U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
Amendment No. 3
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 Operations 10
3. Description of Properties 12
4. Security Ownership of Certain Beneficial Owners
and Management 13
5. Directors, Executive Officers, Promoters and
Control Persons 14
6. Executive Compensation 15
7. Certain Relationships and Related Transactions 15
8. Description of Securities 16
Part II
1. Market Price of and Dividends on the Registrant'a
Common Equity and Related Stockholder Matters 17
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 18
Part F/S Financial Statements 18
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 under our certificate of incorporation or
bylaws or by the General Corporation Law of Delaware. We acquired the
marketing rights for 8,000,000 shares of Ozolutions common stock, or
approximately 42% of the outstanding shares, a non-refundable payment
of $17,217 (CDN$25,000) made at closing, and an additional $1,000,000
payable in installments commencing in November 2000. In November 2000,
Ozolutions and 1421209 Ontario Limited agreed to an extension for the
installment payments scheduled as follows:
* $550,000 on the earlier of 90 days following the
establishment of a public market in Ozolutions
common stock or June 30, 2001;
* $250,000 on the earlier of 150 days following the
establishment of a public market in Ozolutions
common stock or August 30, 2001; and
* $200,000 on the earlier of 180 days following the
establishment of a public market in Ozolutions
common stock or September 30, 2001.
We have yet to generate significant revenue from operations
and there is no assurance we will generate significant revenue
from operations prior to the end of June 2001. Consequently,
Ozolutions may need to seek financing from outside sources to make
the payment of $550,000 due June 30, 2001, or negotiate with 1421209
Ontario Limited a further extension on the payment. We have not
identified any potential sources of financing and have no assurances
that 1421209 Ontario Limited would grant an extension in June 2001.
Failure to make the installment payment due in June 2001, or any
subsequent payment, would be a default under the
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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 $1,025,217, which includes the nonrefundable
payment made at closing in the amount of $17,217, the $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 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
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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 are focusing on dealers located within a four hour
drive of Toronto, so that we can provide more effective marketing and
technical support for the launch of the OzoTitan sales effort. We
have entered into dealer agreements with 10 dealers and are seeking
an additional five dealers. With Hankin we will hold product,
installation, and service training with dealers in January and
February 2001, so that they can initiate sales programs in the winter
and spring.
We have ordered 25 OzoTitans for delivery in January and
February 2001, at a cost to us of $1,667 per unit, or a total of
$41,675. These units will be resold to our dealers at $2,800 per unit
for their initial inventory. The suggested retail price for the
OzoTitan is $3,933. When we place an order with Hankin, we pay 50%
of the total invoice price with the balance due net 30 days after
delivery. We believe we can obtain delivery of units within 30
days of order, so we plan on placing orders for product against
orders we receive from our dealers and customers we sell to directly.
Dealers and customers are required to pay 50% of the invoice
price at the time of ordering with the balance due on the date of
delivery. No units will be ordered for a dealer or customer unless
Ozolutions receives the initial deposit, and units will only be
delivered against payment of the remaining purchase price.
The OzoTitan carries a one year warranty from Hankin against
defects in material and workmanship. Defective units can be returned
to Ozolutions for warranty repairs by Hankin or replacement.
We are in the development stage, in that we have yet to generate
significant revenue from operations. We had a net loss of $51,678
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;
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* 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.
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 (approximatelyUSD$666,666 based on current
exchange rates) 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 (approximately
USD$66,666 based on current exchange rates),
7.5% of the next CDN$100,000 (approximately USD$66,666 based on
current exchange rates),
6% of the next CDN$300,000 (approximately USD$200,000 based on
current exchange rates),
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2% of the next CDN$500,000 (approximately USD$333,333 based on
current exchange rates), and
1% of any remaining amount.
A territory fee of CDN$50,000 (USD$33,333) was required to secure the
marketing rights in Mexico. Of this fee, CDN$15,000 (USD$10,000) 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 expect
to resell the product to our dealers at a mark-up of approximately 68%
of our cost, or a price of approximately $ 2,800 based on our current
cost of $1,667.
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 $27,000 for
medium-sized systems to $200,000 for larger systems.
The OzoTitan is a smaller, self-contained ozone process system
designed by Hankin for the consumer market. 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
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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 is a publicly-held Canada corporation that has engaged in
the business of designing, manufacturing, and selling ozone generating
equipment systems since 1972. Hankin's sales (unaudited) for the nine
months ended June 30, 2000 were CDN$11,614,588, its income before
interest, taxes, and amortization was CDN$1,140,000, and its net income
for the period was CDN$451,729. At June 30, 2000 Hankin had an
accumulated deficit of CDN$7,658,081. For the fiscal year ended
September 30, 1999 sales were CDN$13,662,896 income before interest,
taxes and amortization was CDN$590,099 and net loss for the period was
CDN$1,518,606.
