the additional vesting requirements are met on the 1,000,000 unvested options.
On March 29, 2010, the Company granted 250,000 options to an individual for research and development consulting services to be rendered for the period of April 1, 2010 through September 30, 2010. The options have an exercise price of $0.19 per share, and are exercisable for up to five years. The value of these options granted, totaling $46,094, was recognized as an expense on a monthly basis beginning on April 1, 2010, at $7,682 per month, and ending on September 30, 2010.
F-44
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements (Unaudited)
September 30, 2010 and December 31, 2009
NOTE 6 - OUTSTANDING WARRANTS AND OPTIONS (Continued)
On July 21, 2010, the Company granted a total of 3,500,000 options to certain board members and employees of the Company as additional compensation for work performed. These options are exercisable at $0.20 per share, are exercisable for five years, but do not vest until the Company has achieved commercial sales. As of September 30, 2010, none of these options had vested. The value of these options granted, totaling $710,577, will be recorded in the future once the Company has achieved commercial sales.
Also on July 21, 2010, the Company granted 1,000,000 options to a director of the Company in lieu of an actual stock grant for his services as a board member (see Note 7 for additional discussion on common shares issued to other board members for board service). These options are exercisable at $0.20 per share, are exercisable for five years, and became fully vested on the date of the grant. The value of these options granted, totaling $203,022, has been recorded as board compensation for the nine months ended September 30, 2010.
On August 16, 2010, the Company granted 250,000 options to an outside consultant for patent work performed on behalf of the Company. These options are exercisable at $0.27 per share, are exercisable for five years, and had no vesting provisions. The value of these options granted, totaling $67,465, has been capitalized to patent costs as of September 30, 2010, which costs will be amortized over the expected life of the patent.
On September 1, 2010, the Company granted an additional 250,000 options to an outside consultant in connection with extending his consulting agreement with the Company through September 1, 2011. These options are exercisable at $0.275 per share, are exercisable for five years, but do not vest until the Company has achieved commercialization and sales of the AsepticSure™ product. As of September 30, 2010, none of these options had vested. The value of these options granted, totaling $65,067, will be recorded in the future once the Company has achieved the required commercial sales.
As previously discussed, the Company estimates the fair value of each stock award by using the Black-Scholes option pricing model, which model requires the use of exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate, and the weighted average expected life of the options. Because the Company does not pay dividends, the dividend rate variable in the Black-Scholes model is zero. Under the provisions of this accounting standard, additional expense of $249,116 and $146,097 was recorded for the nine months ended September 30, 2010 and 2009, respectively, under the Black-Scholes option pricing model. An additional amount of $67,465 has been capitalized as patent costs as of September 30, 2010, as previously mentioned, which costs will be amortized over the expected useful life of the patents. An additional expense of $873,042 will be expensed in the futu re as the additional vesting requirements are met.
The Company estimated the fair value of the stock options at the date of the grant, based on the following weighted average assumptions:
|
|
|
|
|
|
|
|
A summary of the status of the Company’s outstanding options as of September 30, 2010 and changes during the nine months then ended is presented below:
|
|
|
| Shares | Weighted Average Exercise Price |
Outstanding, beginning of period | 2,500,000 | $0.10 |
Granted | 5,250,000 | $0.21 |
Expired/Canceled | - | n/a |
Exercised | - | n/a |
Outstanding, end of period | 7,750,000 | $0.17 |
Exercisable | 3,000,000 | $0.16 |
F-45
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements (Unaudited)
September 30, 2010 and December 31, 2009
NOTE 7 - STOCK TRANSACTIONS AND SIGNIFICANT CONTRACTS
During the nine months ended September 30, 2010, the Company issued 9,389,4431,300,000 shares of Common Stock for cash proceeds of $1,198,400 (net ofcommon stock issuance costs of $10,000), at prices ranging from $0.12 to $0.25 per share.
During April 2009, the Company’s Board of Directors approved the issuance of 700,000 (350,000 restricted and 350,000 free-trading) shares of Common Stock to a consultant. The stock was valued at $25,200, or $0.036 per share, which represented the market value of the shares on the date that the shares were approved to be issued. The consulting agreement was based on a one-year term, the shares vested in equal increments, and the consulting expense was recognized over the same period. $16,800 of the $25,200 was recognized during the year ended December 31, 2009. The remaining $8,400 was recognized during the nine months ended September 30, 2010.
