U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUER
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
OZOLUTIONS INC.
(Name of Small Business Issuer in its charter)
Delaware 98-0229321
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
30 Denver Crescent, Suite 200, Toronto, Ontario, Canada M2J 1G8
(Address of Principal Executive Offices and Zip Code)
Issuer's Telephone Number: (416) 490-0254
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $0.001
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TABLE OF CONTENTS
ITEM NUMBER AND CAPTION Page
Part I
1. Description of Business 3
2. Management's Discussion and Analysis or Plan of 9
Operations
3. Description of Properties 11
4. Security Ownership of Certain Beneficial Owners and 12
Management
5. Directors, Executive Officers, Promoters and Control 13
Persons
6. Executive Compensation 14
7. Certain Relationships and Related Transactions 15
8. Description of Securities 15
Part II
1. Market Price of and Dividends on the Registrant's 16
Common Equity and Related Stockholder Matters
2. Legal Proceedings 17
3. Changes in and Disagreements with Accountants 17
4. Recent Sales of Unregistered Securities 17
5. Indemnification of Directors and Officers 17
Part F/S Financial Statements 17
Part III
1. Index to Exhibits 18
2. Description of Exhibits 18
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Ozolutions Inc. was formed as a Delaware corporation in
January 1996 under the name "Unipak Process, Inc." as a
subsidiary of Aban Hytek, Inc. ("AHI"). It received certain
assets of AHI for its stock and the stock was spun-off to the
stockholders of AHI in connection with a business reorganization
between AHI and an unrelated party.
In October 1999, Ozolutions changed its name to Rico
Resources 1999, Inc., in connection with its plan at that time to
engage in the business of developing a gold mining prospect in
Costa Rica. Following further study and evaluation of the
prospect, management determined that the estimated yield of gold
from the prospect would not be sufficient based on prevailing
gold prices to cover extraction costs and produce an acceptable
profit. Consequently, this business endeavor was abandoned.
In June 2000, Ozolutions acquired marketing rights to
products of Hankin Ozone Systems Limited, a Canadian corporation,
from 1421209 Ontario Limited, a Canadian corporation. No
stockholder approval was required for the transaction. We
acquired the marketing rights for 8,000,000 shares of Ozolutions
common stock, or approximately 42% of the outstanding shares, USD
$17,217 (CDN$25,000) paid at closing, and an additional
USD$1,000,000 payable in installments as follows:
* USD$550,000 on November 21, 2001;
* USD$250,000 on the earlier of 150 days following the
establishment of a public market in Ozolutions common
stock or April 21, 2001; and
* USD$200,000 on the earlier of 180 days following the
establishment of a public market in Ozolutions common
stock or August 21, 2001.
Our first installment payment is due in November 2000, and
our remaining installment payments could be accelerated from the
specified due dates if a public market in our common stock
develops before
* November 21, 2000, with respect to the payment due
April 21, 2001, and
* April 21, 2001 with respect to the payment due August
21, 2001.
We have yet to generate significant revenue from operations,
so Ozolutions must seek financing from outside sources to make
the payment of USD$550,000 due November 21, 2000, or negotiate
with 1421209 Ontario Limited for an extension on the payment. We
have not
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identified any potential sources of financing and have not held
any discussions with 1421209 Ontario Limited regarding an
extension. Failure to make the installment payment due in
November 2000, or any subsequent payment, would be a default
under the purchase contract for the marketing rights that could
result in a claim against Ozolutions and a loss of our marketing
rights to Hankin products. Our present plan is to focus only on
the distribution of Hankin products, so the loss of our right to
distribute those products for any reason would effectively
terminate our business operations.
The marketing rights we acquired were valued for financial
reporting purposes at USD$1,025,217, which includes the funds
paid at closing, the USD$1,000,000 installment obligation, and a
value of $8,000 assigned to the common stock issued, which is the
total par value for 8,000,000 shares. In connection with the
acquisition, we changed our name to Ozolutions Inc.
Ozolutions is a development stage company engaged in the
business of distributing Hankin ozone water treatment systems.
Ozone water treatment systems are based on ozonation, which is
the treatment of water with ozone gas to purify the water. Ozone
systems include an ozone generator that applies an electrical
discharge to oxygen or ambient air to produce ozone, and a
transfer system for injecting the ozone into a water stream to
oxidize or purify the water. The medium to large size Hankin
systems are produced for specific projects out of modular
components, so the system can provide the volume of water
treatment required for each project. The smaller OzoTitan is
self-contained unit designed to serve a range of small water
treatment uses.
Ozolutions has an exclusive distributorship agreement with
Hankin, which allows us to market and sell the complete
range of Hankin water treatment products in Mexico and the
Caribbean Zone. In addition, Ozolutions has an exclusive
agreement to market in the Province of Ontario, Canada, a new
compact ozone power generator called the OzoTitan, which can be
used by consumers and smaller commercial and institutional
customers to purify water.
Under our distribution agreements for Mexico and the
Caribbean Zone, we receive a commission for completed sales. In
Ontario we are entitled to purchase from Hankin the OzoTitan and
related products at Hankin's established prices, which are no
higher than prices to other distributors, and we resell the
product to end users at a mark-up.
We began our marketing efforts in Mexico and the Caribbean
Zone in July 2000, and have identified eight potential water
treatment projects in Mexico. The Mexican state of Chihuahua has
three new water projects and two wastewater treatment projects
proposed for development before the end of 2001. As proposed, a
significant portion of the projects would consist of ozone water
treatment systems. Pemex Refinacion, the Mexican petroleum
agency, has proposed three cooling tower installations for
refineries that incorporate ozone water treatment systems. The
current schedule is to collect field data and specifications for
the projects in November 2000, so that bids for the projects can
be submitted in February or March 2001. Although we are unaware
of any other bidders, there is always the possibility that other
companies will submit competitive bids for the ozone treatment
components of these projects, so
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there is no assurance that one or more of the project contracts
will be awarded to the Hankin products we offer. We have yet to
realize any revenue from sale of water treatment systems, but we
expect we will complete sales of our first systems before the end
of 2001. A system is sold when the water treatment unit is
delivered and billed.
We expect to commence a marketing program for the OzoTitan
in Ontario during the first quarter of 2001. Ozolutions is now
interviewing and evaluating independent dealers in Ontario for
the OzoTitan. We expect to select approximately 15 dealers by
the end of November 2000 and hold training sessions through
Hankin for sales and installation in December 2000, so that sales
efforts can begin in January 2001. We plan on taking delivery of
25 OzoTitan units in December 2000, which will be resold to our
dealers for their initial inventory. OzoTitan units will be sold
to dealers and directly to consumers at a mark-up from our
purchase cost.
