SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
- --------------------- ----------------------
September 30, 1996 33-16757-D
MEDIZONE CANADA LIMITED
(Exact name of registrant as specified in its charter)
Utah 87-0431771
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification No.)
or organization)
123 East 54th Street
Suite 7B
New York, New York 10022
(212) 421-0303
(Address, including zip code and telephone number,
including area code of registrant's principal
executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes / X / No
---
At November 4, 1996, there were outstanding 36,493,333 shares of the
registrant's common stock.
Page 1 of 12 pages
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
Index
September 30, 1996
Page
PART I - FINANCIAL INFORMATION Number
------------------------------ ------
Item 1. - Financial Statements
Unaudited Interim Consolidated Balance Sheets 3
Unaudited Interim Consolidated Statements
of Operations 4
Unaudited Interim Consolidated Statement
of Changes in Stockholders' Equity 5
Unaudited Interim Consolidated Statement
of Cash Flow 8
Notes to Unaudited Interim Consolidated
Financial Statements 9
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II - OTHER INFORMATION
---------------------------
Item 6. - Exhibits and Reports on Form 8-K 11
Signatures 12
Page 2 of 12 pages
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. - Financial Statements
- ------------------------------
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Interim Consolidated Balance Sheets
(unaudited)
ASSETS
September December
30, 1996 31, 1995
--------- ---------
Current Assets:
Cash $ -- $ --
--------- ---------
Total Current Assets -- --
Other Assets:
License agreement -- --
Organization costs (net of accumulated
amortization of $5,520 and $5,520, -- --
--------- ---------
respectively)
Total Assets $ -- $ --
--------- ---------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities: $ 9,498 $ 9,498
Accounts payable -- 2,000
--------- ---------
Accrued expenses
Total Current Liabilities $ 9,498 $ 11,498
========= =========
Commitments and Contingencies (Note 1)
Stockholders' Deficiency
Common stock, authorized 100,000,000 shares,
par value $.001 per share; issued and
outstanding 36,493,333 36,493 36,493
Additional paid-in capital 173,453 170,152
Deficit accumulated during development stage (219,444) (218,143)
--------- ---------
Total Stockholders' Deficiency ( 9,498) ( 11,498)
--------- ---------
$ -- $ --
========= =========
The accompanying notes are an integral part
of these consolidated financial statements.
Page 3 of 12 pages
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Interim Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Through September 30, 1996
For the Nine Months For the Three Months Ended From the Date of
Ended September 30, September 30, Inception (Nov. 18, 1987)
--------------------- -------------------------- ----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sales $ -0- $ -0- $ -0- $ -0- $ -0-
----- ----- ----- ----- -----
Cost and Expenses:
Research andDevelopment -0- -0- -0- -0- $29,554
Expenses
General and Administrative 1,301 1,553 557 298 $189,890
----- ----- ----- ----- --------
Expenses
Total Costs and Expenses 1,301 1,553 557 298 %219,444
----- ----- ----- ----- --------
Net Loss $(1,301) $(1,553) $(557) $(298)
======= ======= ===== =====
Weighted Average Number 36,493,000 36,493,333 36,493,33 3,493,000 33,009,000
========== ========== ========= ========= ==========
of Shares Outstanding
Loss Per Share $-0- $-0- $-0- $-0- $-0-
==== ==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 4 of 12 pages
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity
From the Date of Inception (November 18, 1987) through September 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Medizone Canada Ltd. - Common Stock Shares to Paid-in Development
Canadian Shares Amount be Issued Capital Stage
- --------------------- ------ ------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial issuance of shares
exchanged for license
agreement, November 1987
($.0000003 per share) 3,000,000 $ 1
Share issued for cash,
November 1987 ($1/share) 1 1
Net loss for the year
ended December 31, 1987 $ (1,000)
------------ ------------ ------------
Balance, Dec. 31, 1987 3,000,001 2 (1,000)
Sale of shares for cash
($.7692 per share, no
par value) 30,000 100,000
------------ ------------
3,130,001 $ 100,002 $ (1,000)
============ ============ ============
KPC Investments
- ---------------
Initial capitalization of KPC
Investments ($.001 par value)
- July 1984 ($.003 per share) 590,000 $ 590 $ 910
Shares issued for cash -
April 1985 ($.003/share) 3,000,000 3,000 6,819
Shares and warrants issued
for cash - June 1988 2,000,000 2,000 82,089
------------ ------------ ------------
5,590,000 $ 5,590 $ 89,818
============ ============ ============
Medizone Canada Ltd. -
Utah
- -----------------------
Existing shares of MCL
Utah (formerly KPC
Investments) 5,590,000 $ 5,590 $ 89,818