During May 2009, the Company’s Board of Directors approved the issuance of 500,000 restricted shares of Common Stock to a consultant valued at $19,500, or $0.039 per share, which represented the market value of the shares on the date that the shares were approved to be issued. The consulting agreement was based on a one-year term, the shares vested in equal increments, and the consulting expense was recognized over the same period. $11,911 of the $19,500 was recognized during the year ended December 31, 2009. The remaining $7,589 was recognized during the nine months ended September 30, 2010.
During February 2010, the Company’s Board of Directors approved the issuance of a total of 137,000 restricted shares of Common Stock to two consultants for consulting, marketing, and web support services valued at a total of $39,730, or $0.29 per share, which represented the market value of the shares on the date that the shares were approved to be issued. Both consulting agreements were based on a five-month term, the shares vested in equal increments, and the consulting expense was recognized over the same period during 2010.
On March 29, 2010, the Company’s Board of Directors approved the issuance of a total of 250,000 restricted shares of Common Stock to a consulting firm for investor relation services valued at $47,500, or $0.19 per share, which represented the market value of the shares on the date that the shares were approved to be issued. The consulting agreement was for the period of April 1, 2010 through June 30, 2010. The entire amount of $47,500 was recognized as consulting fees during the second quarter of 2010 at $15,833 per month.
As previously discussed in Note 6, on March 29, 2010, the Company granted options to acquire 250,000 free-trading shares of Common Stock to an individual to assist the Company in the scientific development of its technology as well as patent support for the period of April 1, 2010 through September 30, 2010. The options have an exercise price of $0.19 per share, and are exercisable for up to five years. Pursuant to the Black-Scholes option pricing model, the value of these options is $46,094, which amount was recognized as an expense through September 30, 2010.
On April 9, 2010, the Company’s Board of Directors approved the issuance of a total of 588,235 restricted shares of Common Stock in satisfaction of a one-year contract with an investment firm to assist the Company in raising the necessary capital to continue the development of the Company’s research and technology. The shares were valued at $100,000, or $0.17 per share, which represented the market value of the shares on the date that the shares were approved to be issued. $47,500 of the $100,000 value has been recognized as a stock offering cost, and offset against the cash proceeds received as a result of the investment firm’s efforts, during the period ended September 30, 2010 with the remaining $52,500 recorded as deferred stock offering costs as of September 30, 2010, to be recognized as stock offering costs during the remaining period of the contract at $8,333 per month.
On April 12, 2010, the Company’s Board of Directors approved the issuance of a total of 120,000 restricted shares of Common Stock to a consultant in lieu of outstanding consulting fees valued at $22,800, or $0.19 per share, which represented the market value of the shares on the date that the shares were approved to be issued.
On July 8, 2010, the Company’s Board of Directors approved the issuance of 135,000 shares of restricted shares of Common Stock to an investor relations company pursuant to a one-year agreement through July 15, 2011. The shares are valued at $25,650, or $0.19 per share, the market value of the shares on the date that the Board of Directors approved the issuance of the shares. The shares vest in equal increments and the expense is to be recorded over the period of the agreement. $5,343 of the $25,650 consulting expense was recognized during the nine months ended September 30, 2010, with the remaining $20,307 recorded as deferred consulting fees, to be recognized over the remaining period at $2,137 per month.
F-46
MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements (Unaudited)
September 30, 2010 and December 31, 2009
NOTE 7 - STOCK TRANSACTIONS AND SIGNIFICANT CONTRACTS (Continued)
On July 21, 2010, the Company’s Board of Directors approved the issuance of a total of 4,000,000 shares of restricted Common Stock to certain directors and officers for board service and performance bonuses. These shares were valued at a total of $840,000, or $0.21 per share, the market value of the shares on the date that the dis-interested members of the Board of Directors authorized the issuance of the shares. The value of the shares, or $840,000, was recorded as director compensation and bonus expense for the nine months ended September 30, 2010. As discussed in Note 6, these same directors and officers also were granted optionsgrants for the purchase of a total of 3,500,0007,280,000 shares to increase the number of Common Stock, exercisable at $0.20 per shareshares available for a periodfinancing transactions under the Equity Purchase Agreement.
