U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission File No. 33-16757-D
-----------
MEDIZONE CANADA LIMITED
-----------------------
(Name of Small Business Issuer in its Charter)
NEVADA 87-0431771
---------- -----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
55 West 200 North, Suite 2
Provo, UT 84601
---------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (801)377-1758
Securities Registered under Section 12(b) of the Exchange Act: None
Name of Each Exchange on Which Registered: None
Securities Registered under Section 12(g) of the Exchange Act: None
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year:
December 31, 1998 - $0.
<PAGE>
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date
within the past 60 days.
March 30, 1999 - $303,454.25 There are approximately 142,802 shares of
common voting stock of the Company held by non-affiliates. The valuation is
based upon the current average bid prices for the Company's common stock on
the OTC Bulletin Board.
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date:
March 30, 1999
Common - 2,250,172
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained in
Item 13 of this Report.
Transitional Small Business Issuer Format Yes X No
<PAGE>
PART I
Item 1. Description of Business
-----------------------
Business Development
- --------------------
Medizone Canada Limited, a Nevada corporation (the "Company" or the
"Registrant") was organized in 1987 and is a development stage company. The
company was a majority owned subsidiary of Medizone International, Inc.
("MII") until June, 1998. MII is a Nevada corporation, organized in 1986,
whose objective is to (1) gain regulatory approval for its drug, a precise
mixture of ozone and oxygen called MEDIZINE (R), and its process of
inactivating lipid enveloped viruses for the intended purpose of
decontaminating blood and blood products and assisting in the treatment of
certain diseases; and (ii) develop the related technology and equipment for
the medical application of its products, including its drug production and
delivery system (the "Medizone Technology"). Currently, the Company is not
engaged in any business activity, but is seeking potential investments or
business acquisitions and consequently is considered a developmental stage
company as defined in SFAS No. 7. The Company has, at the present time, not
paid any dividends and any dividends that may be paid in the future will
depend upon the financial requirements of the company and other relevant
factors.
Effective the 10th of June, 1998, the Board of Directors authorized a
reverse split of the outstanding voting securities of the Company on a basis
of one for 243, while retaining the authorized shares at 100,000,000 and par
value at $0.001.
The Company sold 1,000,000 post-split shares of its "unregistered"and
"restricted securities" common stock to the appointed Director and President,
Brenda M. Hall, in consideration of the sum of $20,000, cash, effectively
passing control (87%) to the new officer. The Company also appointed Pamela
Price, Vice President and a director; and Paul V. Finlayson,
Secretary/Treasurer and a director, to serve until the next annual meeting of
the stockholders or until their successors are elected and qualified or their
prior resignations or terminations. For information regarding beneficial
holdings of Ms. Hall see Item 11 of this Report. An 8-K Current Report dated
June 5, 1998, respecting this change in control, was filed with the Securities
and Exchange Commission on June 19, 1998, and is incorporated herein by
reference. See Item 13 of this Report.
Subsequently, during the end of August, 1998, the Company sold 1,000,000
"restricted securities" (common stock) to "accredited investors" or
"sophisticated investors" as defined in Rule 506 of the Securities and
Exchange Commission pursuant to Section 4(2) of the Securities Act of 1933, as
amended. For information regarding beneficial holdings of these people see
Item 11 of this Report.
<PAGE>
On July 20, 1998, the stockholders approved the change of domicile of
the Company to the State of Nevada.
On October 6, 1998, the Company authorized the issuance of 100,000 shares
of its $0.001 par value common stock to the Company's counsel for services
rendered and valued at $5,000.
Business
- --------
Other than the above-referenced matters and seeking and investigating
potential assets, properties or businesses to acquire, the Company has had no
business operations for the past year. To the extent that the Company intends
to continue to seek the acquisition of assets, property or business that may
benefit the Company and its stockholders, it is essentially
a "blank check" company. Because the Company has limited assets and conducts
no business, management anticipates that any such acquisition would require it
to issue shares of its common stock as the sole consideration for the
acquisition. This may result in substantial dilution of the shares of current
stockholders. The Company's Board of Directors shall make the final
determination whether to complete any such acquisition; the approval of
stockholders will not be sought unless required by applicable laws, rules and
regulations, its Articles of Incorporation or Bylaws, or contract. The
Company makes no assurance that any future enterprise will be profitable or
successful.
The Company is not currently engaging in any substantive business
activity and has no plans to engage in any such activity in the foreseeable
future. In its present form, the Company may be deemed to be a vehicle to
acquire or merge with a business or company. The Company does not intend to
restrict its search to any particular business or industry, and the areas in
which it will seek out acquisitions, reorganizations or mergers may include,
but will not be limited to, the fields of high technology, manufacturing,
natural resources, service, research and development, communications,
transportation, insurance, brokerage, finance and all medically related
fields, among others. The Company recognizes that the number of suitable
potential business ventures that may be available to it may be extremely
limited, and may be restricted to entities who desire to avoid what these
entities may deem to be the adverse factors related to an initial public
offering ("IPO"). The most prevalent of these factors include substantial time
requirements, legal and accounting costs, the inability to obtain an
underwriter who is willing to publicly offer and sell shares, the lack of or
the inability to obtain the required financial statements for such an
undertaking, limitations on the amount of dilution to public investors in
comparison to the stockholders of any such entities, along with other
conditions or requirements imposed by various federal and state securities
laws, rules and regulations. Any of these types of entities, regardless of
their prospects, would require the Company to issue a substantial number of
shares of its common stock to complete any such acquisition, reorganization or
merger, usually amounting to between 80 and 95 percent of the outstanding
shares of the Company following the completion of any such transaction;
accordingly, investments in any such private entity, if available, would be
much more favorable than any investment in the Company.
