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This may have been asked: is there any value to the tax loss carryforwards?
While this would have to be looked into with a more critical eye, assuming that the amount owed to EM was set forth in the balance sheets filed with the SEC, there is the argument that the debt has been reaffirmed each time and that the SOL begins to run after the last such filing.
"Fraud", in the legal context, is generally defined as the making of a statement which is materially false or the commission of a wrongful act or the omission to perform an act when there is a duty to perform, which is intended to induce another to rely thereon, which does induce another to rely thereon, to the relying party's detriment.
BANKR. TRUSTEE:
While appreciative of the frustration and good intentions of many on this board, the Bankr. Trustee will do nothing with any innuendo provided to him. He will only deal with the "facts," "evidence," "motions - claims for relief" and/or plan(s) properly presented to him. At this time, it appears that Ed Marshall has his ear. Whether management or some "white knight" steps forward remains to be seen.
If Dr. Shannon was willing to defer his compensation as part of a new loan / financing package, assuming the Marshall budget is anywhere close to being good, it would not take all that much to make an offer of a better financing package, longer (through FDA approval) to the BAnkr. Trustee to maximize shareholder value, if that is where the Trustee is truly headed. The pre-bankr. management clearly has sufficient wherewithal to accomplish that, assuming that the believe in themselves and the technology.
In my judgment, such a package would likely force Mr. Marshall (and the Bankr. Trustee) to get real (his proposal does not get through FDA approval, so as to maximize value).
BenK: This makes no sense to me. If management thought this was a lost cause, why would they file a Chapter 7, rather than see what Marshall may offer via his Capter 11? They could always resign and go find other work.
Given their collective interests in the company, it would not surprise me to see Dr. Shannon and others to put together a loan package which is better than that offered by Mr. Marshall. If they did, and there was a default, assuming they got the collateral, they could control their own destiny, not Mr. Marshall.
pent: Carefully read the motions filed by the Trustee. I think you will discover that you are wrong on the bankruptcy issues.
In Exhibit A to the Emergency Motion for Order (the "Budget") there is reference to $6000 budgeted for June and July, 2018, and $0 for August, 2018 for FDA Materials Comp Testing ("FMCT"). In addition, there is a reference to $1,500 budgeted for FDA Testing for June, July and August, 2018. Does anyone know the difference between those two categories? Does the lack of budget for August for the FMCT suggest that progress in being made, in terms of time, to obtain FDA approval? See also, Regulatory Counsel - $5,000 budget for June alone. Who is going to be pushing the FDA approval through? Will it be ready to push through, or is Marshall just attempting to keep the FDA process going until he can arrange to take the company?
The parties involved in the financing could come back to the company as a DIP funding entity in the Marshall Chapter 11 or in a CO Chapter 11, if converted from the CO Chapter 7. While I have not researched it, I do not recall a mechanism for continued operations / additional financing in a Chapter 7.
Needless to say, with all of the "issues" raised in the Answer, this could be a very long, drawn out process. Thus, my prior questions as to how to achieve FDA approval in the interim?
My guess is that Marshall did not think through this. Once he realizes what he is up against, he may think about "negotiating" (although "preference" issues may come into play) and the CO could put the status quo back together.
Possible Course: EM Chapter 11 filed; CO Chapter 7 filed; EM Chapter 11 Dismissed; CO Chapter 7 Converted to Chapter 11; DIP finding obtained w/ Bankr. act. Approval, giving DIP creditor priority over EM and others; Chapter 11 Plan approved; CO has a chance to survive.
The question I have is, what will it cost to get FDA approval and will the Chapter 7 Trustee allow expenditures on it. (I guess a White Night could fund it.)
TEQ: The SOL can be extended for concealment of fact, etc.
Absent resolution of the issues between the parties, the Company would have to convince the Bankr. Trustee that a suit against the Marshall's is warranted, and that if successful, there is a likelihood of recovery. If the Trustee concurs, a lawsuit would have to be brought in the Bankr. Court - this could take a long, long time.
Was the Chapter 7 a tactical move to gain the dismissal of Marshall's Chapter 11, and then convert the Chapter 7 case to a case under Chapter 11 via Code Section 706, thereby giving the management more control of the bankruptcy process, the timing, etc.?