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.
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
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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 t hat 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.
The different technologies used in available systems include filtration
through active carbon or other substances, distillation, ultra violet
treatment, and reverse osmosis. 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. The OzoMax is
manufactured in China in the form of a core units with add on components that
must be purchased to make the product functional, while the OzoTitan comes
complete as a fully integrated unit. Based solely on its own examination
of the products, management of Ozolutions believes the OzoTitan is superior
in materials and workmanship to the OzoMax. Ozolutions has not found any
evidence that there is an established dealer or service network for the
OzoMax in Ontario. We believe we can compete with other small water treatment
systems on the basis of price and product performance.
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
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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, $17,217 (CDN$
25,000) paid at closing, and an additional $1,000,000 payable in
installments.
Ozolutions was originally required to make a payment of $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, but this payment deadline was extended
in November 2000 to June 30, 2001, to provide Ozolutions additional
time to commence operations and raise capital. Additional payments of
$250,000 and $200,000 are due no later than August 30, 2001 and
September 30, 2001. There was no affiliation between 1421209 Ontario
Limited and Ozolutions prior to the purchase of the distribution rights.
There is no assurance that we will be able to generate sufficient
revenue from operations within a time frame that will allow for timely
payment of our obligations to 1421209 Ontario Limited. If this occurs,
we will seek financing from outside sources to make these payments, but
we have not identified any sources of financing, and there is no
assurance any financing will be available on terms acceptable to
Ozolutions. If we are unable to locate financing, Ozolutions will seek
an extension of our payment obligations from 1421209 Ontario Limited.
We have already obtained one extension from 1421209 Ontario Limited,
but there is no assurance that 1421209 Ontario Limited will grant us
another extension should we request it. Failure to make our June 2001
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.
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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 c learing
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 fu nd 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,
D. Brian Robertson, 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 t he 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 January and February 2001 we plan on taking delivery
of the first 25 units, which will be sold and delivered to our
ndependent 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.
Ozolutions believes its general, selling and administrative expenses
during the 12-month period following the date i t 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:
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* 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 d evelopments
that Ozolutions expects or anticipates will or may occu r in the
future, including such things as expansion and growth of its
operations and other such matters are forwardlooking 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, Graham Lintell, we expect to
employ in 2001 to assist in managing our Ontario
dealer group to use, as needed, 1,000 square feet of
warehouse space to store OzoTitan units that are not
shipped directly to end users or dealers. We expect
the cost of this temporary storage space will be
approximately $500 per month. 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.
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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.
Amount and Nature of Beneficial Ownerership
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 (3
persons)
________________________________
(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.
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(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.
Name Age Positions (1) Since
Max Weissengruber 62 President and Director April 2000
James A. Clemenger 44 Secretary, Treasurer and April 2000
Director
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 a marketing and
communications consulting firm engaged in the
business of conducting employee surveys and
developing marketing communications materials and
customized training packages. Annual revenues for
Acris partners over the four year period ended
December 31, 1999, have averaged $60,000 per year.
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.
14
<PAGE>
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 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. Dennis Caplice is currently
devoting between eight and sixteen hours a week to
the business of Ozolutions, and we expect his time
commitment will increase as 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, $17,217
(CDN$25,000) paid at closing, and an additional
$1,000,000 payable in installments as follows:
* $550,000 on the earlier of 90 days
following the
establishment of a public market in
Ozolutions common stock or June 30, 2001;
* $250,000 on the earlier of 150 days
following the establishment of a
public market in Ozolutions common
stock or August 30, 2001; and
* $200,000 on the earlier of 180 days
following the establishment of a public
market in Ozolutions common stock or
September 30, 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
15
<PAGE>
1421209 Ontario Limited receives its first payment
$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 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.
16
<PAGE>
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.
ITEM 2. LEGAL PROCEEDINGS
Neither Ozolutions nor any of its officers,
directors or holders of five percent or more of its
common stock 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, directors or holders of five percent or
more of its common stock 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.
17
<PAGE>
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 F-1.
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 Initial filing
amended October 22, 1999 and April Page E-1
12, 2000
2 (2) By-Laws Initial filing
Page E-5
3 (6) Asset Purchase Agreement dated Inital filing
June 21, 2000, between Page E-14
1421209 Ontario Limited
and Ozolutions Inc.
3(a) (6) Addendum A dated November 7, 2000, Am. No. 2
to Asset Purchas Agreement dated Page E-1
June 21, 2000, 1421209 Ontario Limited
and Ozolutions Inc.