<PAGE>
In the event that the Company engages in any transaction resulting in a
change of control of the Company and/or the acquisition of a business, the
Company will be required to file with the Commission a Current Report on Form
8-K within 15 days of such transaction. A filing on Form 8-K also requires the
filing of audited financial statements of the business acquired, as well as
pro forma financial information consisting of a pro forma condensed balance
sheet, pro forma statements of income and accompanying explanatory notes.
Management intends to consider a number of factors prior to making any
decision as to whether to participate in any specific business endeavor, none
of which may be determinative or provide any assurance of success. These may
include, but will not be limited to an analysis of the quality of the entity's
management personnel; the anticipated acceptability of any new products or
marketing concepts; the merit of technological changes; its present financial
condition, projected growth potential and available technical, financial and
managerial resources; its working capital, history of operations and future
prospects; the nature of its present and expected competition; the quality and
experience of its management services and the depth of its management; its
potential for further research, development or exploration; risk factors
specifically related to its business operations; its potential for growth,
expansion and profit; the perceived public recognition or acceptance of its
products, services, trademarks and name identification; and numerous other
factors which are difficult, if not impossible, to properly or accurately
analyze, let alone describe or identify, without referring to specific
objective criteria.
Regardless, the results of operations of any specific entity may not
necessarily be indicative of what may occur in the future, by reason of
changing market strategies, plant or product expansion, changes in product
emphasis, future management personnel and changes in innumerable other
factors. Further, in the case of a new business venture or one that is in a
research and development mode, the risks will be substantial, and there will
be no objective criteria to examine the effectiveness or the abilities of its
management or its business objectives. Also, a firm market for its products or
services may yet need to be established, and with no past track record, the
profitability of any such entity will be unproven and cannot be predicted with
any certainty.
Management will attempt to meet personally with management and key
personnel of the entity sponsoring any business opportunity afforded to the
Company, visit and inspect material facilities, obtain independent analysis or
verification of information provided and gathered, check references of
management and key personnel and conduct other reasonably prudent measures
calculated to ensure a reasonably thorough review of any particular business
opportunity; however, due to time constraints of management, these activities
may be limited.
The Company is unable to predict the time as to when and if it may
actually participate in any specific business endeavor. The Company
anticipates that proposed business ventures will be made available to it
through personal contacts of directors, executive officers and principal
stockholders, professional advisors, broker dealers in securities, venture
capital personnel, members of the financial community and others who may
present unsolicited proposals. In certain cases, the Company may agree to pay
a finder's fee or to otherwise compensate the persons who submit a potential
business endeavor in which the Company eventually participates. Such persons
may include the Company's directors, executive officers, beneficial owners or
their affiliates. In this event, such fees may become a factor in
negotiations regarding a potential acquisition and, accordingly, may present
a conflict of interest for such individuals.
Although the Company has not identified any potential acquisition target,
the possibility exists that the Company may acquire or merge with a business
or company in which the Company's executive officers, directors, beneficial
owners or their affiliates may have an ownership interest. Current Company
policy does not prohibit such transactions. Because no such transaction is
currently contemplated, it is impossible to estimate the potential pecuniary
benefits to these persons.
Further, substantial fees are often paid in connection with the
completion of these types of acquisitions, reorganizations or mergers, ranging
from a small amount to as much as $250,000. These fees are usually divided
among promoters or founders, after deduction of legal, accounting and other
related expenses, and it is not unusual for a portion of these fees to be paid
to members of management or to principal stockholders as consideration for
their agreement to retire a portion of the shares of common stock owned by
them. In the event that such fees are paid, they may become a factor in
negotiations regarding any potential acquisition by the Company and,
accordingly, may present a conflict of interest for such individuals.
Principal Products and Services.
- --------------------------------
The limited business operations of the Company, as now contemplated,
involve those of a "blank check" company. The only activities to be conducted
by the Company are to manage its current limited assets and to seek out and
investigate the acquisition of any viable business opportunity by purchase
and exchange for securities of the Company or pursuant to a reorganization or
merger through which securities of the Company will be issued or exchanged.
Distribution Methods of the Products or Services.
- -------------------------------------------------
Management will seek out and investigate business opportunities through
every reasonably available fashion, including personal contacts,
professionals, securities broker dealers, venture capital personnel, members
of the financial community and others who may present unsolicited proposals;
the Company may also advertise its availability as a vehicle to bring a
company to the public market through a "reverse" reorganization or merger.
Status of any Publicly Announced New Product or Service.
- --------------------------------------------------------
None; not applicable.
<PAGE>
Competitive Business Conditions.
- --------------------------------
Management believes that there are literally thousands of "blank check"
companies engaged in endeavors similar to those engaged in by the Company;
many of these companies have substantial current assets and cash reserves.
Competitors also include thousands of other publicly-held companies whose
business operations have proven unsuccessful, and whose only viable business
opportunity is that of providing a publicly-held vehicle through which a
private entity may have access to the public capital markets. There is no
reasonable way to predict the competitive position of the Company or any other
entity in the strata of these endeavors; however, the Company, having limited
assets and cash reserves, will no doubt be at a competitive disadvantage in
competing with entities which have recently completed IPO's, have significant
cash resources and have recent operating histories when compared with the
complete lack of any substantive operations by the Company for the past
several years.