We are in the development stage, in that we have yet to
generate significant revenue from operations. We had a net loss
of $41,678 for the year ended August 31, 2000. Ozolutions has no
history of profitable operations on which to base a judgment
regarding our future operations. Our operations and resulting
cash flows are subject to all of the risks inherent in an
emerging business enterprise, which has not achieved
profitability. There can be no assurance that product sales made
by us in the future will be at volumes and prices sufficient for
us to achieve and maintain profitable operations.
As a result of filing this registration statement we are
required to file with the Securities and Exchange Commission
annual reports on Form 10-KSB, quarterly reports on Form 10-QSB,
current reports of certain events on Form 8-K, and proxy and
information statements disseminated to stockholders in connection
with meeting of stockholders and other stockholder actions.
Copies of these and any other materials we file with the
Commission may be inspected without charge at the public
reference facilities maintained by the Commission in:
* Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549;
* The Chicago Regional Office, Suite 1400, 500 West
Madison Street, Citicorp Center, Chicago, Illinois
60661; and
* The New York Regional Office, Suite 1300, 7 World Trade
Center, New York, New York 10048.
Copies of all or any part of our filings may be obtained
from the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, upon payment of the prescribed
fees. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. Our
filings with the Commission are also available through the SEC's
Web site at http://www.sec.gov.
Ozolutions' offices are located at 30 Denver Crescent, Suite
200, Toronto, Ontario, Canada M2J 1G8, where our telephone number
is (416) 490-0254.
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Our Distributorship
In Mexico and the Caribbean Zone (countries located in or
bordering on the Caribbean Ocean with the exception of Mexico and
Cuba) Ozolutions is entitled to market on an exclusive basis
medium to large size Hankin ozone generating equipment systems
used for water treatment in various applications. We can also
distribute in Mexico and the Caribbean Zone the smaller OzoTitan,
but we have not developed any marketing plans for the OzoTitan in
these territories and do not expect we will do so prior to the
end of 2001. Each distribution agreement is for a term of three
years and is renewable for two additional three-year terms. In
order to obtain renewal of our exclusive marketing rights in
Mexico only, we must obtain at least CDN$1,000,000 of sales in
each three-year term of the agreement. Due to this condition in
the distribution contract for Mexico, we have focused on
marketing Hankin products in Mexico and expect we will continue
to do so through the first six months of 2001. We are required
to use our best efforts to procure orders in the territories and
to maintain a sales force in each territory. Each order or
contract for purchase of a Hankin system must be submitted to
Hankin for final pricing and approval, and we receive a
commission on the final contract price, excluding any portion of
the price attributable to consulting, engineering and design
services provided by Hankin and post installation maintenance and
repair. Our commission is 10% of the first CDN$100,000 of the
contract price, 7.5% of the next CDN$100,000, 6% of the next
CDN$300,000, 2% of the next CDN$500,000, and 1% of any remaining
amount. A territory fee of CDN$50,000 was required to secure the
marketing rights in Mexico. Of this fee, CDN$15,000 has been
paid and the balance is payable out of 10% of our commission
earned on product sales.
In Ontario, Canada, Ozolutions is the exclusive distributor
for Hankin's Point of Use and Point of Entry water treatment
units, which are referred to as the OzoTitan, and related
products. We do not hold marketing rights for any of the larger
Hankin systems in Ontario. The distribution agreement for this
smaller system covering Ontario is for a term of three years and
is renewable for two additional three-year terms without minimum
sale requirements. We are required to use our best efforts to
procure orders in the territories and to maintain a sales force
for that purpose. Under the agreement we purchase the OzoTitan
and related products from Hankin at published prices to all
distributors and, if there are no published prices, at prices no
higher than those charged other distributors. We will resell the
product to our dealers at a mark-up of approximately 45% of our
cost.
Hankin Products
Hankin offers a variety of medium to large size ozone
process equipment for use in treating water for recreational,
industrial, municipal and other commercial applications. These
would include swimming and wave pool facilities, treatment of
industrial effluent, treatment of cooling tower water, municipal
water treatment, purification of drinking water, and bottled
water purification. The equipment consists of modules or
component parts that can be configured to meet the specific
treatment needs of the customer. In unusual applications, Hankin
can design custom systems for the customer. The price for ozone
process systems range from CDN$3,900 for smaller turnkey systems
to CDN$300,000 for larger systems.
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The OzoTitan is a smaller ozone process system designed by
Hankin. It incorporates the latest electronics and semi-
conductor technology integrated with a dielectric assembly to
provide a low-cost, high efficiency ozone generator. Perhaps the
most significant feature of the OzoTitan is its great
versatility. Due to its size, weight and energy consumption, it
is well suited to a number of small ozone treatment applications,
including:
* Small bottled water systems
* Cooling water treatment
* Laboratory use
* Ultra pure water
* Residential/cottage use
The OzoTitan comes cabinet mounted with connections in the
rear of the unit. Controls are front panel mounted for easy
access. Electrical components are maintained at a cool operating
temperature by a cabinet mounted fan. Tubing and fittings in
contact with ozonated gas are constructed of glass, 316 stainless
steel or Teflon.
Manufacturing of the OzoTitan has been out-sourced, but not
sold, by Hankin to an independent manufacturer. 1421209 Ontario
Limited acquired a right of first refusal to purchase the
manufacturing rights on the same terms and conditions offered by
a prospective purchaser in the event Hankin ever decides to sell
the manufacturing rights. This first right of refusal was
assigned to Ozolutions when we acquired the marketing rights to
the OzoTitan in Ontario. We have not received any indication
that Hankin ever intends to sell the manufacturing rights, so we
cannot predict whether we would ever be in a position to exercise
this first right of refusal.
Hankin has been engaged in the business of designing,
manufacturing, and selling ozone generating equipment systems
since 1972. It is a publicly-held Canada corporation with total
sales for the fiscal years ended September 30, 1999 and 1998 of
CDN$13,662,896 and CDN$11,115,436, respectively. Hankin's sales
revenue for the nine months ended June 30, 2000, was
CDN$11,614,588, and its earnings before interest, taxes,
depreciation and amortization were CDN$1,140,000 or CDN$0.05 per
share.
