Borislav Tonev

Promising News Gave Medizone International Inc (OTCBB:MZEI) a Boost

by Borislav Tonev April 29, 2013
4MZEI.pngIt would seem that unlike most of the companies that we review on these pages, Medizone International Inc (OTCBB:MZEI, MZEI message board) are finally coming out of the development stage of their business. Back on April 11 they announced that they have reached an agreement with a company called Wood Wyant who will take care of the distribution, technical support and maintenance of the innovative ozone sterilization systems in Canada.

MZEI were so excited about the new deal that their Yahoo Finance profile has detected a total of four press releases between April 11 and April 15 and they all contain exactly the same information. We're pretty sure that this has been part of the reason why the price has been steadily going up during the last 5 trading sessions and on Friday MZEI absolutely exploded - the volume was much higher than the average and the ticker gained as much as 50% over the previous close.

There was a reason the sudden surge as well. Unlike other small cap companies that love to announce some big events and then make us wait for months until the next financial report comes out, MZEI have actually managed to prepare the statement for the first quarter of 2013 in record time and they posted it for all to see on Friday. Fortunately, when you compare it with the ones from years gone by, you will see that they have indeed been working hard during the last couple of months:

  • cash: $49 thousand
  • current assets: $256 thousand
  • current liabilities: $3.5 million
  • quarterly revenue: $4 thousand
  • quarterly net loss: $387 thousand

In the report we also read that after the agreement with Wood Wyant has been closed, they received orders for a further $375 thousand worth of sterilization equipment. Still, while MZEI are making some of the right noises, we're not sure if it's quite time to break out the champagne bottles.

51MZEI_logo.jpgWe can see from the report that the longevity of the development stage means that they have accumulated a deficit amounting to a whopping $30 million. And because of the lack of cash, they were forced to issue quite a lot of common stock in order to pay for wages and consultancy fees. The amount for the quarter covered in the report, for example is eye-popping - 12 million new shares in just three months and we're pretty sure that if they are not able to turn a profit soon, this stock could cause heavy dilution for the long-term shareholders.

There was also a lawsuit against MZEI for some consultancy fees amounting to $25 thousand but unfortunately, because of their inability to pay them off on time, they now owe $143 thousand and from what we can see, MZEI themselves are not sure when they will be able to settle the whole thing.

Certainly, in order for this to happen, they will need to start generating a profit and that, unfortunately, is the biggest unknown with MZEI. Indeed, unlike most of the other penny stocks who claim to have the resources to change the world, MZEI have actually managed to develop their product and put it on sale. Right now, however, a positive cash flow still remains a distant dream and as we all know, profitability could make or break a company, and only through it will MZEI be able to show us the thing that we are all hoping to see - increased value for the shareholders.

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