Sources and Availability of Raw Materials and Names of Principal Suppliers.
- ---------------------------------------------------------------------------
None; not applicable.
Dependence on One or a Few Major Customers.
- --------------------------------------------
None; not applicable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts.
- -----------------
None; not applicable.
Need for any Governmental Approval of Principal Products or Services.
- -----------------------------------------------------------------------
Because the Company currently produces no products or services, it is not
presently subject to any governmental regulation in this regard. However, in
the event that the Company engages in a merger or acquisition transaction with
an entity that engages in such activities, it will become subject to all
governmental approval requirements to which the merged or acquired entity is
subject.
Effect of Existing or Probable Governmental Regulations on Business.
- --------------------------------------------------------------------
The integrated disclosure system for small business issuers adopted by
the Commission in Release No. 34-30968 and effective as of August 13, 1992,
substantially modified the information and financial requirements of a "Small
Business Issuer," defined to be an issuer that has revenues of less than $25
million; is a U.S. or Canadian issuer; is not an investment company; and if a
majority-owned subsidiary, the parent is also a small business issuer;
provided, however, an entity is not a small business issuer if it has a public
float (the aggregate market value of the issuer's outstanding securities held
by non-affiliates) of $25 million or more.
<PAGE>
The Commission, State Securities Commissions and the North American
Securities Administrators Association, Inc. ("NASAA") have expressed an
interest in adopting policies that will streamline the registration process
and make it easier for a small business issuer to have access to the public
capital markets. The present laws, rules and regulations designed to promote
availability to the small business issuer of these capital markets and similar
laws, rules and regulations that may be adopted in the future will
substantially limit the demand for "blank check" companies like the Company,
and may make the use of these companies obsolete.
Research and Development.
- --------------------------
None; not applicable.
Cost and Effects of Compliance with Environmental Laws.
- -------------------------------------------------------
None; not applicable. However, environmental laws, rules and regulations
may have an adverse effect on any business venture viewed by the Company as an
attractive acquisition, reorganization or merger candidate, and these factors
may further limit the number of potential candidates available to the Company
for acquisition, reorganization or merger.
Number of Employees.
- -------------------
None.
Item 2. Description of Property.
------------------------
Other than cash, the Company has virtually no assets, property or
business; its principal executive office address and telephone number are the
business office address and telephone number of its President, Brenda M. Hall,
and are currently provided at no cost. Because the Company has had no
business, its activities will be limited to keeping itself in good standing in
the State of Nevada, seeking out acquisitions, reorganizations or mergers and
preparing and filing the appropriate reports with the Securities and Exchange
Commission. These activities have consumed an insubstantial amount of
management's time.
Item 3. Legal Proceedings.
-----------------
The Company is not a party to any pending legal proceeding. To the
knowledge of management, no federal, state or local governmental agency is
presently contemplating any proceeding against the Company. No director,
executive officer or affiliate of the Company or owner of record or
beneficially of more than five percent of the Company's common stock is a
party adverse to the Company or has a material interest adverse to the Company
in any proceeding.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matter was submitted to a vote of the Company's security holders
during the fourth quarter of the calendar year covered by this Report.
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
---------------------------------------------------------
Market Information
- ------------------
The Company's common stock is listed for quotations on the OTC Bulletin
Board of the National Association of Securities Dealers ("NASD"), under the
symbol "MZNC." There is no "established trading market" for shares of common
stock of the Company; no assurance can be given that any "established trading
market" for the Company's common stock will develop in the future or be
maintained, if one does develop.
Restricted Securities
- ---------------------
There are currently 2,250,176 outstanding shares of the Company's common
stock, of which 2,107,370 are designated as "restricted securities." The one
year holding period required under Rule 144 commenced in August 1998.
Holders
- -------
The number of record holders of the Company's common stock as of the date
of this Report is approximately 195.
Dividends
- ----------
The Company has not declared any cash dividends with respect to its
common stock and does not intend to declare dividends in the foreseeable
future. The future dividend policy of the Company cannot be ascertained with
any certainty, and until the Company completes any acquisition, reorganization
or merger, as to which no assurance may be given, no such policy will be
formulated. There are no material restrictions limiting, or that are likely to
limit, the Company's ability to pay dividends on its common stock.
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
Plan of Operation.
- ------------------
The Company has not engaged in any material operations or had any
revenues from operations during the last four calendar years. The Company's
plan of operation for the next 12 months is to continue to seek the
acquisition of assets, properties or businesses that may benefit the Company
and its stockholders. Management anticipates that to achieve any such
acquisition, the Company will issue shares of its common stock as the sole
consideration for such acquisition.
During the next 12 months, the Company's only foreseeable cash
requirements will relate to maintaining the Company in good standing or the
payment of expenses associated with reviewing or investigating any potential
business venture, which the Company expects to pay from its cash resources,
As of December 31, 1998, it had $21,639 in cash. If additional funds are
required during this period, such funds may be advanced by management or
stockholders as loans to the Company. Because the Company has not identified
any such venture as of the date of this Report, it is impossible to predict
the amount of any such loan. However, any such loan should not exceed $25,000
and will be on terms no less favorable to the Company than would be available
from a commercial lender in an arm's length transaction. As of the date of
this Report, the Company is not engaged in any negotiations with any person
regarding any such venture.
Results of Operations.
- ----------------------
Other than restoring and maintaining its good corporate standing in the
State of Nevada, and seeking the acquisition of assets, properties or
businesses that may benefit the Company and its stockholders, the Company has
had no material business operations in the two most recent calendar years.
