☑
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the fiscal year ended December 31, 2017
|
|
or
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from __________ to ____________
|
Nevada
|
|
87-0412648
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
350 East Michigan Avenue, Suite 500, Kalamazoo, MI
(Address of principal executive offices) |
|
49007
(Zip Code) |
Large accelerated filer
☐
|
|
Accelerated filer
☐
|
Non-accelerated filer
☐
|
|
Smaller reporting company
☑
|
Emerging growth company
☐
|
|
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Page
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Part I
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||
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1
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||
Item 1
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2
|
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Item 1A
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9
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Item 1B
|
16
|
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Item 2
|
16
|
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Item 3
|
16
|
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Item 4
|
16
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Part II
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||
|
|
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Item 5
|
17
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Item 6
|
18
|
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Item 7
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18
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Item 7A
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21
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Item 8
|
21
|
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Item 9
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21
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Item 9A
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21
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Item 9B
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22
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|
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Part III
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||
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|
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Item 10
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23
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Item 11
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28
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Item 12
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33
|
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Item 13
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34
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Item 14
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34
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Part IV
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||
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Item 15
|
36
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|
|
|
|
38
|
||
39
|
||
F-1
|
||
·
|
Expected operating results, such as revenue growth and earnings;
|
·
|
Current or future volatility in the credit markets and future market conditions;
|
·
|
Our belief regarding expectations of necessary levels of liquidity to fund our business operations during the next 12 months;
|
·
|
Strategy for commercialization, product development, regulatory compliance, market penetration, market position, financial results and reserves; and
|
·
|
Strategy for risk management.
|
Organism
|
Log
10
Reduction
|
|
MRSA
|
6.43
|
|
VRE
|
6.08
|
|
E. coli
|
6.02
|
|
C. difficile
|
5.75
|
|
B. Subtilis
|
6.37
|
·
|
Patent No. 5,052,382 – Apparatus for the Controlled Generation and Administration of Ozone
|
·
|
Patent No. 6,073,627 – External Application of Ozone/Oxygen for Pathogenic Conditions, a process patent for the treatment of external afflictions. This patent also describes equipment evolutions and treatment envelope design for external medical applications.
|
·
|
Provisional Patent Application serial no. 10/002943, for Method and Apparatus for Ozone Decontamination of Biological Liquids. This application deals with protocols for biological liquid decontamination as well as the devices for conducting decontamination.
|
·
|
Patent No. 8,551,399 – Healthcare Facility Disinfecting System (Oct 2013).
|
·
|
Patent No. 8,636,951 – Bio-terrorism Counteraction Using Ozone and Hydrogen Peroxide (Jan 2014).
|
·
|
Patent No. 8,992,829 – Sports Equipment and Facility Disinfection.
|
·
|
Patent No. 13/821,483 – Food Handling Disinfection Treatment covering the use of AsepticSure
®
in food processing plants and related facilities for the sterilization of food-borne pathogens such as Listeria, Salmonella, and other human harmful, food-poisoning-causing bacteria.
|
·
|
Patent No. 252583B - Bio-Terrorism Counter Measures Using Ozone and Hydrogen Peroxide (June 2016). Healthcare Facility Disinfection System (Aug 2016)
|
·
|
Patent No. 2735739 – Healthcare Facility Disinfection Process and System with Oxygen/Ozone (Nov. 2011)
|
·
|
Patent No. 2846256 – Sports Equipment and Facility Disinfection
|
·
|
Patent No. ZL 201080030657.2 - Healthcare Facility Disinfection System (Nov 2015)
|
·
|
Patent No.176977 – Healthcare Facility Disinfecting Process and System With Oxygen/Ozone Mixture (Feb 2013)
|
·
|
Patent (allowed, but awaiting issuance) Healthcare Facility Disinfecting Process and System With Oxygen/Ozone Mixture (Nov 2016)
|
·
|
make it more difficult for us to satisfy our obligations with respect to our obligations under the Notes with the Investors;
|
·
|
increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations;
|
·
|
require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, and other general corporate purposes;
|
·
|
limit our ability to obtain additional debt or equity financing due to applicable financial and restrictive covenants in our debt agreements, and
|
·
|
place us at a competitive disadvantage compared to our competitors that have less debt.
