10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549 

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ____________

Commission File Number: 2-93277-D

MEDIZONE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Nevada	87-0412648
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4000 Bridgeway, Suite 401, Sausalito, California 94965

(Address of principal executive offices, Zip Code)

(415) 331-0303

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑   No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☑   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐   No ☑

As of July 31, 2016, the registrant had 369,934,068 shares of common stock issued and outstanding.

MEDIZONE INTERNATIONAL, INC.

FORM 10-Q

TABLE OF CONTENTS

June 30, 2016

		Page No.
Part I — Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2016 and December 31, 2015	3
	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the Three and Six Months Ended June 30,2016 and 2015	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2016 and 2015	5
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	15
Part II — Other Information
Item 1.	Legal Proceedings	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Mine Safety Disclosures	16
Item 5.	Other Information	16
Item 6.	Exhibits	16
Signatures		17

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

MEDIZONE INTERNATIONAL, INC. AND AFFILIATE

Condensed Consolidated Balance Sheets (Unaudited)

	June 30,			December 31,
	2016			2015 (1)
ASSETS
Current Assets:
Cash	$	49,288		$	745,078
Inventory		323,118			277,823
Prepaid expenses		34,619			31,986
Total Current Assets		407,025			1,054,887
Property and equipment, net		208			415
Other Assets:
Trademark and patents, net		159,045			176,086
Lease deposit		4,272			4,272
Total Other Assets		163,317			180,358
Total Assets	$	570,550		$	1,235,660
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable	$	433,826		$	491,044
Accounts payable – related parties		228,109			233,109
Accrued expenses		600,362			554,834
Accrued expenses – related parties		1,928,659			1,928,659
Customer deposits		118,500			-
Other payables		224,852			224,852
Notes payable		292,124			297,396
Total Current Liabilities		3,826,432			3,729,894
Notes payable, net of current portion		75,000			75,000
Total liabilities		3,901,432			3,804,894
Stockholders’ Deficit:
Preferred stock, $0.00001 par value: 50,000,000 shares authorized;     no shares issued or outstanding		-			-
Common stock, $0.001 par value: 395,000,000 shares authorized;     369,934,068 and 369,434,068 shares outstanding, respectively		369,934			369,434
Additional paid-in capital		32,544,146			32,496,646
Accumulated other comprehensive loss		(38,454	)		(36,968	)
Accumulated deficit		(36,206,508	)		(35,398,346	)
Total Stockholders’ Deficit		(3,330,882	)		(2,569,234	)
Total Liabilities and Stockholders’ Deficit	$	570,550		$	1,235,660

__________ 

(1)   The condensed consolidated balance sheet as of December 31, 2015 has been prepared using information from the audited consolidated balance sheet as of that date.

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

MEDIZONE INTERNATIONAL, INC. AND AFFILIATE

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2016			2015			2016			2015
Revenues	$	-		$	-		$	-		$	-
Operating Expenses:
Cost of revenues		-			-			-			-
General and administrative		216,182			288,182			495,246			601,014
Research and development		82,075			76,840			268,036			154,073
Depreciation and amortization		13,988			13,273			27,814			26,303
Total Operating Expenses		312,245			378,295			791,096			781,390
Loss from Operations		(312,245	)		(378,295	)		(791,096	)		(781,390	)
Interest expense		(8,539	)		(6,222	)		(17,130	)		(12,618	)
Interest income		11			-			64			-
Net Loss		(320,773	)		(384,517	)		(808,162	)		(794,008	)
Other comprehensive (loss) gain on foreign currency translation		(2,381	)		1,431			(1,486	)		19,662
Total Comprehensive Loss	$	(323,154	)	$	(383,086	)	$	(809,648	)	$	(774,346	)
Basic and Diluted Net Loss per Common Share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Weighted Average Number of Common Shares Outstanding		369,934,068			351,692,310			369,920,332			349,488,212

The accompanying notes are an integral part of these condensed consolidated financial statements. 

4

MEDIZONE INTERNATIONAL, INC. AND AFFILIATE

Condensed Consolidated Statements of Cash Flows (Unaudited)

	For the Six Months Ended
	June 30,
	2016			2015
Cash Flows from Operating Activities:
Net loss	$	(808,162	)	$	(794,008	)
Adjustments to reconcile net loss to net cash  used in operating activities:
Depreciation and amortization		27,814			26,303
Stock-based compensation expense		48,000			126,369
Changes in operating assets and liabilities:
Prepaid expenses		28,867			42,077
Inventory		(45,295	)		-
Accounts payable and accounts payable – related parties		(62,218	)		66,423
Accrued expenses and accrued expenses – related parties		45,527			40,037
Customer deposits		118,500			-
Net Cash Used in Operating Activities		(646,967	)		(492,799	)
Cash Flows from Investing Activities:
Cost of registering patents		(10,565	)		(12,932	)
Net Cash Used in Investing Activities		(10,565	)		(12,932	)
Cash Flows from Financing Activities:
Principal payments on notes payable		(36,772	)		(37,274	)
Issuance of common stock for cash		-			546,000
Net Cash (Used in) Provided by Financing Activities		(36,772	)		508,726
Effect of Foreign Currency Exchange Rates		(1,486	)		19,662
Net (decrease) increase in cash		(695,790	)		22,657
Cash as of beginning of the period		745,078			140,496
Cash as of end of the period	$	49,288		$	163,153

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	3,568	$	725
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Financing of insurance policies	$	31,500	$	37,392

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

MEDIZONE INTERNATIONAL, INC. AND AFFILIATE

Notes to the Condensed Consolidated Financial Statements (Unaudited)

NOTE 1     BASIS OF PRESENTATION

The financial information of Medizone International, Inc., a Nevada corporation (the “Company”) included herein is unaudited and has been prepared consistent with U.S. generally accepted accounting principles (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all information and notes required by US GAAP for complete financial statements. These notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015. In the opinion of management, these financial statements contain all adjustments (consisting solely of normal recurring adjustments) which are necessary in the opinion of management for a fair presentation of results for the interim periods presented. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the full year ending December 31, 2016.

NOTE 2     CANADIAN FOUNDATION FOR GLOBAL HEALTH

In late 2008, the Company assisted in the formation of the Canadian Foundation for Global Health (“CFGH”), a not-for-profit foundation based in Ottawa, Canada. The Company helped establish CFGH for two primary purposes: (1) to establish an independent not-for-profit foundation intended to have a continuing working relationship with the Company for research purposes that is best positioned to attract the finest scientific, medical and academic professionals possible to work on projects deemed to be of social benefit; and (2) to provide a means for the Company to use a tiered pricing structure for services and products in emerging economies and extend the reach of the Company’s technology to as many in need as possible.

Accounting standards require a variable interest entity (“VIE”) to be consolidated by a company if that company absorbs a majority of the VIE’s expected losses and/or receives a majority of the VIE’s expected residual returns as a result of holding variable interests, which are the ownership, contractual, or other financial interests in the VIE. In addition, a legal entity may be considered to be a VIE, if it does not have sufficient equity at risk to finance its own activities without relying on financial support from other parties. If the legal entity is a VIE, then the reporting entity determined to be the primary beneficiary of the VIE must consolidate its financial statements with those of the VIE. The Company determined that CFGH met the requirements of a VIE effective upon the first advance to CFGH on February 12, 2009. Accordingly, the financial statements of CFGH have been consolidated with those of the Company for all periods presented.

NOTE 3     BASIC AND DILUTED NET LOSS PER COMMON SHARE

The computations of basic and diluted net loss per common share are based on the weighted average number of common shares outstanding during the periods as follows:

	For the Three Months Ended
	June 30,
	2016			2015
Numerator: Net loss	$	(320,773	)	$	(384,517	)
Denominator: Weighted average number of common shares outstanding		369,934,068			351,692,310
Basic and diluted net loss per common share	$	(0.00	)	$	(0.00	)

	For the Six Months Ended
	June 30,
	2016			2015
Numerator: Net loss	$	(808,162	)	$	(794,008	)
Denominator: Weighted average number of common shares outstanding		369,920,332			349,488,212
Basic and diluted net loss per common share	$	(0.00	)	$	(0.00	)

Common stock equivalents, consisting of options to purchase 20,865,000 shares, have not been included in the calculation as their effect is antidilutive for the periods presented.