Marketing Strategy
Ozolutions intends to market Hankin systems in Mexico and
the Caribbean Zone primarily to national, state, and local
governmental units and municipalities as a solution for their
water treatment needs. These marketing efforts will be
undertaken primarily by management and through independent
contractors and consultants. We are now establishing our
independent contractors in Mexico and the Caribbean Zone and are
pursuing directly contacts with government officials responsible
for water projects. These efforts have resulted in the
identification of sales opportunities in food processing, water
bottling, hotels, hospitals, and industrial cooling towers.
Mexico and the Caribbean Zone represent new markets for Hankin
where it has not previously sold its large and medium size water
treatment systems. Our marketing rights give us the opportunity
to develop these markets for Hankin.
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Historically, ozone based water treatment products were
only available to medium and larger sized municipal, industrial
and institutional users. The OzoTitan, which is a new product
developed by Hankin, has the potential to increase greatly the
number of units sold because it opens the market to consumers and
smaller commercial and institutional customers. Since June 2000,
we have been developing a dealer network in Ontario of
independent contractors to promote the OzoTitan for use in home
and small industrial applications. We began by identifying
engineering, electrical, mechanical, and water system
contractors, capable of selling and installing the system and
providing ongoing service. We are now interviewing 35 dealer
candidates, and expect to select a total of 15 dealers for sales
and installation training by the end of 2000. Our objective is
to have the dealers ready to offer the OzoTitan in the first
quarter of 2001 to take advantage of the beginning of the
construction season in the spring of 2001.
Ozolutions has engaged two consultants to assist with the
development of our marketing effort. Edward G. Deans will assist
us with the development of the market in Mexico and the Caribbean
Zone under a consulting agreement that pays to him a fee of
$90,000 per year over the three-year term of the agreement.
Either party may cancel the agreement after the first year on six
months prior notice to the other. Mr. Deans has over 10 years
experience as an independent sales consultant in marketing water
systems and equipment. Ronald L. Larocque & Associates Ltd. will
provide at least six hours per month of marketing and business
development services to Ozolutions for $12,000 payable over the
one-year term of the consulting agreement. Additional services
may be rendered at the rate of $175 per hour. Mr. Larocque is an
engineer who has been involved with ozonation technology, system
design and installation since 1972.
Competition
Hankin products compete with similar products
manufactured by other multi-national companies, many of which
have greater financial and marketing resources than Ozolutions.
Ozonia, PCI Wedeco, Vivendi/US Filter and Mitsubishi are the
major competitors that offer medium and large size ozone water
treatment systems similar to the systems offered by Hankin.
These companies are pursuing the market for water treatment
solutions in areas such as Mexico and the Caribbean Zone where
there is a growing need for water treatment facilities, but we
have found no evidence that these companies have captured a
significant portion of the market for water treatment systems.
We believe we can compete with these companies based on price and
product performance.
The market for smaller water treatment systems in Ontario is
fragmented with a large number of companies offering systems with
differing technologies. Available systems use ozone treatment or
filtration through active carbon or other substances. We have
found no evidence that any one technology has a significantly
greater market share than the other. Only one company, OzoMax,
offers a product similar to the OzoTitan. We believe we can
compete with other small water treatment systems on the basis of
price and product performance.
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Government Regulation
Ozolutions sales activity in various countries may be
subject to local business licensing requirements, to the extent
such requirements exist in a given country. We do not believe
these licensing requirements represent a significant barrier to
our distribution business. Generally, on sale of Hankin products
in various countries Hankin is responsible for complying with any
import and installation regulations applicable to the systems
sold. The adoption of NAFTA several years ago has removed any
significant barriers to the importation of Hankin products in the
countries where we are pursuing our sales efforts.
Employees
As of June 30, 2000, Ozolutions employed a total of three
persons, including two executives and one clerical employee.
None of the its employees is represented by a labor union.
Ozolutions has experienced no work stoppages and believes that
its relations with its employees are good.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Plan of Operation
At the present time Ozolutions is in the development stage
and does not provide any product or service. We intend to be an
international marketer and distributor of water purification
systems using ozone technology. The markets we will target are
Mexico, the Caribbean Zone, and Ontario, Canada.
Ozolutions acquired distribution rights to Hankin products
from 1421209 Ontario Limited for 8,000,000 shares of Ozolutions
common stock, or approximately 42% of the outstanding shares,
USD$17,217 (CDN$25,000) paid at closing, and an additional
USD$1,000,000 payable in installments.
Ozolutions is required to make a payment of USD$550,000 to
1421209 Ontario Limited no later than November 21, 2000, as part
of the purchase price for the distribution rights it acquired
from 1421209 Ontario Limited. Additional payments of USD$250,000
and USD$200,000 are due no later than April 21, 2001 and August
21, 2001. There was no affiliation between 1421209 Ontario
Limited and Ozolutions prior to the purchase of the distribution
rights.
We are in need of additional financing to make payments to
1421209 Ontario Limited when due and to finance our operations.
We have not identified any sources of such financing, and there
is no assurance any financing will be available on terms
acceptable to Ozolutions or within a time frame that will allow
for timely payment of our obligations to 1421209 Ontario Limited.
If we are unable to locate financing, Ozolutions will seek an
extension of our payment obligations from 1421209 Ontario
Limited. We have not had any discussions regarding
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extension, and there is no assurance that 1421209 Ontario Limited
will grant us an extension should we request it. Failure to make
our November 2000 payment to 1421209 Ontario Limited as required
under our purchase agreement would give rise to a claim against
Ozolutions, which could result in a loss of our marketing rights
and effectively terminate our business.
1421209 Ontario Limited has agreed to loan to Ozolutions up
to USD$300,000 at our option to provide financing for our
operations at the time 1421209 Ontario Limited receives its first
payment USD$550,000 from us under the purchase agreement for the
distribution rights to Hankin products. The loan will be
represented by a note due in two years bearing interest at an
annual rate of 6.5% and payable quarterly in arrears.
Following the filing of this registration statement and
clearing comment from the Securities and Exchange Commission,
Ozolutions will seek a broker-dealer that may be willing to make
a market in its common stock and establish a public trading
market. We have not identified any broker-dealer prepared to
make a market in our common stock, so we cannot predict if or
when a public market will develop. Assuming a public market for
our common stock develops, Ozolutions believes this may
facilitate our efforts to obtain debt or equity financing.
Until Ozolutions receives outside financing to fund its
capital commitments, its operations will be limited to those that
can be effected through its officers, directors and consultants.