|
·
|
that a broker or dealer approve a person’s account for transactions in penny stocks; and
|
·
|
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
|
·
|
obtain financial information and investment experience objectives of the person; and
|
·
|
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
|
·
|
sets forth the basis on which the broker or dealer made the suitability determination; and
|
·
|
states that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
|
Fiscal Year 2016
|
High
|
Low
|
||||||
First Quarter Ended March 31
|
$
|
0.10
|
$
|
0.04
|
||||
Second Quarter Ended June 30
|
$
|
0.07
|
$
|
0.04
|
||||
Third Quarter Ended September 30
|
$
|
0.10
|
$
|
0.05
|
||||
Fourth Quarter Ended December 31
|
$
|
0.15
|
$
|
0.07
|
||||
Fiscal Year 2017
|
High
|
Low
|
||||||
First Quarter Ended March 31
|
$
|
0.15
|
$
|
0.08
|
||||
Second Quarter Ended June 30
|
$
|
0.11
|
$
|
0.06
|
||||
Third Quarter Ended September 30
|
$
|
0.10
|
$
|
0.06
|
||||
Fourth Quarter Ended December 31
|
$
|
0.06
|
$
|
0.03
|
Plan category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
|||||||||
|
(a)
|
(b)
|
(c)
|
|||||||||
Equity compensation plans approved by security holders
|
6,400,000
|
$
|
0.097
|
-
|
||||||||
Equity compensation plans not approved by security holders
|
11,687,500
|
$
|
0.105
|
-
|
||||||||
Total
|
18,087,500
|
$
|
0.102
|
-
|
·
|
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
·
|
Provide reasonable assurance that transactions are recorded, as necessary, to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and directors; and
|
·
|
Provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
Name
|
|
Age
|
|
Position
|
David A. Esposito
|
|
49
|
|
Chairman of the Board
|
David A. Dodd
|
|
68
|
|
Director, Chief Executive Officer
|
Michael E. Shannon
|
|
70
|
|
Director, President
|
Vincent C. Caponi
|
|
67
|
|
Director
|
Stephen F. Meyer
|
|
59
|
|
Director
|
Stephanie L. Sorensen
|
|
48
|
|
Chief Financial Officer
|
Philip A. Theodore
|
|
64
|
|
Executive Vice President, Operations and Administration, General Counsel and Corporate Secretary
|
Jude P. Dinges
|
59
|
Executive Vice President, Chief Commercial Officer
|
Name and principal position
|
|
Year
|
|
Salary
($) |
|
Stock
awards
($) |
|
Option
awards
($) |
|
Other
($) |
|
Total
($) |
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
Edwin G. Marshall
(1)
Former Chairman and Chief Executive Officer
|
|
2017
|
|
32,500
|
|
-
|
|
74,147
|
|
-
|
|
106,647
|
2016
|
195,000
|
-
|
-
|
|
-
|
195,000
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
David A. Esposito
(2)
Chairman and Former Interim Chief Executive Officer
|
|
2017
|
|
123,750
|
|
150,000
|
|
74,147
|
|
6,800
|
|
354,697
|
2016
|
-
|
-
|
-
|
|
-
|
-
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
David A. Dodd
(3)
Chief Executive Officer
|
|
2017
|
|
72,197
|
|
60,000
|
|
-
|
-
|
132,197
|
||
2016
|
-
|
-
|
-
|
|
|
-
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Shannon
(4)
President
|
|
2017
|
|
184,704
|
|
-
|
|
74,147
|
|
-
|
|
258,851
|
2016
|
175,922
|
-
|
-
|
|
-
|
175,922
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephanie L. Sorensen
(5)
Chief Financial Officer
|
|
2017
|
|
60,000
|
|
-
|
|
18,537
|
|
-
|
|
78,537
|
2016
|
15,000
|
-
|
-
|
|
-
|
15,000
|
·
|
“Change of Control” means the occurrence of any of the following:
|
(ii)
|
(iii)
|
(iv)
|
the complete liquidation of us or the sale or other disposition by us of all or substantially all of our assets.