At December 31, 1998, the Company had $21,639 in assets. See the Index to
Financial Statements, Item 7 of this Report.
During the calendar year ended December 31, 1998, the Company had net
loss of $19,697. This compares to a net loss of $1,744 during the
calendar year ended December 31, 1997. The Company has received no revenues
in either of its two most recent calendar years. See the Index to Financial
Statements, Item 7 of this Report.
Liquidity.
- ----------
The Company received $45,000 for the sale of 2,000,000 "restricted
securities" (common stock) of the Company during the year ended December 31,
1998. The Company total cash assets and total liabilities for the year ended
December 31, 1998, were $21,639 and $1,181, respectively.
"Year 2000".
- -----------
Because the Company is not presently engaged in any substantial business
operations, management does not believe that computer problems associated with
the change of year to the year 2000 will have any material effect on its
operations. However, the possibility exists that the Company may merge with
or acquire a business that will be negatively affected by the "year 2000"
problem. The effect of such problem or the Company in the future can not be
predicted with any accuracy until such time as the Company identifies a merger
or acquisition target.
<PAGE>
Item 7. Financial Statements.
- ------------------------------
Financial Statements for the years ended
December 31, 1998 and 1997
Independent Auditors' Report
Balance Sheets - December 31, 1998 and 1997
Statements of Operations for the years ended
December 31, 1998, 1997 and 1996
Statements of Stockholders' Equity from inception
November 18, 1987 through December 31, 1998
Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
Notes to the Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- ---------------------
There have been no changes in the Company's principal independent
accountant in the past two calendar years or as of the date of this Report.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
- --------------------------------------------------
There were no delinquent filings by any directors, executive officers or
"affiliate" of the Company during the last calendar year.
Identification of Directors and Executive Officers
- --------------------------------------------------
The following table sets forth the names of all current directors and
executive officers of the Company. These persons will serve until the next
annual meeting of the stockholders or until their successors are elected or
appointed and qualified, or their prior resignation or termination.
<PAGE>
<TABLE>
<CAPTION>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
- ---- --------- ------------- ---------------
<S> <C> <C> <C>
Edwin G. Marshall President 6/3/98 6/5/98
Director 12/97 6/5/98
Jill Marshall Secretary 6/3/98 6/5/98
Milton G. Adair Director 12/97 6/3/98
President 12/97 6/3/98
Gerard V. Sunnen Director 1/98 6/3/98
Secretary 1/98 6/3/98
Arthur P. Bergeron Vice-Pres. 1992 6/3/98
Treasurer 1992 6/3/98
Brenda M. Hall Director 6/10/98 *
President 6/10/98 *
Secretary 10/15/98 *
Treasurer 10/15/98 *
Paul V. Finlayson Director 6/10/98 10/15/98
Secretary 6/10/98 10/15/98
Treasurer 6/10/98 10/15/98
Pamela Price Director 6/10/98 8/28/98
Vice-Pres. 6/10/98 8/28/98
</TABLE>
* This person presently serve in the capacities indicated.
Business Experience.
- --------------------
Brenda M. Hall assumed the roles of President and as one of the
Directors of the Company on June 10, 1998. Her primary duties include
marketing, bookkeeping and general management of the Company. She is
currently self-employed operating, a financial consulting and bookkeeping
business, Dassity, Inc. Mrs. Hall has been operating this business since
September of 1995. From October 1996 to March 1997, Brenda M. Hall assumed
the roles of President, Secretary/Treasurer of Wild Wings, Inc., a public
company that was merged in March 1997 with Red Oak Hereford Farms, Inc., a
company that markets a branded beef product "Certified Hereford Beef." She
was employed as the Assistant to the President of Maca Supply Company and also
served as their AR/AP manager from April 1993 until May 1997, when she decided
to actively pursue her business ventures in Dassity, Inc. full-time . She
graduated from Brigham Young University with a BA in December of 1991.
Paul V. Finlayson assumed the roles of Secretary/Treasurer and a director
on June 10, 1998. He resigned from these offices on October 15, 1998. Mr.
Finlayson is currently employed as the manager of Wild Wings Hunting &
Sporting Clays Club, Inc. He is responsible for customer service, marketing
and raising pheasant, chukar and quail for resale. He graduated with a BS in
Conservation Biology from Brigham Young University in 1996. He received a
technical certificate in fisheries technology from the College of Southern
Idaho in 1996.
Pamela Price assumed the roles of Vice-President and a director on June
10, 1998. She resigned from these offices on August 28, 1998 to seek
full-time employment with the Alpine School District, teaching secondary math
education. She graduated with a BS from Brigham Young University in April of
1998.
Significant Employees.
- ----------------------
The Company has no employees who are not executive officers, but who are
expected to make a significant contribution to the Company's business.
Family Relationships.
- ----------------------
There are no family relationships between any directors or executive
officers of the Company, either by blood or by marriage.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
To the knowledge of current management, no director, person nominated to
become a director, executive officer, promoter or control person of the
Company
during the past five years:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the bankruptcy
or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities law,
and the judgment has not been reversed, suspended or vacated.
<PAGE>
Item 10. Executive Compensation.
-----------------------
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year or Other Rest- Under- LTIP Other
Principal Period Salary Bonus Annual ricted lying Pay- Comp-
Position Ended ($) ($) Compen- Stock Options outs ensation
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Brenda M. Hall 1998 $6,000 0 0 0 0 0 0
Director and
President
Pamela Price 1998 $ 500 0 0 0 0 0 0
Director and
Vice-President
Paul Finlayson 1998 $ 500 0 0 0 0 0 0
Director and
Sec/Treasurer
Compensation of Directors.