6

MEDIZONE INTERNATIONAL, INC. AND AFFILIATE

Notes to the Condensed Consolidated Financial Statements (Unaudited)

NOTE 4     GOING CONCERN

The Company’s consolidated financial statements are prepared using US GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has incurred significant losses from its inception through June 30, 2016, which have resulted in an accumulated deficit of $36,206,508 as of June 30, 2016.  The Company does not have funds sufficient to cover its operating costs for the next 12 months, has negative equity, and has a working capital deficit of $3,419,407 as of June 30, 2016. The Company has relied exclusively on debt and equity financing to sustain its operations.  Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.

Continuation of the Company as a going concern is dependent upon future revenues, obtaining additional capital and ultimately, upon the Company’s attaining profitable operations.  The Company will require substantial additional funds to complete the continued development of its products and product manufacturing, and to fund expected additional losses, until revenues are sufficient to cover the Company’s operating expenses.  If the Company is unsuccessful in obtaining the necessary additional funding, it will be forced to substantially reduce or cease operations.

The Company believes that it will need approximately $1,500,000 over the next 12 months for continued production manufacturing and related activities, research, development, and marketing activities, as well as for general corporate purposes.  No cash was generated through the sale of shares of common stock for the quarter ended June 30, 2016.   

The ability of the Company to continue as a going concern is dependent on its ability to successfully accomplish the plan described in the preceding paragraphs and eventually attain profitable operations.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

NOTE 5     COMMITMENTS AND CONTINGENCIES

The Company is subject to certain claims and lawsuits arising in the normal course of business. In the opinion of management, uninsured losses, if any, resulting from the ultimate resolution of these matters will not have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.

Litigation

Rakas vs. Medizone International, Inc. - A former consultant brought this action against the Company claiming the Company had failed to pay consulting fees under a consulting agreement.  In September 2001, the parties agreed to settle the matter for $25,000.  The Company, however, did not have the funds to pay the settlement and the plaintiff moved the court to enter a default judgment in the amount of $143,000 in January 2002.  On May 8, 2002, the court vacated the default judgment and requested that the Company post a bond of $25,000 to cover the settlement previously entered into by the parties.  The Company has been unable to post the required bond amount as of the date of this report.  Therefore, the Company has recorded, as part of accounts payable, the original default judgment in the amount of $143,000, plus fees totaling $21,308, as of June 30, 2016 and December 31, 2015.  The Company intends to contest the judgment if and when it is able to in the future.

Other Payables

As of June 30, 2016 and December 31, 2015, the Company has $224,852 of past due payables for which the Company has not received statements or demands for payment for over 10 years.  Although management of the Company does not believe that the amounts will be required to be paid, the amounts are recorded as other payables until such time as the Company is certain that no liability exists and until the statute of limitations has expired.

Operating Leases

The Company operates a certified laboratory located at Innovation Park, Queen’s University in Kingston, Ontario, Canada, which provides a primary research and development platform.  The lease term is month-to-month with a monthly lease payment of $1,537 Canadian dollars (“CD”) plus the applicable goods and services tax (“GST”).  Leases for a second laboratory space for full scale room testing and a storage unit are on a month-to-month basis with monthly lease payments of CD$1,537 and CD$475, respectively, plus the applicable GST.  

The Company has a non-cancelable lease for office space located in California, with monthly payments of approximately $2,400 through December 31, 2016.

7

MEDIZONE INTERNATIONAL, INC. AND AFFILIATE

Notes to the Condensed Consolidated Financial Statements (Unaudited)

NOTE 6     COMMON STOCK OPTIONS

In August 2013, the Company granted options for the purchase of 250,000 shares of common stock to a consultant, of which 50,000 were immediately vested.  These options are exercisable at $0.10 per share for five years from the date of grant with 50,000 options vesting immediately and the other 200,000 options vesting upon the achievement of certain milestones, which were met in 2015.  The Company recognized expense of $17,659 during the six months ended June 30, 2015, as milestones were achieved for the remaining 200,000 options.

On February 26, 2014, the Company granted to a new director options for the purchase of 2,000,000 shares of common stock, with an exercise price of $0.1095 per share.  Of these options, 1,000,000 vested on February 26, 2015 and the remaining 1,000,000 options will vest upon the successful achievement of certain milestones.  Unvested options vest immediately in the event of a change in control of the Company.  The options are exercisable for five years from the date of grant. The Company recognized $16,017 of expense in connection with these options during the six months ended June 30, 2015. The Company will measure and begin recognizing the remaining expense when the achievement of the required milestones becomes probable.

On February 26, 2014, the Company granted options to six consultants and service providers for the purchase of a total of 250,000 shares of common stock at an exercise price of $0.1095 per share.  Options for 200,000 shares vested immediately upon grant and options for the remaining 50,000 shares vested January 9, 2015.  The options are exercisable for five years from the date of grant. The grant date fair value of these options was $24,023. The Company recognized expense of $800 in connection with these options during the six months ended June 30, 2015.

On May 6, 2014, the Company granted options to a consultant for the purchase of 100,000 shares of common stock at an exercise price of $0.19 per share.  Options for 50,000 shares vested immediately upon grant and options for the remaining 50,000 shares vested during the six months ended June 30, 2015, when certain milestones were achieved.  The options are exercisable for five years from the date of grant. The Company recognized expense of $8,342 in connection with these options during the six months ended June 30, 2015.

On August 15, 2014, the Company granted options to a consultant for the purchase of 75,000 shares of common stock at an exercise price of $0.13 per share.  The shares will vest when certain required milestones are achieved.  The options are exercisable for five years from the date of grant.  The Company will measure and begin recognizing expense when the achievement of the required milestones becomes probable.

On October 7, 2014, the Company granted to a new board member options for the purchase of 1,000,000 shares of common stock, with an exercise price of $0.16 per share.  These options were fully vested on October 7, 2015.  The options are exercisable for five years.  The grant date fair value of the options was $140,178.  The Company recognized $70,088 of expense in connection with these options during the six months ended June 30, 2015 respectively.

On December 4, 2014, the Company granted options to four consultants for the purchase of 140,000 shares of common stock at an exercise price of $0.11 per share.  The options are fully vested and are exercisable for five years from the date of grant.  The Company recognized expense of $13,461 during the six months ended June 30, 2015.

In August 2015, the Company granted options for the purchase of a total of 7,150,000 shares of common stock for services rendered, as follows: 6,000,000 shares total to five directors of the Company, 650,000 shares total to four consultants, and 500,000 shares to an employee of the Company. All options vested upon grant, have an exercise price of $0.088 per share, and are exercisable for up to five years from the date of grant.  The aggregate fair value of these options at the date of grant was $541,687, which the Company recognized as expense during the year ended December 31, 2015.

In August 2015, the Company granted options to a consultant for the purchase of a total of 250,000 shares of common stock at an exercise price of $0.085 per share. These options vested upon grant and are exercisable for up to five years. The aggregate fair value of these options at the date of grant was $18,991, which the Company recognized as expense during the year ended December 31, 2015.

On May 19, 2016, the Company granted options to an employee for the purchase of 150,000 shares of common stock at an exercise price of $0.05 per share.  The fair value of these options on the date of grant was $6,461. The shares will vest at the earlier of 18 months of service or when certain milestones are achieved, and are exercisable for five years from the date of grant.  The Company is recognizing the expense ratably over the 18-months service period. The Company did not recognize expense during the 6 months ended June 30, 2016 as it was not material to the fair presentation of the consolidated financial statements.

8

MEDIZONE INTERNATIONAL, INC. AND AFFILIATE

Notes to the Condensed Consolidated Financial Statements (Unaudited)

NOTE 6     COMMON STOCK OPTIONS (continued)

The Company estimates the fair value of each stock option award by using the Black-Scholes option-pricing model, which model requires the use of exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate, and the weighted average expected life of the options. Because the Company does not pay dividends, the dividend rate variable in the Black-Scholes option-pricing model is zero. Expense of $0 and $126,369 related to stock options was recorded for the six months ended June 30, 2016 and 2015, respectively.  Excluding options whose performance condition is not yet deemed probable, as of June 30, 2016, the Company had unvested outstanding options with related unrecognized expense of $112,147.  The Company will recognize this expense over the service period or when the achievement of the required milestones becomes probable.