|
(i)
|
a change in the executive’s position that materially diminishes his or her duties, responsibilities, or authority;
|
(ii)
|
a material diminution of the executive’s base salary;
|
(iii)
|
any requirement that the executive relocate or any assignment of duties that would be materially adverse to the maintenance of the principal residence the executive had immediately prior to the Change of Control;
|
(iv)
|
our material breach of the executive’s employment or Change of Control Agreement; or
|
(v)
|
our failure to secure the written assumption of our material obligations under executive’s employment or Change of Control Agreement from any successor to us.
|
·
|
Mr. Philip A. Theodore, an executive officer, was late filing his initial report of beneficial ownership of shares on Form 3 and he was late filing a Form 4 to report his acquisition of 1,000,000 shares of stock on November 30, 2017, which was filed on December 5, 2017.
|
·
|
Mr. Stephen Meyer, a director, was late filing his initial report of beneficial ownership of shares on Form 3, which was filed on May 29, 2017; was late filing a Form 4 to report the grant of 500,000 options to purchase common stock on May 19, 2017, which was filed on May 30, 2017; and was late filing a Form 4 to report the acquisition of 500,000 shares of common stock on June 6, 2017, which was ultimately filed on June 13, 2017.
|
·
|
Mr. Daniel Hoyt, a former director, filed a Form 4 on June 20, 2017. This report was late and/or reported transactions involving dispositions of our common stock that occurred while Mr. Hoyt was a director for which no Form 4 had previously been filed, including gifts and sales, as follows:
|
Date of Transaction
|
Nature of Transaction
|
Number of Shares
|
||
04/23/2014
|
Sale
|
74,432
|
||
11/17/2016
|
Gift
|
500,000
|
||
02/23/2017
|
Gift
|
500,000
|
||
05/16/2017
|
Sale
|
46,500
|
||
05/18/2017
|
Sale
|
53,500
|
||
05/26/2017
|
Sale
|
48,800
|
||
06/01/2017
|
Sale
|
24,000
|
||
06/02/2017
|
Sale
|
30,860
|
||
06/05/2017
|
Sale
|
96,340
|
||
06/14/2017
|
Sale
|
78,100
|
||
06/15/2017
|
Sale
|
121,900
|
||
06/15/2017
|
Sale
|
400,000
|
||
06/16/2017
|
Sale
|
236,500
|
Option Awards
|
Stock Awards
|
||||||||||||||||||||||||||||||||||
Name
|
Number of Securities underlying unexercised options (#) exercisable
|
Number of Securities underlying unexercised options (#) unexercisable
|
Equity incentive plan awards: Number of securities underlying unexercised unearned options
(#)
|
Option
exercise price
($)
|
Option
expiration date
|
Number of shares or units of stock that have not vested (#)
|
Market value of shares or units of stock that have not vested ($)
|
Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)
|
Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
|
||||||||||||||||||||||||||
Edwin G. Marshall
Former Chairman and Chief Executive Officer
|
250,000
1,500,000
1,000,000
|
--
--
--
|
--
--
--
|
0.163
0.0877
0.10
|
4/30/2019
2/28/2020
2/28/2020
|
--
--
--
|
--
--
--
|
--
--
--
|
--
--
--
|
||||||||||||||||||||||||||