SEC Registration Fee |
| $ | 1,548 |
|
Accounting Fees and Expenses* |
| $ | 3,200 |
|
Legal Fees and Expenses* |
| $ | 45,000 |
|
Blue Sky Fees and Expenses* |
| $ | 15,000 |
|
Printing and Engraving* |
| $ | 3,000 |
|
Miscellaneous* |
| $ | 5,000 |
|
Total Estimated Expenses* |
| $ | 72,748 |
|
SEC Registration Fee | $ | 109 | ||
Accounting Fees and Expenses* | $ | 20,000 | ||
Legal Fees and Expenses* | $ | 20,000 | ||
Blue Sky Fees and Expenses* | $ | 0 | ||
Printing and Engraving* | $ | 10,000 | ||
Miscellaneous* | $ | 500 | ||
Total Estimated Expenses* | $ | 50,609 |
In February and March, 2009,
These The sales were made without registration under the Securities Act of 1933, as amended (“Securities Act”), in reliance upon exemptions from registration, including, without limitation, the exemption provided under Section 4(2)4(a)(2) of the Securities Act for private and limited offers and sales of securities made to accredited investors, and the exemptions provided under Regulation D and Rule 506 under the Securities Act for private and limited offers and sales of securities made to accredited investors.
On various dates during the months
II-1
Also during the year ended December 31, 2009, we issued 1,953,497 shares of Common Stock to five different outside consultants, valued at $102,350 or prices ranging from $0.036 to $0.10 per share, the market value of the shares on the date that the shares were approved to be issued. $81,139 of the $102,350 consulting expense was recognized during the year ended December 31, 2009, with the remaining $21,211 recorded as deferred consulting fees, to be recognized monthly over the remaining term of the agreements.
These issuances of shares were made without registration under the Securities Act, as amended, in reliance upon exemptions from registration, including, without limitation, the exemption provided under Section 4(2) of the Securities Act for private and limited offers and sales of securities made to accredited investors.
During August 2009, we issued a total of 5,126,265 shares of Common Stock to two separate Company directors as the result of a cashless exercise of a total of 6,487,408 outstanding stock options. The stock options were exercisable at prices ranging from $0.02 to $0.05 per share but included a cashless provision of exercise. Therefore, no cash proceeds were received us as a result of this stock issuance. Each of these directors is an accredited investor for purposes of Section 4(2) and Regulation D under the Securities Act. The shares issued were restricted shares and the certificates representing such shares were marked with an appropriate restrictive legend indicating that the transfer or sale of such securities was restricted in the absence of registration or an exemption from registration availablepursuant to the sellers under the Securities Act.
We issued 6,191,066 sharesexercise of Common Stockwarrants for aggregate cash proceeds received during October, November and December 2009 totaling $495,040, at prices ranging from $0.06 to $0.25 per share. Theseconsideration of $1,000,000. The shares were issued in a private transactions to twenty accredited investors not otherwise affiliatedtransaction with the Company.holder of the warrants, who is our distributor for certain territories in South America. There were no underwriters involved. The proceeds were used for general operating expenses and to pay for the development of the AsepticSure™ hospital sterilization® system.
These sales were The sale was made without registration under the Securities Act in reliance upon exemptions from registration, including, without limitation, the exemption provided under Section 4(2) of the Securities Act for private and limited offers and sales of securities made to accredited investors.
Effective October 13, 2009, our Board of Directors approved the issuance of a total of 453,569 shares of Common Stock to be issued to two separate consultants for medical research and website design services rendered valued at $29,483, or $0.065 per share, which represented the market value of the shares on the date that the shares were approved to be issued.
Effective November 30, 2009, our Board of Directors approved the issuance of a total of 50,000 shares of Common Stock to be issued to a patent attorney for legal services rendered valued at $14,750, or $0.295 per share, which represented the market value of the shares on the date that the shares were approved to be issued.
