SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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
March 31, 1998 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)
144 Buena Vista
P.O. Box 742
Stinson Beach, CA 94970
(415) 868-0300
(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 May 8, 1998, 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
March 31, 1998
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 12
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
March 31, December 31,
1998 1997
-------- ------------
Current Assets:
Cash $ - $ -
---- -----
Total Current Assets - -
Other Assets:
License agreement - -
Organization cost (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 - 1,400
--------- ---------
Total Current Liabilities 9,498 10,898
-------- ---------
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 178,008 175,797
Deficit accumulated during development stage (223,999) (223,188)
--------- ---------
Total Stockholders' Deficiency (9,498) (10,898)
--------- ---------
$ - $ -
========= =========
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)
From the Date
of Inception
For the Three Months Ended (Nov. 18, 1987)
March 31, through
1998 1997 March 31, 1998
---- ---- --------------
Sales $ -0- $ -0- $ -0-
------ ------ -----
Costs and Expenses:
Research and development
expenses -0- -0- 29,554
General and administrative
expenses 811 -0- 194,445
--------- ------- ---------
Total Costs and Expenses 811 -0- 223,999
--------- ------- ---------
Net Loss $ (811) -0- $(223,999
========= ======= =========
Weighted average number
of shares outstanding 36,493,333 36,493,333 33,519,000
========== ========== ==========
Loss per Share $ -0- $ -0- $0.01
===== ===== =====
The accompanying notes are an integral
part of these consolidated financial statements.
Page 4 of 12 pages
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity
From the Date of Inception (November 18, 1987) through March 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Shares Additional During
Common Stock to be Paid-in Development
Shares Amount Issued Capital Stage
------ ------ ------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Medizone Canada Ltd. -
Canadian
- -----------------------
Initial issuance of shares
exchanged for license
agreement, November 1987
($.000003 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) 130,000 100,000 - - -
--------- --------- --------- --------- -------
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 & 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-result-
ing 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 March 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Shares Additional During
Common Stock to be Paid-in Development
Shares Amount Issued Capital Stage
------ ------ ------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Medizone Canada Ltd. -
Utah (cont'd.)
- ----------------------
Shares reserved for
issuance to minority
shareholder (1,126,888) $(1,127) 1,127 $ - $ -
Shares issued for services
($.005)/share) 1,938,000 1,938 - 8,062 -
Return of capital to
majority shareholder - - - (50,851) -
Net loss for the year
ended Dec. 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 $.075/share) 983,333 983 - 56,517 -
Shares issued for services
($.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 Dec. 31, 1990 - - - - (28,561)
----------- ---------- --------- ---------- ----------
Balance, Dec. 31, 1990 36,493,333 36,493 - 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 - 120,311 (170,282)
</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 March 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Shares Additional During
Common Stock to be Paid-in Development
Shares Amount Issued Capital Stage
------ ------ ------- ---------- -------------
<S> <C> <C> <C> <C> <C>
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 - 126,625 (178,616)
Capital received from
majority shareholder - - - 25,936 -
Net loss for the year
ended Dec. 31, 1993 - - - - (32,357)
---------- --------- --------- ---------- -----------
Balance, Dec. 31, 1993 36,493,333 36,493 - 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 - 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 - 170,152 (218,143)
Capital received from
majority shareholder - - - 3,301 -
Net loss for the year
ended December 31, 1996 - - - - (3,301)
---------- --------- --------- --------- ---------
Balance, Dec. 31, 1996 36,493,333 36,493 - 173,453 (221,444)
</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 Statement of Changes in Stockholders' Equity
From the Date of Inception (November 18, 1987) through March 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Shares Additional During
Common Stock to be Paid-in Development
Shares Amount Issued Capital Stage
------ ------ ------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Capital received from
majority shareholder - - - 2,334 -
Net loss for the year
ended Dec. 31, 1997 - - - - 1,744
---------- --------- --------- ---------- ---------
Balance, Dec. 31, 1997 36,493,333 36,493 - 175,797 (223,188)
Capital received from
majority shareholder - - - 2,211 -
Net loss for the three
months ended
March 31, 1998 - - - - (811)
---------- --------- -------- ---------- --------
Balance, March 31, 1998 36,493,333 $36,493 - $178,008 $(223,999)
========== ======= ======= ======== ==========
</TABLE>
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)
Consolidated Statements of Cash Flow
(unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
From the Date
of Inception
For the Three Months Ended (Nov. 18, 1987)
March 31, through
1998 1997 March 31, 1998
---- ---- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $(811) $ -0- $(223,999)
Adjustment 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 (1,400) -0- 34,759
------- ------- --------
Net cash used in investing activities (2,211) -0- (156,480)
------- ------- ----------
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 2,211 -0- (84,590)
Issuance of stock for cash -0- -0- 246,590
------- ------- ---------
Net cash provided by financing
activities 2,211 -0- 162,000
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
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
Page 9 of 12 pages
<PAGE>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
March 31, 1998
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 three-month periods ended March 31, 1998 and 1997,
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 1997 Annual Report on Form 10-K which has been filed with the
Securities and Exchange Commission.
Page 10 of 12 pages
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- --------------------
General
-------
Three-month periods ended March 31, 1998, and March 31, 1997
------------------------------------------------------------
No research and development expenses were incurred in 1998 or 1997. In 1998
nominal general and administrative expenses totalling $811 were incurred for
shareholder costs, legal fees and taxes. No general and administrative
expenses were incurred in 1997.
Liquidity and Capital Resources
-------------------------------
At March 31, 1998, the Company had a working capital deficiency of $9,498 and
a shareholders' deficiency of $9,498. At December 31, 1997, the Company had a
working capital deficiency of $10,898 and a shareholders' deficiency of
$10,898.
The Company and its parents 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. There can be
no assurance of this, however, since continuation of Medizone as a going
concern is dependent upon obtaining additional capital.
Page 11 of 12 pages
<PAGE>
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
- ------------------------------------------
(b) On February 4, 1998, the Registrant filed a
Current Report on form 8-K in which it announced
(i) the appointment, in December 8, 1997, of (a)
Milton G. Adair ("Adair"), Edwin J. Marshall and
Dr. Gerard Sunnen to Registrants' Board of
Directors and (b) Adair to be Registrants'
President and Chief Executive Officer; and (ii)
the resignations of John D. Pealer and George
Handel, on December 8, 1997 and January 5, 1998,
respectively, from Registrants' Board of
Directors.
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
May 11, 1998
Page 12 of 12 pages
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(This schedule contains summary financial information extracted from (A)
Consolidated Balance Sheets, Statements of Operations, Changes 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 three months ended March 31, 1998)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<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> 811
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (811)
<INCOME-TAX> 0
<INCOME-CONTINUING> (811)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (811)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