David A. Esposito
Chairman and Interim Chief Executive Officer
(1)
|
1,000,000
750,000
1,000,000
|
--
--
--
|
--
--
--
|
0.1095
0.0877
0.10
|
2/26/2019
8/18/2020
2/2/2027
|
--
--
--
|
--
--
--
|
--
--
--
|
--
--
--
|
||||||||||||||||||||||||||
David A. Dodd
Chief Executive Officer
(2)
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
1,000,000
|
40,000
|
||||||||||||||||||||||||||
Michael E. Shannon
President
(3)
|
650,000
1,500,000
1,000,000
|
--
--
--
|
--
--
--
|
0.13
0.0877
0.10
|
8/15/2019
8/18/2020
2/2/2027
|
--
--
--
|
--
--
--
|
--
--
--
|
--
--
--
|
||||||||||||||||||||||||||
Stephanie Sorensen
Chief Financial Officer
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
Name
|
Fees earned or paid in cash
($) |
Stock awards
($) |
Option awards
($) |
Non-equity incentive plan
compensation ($) |
Nonqualified deferred
compensation earnings ($) |
All other compensation
($) |
Total
($) |
|||||||||||||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
|||||||||||||||||||||
Vincent C. Caponi (1)
|
--
|
--
|
74,147
|
--
|
--
|
--
|
74,147
|
|||||||||||||||||||||
Stephen F. Meyer (2)
|
--
|
--
|
11,205
|
--
|
--
|
--
|
11,250
|
|||||||||||||||||||||
Dwayne Montgomery (3)
|
--
|
--
|
18,644
|
--
|
--
|
--
|
18,644
|
|||||||||||||||||||||
Daniel Hoyt (4)
|
--
|
--
|
74,147
|
--
|
--
|
--
|
74,147
|
Title of class
|
Name and Address of beneficial owner
(1)
|
Amount and nature
of beneficial ownership
|
Percentage
of class
(2)
|
|||||||
Common Stock
|
Vincent C. Caponi, Director
|
-
|
-
|
|||||||
Common Stock
|
David A. Dodd, Director and Chief Executive Officer
(3)
|
2,000,000
|
*
|
|||||||
Common Stock
|
David A. Esposito, Chairman of the Board
(4)
|
9,773,334
|
2.39
|
|||||||
Common Stock
|
Stephen F. Meyer, Director
(5)
|
750,000
|
*
|
|||||||
Common Stock
|
Michael E. Shannon, Director and President
(6)
|
3,388,048
|
*
|
|||||||
Common Stock
|
Stephanie L. Sorensen, Chief Financial Officer
|
-
|
-
|
|||||||
Common Stock
|
All Officers and Directors as a Group (8 persons)
|
16,911,382
|
4.05
|
%
|
|
Years Ended December 31,
|
|||||||
|
2017
|
2016
|
||||||
Audit Fees
|
$
|
33,000
|
$
|
41,342
|
||||
Audit Related Fees
|
--
|
--
|
||||||
Tax Fees
|
2,600
|
2,600
|
||||||
All Other Fees
|
--
|
--
|
||||||
Total Fees
|
$
|
35,600
|
$
|
43,942
|
1.
|
The following Audited Financial Statements are filed as part of this report:
|
2.
The following exhibits are filed as part of this report or incorporated herein by reference.
|
Exhibit No.
|
Description
|
2
|
Agreement and Plan of Reorganization, March 12, 1986 (1)
|
3(i)(a)
|
Articles of Incorporation (1)
|
3(i)(b)
|
Articles of Amendment to Articles of Incorporation (2)
|
3(i)(c)
|
|
3(i)(d)
|
|
3(ii)
|
Bylaws (1)
|
10.1
|
|
10.2
|
|
10.3
|
|
10.4
|
|
10.5
|
|
10.6
|
|
10.7
|
|
10.8
|
|
10.9
|
|
10.10
|
|
10.11
|
|
10.12* | |
10.13
|
|
10.14
|
|
10.15
|
|
10.16
|
|
10.17
|
|
10.18
|
10.19
|
|
10.20
|
|
10.21
|
|
10.22
|
10.23*
|
|
21*
|
|
31.1*
|
|
31.2*
|
|
32.1*
|
|
32.2*
|
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
MEDIZONE INTERNATIONAL, INC.