These persons, except for Edward G. Deans and Ronald L. Larocque
& Associates, have verbally agreed to defer payment of
compensation from Ozolutions until revenue generated from sales
of product and financing from outside sources provides sufficient
working capital to fund operations and payment of their
compensation. From June 1 through August 31, 2000, a stockholder
of Ozolutions advanced $28,833 to Ozolutions to cover
administrative expenses. The advances do not bear interest and
no payment terms have been set by the parties. This individual
has indicated verbally his willingness to make further advances
in the future as required to fund administrative costs. These
advances are the sole source of capital to fund administrative
costs. However, there is no written or fixed obligation to make
further advances, so there is no assurance that Ozolutions will
have capital to fund its operations over the next 12 months.
Under distribution agreements with Hankin, product is
shipped by Hankin against purchase orders we place either
directly to the end user or dealer or to us for delivery to the
end user or dealer. Accordingly, we do not require any
significant amount of capital for inventory or facilities
required to maintain and distribute inventory.
Based solely on Management's evaluation of the potential
market, Ozolutions believes 125 OzoTitan units can be sold in
Ontario by the end of April 2001. In December 2000 we plan on
taking delivery of the first 25 units, which will be sold and
delivered to our independent dealers for their initial inventory.
An additional 100 units have been ordered for delivery in the
first four months of 2001 against purchase orders from our
independent dealers. If we have significantly over-estimated the
potential market for the OzoTitan, our need for capital could
increase by as much as $170,000 to purchase and hold in inventory
the OzoTitan units ordered.
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Ozolutions believes its general, selling and administrative
expenses during the 12-month period following the date it can
obtain additional financing of at least $300,000 will be
$255,000. Approximately $75,000 will be used for marketing and
sales expenses, including:
* production of printed sales materials,
* advertising in industry publications,
* travel expenses associated with advancing proposed
projects in Mexico and the Caribbean Zone, and
* travel expenses associated with establishing dealers
in Ontario.
Approximately $102,0000 will be used to make payments under
consulting contracts with Edward G. Deans and Ronald L. Larocque
& Associates, who have assisted Ozolutions in formulating
marketing plans and will assist in implementing those plans. The
remaining $78,000 is the estimated cost of clerical and
management staff and facilities required to operate over the next
year. This increase in general, selling and administrative
expenses will be attributable to implementation of our marketing
plans for Hankin ozone products.
Forward-Looking Statements
All statements, other than statements of historical fact,
which address activities, actions, goals, prospects, or new
developments that Ozolutions expects or anticipates will or may
occur in the future, including such things as expansion and
growth of its operations and other such matters are forward-
looking statements. Any one or a combination of factors could
materially affect Ozolutions' operations and financial condition.
These factors include competitive pressures, success or failure
of marketing programs, changes in pricing and availability of
services and products offered to members, legal and regulatory
initiatives affecting member marketing and rebate programs or
long distance service, and conditions in the capital markets.
Forward-looking statements made by Ozolutions are based on
knowledge of its business and the environment in which it
operates as of the date of this report. Because of the factors
listed above, as well as other factors beyond its control, actual
results may differ from those in the forward-looking statements.
ITEM 3. DESCRIPTION OF PROPERTIES
Ozolutions uses approximately 400 square feet of office
space at 30 Denver Crescent, Suite 200, Toronto, Ontario, Canada
M2J 1G8, provided by Max Weissengruber, one of its officers and
directors, at no charge. We believe this space will be adequate
for our needs for at least the next 12 months.
Ozolutions has a verbal understanding with an unaffiliated
person we expect to employ in 2001 to assist in managing our
Ontario dealer group to use, as needed, 1,000 square feet of
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warehouse space to store OzoTitan units that are not shipped
directly to end users or dealers. We do not expect the cost of
this temporary storage space will be material to our operations.
If for any reason this arrangement is not effected, we believe
there is a substantial amount of warehouse space available at
reasonable rates in the Toronto area that can meet our needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of July 31, 2000, the
number and percentage of the outstanding shares of common stock
which, according to the information supplied to Ozolutions, were
beneficially owned by (i) each person who is currently a
director, (ii) each executive officer, (iii) all current
directors and executive officers as a group and (iv) each person
who, to the knowledge of Ozolutions, is the beneficial owner of
more than 5% of the outstanding common stock. Except as
otherwise indicated, the persons named in the table have sole
voting and dispositive power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
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Amount and Nature of Beneficial
Ownership
Common Percent
Name and Address Shares of Class
1421209 Ontario Limited (1) 8,000,000 42.1
Carl Lavoie
134 Melrose Avenue
Toronto, Ontario CN M5M 1Y7
Max Weissengruber (2) 0 0
30 Denver Crescent, Suite 200
Toronto, Ontario, CN M2J 1G8
James A. Clemenger (2) 0 0
53 Duggan Avenue
Toronto, Ontario, CN M4V 1Y1
Dennis P. Caplice (2) 0 0
1210 Don Mills Road, #125
Toronto, Ontario, CN M3B 3N1
All Executive officers and 0 0
Directors as a Group ( 3persons)
________________________________
(1) Carl Lavoie is the sole owner of 1421209 Ontario Limited.
Accordingly, Mr. Lavoie may be deemed to have voting and
investment control over the 8,000,000 shares of common stock
held of record by 1421209 Ontario Limited. From 1991 to the
present, Mr. Lavoie has served as a Director of Financial
Services with CB Richard Ellis Limited of Toronto, Ontario,
where he has provided commercial mortgage and real estate
transaction development and consulting services.
(2) These persons are all of the directors and executive
officers of Ozolutions.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
Directors and Officers
The following table sets forth the names, ages, and
positions with Ozolutions for each of the directors and officers.
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Name Age Positions (1) Since
Max Weissengruber 62 President and Director April 2000
James A. Clemenger 44 Secretary, Treasurer and Director April 2000
Dennis P. Caplice 64 Director April 2000
All directors hold office until the next annual meeting
of stockholders and until their successors are elected and
qualify. Officers serve at the discretion of the Board of
Directors. We have no Board committees and do not expect to form
any committees until our operations increase. The following is
information on the business experience of each director and
officer.
Max Weissengruber has been a Managing Partner and sole
owner of Acris Partners of Toronto, Ontario since May 1993.
Acris Partners is marketing and communications consulting firm
engaged in the business of conducting employee surveys and
developing marketing communications materials and customized
training packages. Mr. Weissengruber began Acris Partners after
retiring from the position of Director of Marketing of Wilson
Learning Systems, a worldwide provider of strategic business
development planning and employee training program services. He
started with Wilson Learning Systems in November 1987, and was
responsible for developing programs for a number of clients,
including General Motors and IBM Hong Kong.