- --------------------------
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No additional
amounts are payable to the Company's directors for committee participation or
special assignments.
There are no arrangements pursuant to which any of the Company's
directors was compensated during the Company's last completed calendar year
for any service provided as director.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
- -------------
There are no employment contracts, compensatory plans or arrangements,
including payments to be received from the Company, with respect to any
director or executive officer of the Company which would in any way result in
payments to any such person because of his or her resignation, retirement or
other termination of employment with the Company or any subsidiary, any change
in control of the Company, or a change in the person's responsibilities
following a change in control of the Company.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
- ------------------------------------------------
The following table sets forth the shareholdings of those persons who
beneficially own more than five percent of the Company's common stock as of
the date of this Report, with the computations being based upon 2,250,176
shares of common stock being outstanding.
</TABLE>
<TABLE>
<CAPTION>
Number of Shares Percentage
Name and Address Beneficially Owned of Class (1)
- ---------------- ------------------ --------------
<S> <C> <C>
Brenda M. Hall 1,250,000 55.6%
1065 W. 1150 So.
Provo, UT 84601
David N. Nemelka* 231,729 5.9%
2662 Stonebury Loop Rd.
Springville, UT 84663
Joseph Nemelka 200,000 8.9%
104 Rouen Court
Maumelle, AR 72113
Joan Bateman 225,000 10%
866 E. 1600 So.
Mapleton, UT 84663
1st Zamora, Corp. 200,000 8.9%
9025 Oakwood Place
West Jordan, UT 84088
Gary McAdam** 190,082 8.5%
14 Red Tail Dr.
Highlands Ranch, CO 80126
</TABLE>
*Owned or controlled by David N. Nemelka or his affiliated entities.
**Owned or controlled by Gary McAdam or his affiliated entities.
<PAGE>
The following table sets forth the shareholdings of the Company's
directors and executive officers as of the date of this Report:
<TABLE>
<CAPTION>
Number of Percentage of
Name and Address Shares Beneficially Owned of Class *
- ---------------- -------------------------- -------------
<S> <C> <C>
Brenda M. Hall 1,250,000 55.6%
1065 W. 1150 So.
Provo, UT 84601
--------- -----
All directors and executive
officers as a group 1,250,000 55.6%
(1 person)
</TABLE>
See Item 9 of this Report for information concerning the offices or other
capacities in which the foregoing person serves with the Company.
Changes in Control.
- -------------------
There are no present arrangements or pledges of the Company's securities
which may result in a change in control of the Company.
Item 12. Certain Relationships and Related Transactions.
----------------------------------------------
Transactions with Management and Others.
- ----------------------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeded $60,000 and in which any director or executive
officer, or any security holder who is known to the Company to own of record
or beneficially more than five percent of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, had a material
interest.
Certain Business Relationships.
- -------------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeded $60,000 and in which any director or executive
officer, or any security holder who is known to the Company to own of record
or beneficially more than five percent of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, had a material
interest.
Indebtedness of Management.
- ---------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeded $60,000 and in which any director or executive
officer, or any security holder who is known to the Company to own of record
or beneficially more than five percent of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, had a material
interest.
<PAGE>
Parents of the Issuer.
- ----------------------
The Company has no parents.
Transactions with Promoters.
- ----------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeded $60,000 and in which any promoter or founder, or any
member of the immediate family of any of the foregoing persons, had a material
interest.
Item 13. Exhibits and Reports on Form 8-K.
--------------------------------
Reports on Form 8-K
- -------------------
An 8-K Current Report dated June 5, 1998, was filed with the Securities
and Exchange Commission on June 19, 1998, regarding a change in control of the
Company and a reverse split one for 243, effective June 10,
1998. .
Exhibits
- --------
Exhibit
Number Description
- ------- ------------
27 Financial Data Schedule
DOCUMENTS INCORPORATED BY REFERENCE
Form 8-K Current Report dated April 12, 1989.
Form 8-K Current Report dated June 5, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MEDIZONE CANADA, LIMITED
Date: 3/31/99 /s/Brenda M. Hall
Brenda M. Hall
Sole Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this Report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated:
MEDIZONE CANADA, LIMITED
Date: 3/31/99 /s/Brenda M. Hall
Brenda M. Hall
Sole Officer and Director
<PAGE>
MEDIZONE CANADA LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Andersen, Andersen & Strong L.C. Independent Certified Public
Accountants F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-9
Notes to Consolidated Financial Statements F-10
INDEX TO SCHEDULES
None Required
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Medizone Canada Limited
We have audited the consolidated balance sheets of Medizone Canada Limited and
subsidiary (a development stage company) as of December 31, 1998 and 1997, and
the related statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1998, 1997 and 1996, and the period November 18,
1987 (date of inception) through December 31, 1998. 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 audits 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
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Medizone Canada Limited and
subsidiary as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years ended December 31, 1998, 1997 and 1996, and
the period November 18, 1987 (date of inception) through December 31, 1998,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, since its inception (November 18, 1987), the Company has
been in the development stage and has suffered recurring losses from
operations and is dependent on its majority stockholder to provide funds to
continue operations, the continuation of the majority stockholder as a
going concern is dependent upon the majority stockholder obtaining additional
capital. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
ANDERSEN ANDERSEN & STRONG L.C.