The Company estimated the fair value of the stock options described in the above paragraphs as of the date of the grant or date of re-measurement, based on the following weighted-average assumptions:

Risk-free interest rate		1.50% to 1.69		%
Expected life	5 years
Expected volatility		130.31% to 136.34		%
Dividend yield			0.00	%

A summary of the status of the Company’s outstanding options as of June 30, 2016 and changes during the six months then ended, is presented below:

	Shares			Weighted Average Exercise Price
Outstanding, beginning of the period		20,965,000		$	0.145
Granted		150,000			-
Expired/Canceled		(250,000	)		0.002
Exercised		-			-
Outstanding, end of the period		20,865,000			0.143
Exercisable		19,640,000			0.145

NOTE 7     STOCK TRANSACTIONS AND SIGNIFICANT CONTRACTS

During January 2016, the Company issued 500,000 restricted shares of common stock to a consultant. The fair value of the shares on the date of grant was $48,000, or $0.096 per share.  The Company recorded compensation expense of $48,000 in connection with the issuance of the shares.

During April, May, and June 2015 the Company sold an aggregate of 7,500,000 restricted shares of common stock to eight accredited investors for cash proceeds totaling $375,000, or $0.05 per share.

During February and March 2015, the Company sold an aggregate of 3,000,000 restricted shares of common stock to seven accredited investors for cash proceeds totaling $150,000, or $0.05 per share.

During February 2015, the Company sold 300,000 restricted shares of common stock to an accredited investor for cash proceeds totaling $21,000, or $0.07 per share.

NOTE 8     ACCOUNTS PAYABLE – RELATED PARTIES

As of June 30, 2016 and December 31, 2015, the Company owed $228,109 and $233,109, respectively, to certain consultants for services.  These consultants are stockholders of the Company and are related parties.

9

MEDIZONE INTERNATIONAL, INC. AND AFFILIATE

Notes to the Condensed Consolidated Financial Statements (Unaudited)

NOTE 9     RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under US GAAP.  The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.  ASU No. 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing US GAAP.  The standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods therein.  Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016.  The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.  ASU No. 2014-15 sets forth management’s responsibility to evaluate, each reporting period, whether there is substantial doubt about the entity’s ability to continue as a going concern, and if so, to provide related disclosures in the financial statements.  ASU No. 2014-15 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within annual periods ending after December 15, 2016.  The Company is assessing the impact, if any, of implementing this guidance on the Company’s financial statement presentation.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740), simplifying the presentation of deferred income taxes on the balance sheet by requiring companies to classify everything as either a non-current asset or non-current liability. ASU No. 2015-17 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within annual periods ending after December 15, 2016.  The Company is assessing the impact, if any, of implementing this guidance on the Company’s financial statement presentation.

In February 2016, the FASB released ASU No. 2016-02, Leases (Topic 842), to bring transparency to lessee balance sheets. ASU No. 2016-02 will require organizations that lease assets (lessees) to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU No. 2016-02 will apply to both types of leases; capital (or finance) leases and operating leases. Previously, US GAAP has required only capital leases to be recognized on lessee balance sheets. ASU No. 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early application is permitted. The Company is assessing the impact of ASU No. 2016-02 on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation: Improvements to Employee Share- Based Payment Accounting. ASU No. 2016-09 is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU No. 2016-09 is effective for years ending after December 31, 2016, and the Company is assessing the impact of ASU No. 2016-09 on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs.  To simplify presentation of debt issuance costs, the amendments in ASU No. 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU No. 2015-03.  ASU 2015-03 was effective for the Company for the quarter ended March 31, 2016 and there was no impact on its financial reporting.

NOTE 10     SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing date of this Quarterly Report on Form 10-Q and noted none that require accounting or disclosure in the accompanying financial statements.

10

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Medizone International, Inc., a Nevada corporation (collectively with its affiliate, “Medizone,” the “Company,” “we,” “us,” or “our”) is engaged in conducting research into the use of ozone in the disinfection of surgical and other medical treatment facilities and in other applications.  During 2012, we began to sell our patented ozone disinfection system, AsepticSure®.  Our current work is in the field of hospital disinfection, rather than human therapies.  We cannot predict when or if we will generate sufficient cash flows from operating activities to fund continuing or planned operations.  If we fail to obtain additional funding, we will be forced to suspend or permanently cease operations, and may need to seek protection under U.S. bankruptcy laws.

Recent Developments

In June 2016, we received additional patent protection for the AsepticSure ® system by the European Union Patent and Trademark Office (EU) for our patent application Bio-Terrorism Counter Measures Using Ozone and Hydrogen Peroxide.  This EU patent grant expands on the previously awarded bio-terrorism patent protection in the U.S. and Canada.  With this EU patent, we secure patent protection in the United Kingdom, Germany, and France.

As of June 30, 2016, we were preparing to ship our first three units under our agreement with our South American distributor GYD S.A.  The units sold to the distributor are Generation II AsepticSure® systems that were converted to Generation III systems, as such the negotiated price is not reflective of standard pricing.  In connection with this order the distributor paid an initial deposit of $118,500 on June 13, 2016.  We shipped two of the three units in July 2016, at which time we received another payment of approximately $79,000.  The remaining $39,500 is expected to be received when the third unit is shipped in August 2016.

Results of Operations

Three Months Ended June 30, 2016 and 2015

During the quarter ended June 30, 2016, we continued our primary focus on the expansion of our distribution channels, obtaining approval from the U.S. Environmental Protection Agency (“EPA”), and the development of a computer control feature for the AsepticSure® system.

For the quarters ended June 30, 2016 and 2015, we had no revenues or associated cost of revenues.

For the quarter ended June 30, 2016, we had a net loss of $320,733, compared with a net loss of $384,517 for the quarter ended June 30, 2015.  Our primary expenses are payroll and consulting fees, research and development costs, office expenses, and interest expense.  The decrease for the quarter ended June 30, 2016 compared to the prior year quarter was primarily due to reduced general and administrative expenses from less stock-based compensation expense for options previously granted, offset slightly by increased research and development expenses.

For the quarters ended June 30, 2016 and 2015, we incurred $216,182 and $288,182, respectively, in general and administrative expenses. The majority of these expenses were payroll, consulting fees and professional fees. The decrease for the quarter ended June 30, 2016 over the comparable period in the prior year was due to less stock-based compensation expense for options previously granted to directors and consultants.

For the quarters ended June 30, 2016 and 2015, we incurred $82,075 and $76,840, respectively, in research and development expenses.  Research and development expenses include consulting fees, interface development costs, prototypes, and research stage ozone generator and instrument development.  The increase for the quarter ended June 30, 2016 over the comparable period in the prior year was due to increased consulting costs which were partially offset by lower stock-based compensation expense from options that were granted to a consultant and an employee in 2015.

Principal amounts owed on notes payable totaled $292,124 and $297,396 as of June 30, 2016 and December 31, 2015, respectively.  Interest expense on these obligations for the quarters ended June 30, 2016 and 2015, was $8,539 and $6,222, respectively. The interest rates on this debt range from 4.63% to 10.00% per annum.

11

Six Months Ended June 30, 2016 and 2015

For the six months ended June 30, 2016, we had a net loss of $808,162, compared with a net loss of $794,008 for the six months ended June 30, 2015. Our primary expenses are payroll, consulting fees, research and development costs, and office expenses, together with interest expense and additional expense recorded as a result of options granted to directors, employees and consultants.  The increase in net loss for the six months ended June 30, 2016, compared to the same period in 2015, was due to an increase in research and development costs from consulting and stock-based compensation expense for options granted to directors, employees and consultants.

For the six months ended June 30, 2016 and 2015, we incurred $495,246 and $601,014, respectively, in general and administrative expenses. The primary reason for the decrease for the six months ended June 30, 2016, compared to the same period in 2015, was from the decreased option expense.  The number of option grants and vesting for directors, employees and consultants resulting in compensation expense in 2016 was lower than in 2015.  Our primary expenses are payroll, consulting fees, and professional fees. The remaining general and administrative expenses include rent, office expenses and travel expenses.

For the six months ended June 30, 2016 and 2015, we incurred $268,036 and $154,073, respectively, in research and development expenses as a result of prototype development expenses, consulting, and other research activities. The primary reason for the increase for the six months ended June 30, 2016, compared to the same period in 2015, was increased development software, supplies, and consulting expenses including stock-based compensation expense related to restricted common shares issued in January 2016.

Interest expense on the notes payable during the six months ended June 30, 2016 and 2015, was $17,130 and $12,618, respectively. The applicable interest rates on this debt range from 4.63% to 10.00% per annum.