James A. Clemenger has been employed since November 1999
as a Sales Manager for Dynamex of Toronto, Ontario, where he is
responsible for marketing sales programs for Postal Promotions, a
specialized high priority courier service based in Toronto. From
May 1997 to October 1999, he provided consulting services to
MacLeod Trading Inc. on Latin America trading opportunities and
development of product distribution strategies. Mr. Clemenger
was Consul and Trade Commissioner for the Colombian Government
trade Bureau in Toronto form June 1991 through October 1996 where
he was responsible for promoting expansion of Colombian goods and
services exports to Canada. He earned a Masters of Business
Administration from the University of Western Ontario in 1995.
Dennis Caplice has been retired since 1992 from his position
of Deputy Minister of Government Services for the Province of
Ontario, where he was responsible for common services,
purchasing, and land and buildings for the Government of Ontario.
He is formerly a director and President of the Pollution Control
Association of Ontario, a former board member of the
International Joint Commission's Water Quality Advisory Board
(US/Canada boundary waters), and is a member of the Professional
Engineers Organization of Ontario. Mr. Caplice earned a Masters
of Science in Sanitary Engineering from the University of Toronto
in 1961.
ITEM 6. EXECUTIVE COMPENSATION
No executive compensation was paid to any officer of
Ozolutions during the year ended August 31, 2000, or from that
date to the present. Each of the current executive officers have
agreed to defer any compensation until Ozolutions obtains
sufficient capital from operations or
14
<PAGE>
outside sources to cover compensation expenses. Since July 1,
2000, Max Weissengruber has devoted substantially all of his time
to getting the business of Ozolutions started, and he has agreed
to defer compensation of $3,000 per month for his services, which
began to accrue at July 1, 2000. James A. Clemenger has not
devoted any material amount of time to the business of
Ozolutions, and we do not expect his time commitment to us will
change until our business develops and we begin recognizing
revenue from sales of Hankin products. Officers and directors
are reimbursed for travel expenses incurred in connection with
Ozolutions' business.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 2000, Ozolutions acquired marketing rights to
products of Hankin Ozone Systems Limited, a Canadian corporation,
from 1421209 Ontario Limited, a Canadian corporation. At the
time of the transaction 1421209 Ontario Limited was not
affiliated with Ozolutions. We acquired the marketing rights for
8,000,000 shares of Ozolutions common stock, or approximately 42%
of the outstanding shares, USD$17,217 (CDN$25,000) paid at
closing, and an additional USD$1,000,000 payable in installments
as follows:
* USD$550,000 on November 21, 2000;
* USD$250,000 on the earlier of 150 days following the
establishment of a public market in Ozolutions common
stock or April 21, 2001; and
* USD$200,000 on the earlier of 180 days following the
establishment of a public market in Ozolutions common
stock or August 21, 2001.
As a negotiated element of the transaction, 1421209 Ontario
Limited agreed to loan to Ozolutions up to USD$300,000, at our
option, to provide financing for our operations at the time
1421209 Ontario Limited receives its first payment USD$550,000
from us under the purchase agreement. The loan will be
represented by a note due in two years bearing interest at an
annual rate of 6.5% and payable quarterly in arrears.
Ozolutions uses approximately 400 square feet of office
space provided by Max Weissengruber, one of its officers and
directors, at no charge. Ozolutions is of the opinion that the
value of the space provided is not material to Ozolutions or its
financial condition.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capitalization of Ozolutions consists of
50,000,000 shares of common stock, par value $0.001, of which
18,999,133 shares are outstanding. Holders of common stock are
entitled to one vote for each share held on all matters submitted
to a vote of shareholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of all
common stock outstanding entitled to vote in any election of
directors may elect all of the directors standing for election.
Holders of common stock are entitled to receive ratably such
dividends, if any, as may be declared by the board of directors
out of funds legally available
15
<PAGE>
therefor. Upon the liquidation, dissolution or winding up of
Ozolutions, the holders of all shares of common stock are
entitled to receive ratably the net assets of Ozolutions
available after the payment of all debts and other liabilities.
Holders of common stock have no preemptive, subscription,
redemption or conversion rights.
The Securities Exchange Act of 1934 and regulations
promulgated thereunder place restrictions on trading activities
in "penny stocks." Penny stocks are defined as equity securities
priced under $5.00, which are not listed for trading on a
national exchange or Nasdaq and are securities of issuers with a
net tangible book value less than $2,000,000 (if in business for
three years), a net tangible book value less than $5,000,000 (if
in business less than three years), and average annual revenues
less than $6,000,000 for the prior three years. Although there
is presently no trading market for our common stock and we cannot
predict what the market price may be in the future, it is likely
the common stock of Ozolutions will be a penny stock if a trading
market develops because we do not meet any of the asset or
revenue tests described above. Brokers dealing in penny stocks
are subject to special rules of disclosure to their clients
regarding the risks of penny stock transactions, current market
price, and trading activity and compensation to the broker. In
addition, brokers are required to determine the suitability of
penny stock transactions for each of their clients and obtain
from each client written consent to participation in penny stock
transactions. These regulatory burdens discourage a number of
brokers from becoming involved in a security until it is no
longer a penny stock, which may adversely affect the depth and
liquidity of any future market in the common stock of Ozolutions.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
From the date of inception to the date of this
registration statement there has been no public trading market
for Ozolutions' common stock. Following the filing of this
registration statement, Ozolutions will seek out one or more
stock brokerage firms to make a market in our stock and submit an
application for quotation of our common stock on the OTC Bulletin
Board. We voluntarily filed this registration statement on Form
10-SB to become a reporting company under the Securities Exchange
Act of 1934, because being a reporting company is one of the
conditions to quotation on the OTC Bulletin board. Furthermore,
we believe it is difficult to find reputable broker-dealers
willing to look at us and make a market in our stock unless we
are a reporting company. Even if we become a reporting company,
there is no assurance that we will be able to interest any broker-
dealer in making a market in our stock or that a trading market
in the common stock will be established or exist at any time in
the future. Consequently, anyone who acquires stock in
Ozolutions may hold an investment with little or no liquidity.
Since its inception, no dividends have been paid on our
common stock. Ozolutions intends to retain any earnings for use
in its business activities, so it is not expected that any
dividends on the common stock will be declared and paid in the
foreseeable future.
On July 31, 2000, there were 1,530 holders of record of the
Company's Common Stock.