From Innovasource website:
Innovasource
"Innovative Development
At Innovasource, our experienced Research & Development team is developing proprietary formulas using the trusted ingredient of hydrogen peroxide combined with state-of-the-art ingredients, to create high-performance products that are also environmentally responsible.
We're introducing a revolutionary line of products that are unique in the crowded marketplace of consumer packaged goods. Through innovative technologies and raw materials, our formulas offer a point of difference from the traditional."
"Our Team
...
The Company was founded in 2007 by a seasoned team with over fifty years in regulated product experience. Innovasource operates in consumer and commercial channels, and is introducing a unique and proprietary line of hydrogen peroxide-based consumer products."
http://www.innovasource.com/images/big_banner.jpg
I could find nothing which directly references AsepticSure. I hope that changes.
An enlargement of time will give management time to consider and develop a varied spectrum of alternative and make educated decisions on how to proceed. Incidentialy, it will give Innovasource, and hopefully others, to facilitate commercialization.
ElisStaying: Read the Bankr. Rule to which I cited you.
BenK:
What you say makes sense. The primary difference in the two announcements was the inclusion of two (2) machines in the deal, to Innovasource. It appears that Innovasource did not want to take a large risk in purchasing one or more machines, but apparently needs one or more machines to do the demonstrations. A GOOD SIGN INDEED.
ES: I would appreciate a citation to the Bankruptcy Code, Bankruptcy Rules, or any Local Bankruptcy Rule in the District of Nevada which substantiates your position.
While I have not considered any "Local Rules," Bankruptcy Rule 9006(b) seems to be applicable. As near as I can tell, it appears that the only deadlines that the Company cannot move to enlarge is the deadline under Bankruptcy Rule 1007(d) - list of 20 largest creditors.
NOTE: I hope that the company has "friendly creditors" who will attend the meeting of creditors and vote to elect a "trustee" who will act in the best interest of the Company. See Bankr. R. 2003(b)(1).
Does the timing bother anyone else?
May 3, 2018
"Medizone International, Inc. (OTCQB:MZEI) or Medizone, manufacturer of the AsepticSure(R) system, today announced the implementation and expansion of the Product Evaluation Agreement (the "Agreement") with Innovasource, LLC, a leading manufacturer of cleaning, deodorizing and disinfecting products ("Innovasource").
Pursuant to the Agreement signed March 19, 2018, Innovasource is implementing the evaluation of the AsepticSure(R) system compared to existing cleaning practices in a variety of facilities and settings."
March 22, 2018:
"Medizone International, Inc. (OTCQB:MZEI) or Medizone, manufacturer of the AsepticSure(R) system, today announced the initiation of a Product Evaluation Agreement (the "Agreement") with Innovasource, LLC, a leading manufacturer of cleaning, deodorizing and disinfecting products ("Innovasource")."
Let's just hope that the "second" or "amended" agreement post-dates March 22, 2018; but it is not obvious.
As it sits, without knowledge of the date of the "second" or "amended" agreement, it is unknown to shareholders as to whether the same can be used to counter any contention by Mr. Marshall that the management of the company had no intent on commercializing the technology.
ES: It would not surprise me that the Company would move for an enlargement of time to file any response to the petition, or other dispositive motion.
The WLB-RSK Venture case was affirmed on further appeal in 2007:
CaselawCautionIn re Wlb-Rsk Venture, 2004 Bankr. LEXIS 2005
Copy Citation
United States Bankruptcy Appellate Panel for the Ninth Circuit
November 24, 2004, Filed
BAP Docket No.: CC-03-1526-MoPMa
Reporter
2004 Bankr. LEXIS 2005 * | 320 B.R. 221
In re WLB-RSK Venture
Subsequent History: Affirmed by In re Wlb-Rsk, 223 Fed. Appx. 555, 2007 U.S. App. LEXIS 4064 (9th Cir., Feb. 22, 2007)
Prior History: [*1] Appeal From A Published Bankruptcy Court Decision: 296 BR 509 (Bankr. C.D. Cal. 2003).
Disposition: AFFIRMED.
Opinion
Affirmed.
_____________________________
The Wlb-Rsk Venture BAP decision has only been cited 6 times, of which one case, in 2005 criticized it.