Liquidity and Capital Resources

As of June 30, 2016, our working capital deficiency was $3,419,407, compared to a working capital deficiency of $2,675,007 as of December 31, 2015. As of June 30, 2016, we had approximately $49,000 of available cash and as of July 31, 2016 we had approximately $16,000 of available cash.   We have incurred significant losses from inception through June 30, 2016, which have resulted in an accumulated deficit of $36,206,508.  The stockholders’ deficit as of June 30, 2016 was $3,330,882, compared to $2,596,234 as of December 31, 2015.  This change is due to proceeds from the sale of restricted shares of common stock being less than the net loss for the six months ended June 30, 2016.

We will continue to require additional financing to fund operations and to continue to test and market our hospital and medical disinfection system.  We believe we will need approximately $1,500,000 over the next 12 months for continued production manufacturing and related activities, research, development, and marketing activities, as well as for general corporate purposes.  

During the six months ended June 30, 2015, we generated cash of $546,000 through the sale of 10,800,000 shares of common stock to 15 accredited investors at prices ranging from $0.05 per share to $0.07 per share.  No cash was generated through the sale of shares of common stock for the quarter ended June 30, 2016.  We anticipate that we will be able to raise additional funds, as needed, from certain of the accredited investors who have purchased shares during previous years, although we have no agreements at this time with any of these investors to purchase our securities, and there can be no assurance that these investors will purchase additional shares.

Going Concern

Our unaudited condensed interim consolidated financial statements included in this report have been prepared with the assumption that we will continue as a going concern. There is substantial doubt that we will be able to continue as a going concern.  Through the date of this report on Form 10-Q, we have relied upon financing from the sale of our equity securities to sustain operations. Additional financing will be required if we are to continue as a going concern. If additional financing is not obtained in the near term, we will be required to curtail or discontinue operations, or seek protection under the U.S. bankruptcy laws. Even if additional financing becomes available, there can be no assurance that it will be on terms favorable to us. In any event, this additional financing will likely result in immediate and possibly substantial dilution to existing stockholders.

12

Forward-Looking Statements and Risks

The statements contained in this report on Form 10-Q that are not historical are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements discuss our expectations, hopes, beliefs, anticipations, commitments, intentions and strategies regarding the future. They may be identified by the use of the words or phrases that include “believes,” “expects,” “anticipates,” “should,” “plans,” “estimates,” and “potential,” among others. Forward-looking statements include, but are not limited to, statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding our financial performance, revenue and expense levels in the future and the sufficiency of existing liquidity to fund future operations and capital spending needs. Actual results could differ materially from the anticipated results or other expectations expressed in such forward-looking statements for the reasons detailed in our Annual Report on Form 10-K for the year ended December 31, 2015.

We believe that many of the risks previously discussed in our SEC filings are part of doing business in the industry in which we operate and will likely be present in all periods reported. The fact that certain risks are endemic to the industry does not lessen their significance. The forward-looking statements contained in this report are made as of the date of this report and we assume no obligation to update them or to update the reasons why actual results could differ from those projected in such forward-looking statements. Among others, risks and uncertainties that may affect our business, financial condition, performance, development, and results of operations include:

· Rigorous government scrutiny and regulation of our products and planned products;

· Potential effects of adverse publicity regarding ozone and related technologies or industries;

· Failure to sustain or manage growth including the failure to continue to develop new products; and

· The potential inability to obtain needed financing or to obtain funding on terms favorable to us.

Critical Accounting Policies and Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”). The preparation of such statements requires our management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. On an on-going basis, we evaluate these estimates, including those related to intangible assets, expenses, and income taxes. We base our estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying values of assets and liabilities. The actual results may differ from these estimates under different assumptions or conditions. 

We recognize revenue when a contractual arrangement exists, product is shipped, payment from the customer is reasonably assured, and the price is fixed or determinable.  We record customer deposits that have not yet been earned as unearned revenue. Revenue is recognized only when title and risk of loss passes to the customer.

Our inventory consists of our AsepticSure® product and is valued on a specific identification basis.  We purchase our inventory as a finished product from unrelated manufacturing companies. We write off 100% of the cost of inventory that we specifically identify and consider obsolete or excessive to fulfill future sales estimates. No inventory was obsolete or excessive as of June 30, 2016.

We record compensation expense in connection with the granting of stock options and their vesting periods based on their fair values. We estimate the fair values of stock option awards issued to employees, consultants and other non-employees at the grant date by using the Black-Scholes option-pricing model. For stock options with a service condition, the expense is measured at the grant date and expensed over the vesting period. For stock options with a performance condition, the expense is measured when it is probable that the performance condition will be met, subsequently re-measured at each reporting date, and trued up upon the final completion of the performance condition.

13

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under US GAAP.  The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.  ASU No. 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing US GAAP.  The standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods therein.  Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016.  The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.  ASU No. 2014-15 sets forth management’s responsibility to evaluate, each reporting period, whether there is substantial doubt about the entity’s ability to continue as a going concern, and if so, to provide related disclosures in the financial statements.  ASU No. 2014-15 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within annual periods ending after December 15, 2016.  The Company is assessing the impact, if any, of implementing this guidance on the Company’s financial statement presentation.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740), simplifying the presentation of deferred income taxes on the balance sheet by requiring companies to classify everything as either a non-current asset or non-current liability. ASU No. 2015-17 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within annual periods ending after December 15, 2016.  The Company is assessing the impact, if any, of implementing this guidance on the Company’s financial statement presentation.

In February 2016, the FASB released ASU No. 2016-02, Leases (Topic 842), to bring transparency to lessee balance sheets. ASU No. 2016-02 will require organizations that lease assets (lessees) to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU No. 2016-02 will apply to both types of leases; capital (or finance) leases and operating leases. Previously, US GAAP has required only capital leases to be recognized on lessee balance sheets. ASU No. 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early application is permitted. The Company is assessing the impact of ASU No. 2016-02 on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation: Improvements to Employee Share- Based Payment Accounting. ASU No. 2016-09 is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU No. 2016-09 is effective for years ending after December 31, 2016, and the Company is assessing the impact of ASU No. 2016-09 on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs.  To simplify presentation of debt issuance costs, the amendments in ASU No. 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU No. 2015-03.  ASU 2015-03 was effective for the Company for the quarter ended March 31, 2016 and there was no impact on its financial reporting.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

None.

14

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information that is required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods that are specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding any required disclosure.  In designing and evaluating these disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As of the end of the period covered by this report, our Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a- 15(e) under the Exchange Act).  Based on this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2016.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

15

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings

There were no material developments during the quarter ended June 30, 2016 relative to the legal matters previously disclosed by the Company.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

We did not sell any securities during the quarter ended June 30, 2016

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

Effective April 30, 2016, our Chief Financial Officer, Thomas Auger, resigned to pursue other interests.  Effective April 30, 2016, we entered into an employment agreement with our new Chief Financial Officer, Boyd G. Evans.  We filed a Current Report on Form 8-K on May 6, 2016 to report this change.  The Current Report includes biographical and business background information regarding Mr. Evans.

Item 6.  Exhibits

Exhibit 31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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

16

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MEDIZONE INTERNATIONAL, INC.

(Registrant)

/s/ Edwin G. Marshall                                       

Edwin G. Marshall, Chairman and Chief Executive

Officer (Principal Executive Officer)

/s/ Boyd G. Evans                        

Boyd G. Evans, Chief Financial Officer

(Principal Financial and Accounting Officer)

August 15, 2016

17

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Edwin G. Marshall, certify that:

(1)           I have reviewed this quarterly report on Form 10-Q of Medizone International, Inc. for the six months ended June 30, 2016;

(2)           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3)           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4)           The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(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 subsidiaries, 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;

(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;

(5)           The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);

(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;

(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.

Date: August 15, 2016

/s/ Edwin G. Marshall                                                     

Edwin G. Marshall

Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Boyd G. Evans, certify that:

(1)           I have reviewed this quarterly report on Form 10-Q of Medizone International, Inc. for the six months ended June 30, 2016;

(2)           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3)           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4)           The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(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 subsidiaries, 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;

(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;

(5)           The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);

(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;

(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.

Date: August 15, 2016

/s/ Boyd G. Evans                                                           

Boyd G. Evans

Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 1350 of Chapter 63

of Title 18 of the United States Code

I, Edwin G. Marshall, the Chief Executive Officer of Medizone International, Inc. (“Medizone”), certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(i)           the accompanying Form 10-Q of Medizone for the three and six months ended June 30, 2016 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)           the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Medizone.