18
<PAGE>
4 (6) Assignment of Contract for Hankin Initial filing
product distribution rights in Mexico Page E-20
Hankin Atlas Ozone systems Ltd.,
1421209 Ontario Limited and
Ozolutions Inc.
5 (6) Assignment of Contract for Hankin Initial filing
product distribution rights in the Page E-31
Caribbean Zone between Hankin Atlas
Ozone systems Ltd., 1421209 Ontario
Limited and Ozolutions Inc.
6 (6) Assignment of Contract for Initial filing
Hankin product distribution Page E-41
rights in Ontario between
Hankin Atlas Ozone systems
Ltd., 1421209 Ontario Limited
and Ozolutions Inc.
7 (6) Loan Agreement dated June 21,
2000 between 1421209 Ontario Initial filing
Limited and Ozolutions Inc. Page E-49
8 (6) Consulting Agreement between Initial filing
Ozolutions Inc. and Edward G. Deans Page E-54
9 (6) Consulting Agreement between Initial filing
Ozolutions Inc. and Page E-59
R.L. Larocque & Associates
9.1 (6) Form of Ozolutions Dealer Agreement This Filing
Page E-1
10 (15) Financial Data Schedules Am. No. 1
19
<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: January 3, 2001 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: January 3, 2001 /s/ Max Weissengruber, Chief Executive Officer
and Director
Dated: January 3, 2001 /s/ James A. Clemenger, Chief Financial Officer
and Director
Dated: January 3, 2001 /s/ Dennis P. Caplice,Director
20
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
TABLE OF CONTENTS
Independent Auditors' Report F-2
Balance Sheets at August 31, 2000 and 1999 F-3
Statements of Changes in Stockholders' Equity
(Deficit) for the Period from the
Date of Inception (January 10, 1996) through August
31, 1999 and August 31, 2000 F-4
Statements of Operations for the three years in
the period ending August 31, 2000 and for the
period from the Date of Inception
(January 10, 1996) through August 31, 2000 F-5
Statements of Cash Flows for the three years in the
period ending August 31, 2000 and for the period
from the Date of Inception (January 10, 1996)
through August 31, 2000 F-6 - F-7
Notes to Financial Statements F-8 - F-11
F-1
<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 each of the three
years in the period ended August 31, 2000 and for
the period from the date of inception (January 10,
1996) through 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 provides 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
each of the three years in the period ended August
31, 2000 and for the period from the date of
inception (January 10, 1996) through 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
that 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
Rotenberg & Company, LLP
Rochester, New York
October 5, 2000
F-2
<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 as of August 31, 2000 and 20,000,000
Shares Authorized as of August 31, 1999; 18,999,133
and 10,999,000 Issued and Outstanding as of
August 31, 2000 and 1999, respectively 18,999 10,999
Additional Paid-In Capital 33,217 -
Deficit Accumulated During Development Stage (62,727) (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.
F-3
<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) TTHROUGH AUGUST 31, 1999 AND
AUGUST 31, 2000
(U.S.DOLLARS)
<TABLE> Deficit
Accumulated
Additional During
Number Par Common Paid in Developing Stockholders
of Value Stock Capital Stage Deficit
Shares
<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 rights 8,000,000 0.001 8,000 - - 8,000
Cash Contribution of Capital - - - 17,217 - 17,217
Territory Fee Paid by Shareholder
on behalf of Company - - - 10,000 - 10,000
Consulting Services contributed
by shareholder - - - 6,000 - 6,000
Net Loss for the Period - - - - (51,678) (51,678)
Balance - August 31, 2000 18,999,133 $0.001 $18,999 $33,217 $(62,727) $(10,511)
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
STATEMENTS OF OPERATIONS FOR THE THREE YEARS IN
THE PERIOD ENDED AUGUST 31, 2000 AND FOR THE PERIOD
FROM THE DATE OF INCEPTION (JANUARY 10, 1996) THROUGH
AUGUST 31, 2000
U.S. DOLLARS
Inception to Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2000 2000 1999 1998
Revenues $ - $ - $ - $ -
Expenses
Territory Fee 10,000 10,000 - -
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 62,727 51,678 - -
Net Loss for the Period $(62,727) $(51,678) $ - $ -
Weighted Average 12,555,164 12,555,164 10,999,133 10,999,133
Outstanding Shares
Loss per Share - Basic and
Diluted $ (0.01) $ (0.01) $(0.00) $(0.00)
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
STATEMENTS OF CASH FLOWS FOR THE THREE YEARS IN THE
PERIOD ENDED AUGUST 31, 2000 AND FOR THE PERIOD
FROM THE DATE OF INCEPTION (JANUARY 10, 1996) THROUGH
AUGUST 31, 2000
</TABLE>
<TABLE>
<CAPTION>
U.S. DOLLARS
Inception to Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2000 2000 1999 1998
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net Loss for the Period $ (62,727) $ (51,678) $ - $ -
Add: Non-Cash Adjustments
Contributing Services 6,000 6,000 - -
Changes in Assets and Liabilities:
Non-Refundable Payment - 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 (38,216) (27,217) - -
Cash Flows from Investing Activities - - - -
Cash Flows from Financing Activities
Paid-in Capital 27,217 27,217 - -