In re Nat'l Med. Imaging, L.L.C., 2005 Bankr. LEXIS 2374 (Eastern District of Pennsylvania
Yellow - Caution level phrase Criticized by: 2005 Bankr. LEXIS 2374 p.8
Putative Debtors take the position that, even assuming GECC can show that the substantive requirements of § 303(b) and (h) are met, improper motivations or other "bad faith" on GECC's part would provide an independent basis for dismissal of the Involuntary Petitions. There appears to be some divergent opinion on this issue. Compare In re WLB-RSK Venture, 296 B.R. 509 (Bankr. C.D. Cal. 2003) (finding that bad faith could provide basis for dismissal independent of substantive requirements of § 303); In re Alexander, 2000 WL 33951465 (Bankr. D. Vermont Aug. 29, 2000) (same) with Kaplan v. Breslow (In re WLB-RSK Venture), 320 B.R. 221, 2004 WL 3119789 at *6 n. 13 (BAP 9th Cir. 2004) (unpublished table opinion affirming 296 B.R. 509 on another basis while rejecting bad faith as independent basis for dismissal); In re Knoth, 168 B.R. 311, 315 (Bankr. D.S.C. 1994) (motivations of petitioning creditors are irrelevant where the substantive requirements of § 303 are otherwise met unless the issue is whether to allow joinder of additional petitioning creditors to cure a defective petition).
________________
A 9th Cir. Court citing the case, referenced the Wlb standard, but continued with a "bad faith" analysis. See below. While the Court did affirmatively adopt the rational of Wlb, it concluded that facially, "bad faith" was not present, without relying on the Bank. Code's 303 strict analysis.
In In Re Marciano, 446 B.R. 407 (Bankr. C.D. Cal. 2010), the Court stated, in part:
Marciano argues that an order for relief should not be entered because "[t]here is a genuine issue of material fact regarding whether the involuntary Chapter 11 petition was filed in bad faith...." Opposition at 46. Marciano asserts that he is entitled to discovery regarding Petitioning Creditors' subjective reasons for filing the involuntary petition and argues that the involuntary case should be dismissed if the Petitioning Creditors filed it for an improper reason. Id. at 47. As examples of the Petitioning Creditors' alleged bad faith, Marciano contends that Tagle filed the involuntary petition with Chapnick and Fahs after Marciano rebuffed her efforts to settle the matter, that Chapnick and Fahs were two of the most aggressive creditors in pursuing judgment enforcement, that none of the judgment creditors had made a significant recovery, i.e., in excess of $2 million, on his or her unstayed judgment before the involuntary petition was filed and that, after filing the involuntary petition, the Petitioning Creditors opposed Marciano's motion for relief from the automatic stay so that Marciano could pursue his appeals.
Section 303(b), which sets forth the requirements for filing an involuntary petition, does not contain any language regarding the good faith of petitioning creditors. Section 303(i), however, provides that if the court dismisses the involuntary petition "other than on consent of all petitioners and the debtor," the court may grant judgment "against any petitioner that filed the petition in bad faith, for any damages proximately caused by such filing."
At the outset, it is generally inappropriate for the court to consider the good faith or bad faith of petitioning creditors when determining whether to enter the order for relief. See, e.g., Kaplan v. *431 Breslow (In re WLB-RSK Venture), 320 B.R. 221, 2004 WL 3119789, at *6 n. 13 (9th Cir. BAP 2004) (unpublished disposition) ("If the grounds for relief exist under section 303, the good faith or bad faith of the petitioning creditor appears irrelevant"); Ross, 63 B.R. at 955 (stating that an inquiry into whether the petitioning creditors commenced the involuntary petition in "bad faith," to "harass and annoy the debtor," or with "malice and lack of justification" would be unnecessary if the court sustained the involuntary petition and entered an order for relief). Nonetheless, the Court will address Marciano's allegations of bad faith given that the issue can readily be determined based upon the undisputed facts and the applicable legal standard.