/s/ Edwin G. Marshall                                                  

Edwin G. Marshall

Chief Executive Officer (Principal Executive Officer)

August 15, 2016

EX-32.2

Exhibit 32.2

Certification Pursuant to Section 1350 of Chapter 63

of Title 18 of the United States Code

I, Boyd G. Evans, the Chief Financial Officer of Medizone International, Inc. (“Medizone”), certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(i)           the accompanying Form 10-Q of Medizone for the three and six months ended June 30, 2016 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)           the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Medizone.

/s/ Boyd G. Evans                                                       

Boyd G. Evans

Chief Financial Officer

(Principal Financial and Accounting Officer)

August 15, 2016

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 31, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	Medizone International Inc
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		369,934,068
Amendment Flag	false
Entity Central Index Key	0000753772
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2016	Dec. 31, 2015	[1]
Current Assets:
Cash	$ 49,288	$ 745,078
Inventory	323,118	277,823
Prepaid expenses	34,619	31,986
Total Current Assets	407,025	1,054,887
Property and equipment, net	208	415
Other Assets:
Trademark and patents, net	159,045	176,086
Lease deposit	4,272	4,272
Total Other Assets	163,317	180,358
Total Assets	570,550	1,235,660
Current Liabilities:
Accounts payable	433,826	491,044
Accounts payable – related parties	228,109	233,109
Accrued expenses	600,362	554,834
Accrued expenses – related parties	1,928,659	1,928,659
Customer deposits	118,500	0
Other payables	224,852	224,852
Notes payable	292,124	297,396
Total Current Liabilities	3,826,432	3,729,894
Notes payable, net of current portion	75,000	75,000
Total liabilities	3,901,432	3,804,894
Stockholders’ Deficit:
Preferred stock, $0.00001 par value: 50,000,000 shares authorized; no shares issued or outstanding	0	0
Common stock, $0.001 par value: 395,000,000 shares authorized; 369,934,068 and 369,434,068 shares outstanding, respectively	369,934	369,434
Additional paid-in capital	32,544,146	32,496,646
Accumulated other comprehensive loss	(38,454)	(36,968)
Accumulated deficit	(36,206,508)	(35,398,346)
Total Stockholders’ Deficit	(3,330,882)	(2,569,234)
Total Liabilities and Stockholders’ Deficit	$ 570,550	$ 1,235,660

[1] The condensed consolidated balance sheet as of December 31, 2015 has been prepared using information from the audited consolidated balance sheet as of that date.

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares	Jun. 30, 2016	Dec. 31, 2015	[1]
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, par value (in Dollars per share)	$ 0.00001	$ 0.00001
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, shares authorized	395,000,000	395,000,000
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares outstanding	369,934,068	369,434,068

[1] The condensed consolidated balance sheet as of December 31, 2015 has been prepared using information from the audited consolidated balance sheet as of that date.

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenues	$ 0	$ 0	$ 0	$ 0
Operating Expenses:
Cost of revenues	0	0	0	0
General and administrative	216,182	288,182	495,246	601,014
Research and development	82,075	76,840	268,036	154,073
Depreciation and amortization	13,988	13,273	27,814	26,303
Total Operating Expenses	312,245	378,295	791,096	781,390
Loss from Operations	(312,245)	(378,295)	(791,096)	(781,390)
Interest expense	(8,539)	(6,222)	(17,130)	(12,618)
Interest income	11	0	64	0
Net Loss	(320,773)	(384,517)	(808,162)	(794,008)
Other comprehensive (loss) gain on foreign currency translation	(2,381)	1,431	(1,486)	19,662
Total Comprehensive Loss	$ (323,154)	$ (383,086)	$ (809,648)	$ (774,346)
Basic and Diluted Net Loss per Common Share (in Dollars per share)	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Weighted Average Number of Common Shares Outstanding (in Shares)	369,934,068	351,692,310	369,920,332	349,488,212

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2016		Jun. 30, 2015
Cash Flows from Operating Activities:
Net loss	$ (808,162)		$ (794,008)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	27,814		26,303
Stock-based compensation expense	48,000		126,369
Changes in operating assets and liabilities:
Prepaid expenses	28,867		42,077
Inventory	(45,295)		0
Accounts payable and accounts payable – related parties	(62,218)		66,423
Accrued expenses and accrued expenses – related parties	45,527		40,037
Customer deposits	118,500		0
Net Cash Used in Operating Activities	(646,967)		(492,799)
Cash Flows from Investing Activities:
Cost of registering patents	(10,565)		(12,932)
Net Cash Used in Investing Activities	(10,565)		(12,932)
Cash Flows from Financing Activities:
Principal payments on notes payable	(36,772)		(37,274)
Issuance of common stock for cash	0		546,000
Net Cash (Used in) Provided by Financing Activities	(36,772)		508,726
Effect of Foreign Currency Exchange Rates	(1,486)		19,662
Net (decrease) increase in cash	(695,790)		22,657
Cash as of beginning of the period	745,078	[1]	140,496
Cash as of end of the period	49,288		163,153
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	3,568		725
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Financing of insurance policies	$ 31,500		$ 37,392

[1] The condensed consolidated balance sheet as of December 31, 2015 has been prepared using information from the audited consolidated balance sheet as of that date.

XML

NOTE 1 BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2016

Disclosure Text Block [Abstract]

Business Description and Basis of Presentation [Text Block]

NOTE 1     BASIS OF PRESENTATION

The financial information of Medizone International, Inc., a Nevada corporation (the “Company”) included herein is unaudited and has been prepared consistent with U.S. generally accepted accounting principles (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all information and notes required by US GAAP for complete financial statements. These notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015. In the opinion of management, these financial statements contain all adjustments (consisting solely of normal recurring adjustments) which are necessary in the opinion of management for a fair presentation of results for the interim periods presented. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the full year ending December 31, 2016.

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NOTE 2 CANADIAN FOUNDATION FOR GLOBAL HEALTH

6 Months Ended

Jun. 30, 2016

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 2     CANADIAN FOUNDATION FOR GLOBAL HEALTH

In late 2008, the Company assisted in the formation of the Canadian Foundation for Global Health (“CFGH”), a not-for-profit foundation based in Ottawa, Canada. The Company helped establish CFGH for two primary purposes: (1) to establish an independent not-for-profit foundation intended to have a continuing working relationship with the Company for research purposes that is best positioned to attract the finest scientific, medical and academic professionals possible to work on projects deemed to be of social benefit; and (2) to provide a means for the Company to use a tiered pricing structure for services and products in emerging economies and extend the reach of the Company’s technology to as many in need as possible.

Accounting standards require a variable interest entity (“VIE”) to be consolidated by a company if that company absorbs a majority of the VIE’s expected losses and/or receives a majority of the VIE’s expected residual returns as a result of holding variable interests, which are the ownership, contractual, or other financial interests in the VIE. In addition, a legal entity may be considered to be a VIE, if it does not have sufficient equity at risk to finance its own activities without relying on financial support from other parties. If the legal entity is a VIE, then the reporting entity determined to be the primary beneficiary of the VIE must consolidate its financial statements with those of the VIE. The Company determined that CFGH met the requirements of a VIE effective upon the first advance to CFGH on February 12, 2009. Accordingly, the financial statements of CFGH have been consolidated with those of the Company for all periods presented.

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NOTE 3 BASIC AND DILUTED NET LOSS PER COMMON SHARE

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE 3     BASIC AND DILUTED NET LOSS PER COMMON SHARE

The computations of basic and diluted net loss per common share are based on the weighted average number of common shares outstanding during the periods as follows:

	For the Three Months Ended
	June 30,
	2016			2015
Numerator: Net loss	$	(320,773	)	$	(384,517	)
Denominator: Weighted average number of common shares outstanding		369,934,068			351,692,310
Basic and diluted net loss per common share	$	(0.00	)	$	(0.00	)

	For the Six Months Ended
	June 30,
	2016			2015
Numerator: Net loss	$	(808,162	)	$	(794,008	)
Denominator: Weighted average number of common shares outstanding		369,920,332			349,488,212
Basic and diluted net loss per common share	$	(0.00	)	$	(0.00	)

Common stock equivalents, consisting of options to purchase 20,865,000 shares, have not been included in the calculation as their effect is antidilutive for the periods presented.

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NOTE 4 GOING CONCERN

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Substantial Doubt about Going Concern [Text Block]

NOTE 4     GOING CONCERN

The Company’s consolidated financial statements are prepared using US GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has incurred significant losses from its inception through June 30, 2016, which have resulted in an accumulated deficit of $36,206,508 as of June 30, 2016.  The Company does not have funds sufficient to cover its operating costs for the next 12 months, has negative equity, and has a working capital deficit of $3,419,407 as of June 30, 2016. The Company has relied exclusively on debt and equity financing to sustain its operations.  Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.