Effective December 15, 2009, the Company’s Board of Directors approved the issuance of a total of 88,408 shares of Common Stock to be issued to a consultant for medical research services rendered valued at $34,037, or $0.0385 per share, which represented the market value of the shares on the date that the shares were approved to be issued.
Effective December 14, 2009, our Board of Directors approved the issuance of a total of 312,500 restricted shares of Common Stock to Solwin Investments Limited (Solwin), a New Zealand corporation controlled by Richard Solomon, a director of the Company, pursuant to a Termination Agreement. The shares were valued at $0.40 per share, which represented an approximate 4.0% premium over the market value of the shares on the date of the agreement. The shares were issued as full consideration for the early termination of the Licensing Agreement and the Managing Agent Agreement, and to retain all rights and licenses originally granted to Medizone New Zealand, Limited (MNZ), a New Zealand corporation. Also as part of the Termination Agreement, we assigned our ownership rights and shares in MNZ back to Solwin.
These issuances and sales of shares were made without registration under the Securities Act, in reliance upon exemptions from registration, including, without limitation, the exemption provided under Section 4(2) of the Securities Act for private and limited offers and sales of securities made solely to accredited investors.
Nine Months Ended September 30, 2010
In January and February, 2010, we issued an aggregate of 500,000 shares of Common Stock for cash proceeds totaling $125,000, or $0.25 per share. The shares were issued in private transactions to four accredited investors not otherwise affiliated with the Company. There were no underwriters involved. In April, May and June 2010, we issued an additional 3,622,777 shares of Common Stock for cash proceeds totaling $441,400, at prices ranging from $0.12 to $0.18 per share. We also paid stock offering costs to an investment firm of $10,000 who assisted us in raising these funds.
II-2
These shares were issued in private transactions to a total of thirteen accredited investors not otherwise affiliated with the Company. In July and August 2010, we issued an additional 5,266,666 shares of Common Stock for cash proceeds totaling $632,000, at $0.12 per share. These shares were issued in private transactions to a total of twenty-one accredited investors not otherwise affiliated with the Company. All of these proceeds received were used for general operating expenses and to pay for the development of the AsepticSure™ hospital sterilization system. These sales were made without registration under the Securities Act in reliance upon exemptions from registration, including, without limitation, the exemption provided under Section 4(2)4(a)(2) of the Securities Act for private and limited offers and sales of securities made to accredited investors, and the exemptions provided under Regulation D and Rule 506 under the Securities Act for private and limited offers and sales of securities made to accredited investors.
During February 2010,
issuance.
On March 29, 2010,
On April 9, 2010, we issuedconsultant received a total of 588,235 restrictedwarrant to purchase up to 750,000 shares of Common Stock in satisfactionat an exercise price of a one-year contract with an investment firm to assist the Company in raising required capital, valued at $100,000, or $0.17$0.10 per share, which represented the market value of the shares on the date that the Board of Directors authorized the issuance of the shares.
share.
On April 12, 2010,
On July 8, 2010, we issued 135,000 restricted shares of Common Stock to an investor relations company pursuant to a one-year agreement through July 15, 2011. The shares were valued at $25,650, or $0.19 per share, which represented the market value of the shares on the date that the Board of Directors authorized the issuance of shares. The shares vest in equal increments and the expense is being recorded over the period of the agreement.
On July 21, 2010, we issued a total of 4,000,000 shares of restricted Common Stock to certain directors and officers for board service and performance bonuses. These shares were valued at a total of $840,000, or $0.21 per share, which represented the market value of the shares on the date that the dis-interested members of the Board of Directors authorized the issuance of shares.
On August 26, 2010, we issued a total of 225,000 restricted shares of Common Stock to two consultants for consulting, marketing, and web support services valued at a total of $60,750, or $0.27 per share, which represented the market value of the shares on the date thatawarded our Board of Directors authorized the issuance of the shares. The first agreement was for the period of July 15, 2010 through March 31, 2011. The second agreement was for the period of August 26, 2010 through August 26, 2011. For both agreements, the shares vest in equal increments and the consulting expense is recognized over the period of the contracts.
