Part I of this Report was the subject of a
                    Form 12b-25 and has been included in this
                                     Report.

                                   FORM 10-Q/A

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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

                  For the quarterly period ended June 30, 1996

                                       OR

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


                        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           (I.R.S. Employer)
             of incorporation or              Identification No.)
                organization)

                              123 East 54th Street
                            New York, New York 10022
               (Address of principal executive offices, zip code)

                                 (212) 421-0303
              (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  X      No
                                                   ----   -----

At August 7, 1996, there were outstanding 129,951,613 shares of the registrant's
common stock.

<PAGE>
                 MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES

                                   FORM 1O-Q/A

                                      INDEX

                                  June 30, 1996


                         PART I - FINANCIAL INFORMATION
                         ------------------------------
                         
                                                                           Page
                                                                          Number
                                                                          ------
                                                                          

Item 1. - Financial Statements
------------------------------

                  Unaudited Interim Consolidated Balance Sheets             3

                  Unaudited Interim Consolidated Statements of
                      Operations                                            5

                  Unaudited Interim Consolidated Statements of
                      Changes in Stockholders' Equity                       6

                  Unaudited Interim Consolidated Statements of Cash
                      Flow                                                 12

                  Notes to Unaudited Interim Consolidated Financial
                      Statements                                           14

Item 2. -         Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                  28


                           PART II - OTHER INFORMATION
                           ---------------------------


Item 4. -         Submission of Matters to Securities Holders              31


Item 6. -         Exhibits and Reports on Form 8-K                         32

Signatures                                                                 33

                                  Page 2 of 33
<PAGE>
                         PART I - FINANCIAL INFORMATION
                         ------------------------------


Item 1. - Financial Statements
------------------------------

                 MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES
                          (A Development Stage Company)
                       Interim Consolidated Balance Sheets
                                   (unaudited)


                                     ASSETS

                                                                    December 31,
                                               June 30, 1996            1995

CURRENT ASSETS
   Cash and cash equivalents                        3,842           $       --
   Prepaid expenses and advances                   33,022                 19,431
                                               ----------           ------------

                                                   36,864                 19,431
FIXED ASSETS
   Leasehold improvements                           3,004                   --
   Office equipment                                11,663                  4,663
   Furniture and fixtures                           2,711                  2,711
                                               ----------           ------------
                                                   17,378                  7,374
   Less accumulated depreciation                    6,675                  5,401
                                               ----------           ------------
                                                   10,703                  1,973
                                               ----------           ------------
OTHER ASSETS
   Investment in affiliate (Note 1)                  --                     --
   Receivable from affiliate (Note 1)              48,947                 48,947
   License agreement (Note 5)                        --                     --
   Organization costs (net of accumulated
      amortization)                                  --                     --
   Deposits (Note 6)                               55,997                 54,302
                                               ----------           ------------
                                                 $152,511               $124,653
                                               ==========           ============

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES                                                             
   Checks issued in excess of deposit            $   --                 $  1,760
   Accounts payable                               298,534                315,972
   Accrued liabilities                             70,337                 91,986
   Notes payable (Note 10)                        194,815                147,815
                                               ----------           ------------

      Total Current Liabilities                   563,686                557,553
                                               ----------           ------------
COMMITMENTS AND CONTINGENCIES
(Notes 2, 3, 6 and 13)                               --

REDEEMABLE COMMON STOCK (Note 13)                    --                     --
                                               ----------           ------------
MINORITY INTEREST (Note 9)                           --                     --


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

                                  Page 3 of 33
<PAGE>
STOCKHOLDERS' DEFICIENCY (Notes 1, 2, 3, 7, 8, 9
   and 11)
   Common  stock,  authorized  250,000,000
   shares;  par value  $.001 per share,
   issued and outstanding 128,808,889 and
   120,123,359 shares for 1996 and 1995,
   respectively                               $   128,809           $   120,123
   Common stock subscribed                          2,216                 5,047
   Additional paid-in capital                  11,134,235            10,554,674
   Accrued stock option compensation                 -                      -
   Deficit accumulated during development
   stage                                      (11,676,435)          (11,112,724)
                                              -----------           -----------
      Total Stockholders' Deficiency             (411,175)             (432,880)
                                              -----------           -----------
                                              $   152,511           $   124,653
                                              ===========           ===========

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

                                  Page 4 of 33
<PAGE>



                 MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES
                          (A Development Stage Company)
                              Interim Consolidated
                      (unaudited) Statements of Operations


================================================================================
<TABLE>
<CAPTION>
                                          For the Six Months Ended    For the Three Months      1986) through
                                                 June 30,                Ended June 30,         June 30, 1996
                                                                                             -------------------
                                            1996          1995         1996          1995
                                            ----          ----         ----          ----
<S>                                  <C>          <C>           <C>           <C>                <C>
SALES