16
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
Neither Ozolutions nor any of its officers and directors
is a party to any material pending legal proceedings, and to the
best of our knowledge, no such proceedings by or against
Ozolutions or its officers and directors have been threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no changes in or disagreements with
accountants since the Company's organization.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Under the Asset Purchase Agreement dated June 21, 2000,
between Ozolutions and 1421209 Ontario Limited, Ozolutions issued
to Ontario Limited 8,000,000 shares of common stock to acquire
all of Ontario Limited's distribution rights to Hankin products.
These shares were issued in reliance on the exemptions from
registration under Sections 3(b) and/or 4(2) of the Securities
Act of 1933, and the safe harbor from registration provided in
Regulation S. No broker was involved in the transaction and no
commissions were paid to any person.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law,
Ozolutions' Certificate of Incorporation provides that no
director or officer shall have any liability to Ozolutions or its
stockholders for monetary damages except: (1) to the extent that
it is provided that the person actually received an improper
benefit or profit in money, property or services, for the amount
of the benefit or profit in money, property or services actually
received, or (2) to the extent that a judgment or other final
adjudication adverse to the person is entered in a proceeding
based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in
the proceeding. Ozolutions' Bylaws provide that it shall
indemnify and advance expenses to its officers and directors with
respect to liabilities arising form their service to Ozolutions.
However, nothing in the Certificate of Incorporation or Bylaws of
Ozolutions protects or indemnifies a director, officer, employee
or agent against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office.
PART F/S
FINANCIAL STATEMENTS
The financial statements of Ozolutions appear at the end of
this registration statement beginning with the Index to Financial
Statements on page 20.
17
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
ITEM 2. DESCRIPTION OF EXHIBITS
Copies of the following documents are included as exhibits
to this report.
Exhibit Form 1-A Title of Document Location
No. Ref. No.
1 (2) Certificate of Incorporation, as amended Initial filing
October 22, 1999 and April 12, 2000 Page E-1
2 (2) By-Laws Initial filing
Page E-5
3 (6) Asset Purchase Agreement dated June 21, 2000, Initial filing
between 1421209 Ontario Limited and Page E-14
Ozolutions Inc.
4 (6) Assignment of Contract for Hankin product Initial filing
distribution rights in Mexico between Hankin Page E-20
Atlas Ozone systems Ltd., 1421209 Ontario
Limited and Ozolutions Inc.
5 (6) Assignment of Contract for Hankin product Initial filing
distribution rights in the Caribbean Zone Page E-31
between Hankin Atlas Ozone systems Ltd.,
1421209 Ontario Limited and Ozolutions Inc.
6 (6) Assignment of Contract for Hankin product Initial filing
distribution rights in Ontario between Hankin Page E-41
Atlas Ozone systems Ltd., 1421209 Ontario
Limited and Ozolutions Inc.
7 (6) Loan Agreement dated June 21, 2000 between Initial filing
1421209 Ontario Limited and Ozolutions Inc. Page E-49
8 (6) Consulting Agreement between Ozolutions, Inc. Initial filing
and Edward G. Deans Page E-54
9 (6) Consulting Agreement between Ozolutions, Inc. Initial filing
and R.L. Larocque & Associates Page E-59
10 (15) Financial Data Schedules This filing
18
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act
of 1934, the registrant caused this registration statement to be
signed on its behalf by the undersigned thereunto duly
authorized.
OZOLUTIONS, INC.
Date: October 17, 2000 By: /s/ Max Weissengruber, President
In accordance with the Exchange Act, this registration
statement has been signed by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Dated: October 17, 2000 /s/ Max Weissengruber, Chief Executive Officer
and Director
Dated: October 17, 2000 /s/ James A. Clemenger, Chief Financial Officer
and Director
Dated: October 17, 2000 /s/ Dennis P. Caplice, Director
19
<PAGE>
OZOLUTIONS, INC.
Index to Financial Statements
Report of Independent Accountants 21
Balance Sheets as of August 31, 2000 and 1999 22
Statements of Changes in Stockholders' Equity (Deficit) 23
for the period from inception to August 31, 1999
and August 31, 2000
Statements of Operations for the period from inception 24
To August 31, 2000, for the years ended August 31,
2000 and 1999
Statements of Cash Flows for the period from inception 25
to August 31, 2000 and for the years ended
August 31, 2000 and 1999
Notes to Financial Statements 27
20
<PAGE>
Rotenberg & Company, LLP
Certified Public Accountants & Consultants
500 First Federal Plaza, Rochester, N.Y. 14614
(716) 546-1158 Fax (716) 546-2943
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders
Ozolutions, Inc.
Toronto, Ontario, Canada
We have audited the accompanying balance sheets of Ozolutions,
Inc. A Development Stage Company (A Delaware Corporation) as of
August 31, 2000 and 1999, and the related statements of
operations, changes in stockholders' equity (deficit), and cash
flows for the period from the date of inception (January 10,
1996) to August 31, 1999 and August 31, 2000. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Ozolutions, Inc. A Development Stage Company (A Delaware
Corporation) as of August 31, 2000 and 1999, and the results of
its operations and its cash flows for the period from the date of
inception (January 10, 1996) to August 31, 1999 and August 31,
2000, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming
Ozolutions, Inc. A Development Stage Company (A Delaware
Corporation) will continue as a going concern. As more fully
described in Note H, the Company has incurred losses which have
resulted in a retained deficit. This condition raises
substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
/s/ Rotenberg & Company, LLP
Rochester, New York
October 5, 2000
21
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
BALANCE SHEETS
(U.S. Dollars)
August 31, 2000 1999
ASSETS
Cash and Cash Equivalents $ - $ -
Marketing Rights 1,025,217 -
Total Assets $ 1,025,217 $ -
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable $ 6,845 $ -
Due to 1421209 Ontario Limited - Due Within One Year 800,000 -
Due to Stockholder 28,883 50
Total Current Liabilities 835,728 50
Other Liabilities
Due to 1421209 Ontario Limited - Due After One Year 200,000 -
Total Liabilities 1,035,728 50
Stockholders' Equity (Deficit)
Common Stock: $.001 Par; 50,000,000 Shares Authorized
August 31, 2000 20,000,000 Shares Authorized
August 31, 1999; 18,999,133 and 10,999,000 Issued
and Outstanding at August 31, 2000 and August 31, 1999 18,999 10,999
Additional Paid-In Capital 23,217 -
Deficit Accumulated During Development Stage (52,727) (11,049)
Total Stockholders' Equity (Deficit) (10,511) (50)
Total Liabilities and Stockholders' Equity (Deficit) $ 1,025,217 $ -
The accompanying notes are an integral part of this financial statement.