|
|
|
|
|
Dated: March 20, 2018
|
By:
|
/s/ David A. Dodd
|
|
|
David A. Dodd, Chief Executive Officer
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ David A. Esposito
|
|
Chairman of the Board of Directors
|
|
March 20, 2018
|
David A. Esposito
|
|
|
|
|
|
|
|
|
|
/s/ David A. Dodd
|
Chief Executive Officer and Director
|
March 20, 2018
|
||
David A. Dodd
|
||||
/s/ Michael E. Shannon
|
|
President and Director
|
|
March 20, 2018
|
Michael E. Shannon
|
|
|
|
|
|
|
|
|
|
/s/ Stephen F. Meyer
|
|
Director
|
|
March 20, 2018
|
Stephen F. Meyer
|
|
|
|
|
|
|
|
|
|
/s/ Vincent C. Caponi
|
|
Director
|
|
March 20, 2018
|
Vincent C. Caponi
|
|
|
|
|
/s/ Stephanie L. Sorensen
|
|
Chief Financial Officer (Principal Accounting and Financial Officer)
|
|
March 20, 2018
|
Stephanie L. Sorensen
|
|
Page
|
|
|
F-1 | |
|
|
F-2 | |
|
|
F-3 | |
|
|
F-4 | |
|
|
F-5 | |
|
|
F-6 |
ASSETS
|
||||||||
|
December 31,
|
|||||||
|
2017
|
2016
|
||||||
Current assets:
|
||||||||
Cash
|
$
|
29,623
|
$
|
398,290
|
||||
Inventory
|
290,057
|
109,573
|
||||||
Prepaid expenses
|
23,303
|
81,666
|
||||||
Total current assets
|
342,983
|
589,529
|
||||||
Other assets:
|
||||||||
Trademark and patents, net
|
117,616
|
151,444
|
||||||
Lease deposit
|
2,823
|
4,272
|
||||||
Total other assets
|
120,439
|
155,716
|
||||||
Total assets
|
$
|
463,422
|
$
|
745,245
|
||||
|
||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
||||||||
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
637,557
|
$
|
459,654
|
||||
Accounts payable – related parties
|
40,415
|
-
|
||||||
Accrued expenses
|
630,899
|
592,621
|
||||||
Accrued expenses – related parties
|
780,044
|
538,887
|
||||||
Other payables
|
224,852
|
224,852
|
||||||
Notes payable
|
362,223
|
297,332
|
||||||
Notes payable – related parties
|
1,643,578
|
1,617,881
|
||||||
Warrant liability
|
690,508
|
985,163
|
||||||
Total current liabilities
|
5,010,076
|
4,716,390
|
||||||
Notes payable, net of current portion
|
-
|
75,000
|
||||||
Total liabilities
|
5,010,076
|
4,791,390
|
||||||
Commitments and contingencies (Notes 5,6,10 and 12)
|
||||||||
|
||||||||
Stockholders’ deficit:
|
||||||||
Preferred stock, $0.00001 par value:
50,000,000 authorized; no shares outstanding |
-
|
-
|
||||||
Common stock, $0.001 par value:
500,000,000 authorized; 408,317,402 and 393,934,068 shares issued and outstanding, respectively |
408,317
|
393,934
|
||||||
Additional paid-in capital
|
35,185,874
|
33,680,146
|
||||||
Accumulated other comprehensive loss
|
(54,864
|
)
|
(48,043
|
)
|
||||
Accumulated deficit
|
(40,085,981
|
)
|
(38,072,182
|
)
|
||||
Total stockholders’ deficit
|
(4,546,654
|
)
|
(4,046,145
|
)
|
||||
Total liabilities and stockholders’ deficit
|
$
|
463,422
|
$
|
745,245
|
|
For the Years Ended
December 31,
|
|||||||
|
2017
|
2016
|
||||||
Revenues
|
$
|
-
|
$
|
237,000
|
||||
Operating expenses:
|
||||||||
Cost of revenues
|
-
|
203,460
|
||||||
General and administrative
|
1,909,046
|
2,068,391
|
||||||
Research and development
|
257,312
|
501,734
|
||||||
Depreciation and amortization
|
52,442
|
56,311
|
||||||
Total operating expenses
|
2,218,800
|
2,829,896
|
||||||
Loss from operations
|
(2,218,800
|
)
|
(2,592,896
|
)
|
||||
Gain (loss) on warrant liability
|
294,655
|
(47,212
|
)
|
|||||
Interest expense
|
(89,685
|
)
|
(33,850
|
)
|
||||
Interest income
|
31
|
122
|
||||||
Net loss
|
(2,013,799
|
)
|
(2,673,836
|
)
|
||||
Other comprehensive loss:
|
||||||||
Loss on foreign currency translation