Continuation of the Company as a going concern is dependent upon future revenues, obtaining additional capital and ultimately, upon the Company’s attaining profitable operations.  The Company will require substantial additional funds to complete the continued development of its products and product manufacturing, and to fund expected additional losses, until revenues are sufficient to cover the Company’s operating expenses.  If the Company is unsuccessful in obtaining the necessary additional funding, it will be forced to substantially reduce or cease operations.

The Company believes that it will need approximately $1,500,000 over the next 12 months for continued production manufacturing and related activities, research, development, and marketing activities, as well as for general corporate purposes.  No cash was generated through the sale of shares of common stock for the quarter ended June 30, 2016.   

The ability of the Company to continue as a going concern is dependent on its ability to successfully accomplish the plan described in the preceding paragraphs and eventually attain profitable operations.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

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NOTE 5 COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE 5     COMMITMENTS AND CONTINGENCIES

The Company is subject to certain claims and lawsuits arising in the normal course of business. In the opinion of management, uninsured losses, if any, resulting from the ultimate resolution of these matters will not have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.

Litigation

Rakas vs. Medizone International, Inc. - A former consultant brought this action against the Company claiming the Company had failed to pay consulting fees under a consulting agreement.  In September 2001, the parties agreed to settle the matter for $25,000.  The Company, however, did not have the funds to pay the settlement and the plaintiff moved the court to enter a default judgment in the amount of $143,000 in January 2002.  On May 8, 2002, the court vacated the default judgment and requested that the Company post a bond of $25,000 to cover the settlement previously entered into by the parties.  The Company has been unable to post the required bond amount as of the date of this report.  Therefore, the Company has recorded, as part of accounts payable, the original default judgment in the amount of $143,000, plus fees totaling $21,308, as of June 30, 2016 and December 31, 2015.  The Company intends to contest the judgment if and when it is able to in the future.

Other Payables

As of June 30, 2016 and December 31, 2015, the Company has $224,852 of past due payables for which the Company has not received statements or demands for payment for over 10 years.  Although management of the Company does not believe that the amounts will be required to be paid, the amounts are recorded as other payables until such time as the Company is certain that no liability exists and until the statute of limitations has expired.

Operating Leases

The Company operates a certified laboratory located at Innovation Park, Queen’s University in Kingston, Ontario, Canada, which provides a primary research and development platform.  The lease term is month-to-month with a monthly lease payment of $1,537 Canadian dollars (“CD”) plus the applicable goods and services tax (“GST”).  Leases for a second laboratory space for full scale room testing and a storage unit are on a month-to-month basis with monthly lease payments of CD$1,537 and CD$475, respectively, plus the applicable GST.  

The Company has a non-cancelable lease for office space located in California, with monthly payments of approximately $2,400 through December 31, 2016.

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NOTE 6 COMMON STOCK OPTIONS

6 Months Ended

Jun. 30, 2016

Disclosure Text Block Supplement [Abstract]

Shareholders' Equity and Share-based Payments [Text Block]

NOTE 6     COMMON STOCK OPTIONS

In August 2013, the Company granted options for the purchase of 250,000 shares of common stock to a consultant, of which 50,000 were immediately vested.  These options are exercisable at $0.10 per share for five years from the date of grant with 50,000 options vesting immediately and the other 200,000 options vesting upon the achievement of certain milestones, which were met in 2015.  The Company recognized expense of $17,659 during the six months ended June 30, 2015, as milestones were achieved for the remaining 200,000 options.

On February 26, 2014, the Company granted to a new director options for the purchase of 2,000,000 shares of common stock, with an exercise price of $0.1095 per share.  Of these options, 1,000,000 vested on February 26, 2015 and the remaining 1,000,000 options will vest upon the successful achievement of certain milestones.  Unvested options vest immediately in the event of a change in control of the Company.  The options are exercisable for five years from the date of grant. The Company recognized $16,017 of expense in connection with these options during the six months ended June 30, 2015. The Company will measure and begin recognizing the remaining expense when the achievement of the required milestones becomes probable.

On February 26, 2014, the Company granted options to six consultants and service providers for the purchase of a total of 250,000 shares of common stock at an exercise price of $0.1095 per share.  Options for 200,000 shares vested immediately upon grant and options for the remaining 50,000 shares vested January 9, 2015.  The options are exercisable for five years from the date of grant. The grant date fair value of these options was $24,023. The Company recognized expense of $800 in connection with these options during the six months ended June 30, 2015.

On May 6, 2014, the Company granted options to a consultant for the purchase of 100,000 shares of common stock at an exercise price of $0.19 per share.  Options for 50,000 shares vested immediately upon grant and options for the remaining 50,000 shares vested during the six months ended June 30, 2015, when certain milestones were achieved.  The options are exercisable for five years from the date of grant. The Company recognized expense of $8,342 in connection with these options during the six months ended June 30, 2015.

On August 15, 2014, the Company granted options to a consultant for the purchase of 75,000 shares of common stock at an exercise price of $0.13 per share.  The shares will vest when certain required milestones are achieved.  The options are exercisable for five years from the date of grant.  The Company will measure and begin recognizing expense when the achievement of the required milestones becomes probable.

On October 7, 2014, the Company granted to a new board member options for the purchase of 1,000,000 shares of common stock, with an exercise price of $0.16 per share.  These options were fully vested on October 7, 2015.  The options are exercisable for five years.  The grant date fair value of the options was $140,178.  The Company recognized $70,088 of expense in connection with these options during the six months ended June 30, 2015 respectively.

On December 4, 2014, the Company granted options to four consultants for the purchase of 140,000 shares of common stock at an exercise price of $0.11 per share.  The options are fully vested and are exercisable for five years from the date of grant.  The Company recognized expense of $13,461 during the six months ended June 30, 2015.

In August 2015, the Company granted options for the purchase of a total of 7,150,000 shares of common stock for services rendered, as follows: 6,000,000 shares total to five directors of the Company, 650,000 shares total to four consultants, and 500,000 shares to an employee of the Company. All options vested upon grant, have an exercise price of $0.088 per share, and are exercisable for up to five years from the date of grant.  The aggregate fair value of these options at the date of grant was $541,687, which the Company recognized as expense during the year ended December 31, 2015.

In August 2015, the Company granted options to a consultant for the purchase of a total of 250,000 shares of common stock at an exercise price of $0.085 per share. These options vested upon grant and are exercisable for up to five years. The aggregate fair value of these options at the date of grant was $18,991, which the Company recognized as expense during the year ended December 31, 2015.

On May 19, 2016, the Company granted options to an employee for the purchase of 150,000 shares of common stock at an exercise price of $0.05 per share.  The fair value of these options on the date of grant was $6,461. The shares will vest at the earlier of 18 months of service or when certain milestones are achieved, and are exercisable for five years from the date of grant.  The Company is recognizing the expense ratably over the 18-months service period. The Company did not recognize expense during the 6 months ended June 30, 2016 as it was not material to the fair presentation of the consolidated financial statements.

The Company estimates the fair value of each stock option award by using the Black-Scholes option-pricing model, which model requires the use of exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate, and the weighted average expected life of the options. Because the Company does not pay dividends, the dividend rate variable in the Black-Scholes option-pricing model is zero. Expense of $0 and $126,369 related to stock options was recorded for the six months ended June 30, 2016 and 2015, respectively.  Excluding options whose performance condition is not yet deemed probable, as of June 30, 2016, the Company had unvested outstanding options with related unrecognized expense of $112,147.  The Company will recognize this expense over the service period or when the achievement of the required milestones becomes probable.

The Company estimated the fair value of the stock options described in the above paragraphs as of the date of the grant or date of re-measurement, based on the following weighted-average assumptions:

Risk-free interest rate		1.50% to 1.69		%
Expected life	5 years
Expected volatility		130.31% to 136.34		%
Dividend yield			0.00	%

A summary of the status of the Company’s outstanding options as of June 30, 2016 and changes during the six months then ended, is presented below:

	Shares			Weighted Average Exercise Price
Outstanding, beginning of the period		20,965,000		$	0.145
Granted		150,000			-
Expired/Canceled		(250,000	)		0.002
Exercised		-			-
Outstanding, end of the period		20,865,000			0.143
Exercisable		19,640,000			0.145

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NOTE 7 STOCK TRANSACTIONS AND SIGNIFICANT CONTRACTS

6 Months Ended

Jun. 30, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 7     STOCK TRANSACTIONS AND SIGNIFICANT CONTRACTS

During January 2016, the Company issued 500,000 restricted shares of common stock to a consultant. The fair value of the shares on the date of grant was $48,000, or $0.096 per share.  The Company recorded compensation expense of $48,000 in connection with the issuance of the shares.