22
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE
PERIOD FROM THE DATE OF INCEPTION (JANUARY 10, 1996) TO AUGUST
31, 1999 AND AUGUST 31, 2000
<TABLE>
<CAPTION>
(U.S. DOLLARS)
Deficit
Accumulated
Additional During
Number Par Common Paid In Developing Stockholders'
of Shares Value Stock Capital Stage Deficit
<S> <C> <C> <C> <C> <C> <C>
Balance - January 10, 1996 - $ - $ - $ - $ - $ -
January 11, 1996
Common Stock issued in
exchange for expenses paid by
shareholders 10,999,133 0.001 10,999 - - 10,999
Net Loss for the Period - - - - (11,049) (11,049)
Balance - August 31, 1999 10,999,133 0.00 10,999 - (11,049) (50)
June 21, 2000
Common Stock issued as partial
consideration for acquisition of
marketing contracts 8,000,000 0.001 8,000 17,217 - 25,217
Consulting Services contributed
by shareholders - - - 6,000 - 6,000
Net Loss for the Period - - - - (41,678) (41,678)
Balance - August 31, 2000 18,999,133 $ 0.001 $ 18,999 $ 23,217 $(52,727) $(10,511)
</TABLE>
The accompanying notes are an integral part of this financial statement.
23
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
STATEMENTS OF OPERATIONS FOR THE PERIOD FROM THE DATE OF
INCEPTION (JANUARY 10, 1996)
TO AUGUST 31, 1999 AND AUGUST 31, 2000 AND 1999
U.S. DOLLARS
Inception to Year Ended Year Ended
August 31, 2000 August 31, 2000 August 31, 1999
Revenues $ - $ - $ -
Expenses
Consulting Fees 6,000 6,000 -
Organization Costs 11,049 - -
Professional Fees 26,333 26,333 -
Transfer Agent Fees 7,035 7,035 -
General and Administrative 2,310 2,310 -
Total Expenses 52,727 41,678 -
Net Loss for the Period $ (52,727) $ (41,678) $ -
Weighted Average Outstanding Shares 11,196,260 11,196,260 10,999,133
Earnings (loss) per Share -
Basic and Diluted $ (0.01) $ (0.01) $ (0.00)
The accompanying notes are an integral part of this financial statement.
24
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
STATEMENTS OF CASH FLOWS FOR THE PERIOD
FROM THE DATE OF INCEPTION (JANUARY 10, 1996)
TO AUGUST 31, 2000 AND FOR THE YEARS ENDED AUGUST 31, 2000 AND 1999
U.S. DOLLARS
Inception to
August 31, Year Ended Year Ended
2000 August 31, August 31,
2000 1999
Cash Flows from Operating Activities
Net Loss for the Period $ (52,727) $ (41,678) $ -
Add: Non-Cash Adjustments
Contributing Services 6,000 6,000 -
Changes in Assets and Liabilities:
Marketing Rights (17,217) (17,217) -
Accounts Payable 6,845 6,845 -
Due to Stockholder 28,883 28,833 50
Net Cash Flows from Operating Activities (28,216) (17,217) -
Cash Flows from Investing Activities - - -
Cash Flows from Financing Activities
Paid-in Capital 17,217 17,217 -
Proceeds from Common Stock 10,999 - -
Net Cash Flows from Financing Activities 28,216 17,217 -
Net Increase in Cash and Cash Equivalents - - -
Cash and Cash Equivalents - Beginning of Period - - -
Cash and Cash Equivalents - End of Period $ - $ - $ -
The accompanying notes are an integral part of this financial statement.
25
<PAGE>
OZOLUTIONS
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Inception to Year Ended Year Ended
August 31, August 31, August 31,
2000 2000 1999
Acquisition of Marketing Contracts
Assets Purchased $ 1,025,217 $ 1,025,217 $ -
Less: Purchase Price Financed via
Payable to1421209 Ontario Limited (1,000,000) (1,000,000) -
Less: Purchase Price Paid via Stock
Issuance (8,000) (8,000) -
Cash Paid $ 17,217 $ 17,217 $ -
The accompanying notes are an integral part of this financial statement.
26
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
NOTES TO FINANCIAL STATEMENTS
Note A - The Company
The Company was incorporated under the laws of the state of
Delaware on January 10, 1996 as Unipack Process, Inc. The name
of the Company was changed to Rico Resources 1999, Inc. on
October 22, 1999. On April 12, 2000 the Board of Directors filed
a Certificate of Amendment with the Secretary of the State of
Delaware changing the name to Ozolutions, Inc. On April 12,
2000, the Board of Directors amended the articles of
incorporation to increase the number of authorized shares of
common stock from 20,000,000 to 50,000,000 shares of $.001 par
value common stock. The Company's principal office is located in
Toronto, Ontario, Canada.
Scope of Business
At the present time the Company is in the development stage and
does not provide any product or service. The Company intends to
be an international marketer and distributor of water
purification systems using ozone technology. The markets the
Company will target are Mexico, Caribbean, and Ontario, Canada.
The Company's future success is dependent upon its ability to
raise sufficient capital in order to continue to develop its
market for its services. There is no guarantee that such capital
will be available on acceptable terms, if at all.
Purchase of Marketing Rights
The Company purchased the exclusive marketing rights to
distribute "Hankin Atlas Ozone Systems" products in Canada and
Mexico from 1421209 Ontario Limited. The purchase price was for
One Million ($1,000,000) Dollars, U.S, Twenty-five Thousand
($25,000) Dollars, Canadian, ($17,217 U.S.)and the issue of Eight
Million (8,000,000) common shares of Ozolutions, Inc. The Twenty-
five Thousand ($25,000) Dollars Canadian is a non-refundable
deposit paid to the Solicitors in trust for 1421209 Ontario
Limited. The sum of Five Hundred and Fifty Thousand ($550,000)
Dollars, U.S. and the delivery of Eight Million (8,000,000)
common shares of stock are payable on or before the sixtieth
(60th) day following the qualification for trading of the
Ozolutions, Inc. common shares on a recognized United States
Securities Exchange, but in no case later than November 21, 2000.