|
(6,821
|
)
|
(11,075
|
)
|
||||
Total comprehensive loss
|
$
|
(2,020,620
|
)
|
$
|
(2,684,911
|
)
|
||
Basic and diluted net loss per common share
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
||
Weighted average number of common shares outstanding
|
400,207,813
|
375,118,494
|
|
Accumulated
|
|||||||||||||||||||||||
|
Common Stock
|
Additional Paid-in
|
Other Comprehensive
|
Accumulated
|
Total Stockholders’
|
|||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Loss
|
Deficit
|
Deficit
|
||||||||||||||||||
|
||||||||||||||||||||||||
Balance, December 31, 2015
|
369,434,068
|
$
|
369,434
|
$
|
32,496,646
|
$
|
(36,968
|
)
|
$
|
(35,398,346
|
)
|
$
|
(2,569,234
|
)
|
||||||||||
|
||||||||||||||||||||||||
Common stock issued for services at $0.096 per share
|
500,000
|
500
|
47,500
|
-
|
-
|
48,000
|
||||||||||||||||||
|
||||||||||||||||||||||||
Common stock for cash ranging from $0.04 to $0.05 per share
|
24,000,000
|
24,000
|
1,136,000
|
-
|
-
|
1,160,000
|
||||||||||||||||||
|
||||||||||||||||||||||||
Loss on foreign currency translation
|
-
|
-
|
-
|
(11,075
|
)
|
-
|
(11,075
|
)
|
||||||||||||||||
|
||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
(2,673,836
|
)
|
(2,673,836
|
)
|
||||||||||||||||
|
||||||||||||||||||||||||
Balance, December 31, 2016
|
393,934,068
|
393,934
|
33,680,146
|
(48,043
|
)
|
(38,072,182
|
)
|
(4,046,145
|
)
|
|||||||||||||||
|
||||||||||||||||||||||||
Common stock issued for services at $0.07 per share
|
250,000
|
250
|
17,250
|
-
|
-
|
17,500
|
||||||||||||||||||
Common stock issued for cash ranging from $0.05 to $0.06 per share
|
11,833,334
|
11,833
|
663,167
|
-
|
-
|
675,000
|
||||||||||||||||||
Restricted stock awards
|
2,300,000
|
2,300
|
225,700
|
-
|
-
|
228,000
|
||||||||||||||||||
Warrant to purchase common stock issued for services
|
-
|
-
|
33,960
|
-
|
-
|
33,960
|
||||||||||||||||||
|
||||||||||||||||||||||||
Stock based compensation
|
-
|
-
|
565,651
|
-
|
-
|
565,651
|
||||||||||||||||||
|
||||||||||||||||||||||||
Loss on foreign currency translation
|
-
|
-
|
-
|
(6,821
|
)
|
-
|
(6,821
|
)
|
||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
(2,013,799
|
)
|
(2,013,799
|
)
|
||||||||||||||||
|
||||||||||||||||||||||||
Balance, December 31, 2017
|
408,317,402
|
$
|
408,317
|
$
|
35,185,874
|
$
|
(54,864
|
)
|
(40,085,981
|
)
|
$
|
(4,546,654
|
)
|
|
For the Years Ended
December 31,
|
|||||||
|
2017
|
2016
|
||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(2,013,799
|
)
|
$
|
(2,673,836
|
)
|
||
Adjustments to reconcile net loss to net cash
used in operating activities:
|
||||||||
Stock-based compensation
|
565,651
|
-
|
||||||
Stock issued for compensation
|
228,000
|
-
|
||||||
Depreciation and amortization
|
52,442
|
56,311
|
||||||
Fair value of warrants issued for services
|
33,960
|
937,951
|
||||||
Stock issued for services
|
17,500
|
48,000
|
||||||
Change in warrant liability
|
(294,655
|
)
|
47,212
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Inventory
|
(180,484
|
)
|
168,250
|
|||||
Prepaid expenses
|
96,503
|
17,075
|
||||||
Lease deposits
|
1,449
|
-
|
||||||
Accounts payable and accounts payable – related parties
|
218,318
|
(36,389
|
) | |||||
Accrued expenses and accrued expenses – related parties
|
279,435
|
37,787
|
||||||
Net cash used in operating activities
|
(995,680
|
)
|
(1,397,639
|
)
|
||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Expenditures for trademark and patents
|
(18,613
|
)
|