Exchange of 3,130,001 shares
of Medizone Canada Ltd. -
Canadian for shares of MCL -
Utah resulting in a reverse
merger, December 1988 27,132,000 27,132 66,551
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 5 of 12 pages
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity
From the Date of Inception (November 18, 1987) through September 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Medizone Canada Ltd. - Common Stock Shares to Paid-in Development
Utah (cont'd.) Shares Amount be Issued Capital Stage
- ----------------------- ------ ------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Shares reserved for issuance to
minority shareholder (1,126,888) (1,127) (1,127)
Shares issued for services
($.005 per share) 1,938,000 1,938 $ 8,062
Return of Capital to majority
shareholder (50,851)
Net loss for the year ended
December 31, 1988 $ (106,392)
------------ ------------ ------------ ------------ ------------
Balance, Dec. 31, 1988 33,533,112 33,533 1,127 113,580 (107,392)
Return of capital to majority
shareholder (58,056)
Net loss for the year ended
December 31, 1989 (26,179)
------------ ------------ ------------ ------------ ------------
Balance Dec. 31, 1989 33,533,112 33,533 1,127 55,524 (133,571)
Sale of shares for cash
(from $.05 to $.075 per share) 983,333 983 56,517
Shares issued for services
($.05 per share) 850,000 850 41,650
Shares issued to minority
shareholder which had
been previously
reserved 1,126,888 1,127 (1,127)
Return of capital to
majority shareholder (42,480)
Net loss for the year ended
December 31, 1990 (28,561)
------------ ------------ ------------ ------------ ------------
Balance, Dec. 31, 1990 36,493,333 36,493 -0- 111,211 (162,132)
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 6 of 12 pages
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity
From the Date of Inception (November 18, 1987) through September 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Common Stock Shares to Paid-in Development
Shares Amount be Issued Capital Stage
------ ------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Capital received from
majority shareholder 9,100
Net loss for the year ended
December 31, 1991 $ (8,150)
------------ ------------ ------------ ------------ ------------
Balance, Dec. 31, 1991 36,493,333 36,493 -0- 120,311 (170,282)
Capital received from
majority shareholder 6,314
Net loss for the year ended
December 31, 1992 (8,334)
------------ ------------ ------------ ------------ ------------
Balance, Dec. 31, 1992 36,493,333 36,493 -0- 126,625 (178,616)
Capital received from
majority shareholder 25,936
Net loss for the year ended
December 31, 1993 (32,357)
------------ ------------ ------------ ------------ ------------
Balance Dec. 31, 1993 36,493,333 36,493 -0- 152,561 (210,973)
Capital received from
majority shareholder 12,038
Net loss for the year ended
December 31, 1994 (3,617)
------------ ------------ ------------ ------------ ------------
Balance, Dec. 31, 1994 36,493,333 36,493 -0- 164,599 (214,590)
Capital received from
majority shareholder 5,553
Net loss for the year ended
December 31, 1995 (3,553)
------------ ------------ ------------ ------------ ------------
Balance December 31, 1995 36,493,333 $ 36,493 $ -0- 170,152 (218,143)
Capital received from
majority shareholder 3,301
Net loss for the nine months
ended September 30, 1996 (1,301)
------------
Balance, June 30, 1996 36 493,333 $ 36,493 $ -0- $ 173,453 $ (219,444)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 7 of 12 pages
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flow
(unaudited)
Increase (Decrease) in Cash and Cash Equivalents
From the Date
of Inception
For the Nine Months (November 18
Ended September 30, 1987) through
1996 1995 September 30, 1996
---- ---- ------------------
OPERATING ACTIVITIES:
Net Loss $(1,301) $(1,553) $(219,444)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Issuance of stock for services -0- -0- 52,500
Write-off of prior year payables -0- -0- (25,261)
Amortization -0- -0- 5,520
Write-off of license agreement -0- -0- 1
Changes in assets and liabilities:
Accounts payable and accrued
expenses (2,000) (4,000) 34,759
------- ------- ---------
Net cash used in operating activities (3,301) (5,553) (151,925)
------- ------- ---------
INVESTMENT ACTIVITIES:
Additions to other assets:
Organization costs -0- -0- (5,520)
------- ------- ---------
Net cash used in investing activities -0- -0- (5,520)
------- ------- ---------
FINANCING ACTIVITIES:
Cash received from (advanced to)
majority shareholder 3,301 5,553 (89,145)
Issuance of stock for cash -0- -0- 246,590
------- ------- ---------
Net cash provided by financing
activities 3,301 5,553 157,445
------- ------- ---------
INCREASE (DECREASE) IN CASH -0- -0- -0-
CASH
Beginning of period -0- -0- -0-
------- ------- ---------
End of Period $-0- $-0- $-0-
------- ------- ---------
NONCASH ACTIVITIES:
Issuance of stock for license
agreement -- -- 1
The accompanying notes are an integral part of these
consolidated financial statements.