Salt Lake City, Utah
March 23, 1999
<PAGE>
<TABLE>
MEDIZONE CANADA LIMITED
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
------ ------
<S> <C> <C>
CURRENT ASSETS
Cash $ 21,639 $ -
--------- --------
Total Current Assets $ 21,639 -
--------- --------
OTHER ASSETS
License agreement - -
Organization costs (net of
accumulated amortization of $5,520) - -
---------- ---------
$ 21,639 $ -
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 387 $ 9,498
Accrued expenses 794 1,400
--------- -----------
Total Current Liabilities 1,181 10,898
--------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 2 and 5) - -
STOCKHOLDERS' DEFICIENCY (Note 6)
Common stock, authorized 100,000,000
shares, par value $.001 per share;
issued and outstanding 2,250,176 and
150,176 shares (giving effect to
reverse stock split) as of December
31, 1998 and 1997, respectively
2,250 150
Additional paid-in capital 261,093 212,140
Deficit accumulated during development stage(242,885) (223,188)
--------- ---------
Total Stockholders' Deficiency 20,458 (10,898)
--------- ---------
$ 21,639 $ -
---------- ------------
---------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
MEDIZONE CANADA LIMITED
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
From the Date
of Inception
(November 18,
1987) through
For the Years Ended December 31, December 31,
1998 1997 1996 1998
-------- -------- ------- -------------
(restated)
<S> <C> <C> <C> <C>
SALES $ - $ - $ - $ -
-------- -------- -------- -----------
COSTS AND EXPENSES
Research and develop-
ment expenses - - - 29,554
Gen. and administrative
expenses 19,697 1,744 3,301 213,331
------ ----- ----- -------
Total Costs and Expenses 19,697 1,744 3,301 242,885
------- ----- ----- --------
Net loss $(19,697) $(1,744) $(3,301) $ (242,885)
--------- -------- -------- -------------
--------- -------- -------- -------------
Weighted average number
ofshares outstanding 1,175,176 150,179 150,179 234,122
--------- ------- ------- ------------
--------- ------- ------- ------------
Loss per share $ (.02) $ (.01) $ (.02) $ (1.04)
--------- ------- -------- -------------
--------- ------- -------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
MEDIZONE CANADA LIMITED
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From the Date of Inception (November 18, 1987)
through December 31, 1998 (restated)
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,
Nov. 1987
($.0000003 per share) 3,000,000 $ 1 - $ - $ -
Share issued for cash,
November 1987
($1 per share) 1 1 - - -
Net loss for the year
ended Dec. 31, 1987 - - - - (1,000)
---------- ------ ----- -------- ---------
Balance, Dec. 31, 1987 3,000,001 2 - - (1,000)
Sale of shares for cash
($.7692 per share,
no par value) 130,000 100,000 - - -
---------- ------- ------ ----------
- ----------
3,130,001 $100,002 - - $ (1,000)
---------- -------- ------ ----------
- ----------
KPC Investments
Initial capitalization
of KPCInvestments
($.001 par value),
July 1984 ($.003 per
share) 590,000 $ 590 - $ 910 $ -
Shares issued for cash,
April 1985 ($.003 per
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 Invest.) 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 -
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
MEDIZONE CANADA LIMITED
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)
From the Date of Inception (November 18, 1987)
through December 31, 1998 (restated)
Deficit
Accumulated
Shares Additional During
Medizone Canada Ltd. Common Stock to be Paid-in
Development
-Utah (continued)- Shares Amount 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 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 $.075
per share) 983,333 983 - 56,517 -
Shares issued for
services ($.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 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 -
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
MEDIZONE CANADA LIMITED
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)
From the Date of Inception (November 18, 1987)
through December 31, 1998 (restated)
Deficit
Accumulated
Shares Additional During
Medizone Canada Ltd. Common Stock to be Paid-in Development
Utah(continued)- Shares Amount Issued Capital Stage
-------- -------- -------- -----------
- ------------
<S> <C> <C> <C> <C> <C>
Net loss for the
year ended
December 31, 1991 - $ - - $ - $ (8,150)
---------- --------- ------- ---------- ----------
Balance, Dec.31, 1991 36,493,333 36,493 - 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 - 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)
Contributed capital
from majority
shareholder - - - 5,553 -
Net loss for the year
ended Dec. 31, 1995 - - - - (3,553)
----------- ------- ------- --------
- ---------
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
MEDIZONE CANADA LIMITED
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)
From the Date of Inception (November 18, 1987)
through December 31, 1998 (restated)
Deficit
Accumulated
Shares Additional During
Medizone Canada Ltd. Common Stock to be Paid-in
Development
Utah (cont.)- Shares Amount Issued Capital Stage
-------- ------- ------- ----------
- ----------
<S> <C> <C> <C> <C> <C>
Balance, Dec. 31, 1995 36,493,333 $ 36,493 - $ 170,152 $(218,143)
Adjust beginning shares
for reverse stock split
at 1 share for 243
shares (36,343,157) (36,343) - 36,343 -
Contributed capital
from majority
shareholder - - - 3,301 -
Net loss for the year
Dec. 31, 1996 - - - - (3,301)
------------ -------- ------ ----------- --------
Balance, Dec. 31, 1996 150,176 150 - 209,796 (221,444)
Net loss for the year
December 31, 1997 - - - - (1,744)
Contributed capital
from majority
stockholder - - - 2,344 -
------------ -------- ------ ------------
- ---------
Balance, Dec. 31, 1997 150,176 150 - 212,140
(223,188)
Contributed capital
from majority
shareholder - - - 1,053 -