Proceeds from Common Stock 10,999 - - -
Net Cash Flows from Financing
Activities 38,216 27,217 - -
Net Increase in Cash and Cash
Equivalents - - - -
Cash and Cash Equivalents -
Beginning of Period - - - -
Cash and Cash Equivalents -
End of Period $ - $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE>
OZOLUTIONS
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
<TABLE>
<CAPTION>
Inception to Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2000 2000 1999 1998
<S> <C> <C> <C> <C>
Acquisition of Marketing Contracts
Assets Purchased $1,025,217 $1,025,217 $ - $ -
Less: Purchase Price Financed via
Payable to 1421209 Ontario Limited (1,000,000) (1,000,000) - -
Less: Purchase Price Paid via (8,000) (8,000) - -
Stock Issuance
Cash Paid - Non-Refundable Deposit $ 17,217 $ 17,217 $ - $ -
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-7
<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 acquisition occurred on June 21, 2000
in which Ozolutions, Inc. received the rights to
begin Distributing Hankin Atlas Ozone systems and
became obligated to Hankin for the purchase price
described below.
The original payment terms (subsequently amended on
November 7, 2000) was for One Million Seventeen
Thousand Two Hundred and Seventeen ($1,017,217)
Dollars, U.S. and the issuance of Eight Million
(8,000,000) common shares of Ozolutions, Inc.
The Seventeen Thousand Two Hundred and Seventeen
($17,217) Dollars U.S. was a non non-refundable
deposit paid to 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 were 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 not case later than
November 21, 2000. 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. was 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
April 21, 2001. The remainder of the purchase price
for Two Hundred Thousand ($200,000) Dollars, U.S.
was 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.
-continued -
F-8
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
NOTES TO FINANCIAL STATEMENTS
Note A - The Company - continued
On November 7, 2000 the agreement was amended to
extend the original due dates of the purchase
price installments to allow Ozolutions additional
time to raise capital and to further business
operations. The revised due dates of the
installments are as follows:
The sum of Five Hundred and Fifty Thousand
($550,000) Dollars, U.S. is payable on or
before the 90th day following qualification
for trading of Ozolutions stock on a recognized
U.S. exchange but in no case later than June 30,
2001, and the delivery of Eight Million
(8,000,000) common shares of stock
are payable on or before the thirtieth (30th) 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 April 30, 2001. In November 2000, the
8,000,000 shares of common stock were delivered
to 141209 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 Stats Securities Exchange,
but in no case later than August 30, 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 September 30, 2001. The above terms reflect
the current terms of the asset purchase agreement as
outlined in an addendum effective on November 7,
2000. Should the Company fail to achieve
qualification on a recognized U.S. Securities
Exchange, the purchase agreement will continue as
long as the Company meets the above payment
obligations.
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.
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.
- continued -
F-9
<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
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.
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.
- continued -
F-10
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
NOTES TO FINANCIAL STATEMENTS
Note C - Stockholders' Equity - continued
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. In addition, certain stockholders
made cash contributions of $27,217, of which $17,217
was used for purchasing the marketing rights
and $10,000 for territory fees. The cash
contributions have been recorded as additional
paid-in capital in the accompanying financial
statements.
Shares Issued in Connection with the Purchase
of the Marketing Contracts
The Company approved the issuance of Eight
Million (8,000,000) Shares of common stock in
June 2000 as part of the purchase of the
business. See Note A for details. The value
assigned to the shares was $.001 U.S.
The shares were subsequently delivered in
November 2000.
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. The
proceeds become available to the company upon
1421209 Ontario Limited receiving the first
installment of $550,000 of the purchase
price of the marketing rights. 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, a Company which owns 42% of the
outstanding stock of Ozolutions, Inc. at August
31, 2000. 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.
F-11
<PAGE>
OZOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Toronto, Ontario, Canada
NOTES 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 $62,727
from the period of inception (January 10,
1996) through August 31, 2000. As a result
there is a retained deficit of $62,727 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.
F-12
<PAGE>