The shares have been issued in book form at August 31, 2000 and
are held by the registrar for 1421209 Ontario Limited. The sum
of Two Hundred and Fifty Thousand ($250,000) Dollars, U.S. is
payable on or before the one hundred fiftieth (150th) day
following the qualifications for trading of the Ozolutions, Inc.
common shares on a recognized United States Securities Exchange,
but in no case later than April 21, 2001. The remainder of the
purchase price for Two Hundred Thousand ($200,000) Dollars, U.S.
is payable on or before the expiration of one hundred eighty days
after the shares of Ozolutions, Inc. have been qualified for
trading on a recognized United States Securities Exchange, but in
no case later than August 21, 2001.
Note B - Summary of Significant Accounting Policies
Method of Accounting
The Company maintains its books and prepares its financial
statements on the accrual basis of accounting.
continued -
27
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
NOTES TO FINANCIAL STATEMENTS
Note B - Summary of Significant Accounting Policies - continued
Development Stage
The Company has operated as a development stage enterprise since
its inception by devoting substantially all of its efforts to
financial planning, raising capital, research and development,
and developing markets for its services. The Company prepares
its financial statements in accordance with the requirements of
Statement of Financial Accounting Standards No. 7, Accounting and
Reporting by Development Stage Enterprises.
Earnings (Loss) Per Common Share
Earnings (loss) per common share is computed in accordance with
SFAS No. 128, "Earnings Per Share," by dividing income available
to common stockholders by weighted average number of common
shares outstanding for each period.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expense during the reporting
period. Actual results can differ from those estimates.
Organizational Expenses
Organizational expenses represent management, consulting, legal,
accounting, and filing fees incurred to date in the formation of
the Company. Organizational costs are expensed as incurred
pursuant Statement of Position 98-5 on Reporting on the Costs of
Start-Up Activities.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes," using the asset and liability
approach, which require recognition of deferred tax liabilities
and assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of
such assets and liabilities. This method utilizes enacted
statutory tax rates in effect for the year in which the temporary
differences are expected to reverse and gives immediate effect to
changes in income tax rates upon enactment. Deferred tax assets
are recognized, net of any valuation allowance, for temporary
differences and net operating loss and tax credit carryforwards.
Deferred income tax expense represents the change in net deferred
assets and liability balances. The Company had no material
deferred tax assets or liabilities for the periods presented.
Provision for Income Taxes
Deferred income taxes result from temporary differences between
the basis of assets and liabilities recognized for differences
between the financial statement and tax basis thereon, and for
the expected future tax benefits to be derived from net operating
losses and tax credit carryforwards. A valuation allowance is
recorded to reflect the likelihood of realization of deferred tax
assets. At August 31, 2000 the Company has approximately $53,000
of net operating losses available for Federal tax purposes which
are available to offset future taxable income. The net operating
loss carry forwards begin to expire in 2011. The Company has
fully reserved for any furture tax benefits from the net
operating loss carry forwards since it has not generated any
revenues to date.
28
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
NOTES TO FINANCIAL STATEMENTS
Note B - Summary of Significant Accounting Policies - continued
Marketing Rights
Marketing rights represent the exclusive rights to distribute
"Hankin Atlas Ozone Systems" acquired from 1421209 Ontario
Limited. Contracts are recorded at cost. No amortization has
been taken since the contracts have not yet been placed in
service.
Note C - Stockholders' Equity
Common Stock
The Company's Securities are not registered under the Securities
Act of 1933 and, therefore, no offering may be made which would
constitute a "Public Offering" within the meaning of the United
States Securities Act of 1933, unless the shares are registered
pursuant to an effective registration statement under the Act.
The stockholders may not sell, transfer, pledge or otherwise
dispose of the common shares of the company in the absence of
either an effective registration statement covering said shares
under the 1933 Act and relevant state securities laws, or an
opinion of counsel that registration is not required under the
Act or under the securities laws of any such state.
Initial Capitalization
The Company had all of its organizational costs paid by the
shareholders. The shareholders paid $10,999 for these services
for which they received 10,999,133 shares of the Company's common
stock. The value assigned to the shares was $.001 U.S. per share.
Shares Issued in Connection with the Purchase of the Marketing
Contracts
The Company issued Eight Million (8,000,000) Shares of common
stock as part of the purchase of the business. See Note A for
details. The value assigned to the shares was $.001 U.S.
29
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
NOTES TO FINANCIAL STATEMENTS
Note D - Loan Agreement
The Company signed a loan agreement on June 21, 2000 with 1421209
Ontario Limited (A Related Party) for Three Hundred Thousand
($300,000) Dollars, U.S. The proceeds will be made available to
the Company at its option for use as working capital during the
start up phase of the operation. No amounts were outstanding
under this agreement as of August 31, 2000 or 1999. The loan is
payable quarterly in arrears with an interest rate of Six and One-
Half Percent (6.5 %) per annum, and is payable in full in two (2)
years.
Note E - Due to Stockholder
Due to stockholder represents amounts due for expenses paid on
behalf of the Company. The amount due is non-interest bearing
and contains no formal repayment terms.
Note F - Consulting Agreements
The Company signed a consulting agreement on July 1, 2000. The
consulting services consist of managerial services, advising on
production, distribution, sales and promotion, labor
negotiations, contract negotiations, financial services, and such
other consulting services as the Company and consultant agree
upon. The agreement is in effect September 1, 2000 through
August 31, 2003 with an annual fee of Ninety Thousand ($90,000)
Dollars, U.S.
The Company entered into a consulting agreement on May 5, 2000
which consists of the development of sales marketing and
application of technology for the use of ozone related
technologies. The agreement is for a term of one year commencing
September 1, 2000 with an annual fee of $12,000.
Note G - Related Party Transactions
The expenses of Ozolutions, Inc. have been paid on behalf of one
of the stockholders, therefore a Due to Stockholder account has
been set up. The balance for the period from inception (January
10, 1996) to August 31, 2000 and August 31, 1999 is $28,883 and $-
0-, respectively. The Company purchased marketing rights from
and has outstanding debt with 1421209 Ontario Limited.1421209
Ontario Limited became a 42% stockholder in the company when it
received 8,000,000 shares as part of the sale of its marketing
rights to Ozolutions, Inc. The Company used office space in a
facility owned by a stockholder at no cost. The estimated fair
rental of the office space is deemed immaterial to financial
statements.
Note H - Going Concern
The Company's financial statements have been presented on the
basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company reported net losses of
$52,727 from the period of inception (January 10, 1996) through
August 31, 2000. As a result there is a deficit of $52,727 at
August 31, 2000.
The Company's continued existence is dependent upon its ability
to raise capital or to successfully market and sell its products.
The financial statements do not include any adjustments that
might be necessary should the Company be unable to continue as a
going concern.
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