"[T]here is a presumption of good faith in favor of the petitioning creditor, and thus the alleged debtor has the burden of proving bad faith." Lubow Machine Co. v. Bayshore Wire Products Corp. (In re Bayshore Wire Products Corp.), 209 F.3d 100, 105 (2d Cir.2000) (internal citation omitted). "Whether a party acted in bad faith is essentially a question of fact. Bad faith should be measured by an `objective test' that asks `what a reasonable person would have believed.'" Jaffe v. Wavelength, Inc. (In re Wavelength, Inc.), 61 B.R. 614, 620 (9th Cir. BAP 1986) (internal citation omitted); see also In re Mi La Sul, 380 B.R. 546, 557 (Bankr.C.D.Cal. 2007) (same).
The Court concludes that Marciano is not entitled to discovery "regarding the subjective reasons why the petitioning creditors filed the involuntary petition." Opposition at 47. Where a review of the facts associated with the filing of the involuntary petition indicate that a reasonable person would be justified in filing the petition, the specific motivations of the petitioning creditors are irrelevant. Here, a reasonable person could have concluded in good faith that the filing of an involuntary petition was justified. Marciano was facing multiple unstayed judgments that he could not afford to pay in full.
Moreover, Marciano's examples of "bad faith" are not convincing. The fact that the judgment creditors had not experienced tremendous success in their collection efforts before some of them filed the involuntary petition does not mean the petition was filed in bad faith. Given that eight creditors held substantial unstayed judgments, the Petitioning Creditors were faced with the imminent prospect that one judgment creditor might succeed in collecting to the detriment of others.
Similarly, Petitioning Creditor Tagle's attempt to reach a settlement with Marciano before she filed the involuntary petition is not demonstrative of bad faith. A creditor's attempt to settle, followed by a change in tactics when settlement proves unsuccessful, does not constitute bad faith. To hold otherwise would discourage creditors from trying to resolve payment disputes consensually before they turn to the remedy of filing an involuntary petition.
Permitting Marciano to probe Petitioning Creditors' reasons for filing the involuntary petition?where the undisputed facts indicate that a reasonable creditor would be justified in doing so?would needlessly prolong the time period before this matter can be resolved. The inevitable delay would contravene the provisions of Fed. R. Bankr.P. 1013, which provides that "[t]he court shall determine the issues of a contested petition at the earliest practicable time and forthwith enter an order for relief, dismiss the petition, or enter any other appropriate order." Finally, none of the cases cited by Marciano as to this issue *432 are applicable to the facts at hand.
BenK: I do not disagree. The issue will include overcoming the precedential value of the BAP (Bankruptcy Appellate Panel) decision out of the 9th Circuit, which is not that old.
The Bankruptcy Court (trail court, for this purpose) dismissed the involuntary petition.
https://www.leagle.com/decision/2003805296br5091746
The BAP decision, Kaplan v. Breslow (In re WLB-RSK Venture), 320 B.R. 221, 2004 WL 3119789 (9th Cir. BAP 2004)(unpublished disposition), was not a "reported" decision, and as a result, may be given less precedential weight.
Without going into PACER and looking the case / decision up, it is unknown to me whether any of the normal three judge panel making the BAP decision are still on the 6 judge panel for the 9th Cir. BAP (all bankruptcy appeals from Bankruptcy Courts in the 9th Cir. are referred automatically to the BAP), or whether the decision itself was a plurality decision.
Obviously, some additional research will be required, but Nevada is in the 9th Circuit:
Less often litigated is the issue here, namely, whether bad faith may serve as a basis for dismissal even where the criteria for commencing a suit are satisfied and where the debtor is admittedly not paying its debts as they become due. According to the Dawsons, we cannot engage in a bad-faith inquiry in these circumstances. They say a creditor’s subjective motivations are irrelevant because §303(b)(1) contains objective criteria for who may file an involuntary petition, and if they are satisfied, § 303(h)(1) provides that the court “shall order relief” against a debtor who is not paying its debts. Some courts have been receptive to this position.See, e.g., In re WLB-RSK Venture, No. BAP CC-03-1526- MOPMA, 2004 WL 3119789, at *6 n.13 (B.A.P. 9th Cir. Nov. 24, 2004) (“Section 303 sets forth the standards for granting or denying an order for relief on an involuntary petition. If the grounds for relief exist under section 303, the good or bad faith of the petitioning creditor appears irrelevant . . . .”)