During April, May, and June 2015 the Company sold an aggregate of 7,500,000 restricted shares of common stock to eight accredited investors for cash proceeds totaling $375,000, or $0.05 per share.

During February and March 2015, the Company sold an aggregate of 3,000,000 restricted shares of common stock to seven accredited investors for cash proceeds totaling $150,000, or $0.05 per share.

During February 2015, the Company sold 300,000 restricted shares of common stock to an accredited investor for cash proceeds totaling $21,000, or $0.07 per share.

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NOTE 8 ACCOUNTS PAYABLE - RELATED PARTIES

6 Months Ended

Jun. 30, 2016

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 8     ACCOUNTS PAYABLE – RELATED PARTIES

As of June 30, 2016 and December 31, 2015, the Company owed $228,109 and $233,109, respectively, to certain consultants for services.  These consultants are stockholders of the Company and are related parties.

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NOTE 9 RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2016

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

NOTE 9     RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under US GAAP.  The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.  ASU No. 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing US GAAP.  The standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods therein.  Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016.  The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.  ASU No. 2014-15 sets forth management’s responsibility to evaluate, each reporting period, whether there is substantial doubt about the entity’s ability to continue as a going concern, and if so, to provide related disclosures in the financial statements.  ASU No. 2014-15 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within annual periods ending after December 15, 2016.  The Company is assessing the impact, if any, of implementing this guidance on the Company’s financial statement presentation.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740), simplifying the presentation of deferred income taxes on the balance sheet by requiring companies to classify everything as either a non-current asset or non-current liability. ASU No. 2015-17 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within annual periods ending after December 15, 2016.  The Company is assessing the impact, if any, of implementing this guidance on the Company’s financial statement presentation.

In February 2016, the FASB released ASU No. 2016-02, Leases (Topic 842), to bring transparency to lessee balance sheets. ASU No. 2016-02 will require organizations that lease assets (lessees) to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU No. 2016-02 will apply to both types of leases; capital (or finance) leases and operating leases. Previously, US GAAP has required only capital leases to be recognized on lessee balance sheets. ASU No. 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early application is permitted. The Company is assessing the impact of ASU No. 2016-02 on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation: Improvements to Employee Share- Based Payment Accounting. ASU No. 2016-09 is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU No. 2016-09 is effective for years ending after December 31, 2016, and the Company is assessing the impact of ASU No. 2016-09 on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs.  To simplify presentation of debt issuance costs, the amendments in ASU No. 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU No. 2015-03.  ASU 2015-03 was effective for the Company for the quarter ended March 31, 2016 and there was no impact on its financial reporting.

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NOTE 10 SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE 10     SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing date of this Quarterly Report on Form 10-Q and noted none that require accounting or disclosure in the accompanying financial statements.

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NOTE 3 BASIC AND DILUTED NET LOSS PER COMMON SHARE (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The computations of basic and diluted net loss per common share are based on the weighted average number of common shares outstanding during the periods as follows:

	For the Three Months Ended
	June 30,
	2016			2015
Numerator: Net loss	$	(320,773	)	$	(384,517	)
Denominator: Weighted average number of common shares outstanding		369,934,068			351,692,310
Basic and diluted net loss per common share	$	(0.00	)	$	(0.00	)

	For the Six Months Ended
	June 30,
	2016			2015
Numerator: Net loss	$	(808,162	)	$	(794,008	)
Denominator: Weighted average number of common shares outstanding		369,920,332			349,488,212
Basic and diluted net loss per common share	$	(0.00	)	$	(0.00	)

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NOTE 6 COMMON STOCK OPTIONS (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure Text Block Supplement [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The Company estimated the fair value of the stock options described in the above paragraphs as of the date of the grant or date of re-measurement, based on the following weighted-average assumptions:

Risk-free interest rate		1.50% to 1.69		%
Expected life	5 years
Expected volatility		130.31% to 136.34		%
Dividend yield			0.00	%

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

A summary of the status of the Company’s outstanding options as of June 30, 2016 and changes during the six months then ended, is presented below:

	Shares			Weighted Average Exercise Price
Outstanding, beginning of the period		20,965,000		$	0.145
Granted		150,000			-
Expired/Canceled		(250,000	)		0.002
Exercised		-			-
Outstanding, end of the period		20,865,000			0.143
Exercisable		19,640,000			0.145

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NOTE 2 CANADIAN FOUNDATION FOR GLOBAL HEALTH (Details)	12 Months Ended
	Dec. 31, 2008
Disclosure Text Block [Abstract]
Variable Interest Entity, Qualitative or Quantitative Information, Purpose of VIE	(1) to establish an independent not-for-profit foundation intended to have a continuing working relationship with the Company for research purposes that is best positioned to attract the finest scientific, medical and academic professionals possible to work on projects deemed to be of social benefit; and (2) to provide a means for the Company to use a tiered pricing structure for services and products in emerging economies and extend the reach of the Company’s technology to as many in need as possible.

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NOTE 3 BASIC AND DILUTED NET LOSS PER COMMON SHARE (Details)	6 Months Ended
	Jun. 30, 2016 shares
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	20,865,000

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NOTE 3 BASIC AND DILUTED NET LOSS PER COMMON SHARE (Details) - Schedule of Earnings Per Share, Basic and Diluted - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Schedule of Earnings Per Share, Basic and Diluted [Abstract]
Numerator: Net loss	$ (320,773)	$ (384,517)	$ (808,162)	$ (794,008)
Denominator: Weighted average number of common shares outstanding	369,934,068	351,692,310	369,920,332	349,488,212
Basic and diluted net loss per common share	$ 0.00	$ 0.00	$ 0.00	$ 0.00

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NOTE 4 GOING CONCERN (Details) - USD ($)	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015	[1]
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Retained Earnings (Accumulated Deficit)	$ (36,206,508)	$ (35,398,346)
Working capital (deficit)	$ (3,419,407)
Substantial Doubt about Going Concern, Conditions or Events	The Company believes that it will need approximately $1,500,000 over the next 12 months for continued production manufacturing and related activities, research, development, and marketing activities, as well as for general corporate purposes.

[1] The condensed consolidated balance sheet as of December 31, 2015 has been prepared using information from the audited consolidated balance sheet as of that date.

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NOTE 5 COMMITMENTS AND CONTINGENCIES (Details)	6 Months Ended		12 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2016 CAD	Dec. 31, 2002 USD ($)	Dec. 31, 2001 USD ($)	Dec. 31, 2015 USD ($)
NOTE 5 COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Accounts Payable, Current	$ 433,826				$ 491,044	[1]
Accounts Payable, Other, Current	224,852				224,852	[1]
Default Judgement [Member] | Rakas Litigation [Member]
NOTE 5 COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Accounts Payable, Current	143,000				143,000
Litigation Fees [Member] | Rakas Litigation [Member]
NOTE 5 COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Accounts Payable, Current	21,308				$ 21,308
Settlement Amount, September 2001 [Member] | Rakas Litigation [Member]
NOTE 5 COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Litigation Settlement, Amount				$ 25,000
Settlement Amount, January 2002 [Member] | Default Judgement [Member] | Rakas Litigation [Member]
NOTE 5 COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Loss Contingency, Damages Sought, Value			$ 143,000
Building [Member]
NOTE 5 COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Operating Leases, Rent Expense, Minimum Rentals	$ 2,400
Building [Member] | Certified Laboratory Space [Member]
NOTE 5 COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Operating Leases, Rent Expense, Minimum Rentals | CAD		CAD 1,537
Building [Member] | Second Laboratory for Full Scale Room Testing [Member]
NOTE 5 COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Operating Leases, Rent Expense, Minimum Rentals | CAD		1,537
Building [Member] | Full Scale Room Testing [Member]
NOTE 5 COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Operating Leases, Rent Expense, Minimum Rentals | CAD		CAD 475

[1] The condensed consolidated balance sheet as of December 31, 2015 has been prepared using information from the audited consolidated balance sheet as of that date.