(31,255
|
)
|
||||
Net cash used in investing activities
|
(18,613
|
)
|
(31,255
|
)
|
||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Principal payments on notes payable
|
(22,553
|
)
|
(66,819
|
)
|
||||
Issuance of common stock for cash
|
675,000
|
1,160,000
|
||||||
Net cash provided by financing activities
|
652,447
|
1,093,181
|
||||||
Effects of foreign currency exchanges rates on cash
|
(6,821
|
)
|
(11,075
|
)
|
||||
Net decrease in cash
|
(368,667
|
)
|
(346,788
|
)
|
||||
Cash as of beginning of the year
|
398,290
|
745,078
|
||||||
Cash as of end of the year
|
$
|
29,623
|
$
|
398,290
|
||||
|
||||||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for interest
|
$
|
5,728
|
$
|
12,956
|
||||
Supplemental disclosure of non-cash financing activities:
|
||||||||
Financing of insurance premiums
|
$
|
38,141
|
$
|
66,755
|
||||
Settlement of accounts payable and accrued expenses with notes payable – related party
|
$
|
-
|
$
|
1,617,881
|
|
For the Years Ended
December 31, |
|||||||
|
2017
|
2016
|
||||||
|
||||||||
Numerator (net loss)
|
$
|
(2,013,799
|
)
|
$
|
(2,673,836
|
)
|
||
|
||||||||
Denominator (weighted average number of common shares outstanding – basic and diluted)
|
400,207,813
|
375,118,494
|
||||||
|
||||||||
Basic and diluted net loss per common share
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
2017
|
2016
|
||||||
|
||||||||
Net operating loss carryforwards
|
$
|
3,514,700
|
$
|
4,959,900
|
||||
Related party accruals
|
980,100
|
1,564,700
|
||||||
Valuation allowance
|
(4,494,800
|
)
|
(6,524,600
|
)
|
||||
|
$
|
-
|
$
|
-
|
|
2017
|
2016
|
||||||
|
||||||||
Income tax benefit based on U.S. statutory rate of 34%
|
$
|
(684,700
|
)
|
$
|
(909,100
|
)
|
||
Effect of change in deferred tax rates (39.834% to 24.95%)
|
2,681,404
|
-
|
||||||
Other
|
33,096
|
(40,800
|
)
|
|||||
Change in valuation allowance
|
(2,029,800
|
)
|
949,900
|
|||||
|
$
|
-
|
$
|
-
|
·
|
Level 1 measurements are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
|
·
|
Level 2 measurements are inputs other than quoted prices included in Level 1 that are observable either directly or indirectly.
|
·
|
Level 3 measurements are unobservable inputs.
|
|
2017
|
2016
|
||||||
Patent costs
|
$
|
433,865
|
$
|
415,251
|
||||
Trademark
|
770
|
770
|
||||||
|
434,635
|
416,021
|
||||||
Accumulated amortization
|
(317,019
|
)
|
(264,577
|
)
|
||||
Trademark and patents, net
|
$
|
117,616
|
$
|
151,444
|
|
2017
|
2016
|
||||||
Accrued interest
|
$
|
577,978
|
$
|
549,909
|
||||
Other accruals
|
52,921
|
42,712
|
||||||
Total
|
$
|
630,899
|
$
|
592,621
|
|
2017
|
2016
|
||||||
Accrued payroll and consulting – related parties
|
$
|
648,167
|
$
|
422,334
|
||||
Accrued payroll taxes – related parties
|
131,877
|
116,553
|
||||||
Total
|
$
|
780,044
|
$
|
538,887
|
|
2017
|
2016
|
||||||
Unsecured notes payable to former directors and a family member of a former director, due at various dates in 1995, 1996 and 1997, interest at 8%. The Company has the right to repay the loans with restricted stock at $0.10 per share if alternative financings do not occur. These notes payable are in default.
|
$
|
182,676
|
$
|
182,676
|
||||
Unsecured notes payable to a third party in the amount of $50,000, due on September 8, 2018, interest at 12%. Accrued interest due semi-annually, January 5 and July 5 of each year. The note holder has the right to convert 20% of the then outstanding principal into common shares at $0.10 per share.