In re Wavelength, Inc., 61 B.R. 614, 620 (B.A.P. 9th Cir. 1986)
Does anyone know what, if any, collateral the Marshals and other creditors have? Collateral (secured status) would seem to be a condition precedent to any request for “adequate protection.”
ferrot: If the Marshalls did this, and it was found out, it would likely subject them to the consequences of a "bad faith" filing.
Jack: The Company could not settle the debt with the smaller creditors - violation of preference provisions. That would not preclude another person / entity from 'purchasing' such debt and then moving the Court for a dismissal of the case.
It appears quite clear that management has a lot to consider, such as: 1) is there a basis to move to dismiss the bankruptcy; 2) is there a basis to object to one or more of the creditor’s claims; 3) what is the impact of the filing on the financing - does it constitute a breach or default or will SEC docs have to be amended; 4) what, if anything do Marshall et. al want in the form of “adequate protection” and does the company have the ability to provide it; 5) how does the company fund ongoing operations on a going forward basis - can the financing be approve by the bankr. court to provide the creditor with a preferred status; 6) is there an ability to purchase the claims of Marshall (others) by third parties (to avoid preference claims) and then move to dismiss the bankruptcy (would Marshall sell his claim at a ‘discount’); 7) what does Marshall really want - what will his chapter 11 plan call for (just a guess, is it possible that the Marshalls are dying for cash, did not have the staying power to pursue remedies in state court, and dropped the ‘nuclear bomb’ in an effort to obtain ‘current’ monthly payments under their notes, with the realization that the bankr. court could string out the payment of the default balance for a protracted period of time; 8) what is the impact of the bankruptcy on finding a suitor; etc.? Time will tell.
Was the "selective no cost use" of the PR aimed at keeping the interest / calls / other contacts down?
Does anyone have contacts at the WSJ and/or the major newspapers in NY, Chicago, Atlanta, Huston, Montreal, San Francisco, L.A., Paris, London, etc., to whom a copy of the Press Release can be sent?
Does anyone know to whom Mr. Pentony released the PR? Isn't this what he gets paid for?
First, is it necessary, at this time, to authorize 500,000,000 additional shares? Authorization of such a large block will take significant shareholder oversight away, I believe.
Second, what is the purpose of maintaining the preferred authorization? (just curious)
WIV: My “guess” is that Dodd is looking for or has found a buyer, even if on terms that are not palitable. Why else would he be putting management infrastructure in place, when not needed (terms of his ‘ee agreement). They are still outsourcing marketing efforts, and have no or very expensive capital. They are deferring comp (doing what, who knows); and would likely not be doing that without an “end game.” I hope that I am wrong, but this is looking more and more like a $.05-$.06 sale to someone.
Clearly, today's activity demonstrates that some shareholder(s) has had enough.
I would expect the price to bounce back, assuming that the financing package announcement comes out next week, and it is not drastically different (harmful to the shareholders), from what was previously announced.
No time soon. They don’t have any answers. Heck, they haven’t thought of the questions.
See 47390 and 47392.
Gofor: As a lot of shareholders have been saying, "FIND A BUYER." Cut a deal, cut your losses, get this into the hands of someone who can actually get something accomplished.
The arrogance of Mr. Dodd is palpable.
"Note: our approach to shareholder communications is to ensure full compliance with regulatory guidelines, thereby using public announcements, our website and other “public” means of communication. As a result, we refrain from individual shareholder interactions/communications to ensure open, compliant communications to shareholders and other interested parties. Those inquiries that can be addressed will typically be handled by Investor Relations (John Pentony: j.pentony@medizoneint.com."
Under the guise of maintaining regulatory compliance, the BOD / Management do not want to communicate with shareholders, i.e., those individuals who, in large part, have lived with this for years and years, who have valid insights and questions, who have a right to voice their communications (pro and con), etc.
WIV / ELIS: what do you think of that?
Does management have so much going on that they cannot take shareholder calls, and during those calls, refrain from commenting on information of a material nature which has not been made public? Really?
Management has not earned, nor can they earn, that right.
What are the board members and/or employees doing for the company, on a regular basis, such that "deferral" is necessary or appropriate?
I for one, would like to see management implement a policy of requiring employees to maintain a 1/4 hour activity log - much like an accountant or lawyer, so that shareholders actually know what they are paying for (or will be paying for).
