Medizone Intl. (fka MZEIQ)

[Whatisvalue]

Vince, I understand several of your points.

I agree that without EPA approval, the value of MZEI shares is next to nothing. In large respect, I think the company thought they were close to EPA approval a year ago, just as they believe now. Clearly, that wasn’t the case. New BOD members weren’t happy with the EPA results being generated and brought on board folks they’ve previously and successfully used with the EPA. That topic was referenced in Ed’s recent letter and I think is the reason for the renewed optimism on that front.

Now, if the company thought they were close to EPA approval a year ago, why weren’t steps being taken then to turn the company into an operating company? Why not hire a new CEO, a marketing team, consolidate geographically disparate activities, etc. etc.? The same could be asked today. I think the simple answer is that there isn’t an expectation to do so. I think, as I’ve stated, the view is to sell some machines to prove the technology in the field and then sell the company (i.e. enter Mr. Esposito who has a resume doing such and whose compensation is calculated differently than other BOD members [he uniquely has a performance clause]).

I agree that management has not shown a capacity to sell ASure units. The appearances at FIME and the Vegas cleaning show, initiated by a major shareholder, proved to be premature at best, if not misguided. Premature in that equipment wasn’t ready, and regulatory approvals were not in hand (or even thought of pre-FIME) and misguided in that the method of marketing used may well be inappropriate. We understand Ed’s not a marketing wiz. This involvement by the shareholder does show such acknowledgement, a certain degree of impatience, and that he too mistook MZEI’s pre-market status and perhaps the nature of marketing in this field.

Nonetheless, there is a market for disinfectant equipment. Xenex raised a lot of money in late 2013 and again this week ($25mm) for the purpose of commercial expansion. http://www.xenex.com/article/xenex-secures-25-million-funding-interest-germ-zapping-robot-heightened-ebola-outbreak-hospital-penalties-infections/ If MZEI was serious about forming an operating company, they would hire away Xenex’s marketing man who has plunged the depths of this market for several years and knows it well. You can bet that suitors see this issue well and if you were Xenex’s guy, would you listen to an offer of a company which had presumptively better technology?

I recognize that MZEI has limited resources of all manner. The remaining share authorization can’t raise the kind of money Xenex just did unless the SP is in the $.75-$1.00 area (with discounts). I don’t think Ed could survive a shareholder meeting (the havoc you mention – any significant amount of new capital requiring altered leadership). So what’s left is for Ed to prove whether the expressed interest in the US is real, post EPA approval, or it’s not. Is the lack of sales in the US and Canada truly based upon lack of EPA approval or is it something else? Any real deal with KSA just gives MZEI some operating room.

Can Esposito and Caponi sell MZEI? Yes, I think so. At what price? At a price offered by a suitor. Some folks may think MZEI is worth a great deal of money; it’s only worth what someone is willing to pay you for it (if you have multiple bidders, it would be pretty hard to say the value is more and we need to go it alone for a time). MZEI hasn’t done the longitudinal hospital studies or perfected applications for which other patents have been received or are being processed. At this point, they lack the resources to do so. In that light, a suitor will apply a greater discount to his/her model if they give much credence to the other potential applications at all. Don’t forget that JNJ paid >$900MM for Glauser and it didn’t have EPA approval for many months post acquisition. Did they learn a few lessons there? No doubt. With a handful of units sold, JNJ thought Glauser’s technology was worth that figure – again, they weren’t buying a balance sheet or income statement that translated exceptional managerial execution, they were buying the science, or rather, what the science could do. Would JNJ even have an interest in MZEI after the Glauser folly? What about others? Absent having a relationship with a high powered investment bank, we are de facto relying on Esposito and Caponi to develop suitor interest.

As it relates to some observations that Ed may not want to sell for any variety of reasons, I’m reminded of a Western saying, ‘money talks and _____ walks’. In the context of a high degree of risk that Ed could turn MZEI into an operating company so as to make it more attractive later versus taking a reasonable offer soon, what would you do? What would the major shareholders do who have already shown their relative impatience? I think we’d all cash the check and leave those wanting more to ponder what might have been if different decisions had been made over the years.