COST AND EXPENSES:                        $ -0-          $ -0-        $ -0-          $ -0-       $   133,349
                                     ----------   ------------  -----------   ------------       -----------
  Cost of sales                             -0-            -0-          -0-            -0-           103,790
  Research and development               70,923          9,000       31,323            -0-          2,399,49
        expenses
  General and administrative            487,084        668,229      288,175        408,839         8,129,337
        expenses
  Compensation under stock                  -0-            -0-          -0-            -0-           872,894
        options (Note 8)
  Interest expense                        5,704          5,598        2,402          3,316           737,293
  Other (income) and                        -0-            -0-         $-0-           $-0-           (16,018)
                                     ----------   ------------  -----------   ------------       -----------
        expense, net

        Total Costs and Expenses        563,711        682,827      321,900        412,155        12,226,793
                                     ----------   ------------  -----------   ------------       -----------

Net loss before extraordinary         (563,711)      (682,827)    (321,900)      (412,155)       (12,093,444)
  gain or minority interest

Extraordinary gain on sale of               -0-            -0-          -0-            -0-           100,000
  investment in subsidiary
  (Note 1)
Net loss before minority              (563,711)      (682,827)    (321,900)      (412,155)       (11,993,444)
  interest
Minority interest in loss                   -0-            -0-          -0-            -0-            26,091
Prior period adjustment (Note               -0-            -0-          -0-            -0-           291,228
                                     ----------   ------------  -----------   ------------       -----------
  11)

  Net loss                           $(563,711)     $(682,827)   $(321,900)     $(412,155)      $(11,676,125)
                                    ===========   ============  ===========   ===========       ============

  Weighted average number of        124,466,000    115,811,000  124,466,000   114,507,000         77,582,000
                                    ===========   ============  ===========   ============      ============
        shares outstanding
  Loss per share                          $0.00          $0.01        $0.01         $0.00             $(0.15)
                                    ===========   ============  ===========   ============      ============
</TABLE>



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

                                  Page 5 of 33

<PAGE>
                MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES
                          (A Development Stage Company)
       Interim Consolidated Statements of Changes in Stockholders' Equity
                  From the Date of Inception (January 31, 1986)
                        through June 30, 1996 (unaudited)

================================================================================
<TABLE>
<CAPTION>
                                                                                           Deficit
                                                                                         Accumulated
                                                             Additional    Accrued         During
                                          Common Stock         Paid-in   Stock Option    Development
                                     Shares        Amount      Capital   Compensation       Stage
                                     ------        ------    ----------  ------------    -----------

<S>                           <C>            <C>             <C>         <C>            <C>
MEDIZONE - DELAWARE
-------------------

Initial capitalization
   of Medizone Delaware
   (no par value) Feb. 
   1986 ($10.21 per share)            882    $      9,001
Shares of Medizone
   (Delaware [no par
   value] issued for
   cash, March 1986
   ($22.58 per share)                  50           1,129
                             ------------    ------------
                                      932    $     10,130
                             ============    ============

MEDIZONE - NEVADA
-----------------
(formerly Madison Funding, Inc.)
Existing shares of
  Medizone Nevada
  (formerly Madison
  Funding, Inc.) (par
  value $.001 per share)        5,500,000    $      5,500    $    139,998                $       (310)
Exchange of 932 shares
  of Medizone Delaware
  for shares of Medizone 
  Nevada resulting in a
  reverse merger, March 1986   37,500,000          10,130
Reallocation of paid-
  in capital to par
  value due to
  recapitalization as
  a result of reverse
  merger                           27,370         (27,370)
                               ----------     ------------   ------------                --------------
Balance after reverse
  merger, March 1986
  (par value $.001 per
  share)                       43,000,000          43,000         112,628                         (310)
Shares issued for
  services, July 1986
  ($.10 per share)                 50,000              50           4,950
Shares issued for
  warrants, Aug 
  through Oct. 1986
  ($.10/share)                  7,814,600           7,815         773,645
Stock issuance cost in
  connection with
  shares issued for warrants                                     (105,312)
Adjustment to accrued
  stock option compensation                                                  $    223,521
Net/(loss) for the year
  ended December 31, 1986                                                                      (795,758)
                               ----------     ------------   ------------    ------------ --------------    
Balance, December 31, 1986     50,864,600     $     50,865   $    785,911    $    223,521  $   (796,068)
</TABLE>

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

                                  Page 6 of 33
<PAGE>
                MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES
                          (A Development Stage Company)
       Interim Consolidated Statements of Changes in Stockholders' Equity
                  From the Date of Inception (January 31, 1986)
                        through June 30, 1996 (unaudited)

================================================================================
<TABLE>
<CAPTION>
                                                                                           Deficit
                                                                                         Accumulated
                                                             Additional    Accrued         During
                                          Common Stock         Paid-in   Stock Option    Development
                                     Shares        Amount      Capital   Compensation       Stage
                                     ------        ------    ----------  ------------    -----------

<S>                           <C>            <C>             <C>         <C>            <C>
Balance, December 31,
  1986                        50,864,600     $ 50,865        $  785,911  $   223,521    $   (796,068)