Shares issued for cash
($.02 per share) 2,000,000 2,000 - 43,000 -
Shares issued for
services ($.05 per share) 100,000 100 - 4,900 -
Net loss for the year
December 31, 1998 - - - -
(19,697)
---------- ------ ------ -----------
- --------
Balance, Dec. 31, 1998 2,250,176 $2,250 $ - $ 261,093
$(242,885)
---------- ------- -------- ----------
- ----------
---------- ------- -------- ----------
- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
MEDIZONE CANADA LIMITED AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
From the Date
of Inception
(November 18,
1987) through
For the Years Ended December 31, December 31,
1998 1997 1996 1998
------ ------ ------ -------------
(restated)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(19,697) $(1,744) $(3,301) $(242,885)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Issuance of stock
for services 5,000 - - 57,500
Amortization - - - 5,520
Write-off of prior
year payables - - - (25,261)
Write-off of license
agreement - - - 1
Changes in assets and
liabilities:
Accounts payable and
accrued expenses (9,717) (600) - 28,786
-------- ------- --------
- ----------
Net Cash Used in
Operating Activities (24,414) (2,344) (3,301) (176,339)
INVESTING ACTIVITIES
Organization costs - - - (5,520)
-------- -------- ----------
- ----------
Net Cash Used in
Investing Activities - - - (5,520)
-------- -------- ----------
- ---------
FINANCING ACTIVITIES
Issuance of stock for
cash 45,000 - - 291,590
Cash received from
(advanced to)
majority stockholder 1,053 2,344 3,301
(88,092)
-------- -------- -----------
- ----------
Net Cash Provided by
Financing Activities 46,053 2,344 3,301 203,498
-------- -------- ------------
- ----------
INCREASE (DECREASE) IN
CASH 21,639 - - 21,639
Cash, beginning of year - - - -
-------- -------- ------------
- ---------
Cash, end of year $ 21,639 $ - $ - $ 21,639
--------- -------- -------------
- -----------
--------- -------- -------------
- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES
Issuance of stock for
license agreement $ - $ - $ - $ 1
Issuance of stock for
services 5,000 - - -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
MEDIZONE CANADA LIMITED
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF THE BUSINESS
----------------------
Background
- ----------
On November 18, 1987, Medizone Canada Ltd. (MedCan) was incorporated under the
laws of the Province of British Columbia with authorized capital of 25,000,000
common shares without par value. Shortly thereafter, MedCan entered into a
license agreement with Medizone International, Inc., a Nevada corporation (the
Stockholder) wherein the Stockholder transferred to MedCan the licenses and
rights necessary to permit MedCan to hold substantially the same rights with
respect to the medical applications of ozone in Canada as the Stockholder
holds in the United States. As consideration for the transfer, the
Stockholder received 3,000,000 shares of MedCan and, in addition, purchased 1
common share for the sum of $1.00. Under a separate agreement among the
Stockholder, MedCan and International Blue Sun Resource Corporation (formerly
Australian Gold Mines Corporation (AGMC)), a company incorporated under the
laws of the Province of British Columbia, AGMC purchased 130,000 shares of
MedCan for (U.S.) $100,000. On December 23, 1988, MedCan was recapitalized in
a transaction in which the majority of its shares were exchanged for shares of
KPC Investments, a Utah corporation (KPC). Following this transaction, the
Stockholder owned 25,029,921 shares of KPC, representing 72% of the then
outstanding shares. KPC then changed its name to Medizone Canada Limited.
MedCan acquired all of the assets of Medizone Canada Limited, consisting
solely of cash of approximately $89,000. Medizone Canada Limited and its
subsidiary MedCan are hereinafter referred to as the Company.
Initially, AGMC did not exchange its shares of MedCan for shares of KPC;
however in August 1990, the shares were exchanged. Shares to be issued to AGMC
have been reserved in the accompanying financial statements and are shown
separately prior to the exchange.
On June 8, 1998, the Company agreed to sell to Medizone International, Inc.
(the former parent company of Medizone Canada Limited) certain intangibles and
intellectual property and other assets in exchange for the assumption of
certain intercompany liabilities.
On August 4, 1998, the Company formed a wholly-owned subsidiary, Medizone
Canada Limited ("Medizone Nevada"), in the State of Nevada for the sole
purpose of changing the domicile of the Company to the State of Nevada.
Subsequently, the Company was merged into Medizone Nevada which became the
surviving corporation.
Business Activities
- -------------------
The business of the Company was the exploration of the efficacy of using ozone
to inactivate certain viruses and assist in the treatment of certain diseases.
On June 8, 1998, the Company agreed to sell to Medizone International, Inc.
(the former parent company of Medizone Canada Limited) certain intangibles and
intellectual property and other assets in exchange for the assumption of
certain intercompany liabilities. Subsequent to the sale, the Company is
currently seeking other business opportunities that may be profitable.
F-10
<PAGE>
MEDIZONE CANADA LIMITED
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. GOING CONCERN
-------------
Continuation of the Company as a going concern is dependent upon the Company
obtaining additional capital. The management of the Company has developed a
strategy, which it believes will accomplish this objective through additional
equity funding and long-term financing, which will enable the Company to
operate in the future. Management recognizes that, if it is unable to raise
additional capital, the Company cannot be successful in its efforts.