Also on August 26, 2010, we issued 118,839 restricted shares of Common Stock in lieu of outstanding consulting fees totaling $32,087, or $0.27 per share, which represented the market value of the shares on the date that the Board of Directors authorized the issuance of the shares. An additionalnewly appointed CEO 1,000,000 restricted shares of Common Stock were approved and issued to this same consultant on September 1, 2010, as bonus compensation for extending his consulting agreement through September 1, 2011. Thesepart of an employment agreement. The shares were valued at $270,000, or $0.27 per share, which represented thehad a fair market value of the shares$60,000 on the date thatof issuance.
These issuances of shares for services renderedAsepticSure® system. The sales were made without registration under the Securities Act in reliance upon exemptions from registration, including, without limitation, the exemption provided under Section 4(2)4(a)(2) of the Securities Act for private and limited offers and sales of securities made solelyto accredited investors, and the exemptions provided under Regulation D and Rule 506 under the Securities Act for private and limited offers and sales of securities made to accredited investors.
II-3
Exhibit No. | Description |
2 | Agreement and Plan of Reorganization, March 12, 1986 (1) |
3(i)(a) | Articles of Incorporation (1) |
3(i)(b) | Articles of Amendment to Articles of Incorporation (2) |
3(i)(c) | |
|
|
| Bylaws (1) |
5# | Opinion re Legality |
|
|
|
|
| |
10.4 | |
10.5 | |
10.6 | |
10.7 | |
10.8 | |
10.9 | |
10.10 | |
10.11 | |
10.12 | |
10.13 | |
10.14 | |
10.15 | |
10.16 | |
10.17 | |
10.18 | |
| |
10.20 | |
10.21 | |
10.22+ | |
10.23 | |
21+ | |
23(a) | |
23(b) | Consent of Durham Jones & Pinegar, P.C. |
24 | |
amendment
+ Filed herewith.
Incorporated by reference to Annual Report on Form 10-KSB for the period ended December 31, 2008.
(5)
Incorporated by reference to Annual Report on Form 10-K for the period ended December 31, 2009.
(6)
(7)
3, 2017.
(8)
See page II-7.
II-4
That, for the purpose of determining liability of the undersigned Registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropri ateappropriate jurisdiction the question of whether such
II-5
indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
SIGNATURES
By: /s/ David A. Dodd Title: Chief Executive Officer Date: April 3, 2018 |
By: /s/ Stephanie L. Sorensen Title: Chief Financial Officer Date: April 3, 2018 |
By:
/S/ Edwin G. Marshall
Edwin G. Marshall
Chief Executive Officer
Date:
January 1, 2011
By:
/S/ Tommy E. Auger
Thomas (“Tommy”) E. Auger
Chief Financial Officer
Date:
January 3, 2011
Signature
Title
Date
/s/ Edwin G. Marshall_____________
Edwin G. Marshall
Chief Executive Officer (Principal Executive Officer) and Director
1/1/2011
/s/ Tommy E. Auger______________
Thomas (“Tommy”) E. Auger
Chief Financial Officer (Principal Financial
1/3/2011
and Accounting Officer)
/s/ Daniel D. Hoyt________________
Daniel D. Hoyt
Director
1/3/2011
/s/ Michael E. Shannon____________
Michael E. Shannon
Director
1/3/2011
/s/ Richard G. Solomon____________
Richard G. Solomon
Director
1/3/2011
II-7
Name | Title | Date |
/s/ David A. Dodd David A. Dodd | Chief Executive Officer (Principal Executive Officer) and Director | April 3, 2018 |
/s/ Stephanie L. Sorensen Stephanie L. Sorensen | Chief Financial Officer (Principal Accounting and Financial Officer) | April 3, 2018 |
/s/ David A. Esposito David A. Esposito | Chairman of the Board of Directors | April 3, 2018 |
/s/ Michael E. Shannon Michael E. Shannon | President and Director | April 3, 2018 |
/s/ Vincent C. Caponi Vincent C. Caponi | Director | April 3, 2018 |
/s/ Stephen F. Meyer Stephen F. Meyer | Director | April 3, 2018 |