It is clear that the company has "outsourced" a significant amount of what employees would traditionally do (we still do not know at what costs). So what are the employees actually doing?
CAN SOMEONE IN MANAGEMENT STEP FORWARD AND TELL THE TRUTH?
- We have something here.
- We don't know what it is.
- We don't know how it can be used.
- We don't know how to test what it is.
- We don't know how it can be commercialized.
- We don't understand the regulatory environments.
- We don't understand its value.
- We like getting paid….
- We can't structure financing.
- We don't do due diligence on potential agents.
- Etc., etc., etc.
- BUT WE WANT MORE OF YOUR TIME AND MONEY!
ANOTHER PUFF PIECE:
"Note: We recently began a series of commercial roll-out interactions with potential customers, recognizing that the first step in AsepticSure® utilization begins with real-world trial, use, validation and adoption. Our goal is to establish real-world use and evaluation of AsepticSure® within a variety of customer areas that will lead to formal adoption of our technology and product."
What is included within the "series?"
What is a "commercial roll-out interaction?"
What is "formal adoption of our technology and product?"
FDA? If so, how does this work?
Perception of one-trick pony - "product"
"We have completed our proposed protocols for the Materials Compatibility studies and Efficacy studies, which are currently under review."
Who are the studies under review by? FDA / Management / some independent?
It looks like the FDA has issues with corrosion, etc.
I thought this technology was the next best thing to sliced bread. What is the FDA challenging regarding "efficacy?"
"Regarding the timeframe for approval, we can only estimate that timeline, which we expect will be less than six months following submission."
Earliest FDA approval is now projected at the end Q1 '19
"Recently, we've commenced commercial presentations and discussions with various potential AsepticSure® customers within the U.S. Historically, the Company has conducted multiple validation demonstrations of AsepticSure®, but we've yet to achieve a real-world trial and validation use of our technology."
Why is this just happening now?
Why are these presentations / discussions limited to the U.S.?
SOMEONE SHOULD GO BACK TO PRIOR PUBLICATIONS TO SHAREHOLDERS AND DETERMINE WHAT, IT ANY, MISREPRESENTATIONS WERE PREVIOUSLY MADE ON THIS TOPIC.
"Separately, addressing non-US markets, we believe that successful "distributor development" requires a more comprehensive and formal approach than previously used, which we're addressing through efforts with existing distributors, as well as potential new distributors. We believe that to be successful, AsepticSure® distributors must be committed to and capable of addressing any national/local regulatory requirements, while committed to investing the commercial efforts necessary to achieve trial, use and adoption within their assigned territory."
This looks like more E.D. "channel" language. Does anyone have any idea what is being said here, other than there is a recognition of what they were doing does not work (but we are working with the same people / entities who have nothing to offer).
"The recent financing with SBI Investments and L2 Capital provided us with critical immediate cash, as well as the opportunity to use an Equity Line of Credit, until we can further capitalize the Company and proceed more vigorously with our efforts to establish an operating business. Once the Securities and Exchange Commission (SEC) approves our S-1 registration, use of the Equity Line of Credit can proceed. We recently withdrew the previously filed S-1 as a result of an amendment to the equity purchase agreement; we expect to file the revised S-1 within a matter of days."
What was wrong with the prior structure?
How is the structure going to change?
What is the company operating on in the interim?
"In general, we need a minimum capital raise of approximately $5 million, which will enable us to ensure that we are operating our business successfully, focused on growth in value, while addressing various longer-term, existing accounts payables."
How is the $5,000,000 figure derived?
"Improve health and lives worldwide through the adoption and use of AsepticSure®.
"Note: this ultimate goal is only achievable if we're able to successfully proceed with our FDA activities and a solid commercialization of AsepticSure®."
NO, there are other options; like sell the company!
The focus should not be on:
"only" or
"we're"
The sactions of Big Government related to HAI have not been large enough to motivate a change in practices in the medical sector. Until the government is convinced that there is a ready and viable solution, I do not see the sanctions increasing. IF FDA approval is achieved, that may well be the catalyst for Uncle Sam to get serious about HAI and take some of the do nothing incentives away from medical facilities, pharmacy, etc. Just thinking.