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NOTE 6 COMMON STOCK OPTIONS (Details)							1 Months Ended		6 Months Ended		12 Months Ended
	May 19, 2016 USD ($) $ / shares shares	Dec. 04, 2014 $ / shares shares	Oct. 07, 2014 USD ($) $ / shares shares	Aug. 15, 2014 $ / shares shares	May 06, 2014 $ / shares shares	Feb. 26, 2014 USD ($) $ / shares shares	Aug. 31, 2015 $ / shares shares	Aug. 31, 2013 $ / shares shares	Jun. 30, 2016 USD ($) shares	Jun. 30, 2015 USD ($) shares	Dec. 31, 2015 USD ($)
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	150,000								150,000
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share) | $ / shares	$ 0.05
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	5 years
Share-based Compensation (in Dollars) | $	$ 6,461								$ 48,000	$ 126,369
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	18 months
August 2015 [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross							7,150,000
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period							5 years
Share-based Compensation (in Dollars) | $											$ 541,687
Director [Member] | October 7, 2014 [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			1,000,000
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share) | $ / shares			$ 0.16
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			5 years
Share-based Compensation (in Dollars) | $										70,088
Share-based Compensation Arrangement by Share-based Payment Award, Options, Fair Value Grants in Period (in Dollars) | $			$ 140,178
Non-Employee Stock Option [Member] | August 2013 [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross								250,000
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share) | $ / shares								$ 0.10
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period								5 years
Share-based Compensation (in Dollars) | $										$ 17,659
Non-Employee Stock Option [Member] | August 2013 [Member] | Share-based Compensation Award, Tranche One [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares								50,000
Non-Employee Stock Option [Member] | August 2013 [Member] | Share-based Compensation Award, Tranche Two [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares								200,000
Non-Employee Stock Option [Member] | February 2014 [Member] | Options Granted for Consulting Services [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						250,000				800
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share) | $ / shares						$ 0.1095
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period						5 years
Number of consultants and service providers issued options						6
Share-based Compensation Arrangement by Share-based Payment Award, Options, Fair Value Grants in Period (in Dollars) | $						$ 24,023
Non-Employee Stock Option [Member] | February 2014 [Member] | Share-based Compensation Award, Tranche One [Member] | Options Granted for Consulting Services [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares						200,000
Non-Employee Stock Option [Member] | February 2014 [Member] | Share-based Compensation Award, Tranche Two [Member] | Options Granted for Consulting Services [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares						50,000
Non-Employee Stock Option [Member] | May 6, 2014 [Member] | Options Granted for Consulting Services [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross					100,000
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share) | $ / shares					$ 0.19
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period					5 years
Share-based Compensation (in Dollars) | $										$ 8,342
Non-Employee Stock Option [Member] | May 6, 2014 [Member] | Share-based Compensation Award, Tranche One [Member] | Options Granted for Consulting Services [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares					50,000
Non-Employee Stock Option [Member] | May 6, 2014 [Member] | Share-based Compensation Award, Tranche Two [Member] | Options Granted for Consulting Services [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares					50,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights					vested immediately upon grant and options for the remaining 50,000 shares vested during the six months ended June 30, 2015, when certain milestones were achieved.
Non-Employee Stock Option [Member] | August 15, 2014 [Member] | Options Granted for Consulting Services [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross				75,000
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share) | $ / shares				$ 0.13
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period				5 years
Non-Employee Stock Option [Member] | December 4, 2014 [Member] | Options Granted for Consulting Services [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		140,000
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share) | $ / shares		$ 0.11
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		5 years
Share-based Compensation (in Dollars) | $										13,461
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights		The shares will vest when certain required milestones are achieved.
Number of consultants and service providers issued options		4
Non-Employee Stock Option [Member] | August 2015 [Member] | Options Granted for Consulting Services [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross							250,000
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share) | $ / shares							$ 0.085
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period							5 years
Share-based Compensation (in Dollars) | $											$ 18,991
Non-Employee Stock Option [Member] | August 2015 [Member] | Options Granted to Four Consultants [Member[
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross							650,000
Number of consultants and service providers issued options							4
Employee Stock Option [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation (in Dollars) | $									0	126,369
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options (in Dollars) | $									$ 112,147
Employee Stock Option [Member] | August 2015 [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross							500,000
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share) | $ / shares							$ 0.088
Employee Stock Option [Member] | Director [Member] | February 2014 [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						2,000,000
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share) | $ / shares						$ 0.1095
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period						5 years
Share-based Compensation (in Dollars) | $										$ 16,017
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights						Unvested options vest immediately in the event of a change in control of the Company
Employee Stock Option [Member] | Director [Member] | February 2014 [Member] | Share-based Compensation Award, Tranche One [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares						1,000,000
Employee Stock Option [Member] | Director [Member] | February 2014 [Member] | Share-based Compensation Award, Tranche Two [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares						1,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights						vest upon the successful achievement of certain milestones
Employee Stock Option [Member] | Director [Member] | August 2015 [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross							6,000,000
Number of directors issued options							5

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NOTE 6 COMMON STOCK OPTIONS (Details) - Schedule of Fair Value Assumptions of Stock Options	6 Months Ended
	Jun. 30, 2016
NOTE 6 COMMON STOCK OPTIONS (Details) - Schedule of Fair Value Assumptions of Stock Options [Line Items]
Expected life	5 years
Dividend yield	0.00%
Minimum [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) - Schedule of Fair Value Assumptions of Stock Options [Line Items]
Risk-free interest rate	1.50%
Expected volatility	130.31%
Maximum [Member]
NOTE 6 COMMON STOCK OPTIONS (Details) - Schedule of Fair Value Assumptions of Stock Options [Line Items]
Risk-free interest rate	1.69%
Expected volatility	136.34%

XML

NOTE 6 COMMON STOCK OPTIONS (Details) - Schedule of Share-Based Compensation, Stock Options, Activity - $ / shares		6 Months Ended
	May 19, 2016	Jun. 30, 2016
Schedule of Share-Based Compensation, Stock Options, Activity [Abstract]
Outstanding, beginning of the period		20,965,000
Outstanding, beginning of the period		$ 0.145
Granted	150,000	150,000
Granted		$ 0
Expired/Canceled		(250,000)
Expired/Canceled		$ 0.002
Exercised		0
Exercised		$ 0
Outstanding, end of the period		20,865,000
Outstanding, end of the period		$ 0.143
Exercisable		19,640,000
Exercisable		$ 0.145

XML

NOTE 7 STOCK TRANSACTIONS AND SIGNIFICANT CONTRACTS (Details)		1 Months Ended		2 Months Ended	3 Months Ended	6 Months Ended
	May 19, 2016 USD ($)	Jan. 31, 2016 USD ($) $ / shares shares	Feb. 28, 2015 USD ($) $ / shares shares	Mar. 31, 2015 USD ($) $ / shares shares	Jun. 30, 2015 USD ($) $ / shares shares	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($) $ / shares
NOTE 7 STOCK TRANSACTIONS AND SIGNIFICANT CONTRACTS (Details) [Line Items]
Share-based Compensation	$ 6,461					$ 48,000	$ 126,369
Stock Issued During Period, Shares, New Issues (in Shares) | shares					7,500,000
Number of Investors					8
Proceeds from Issuance or Sale of Equity					$ 375,000
Sale of Stock, Price Per Share (in Dollars per share) | $ / shares					$ 0.05		$ 0.05
Restricted Stock [Member]
NOTE 7 STOCK TRANSACTIONS AND SIGNIFICANT CONTRACTS (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares		500,000
Stock Issued During Period, Value, Issued for Services		$ 48,000
Shares Issued, Price Per Share (in Dollars per share) | $ / shares		$ 0.096
Share-based Compensation		$ 48,000
Stock Issued During Period, Shares, New Issues (in Shares) | shares			300,000	3,000,000
Number of Investors				7
Proceeds from Issuance or Sale of Equity				$ 150,000
Sale of Stock, Price Per Share (in Dollars per share) | $ / shares			$ 0.07	$ 0.05
Stock Issued During Period, Value, New Issues			$ 21,000

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NOTE 8 ACCOUNTS PAYABLE - RELATED PARTIES (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Related Party Transactions [Abstract]
Accounts Payable, Related Parties, Current	$ 228,109	$ 233,109	[1]

[1] The condensed consolidated balance sheet as of December 31, 2015 has been prepared using information from the audited consolidated balance sheet as of that date.