|
50,000
|
50,000
|
||||||
Unsecured notes payable to 10 stockholders, due on demand, interest at 10%. The Company is obligated to accept the principal at face value plus accrued interest as partial payment for shares the lenders may purchase from the Company upon exercise of the lenders’ option to acquire shares from the Company.
|
60,815
|
60,815
|
||||||
Unsecured notes payable to a third party in the amount of $25,000, due on September 17, 2018, interest at 12%. Accrued interest due semi-annually, January 5 and July 5 of each year. The note holder has the right to convert 20% of the then outstanding principal into common shares at $0.10 per share.
|
25,000
|
25,000
|
||||||
Unsecured notes payable to directors totaling $28,000 and a note payable to a third party in the amount of $9,000, due on April 22, 1995, interest at 8%. Each lender has the right to convert any portion of the principal and interest into common stock at a price per share equal to the price per share under a prior private placement transaction. These notes payable are in default.
|
37,000
|
37,000
|
||||||
Unsecured notes payable to a financing company, payable in nine monthly installments, interest ranging from 5.1% to 7.3%, maturing in April, July and October 2018.
|
6,732
|
16,841
|
||||||
Total notes payable
|
362,223
|
372,332
|
||||||
Less notes payable current portion
|
(362,223
|
)
|
(297,332
|
)
|
||||
Total notes payable long term, net of current portion
|
$
|
-
|
$
|
75,000
|
Input
|
December 31, 2017
|
December 31, 2016
|
||||||
Risk-free interest rate
|
1.28
|
%
|
.85
|
%
|
||||
Expected life in years
|
1 month
|
1 year
|
||||||
Dividend yield
|
—
|
—
|
||||||
Volatility
|
136.3
|
%
|
120.0
|
%
|
||||
Stock price
|
$
|
0.04
|
$
|
0.11
|
Risk-free interest rate
|
1.36% to 1.99
|
%
|
||
Expected life
|
5 years
|
|||
Expected volatility
|
98.38% to 101.86
|
%
|
||
Dividend yield
|
0.00
|
%
|
|
Number of Shares
|
Weighted Average
Exercise Price
|
Weighted Average Remaining Contractual Term (Years)
|
Aggregate Intrinsic Value
|
||||||||||||
|
||||||||||||||||
As of December 31, 2016
|
20,715,000
|
$
|
0.143
|
2.08
|
$
|
261,220
|
||||||||||
Granted
|
6,900,000
|
0.097
|
||||||||||||||
Forfeited
|
(7,550,000
|
)
|
0.202
|
|||||||||||||
Surrendered
|
(1,977,500
|
)
|
0.128
|
|||||||||||||
As of December 31, 2017
|
18,087,500
|
0.102
|
3.72
|
-
|
||||||||||||
Exercisable
|
17,762,500
|
0.103
|
3.79
|
-
|
|
Number of Shares
|
Weighted Average Grant Date Fair Value
|
||||||
|
||||||||
Non-vested balance as of December 31, 2016
|
1,075,000
|
$
|
0.11
|
|||||
Awarded
|
1,000,000
|
0.08
|
||||||
Vested
|
(250,000
|
)
|
0.06
|
|||||
Forfeited
|
(500,000
|
)
|
0.10
|
|||||
Surrendered
|
(1,000,000
|
)
|
0.1095
|
|||||
Non-vested balance as of December 31, 2017
|
325,000
|
0.08
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated affiliate and subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ David A. Dodd
|
|
|
|
|
|
Name:
|
David A. Dodd
|
|
Title:
|
Chief Executive Officer (Principal Executive Officer)
|
|
Date:
|
March 20, 2018
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated affiliate and subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/Stephanie L. Sorensen
|
|
|
|
|
|
Name:
|
Stephanie L. Sorensen
|
|
Title:
|
Chief Financial Officer (Principal Accounting and Financial Officer)
|
|
Date:
|
March 20, 2018
|
|
/s/ David A. Dodd
|
|
|
|
David A. Dodd
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/s/ Stephanie L. Sorensen
|
|
|
|
Stephanie L. Sorensen
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
|