Page 8 of 12 pages
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
(unaudited)
September 30, 1996
Continuation of the Company as a going concern is dependent upon the Company's
obtaining additional capital and the requisite approvals from the Canadian
Health and Welfare authorities for the marketing of ozone-related products and
equipment and, ultimately, upon the Company's attaining profitable operations.
The Company may require a substantial amount of additional funds to complete the
development of its products, to establish manufacturing facilities, to build a
sales and marketing organization and to fund additional losses which the Company
expects to incur over the next several years.
The Company expects that its parent, Medizone International, Inc., ("MII") will
provide funds or undertake such actions as are necessary to continue operations.
The Company has no continuing financial commitments and it has estimated that
expenditures for the next twelve months will consist only of the costs of
continuing its bare legal existence.
In the opinion of management of the Company, the unaudited consolidated
financial statements for the nine-month periods ended September 30, 1996 and
1995, respectively, include all adjustments, which comprise only normal
recurring accruals, necessary for a fair presentation of the results for such
periods. It is suggested that these unaudited consolidated financial statements
be read in conjunction with the financial statements and notes thereto included
in the Company's 1995 Annual Report on Form 10-K which has been filed with the
Securities and Exchange Commission.
Page 9 of 12 pages
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
General
- -------
Nine-month periods ended September 30, 1996, and September 30, 1995
- -------------------------------------------------------------------
No research and development expenses were incurred in 1996 or 1995. General and
administrative expenses in 1996 were $1,301, which were shareholder costs,
professional fees and miscellaneous taxes and fees. General and administrative
expenses incurred in 1995 were $1,553, which were shareholder expenses, taxes
and professional fees.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1996, the Company had a working capital deficiency of $9,498
and a shareholders' deficiency of $9,498. At December 31, 1995, the Company had
a working capital deficiency of $11,498 and a shareholders' deficiency of
$11,498.
The Company and its parent company, MII, have had discussions with a number of
potential lenders, investors and underwriters with a view towards raising
additional funds to fund research and continuing operations.
The Company has outstanding warrants to purchase 4,000,000 shares of common
stock at $.125 per share; however, there can be no assurance that such warrants
will be exercised. Also, the Company is required to file a post effective
amendment to its Registration Statement in order to register the shares it
proposes to issue upon any exercise of warrants. The warrants scheduled to
expire on December 31, 1995 have been extended to December 31, 1996.
The Company expects that MII will provide funds or undertake such actions as are
necessary to continue operations of the Company. In the event that the
outstanding warrants of the Company are exercised, fully or partially, the
Company will expend any net proceeds for the continuation of its business
including continuation of its research endeavors.
Page 10 of 12 pages
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(b) No reports on Form 8-K were filed by the Registrant this quarter.
(Remainder of page intentionally left blank)
Page 11 of 12 pages
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEDIZONE CANADA LIMITED
(Registrant)
s/Arthur P. Bergeron
--------------------
Arthur P. Bergeron
Vice President
and Chief Financial Officer
November 8, 1996
Page 12 of 12 pages
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(This schedule contains summary financial information extracted from (A)
Interim Consolidated Balance Sheets, Statements of Operations, Change in
Stockholders Equity and Cash Flows and is qualified in its entirety by reference
to such (B) quarterly report on Form 10-Q for the nine months ended September
30, 1996)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 9,498
<BONDS> 0
0
0
<COMMON> 36,493
<OTHER-SE> (45,991)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1301)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1301)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1301)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