The Company believes that the stockholders will provide funds or undertake
such actions as are necessary to continue operations. The Company also
believes it 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. There can be no assurances that the
Stockholder will be able to provide such funds or take action necessary to
continue operations.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid instruments, purchased with a maturity
at the time of purchase of less than three months, to be cash equivalents.
Other Assets - Organization Costs
- ---------------------------------
Organization costs were capitalized and amortized over a 60 month period on a
straight-line basis.
Loss per Share
- --------------
The computation of loss per common share is based on the weighted average
number of shares outstanding during the period.
Estimates and Assumptions
- --------------------------
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the estimates
that were assumed in preparing the financial statements.
Fair Values of Financial Instruments
- -------------------------------------
The Company estimates that the fair value of all financial instruments at
December 31, 1998 and 1997 does not differ materially from the aggregate
carrying values of its financial instruments recorded in the accompanying
balance sheets.
F-11
<PAGE
MEDIZONE CANADA LIMITED
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ISSUANCES OF COMMON STOCK AND WARRANTS
---------------------------------------
Unless otherwise stated, all transactions shown below were with unrelated
parties and the securities issued were restricted:
In July 1984, KPC initially issued 590,000 shares in a private transaction to
shareholders no longer affiliated with the Company for proceeds of $1,500.
In April 1985, KPC issued 3,000,000 shares of common stock in a public
offering for net proceeds after offering costs of $9,819.
In June 1988, KPC issued 2,000,000 units consisting of one share of common
stock and two warrants which allow the holder to purchase one share of common
stock per warrant. The warrants were exercisable at $.125 per share and
expired on December 31, 1997. The net proceeds of this offering were $84,089.
In December 1988, KPC reserved 27,200,000 shares for issuance to the
stockholders of MedCan in exchange for all the shares of MedCan. Of this
amount, 26,005,112 shares were so exchanged and 1,126,888 shares were
reserved. Also during 1988, 1,938,000 shares were issued to a consultant for
services rendered with a value of $10,000.
In 1990, the Company issued 983,333 shares of common stock at prices ranging
from $.05 to $.075 per share in private offerings to two individuals unrelated
to the Company for proceeds of $57,400. The Company also issued, for services
rendered, 850,000 shares to five individuals, 550,000 shares to the three
directors of the Company, 50,000 shares to an employee, and 250,000 shares to
a consultant, to which it assigned the value of $.05 per share for an
aggregate of $42,500.
During 1990, the 1,126,888 shares reserved in December 1988 for issuance to
the remaining stockholder of MedCan in exchange for the shares of MedCan were
issued.
On June 10, 1998, the Company effected a reverse split of its outstanding
common stock on the basis of 1 share for each 243 shares outstanding. The
effect has been accounted for on a retroactive basis for the years ended
December 31, 1998, 1997 and 1996. During 1998, a capital contribution of
$1,053 was made to the Company by a majority shareholder. Also during 1998,
the Company issued 2,000,000 shares of common stock at prices ranging from
$.02 to $.025 per share for net proceeds of $43,000 and additionally, issued
100,000 shares of common stock at $.05 per share for services.
F-12
<PAGE>
MEDIZONE CANADA LIMITED
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INCOME TAXES
-------------
At December 31, 1998, the Company had a net operating loss (NOL) carryforward
totaling approximately $45,000 that may be offset against future taxable
income in varying amounts through 2007. MedCan, which was incorporated under
the laws of the Province of British Columbia and, accordingly, files tax
returns in Canada, had a NOL carryforward of approximately $177,000. No
benefit has been reported in the 1998, 1997 and 1996 financial statements,
however, because the Company believes there is at least a 50% chance that the
carryforward will expire unused. Accordingly, the tax benefit of the loss
carryforward has been offset by a valuation allowance of the same amount. The
expected tax benefit that would result from applying federal statutory tax
rates to the pretax loss differs from amounts reported in the financial
statements because of the increase in valuation allowance.
Under certain circumstances, Section 382 of the Internal Revenue Code of 1986
restricts a corporation's use of its NOL carryforward. Due to the Company's
issuance of additional stock, the Company's use of its existing NOL
carryforward could be limited. Therefore, the Company may have to pay federal
income taxes sooner than if the use of its NOL carryforward were not
restricted.
6. RESTATEMENT OF PRIOR PERIODS (unaudited)
-----------------------------------------
During 1990, 1989 and 1988, the Company advanced $42,480, $58,056 and $50,851,
respectively, to the Stockholder for the operations of the Stockholder. During
1994, 1993, 1992 and 1991, the Stockholder advanced $12,038, $25,936, $6,314
and $9,100, respectively, to the Company for the operations of the Company.
These transactions have been accounted for as infusions of capital in the
restated financial statements.
In prior years' financial statements, such stockholders' advances were
incorrectly accounted for as accounts receivable and were written off at the
end of each year as uncollectible. The following table describes the effect of
these restatements on the net loss of the Company:
<TABLE>
<CAPTION>
1991 1990 1989 1988
------- -------- --------- ------------
<S> <C> <C> <C> <C>
Net income (loss), as previously
stated $ 950 $(71,041) $(84,235) $(157,243)
Net (loss), as restated (8,150) (28,561) (26,179) (106,392)
</TABLE>
The effect of restatement on loss per share is immaterial.
7. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
The officers and directors of the Company are involved in other business
activities and they may, in the future become involved in additional business
ventures which also may require their attention. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between the Company and their other business interest. The Company has
formulated no policy for the resolution of such conflicts.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000821172
<NAME> MEDIZONE CANADA LIMITED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
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0
0
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</TABLE>
