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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, 1997 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 or Identification No.)
organization)
4505 South Wasatch Boulevard
Suite 210
Salt Lake City, Utah 84124
(801) 274-8400
(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 require-
ments for the past 90 days.
YES NO X
----- -----
At February 3, 1998, there were outstanding 36,493,333 shares of the
registrant's common stock.
1 of 11
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
Index
September 30, 1997
Page
Number
======
PART I - FINANCIAL INFORMATION
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 5-8
Unaudited Interim Consolidated Statements of Cash Flow 9
Notes to Unaudited Interim Consolidated Financial
Statements 10
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K Signatures 12
Signatures 12
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Interim Consolidated Balance Sheets
(unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
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:
Accounts payable $ 9,498 $ 9,498
Accrued expenses 2,000 2,000
--------- ---------
Total Current Liabilities 11,498 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 173,453 173,453
Deficit accumulated during development stage (221,444) (221,444)
Total Stockholders' Deficiency ( 11,498) ( 11,498)
$ - $ -
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3 of 11
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Interim Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
From the
Date of
Inception
Nov. 18,
For the Nine Months For the Three Months 1987)
Ended September 30, Ended September 30, through
------------------- --------------------
1997 1996 1997 1996 September
---- ---- ---- ---- 30, 1997
---------
<S> <C> <C> <C> <C> <C>
Sales $-0- $-0- $-0- $-0- $-0-
---- ---- ---- ---- ----
Costs and Expenses: -0- -0- -0- -0- 29,554
General & -0- 1,301 -0- 557 191,890
administrative
expenses
Total Costs & -0- 1,301 -0- 557 221,444
Expenses
Net Loss $-0- $1,30 $-0- $(557) $(221,444)
==== ======= ==== ====== ==========
Weighted average 36,493,333 36,493,333 36,493,000 36,493,000 33,367,000
number of shares ========== ========== ========== ========== =============
outstanding
Loss per Share $-0- $-0- $-0- $-0- $-0-
==== ==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4 of 11
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity
From the Date of Inception (November 18, 1987) through September 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Shares Additional During
Medizone Canada Ltd. - Common Stock to be Paid-in Development
Canadian Shares Amount Issued Capital Stage
- ---------------------- ------ ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Initial issuance of shares
exchanged for license
agreement, November 1987
($.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 3,000,000 2 (1,000)
Sale of shares for cash
($.7692 per share, no par
value) 130,000 100,000
--------- -------- ---------
3,130,000 $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 & 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.
5 of 11
<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, 1997
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Shares Additional During
Medizone Canada Ltd. - Common Stock to be Paid-in Development
Utah (con't.) Shares Amount Issued Capital Stage
- ---------------------- ------ ----- ------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Shares reserves for
issuance to minority
shareholder (1,126,888) (1,127) $1,127
Share issued for servi-
ces ($.005/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 Dec. 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 $.075/sh) 983,333 983
Shares issued for services
($.05 per share) 850,000 850
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 Dec. 31, 1990 (28,561)
----------- ------- ------- --------- ---------
Balance, Dec. 31, 1990 36,493,333 36,493 -0- 111,211 (162,132)
Capital received from
majority shareholder 9,100
Net loss for the year
ended Dec. 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 Dec. 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
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
6 of 11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net loss for the year
ended Dec. 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 Dec. 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 Dec. 31, 1995 (3,553)
Balance, Dec. 31, 1995 36,493,333 36,493 -0- 170,152 (218,143)
Capital received from
majority shareholder 3,301
Net loss for the six
months ended, Dec. 31, (3,301)
1996
Balance, Dec. 31, 1996 36,493,333 $ 36,493 $ -0- $ 173,453 $ (221,444)
Net loss for the six
months ended
June 30, 1997 -0-
Balance, June 30, 1997 36,493,333 $ 36,493 $ -0- $ 173,453 $ (221,444)
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
7 of 11
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Cash Flow
(unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
From the Date
of Inception
For the Nine Months Ended (Nov. 18,
September 30, 1987)
through
1997 1996 September 30, 1997
---- ---- ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ -0- $ (1,301) $(221,444)
Adjustments to reconcile net
loss to net cash used in
operating activities: -0-
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- 1
Changes in assets and liabilities:
Accounts payable and accrued (2,000)
expenses -0- 36,759
Net cash used in operating activities -0- (3,301) (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 -0- 3,301 (89,145)
Issuance of stock for cash -0- -0- 246,590
Net cash provided by financing
activities -0- 3,301 157,445
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
agreements - - 1
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
8 of 11
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
September 30, 1997
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 finan-
cial statements for the nine month periods ended September 30, 1997 and 1996,
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 1996 Annual Report on Form 10-K which has been filed with the
Securities and Exchange Commission.
9 of 11
<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, 1997, and September 30, 1996
No research and development expenses were incurred in 1997 or 1996. No general
and administrative expenses were incurred in 1997 or 1996 period. General
administrative expenses in 1996 were $1,301 which were shareholder costs and
professional fees.
Liquidity and Capital Resources
At September 30, 1997, the Company had a working capital deficiency of $11,498
and a shareholders' deficiency of $11,498. At December 31, 1996, the Company had
a working capital deficiency of $11,498 and a shareholders' deficiency of
$11,498.
The Company and its parent company, Medizone International, Inc., 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 expects that Medizone 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.
10 of 11
<PAGE>
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
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
February 10, 1998
11 of 11
<PAGE>
<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, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 11,498
<BONDS> 0
0
0
<COMMON> 36,453
<OTHER-SE> (47,991)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (0)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