Shares issued for
  warrants, Jan. 1987
  ($.10 per share)                 2,600            2               257
Shares issued for
  patent, March 1987
  ($.69275 per share)          1,000,000        1,000           692,750
Shares issued for
  cash, June 1987
  (from $.10 to $.25
  per share)                     950,000          950           149,050
Shares issued for
  services, June and
  July 1987 (from $.10
  to $.25 per share)             203,167          203            24,314
Stock option
  compensation expense
  relating to option
  exercised in August
  1987                                                                       388,551
Option exercised,
  August 1987 ($.001
  per share)                     250,000          250           437,250     (437,250)
Adjustment to accrued
  stock option
  compensation                                                               510,527
Net/(loss) for the year
  ended December 31, 1987                                                               (2,749,400)
                             -----------  -----------   ---------------  -----------  ------------     

Balance, December 31,
  1987                        53,270,367       53,270         2,089,532      685,349    (3,545,468)

Options exercised,
  Jan. 1988 ($.001 per
  share)                         200,000          200            99,800      (99,800)
Shares issued for
  cash, Sept. 1988
  ($.0833 per share)           1,000,000        1,000            79,000
Shares issued for
  services (from $.10
  to $.25/share)                  35,000           35             7,965
Adjustment to accrued
  stock option
  compensation                                                              (584,599)
Issuance of shares by
  subsidiaries                                                  174,126
Net/(loss) for the
  year ended December
  31, 1988                                                                               (714,347)
                             -----------  -----------   ---------------  -----------  ------------

Balance, December 31, 1988    54,505,367      $54,505        $2,450,423         $950  $(4,259,815)
</TABLE>

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

                                  Page 7 of 33
<PAGE>
                MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES
                          (A Development Stage Company)
       Interim Consolidated Statements of Changes in Stockholders' Equity
                  From the Date of Inception (January 31, 1986)
                        through June 30, 1996 (unaudited)

================================================================================
<TABLE>
<CAPTION>
                                                                                        Deficit
                                                                                      Accumulated
                                                         Additional     Accrued         During
                                  Common Stock            Paid-in     Stock Option    Development
                              Shares        Amount         Capital    Compensation       Stage
                              ------        ------       ----------   ------------    -----------

<S>                           <C>         <C>           <C>           <C>            <C>

Balance, December 31,
  1988                      54,505,367    $    54,505   $ 2,450,423   $       950    $(4,259,815)

Shares issued for
  services (from $.10
  to $.19/share)               261,889            262        46,363
Shares issued for cash
  (from $.03 to $.10
  per share)                 5,790,000          5,790       285,710
Shares issued for
  notes and accrued
  liabilities (from
  $.06 to $.24 per
  share)                     4,749,532          4,750       578,978
Options exercised
  ($.001 per share)            375,000            375        59,125       (59,125)
Adjustment to accrued
  stock option
  compensation                  58,175
Net/(loss) for the
  year ended December
  31, 1989                                                                           (862,051)
                           -----------      ----------  -----------   -----------  ----------

Balance, December 31,
  1989                      65,681,788         65,682     3,420,599           -0-  (5,121,866)

Shares issued for
  services ($.10 per
  share)                       880,000            880        87,120
Shares issued for cash
  (from $.03 to $.05
  per share)                 4,250,000          4,250       175,250
Shares issued for
  notes and accrued
  liabilities (from
  $.055 to $.10 per
  share)                     2,422,727          2,423       137,577
Adjustment to accrued
  stock option
  compensation                   6,000
Issuance of shares by
  subsidiaries                 100,000
Net/(loss) for the
  year ended December
  31, 1990                    (606,309)
                           -----------    -----------   -----------   -----------    -----------

Balance, December 31,
  1990                      73,234,515    $    73,235   $ 3,920,546   $     6,000    $(5,728,175)
</TABLE>


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

                                  Page 8 of 33

<PAGE>
                MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES
                          (A Development Stage Company)
       Interim Consolidated Statements of Changes in Stockholders' Equity
                  From the Date of Inception (January 31, 1986)
                        through June 30, 1996 (unaudited)

================================================================================
<TABLE>
<CAPTION>
                                                                                        Deficit
                                                                                      Accumulated
                                                         Additional     Accrued         During
                                  Common Stock            Paid-in     Stock Option    Development
                              Shares        Amount         Capital    Compensation       Stage
                              ------        ------       ----------   ------------    -----------

<S>                        <C>          <C>           <C>           <C>            <C>

Balance, December 31,
  1990                    73,234,515    $    73,235   $ 3,920,546   $     6,000    $(5,728,175)

Shares issued for
  services (from $.15
  to $.20/share)             425,000            425        72,075
Shares issued for cash
  (from $.036 to $.20
  per share)               4,366,667          4,366       305,634
Adjustment to accrued
  stock option
  compensation               324,800
Options exercised
  (from $.22 to $.93
  per share)                 450,000            450       204,050      (204,050)
Sale of subsidiary's
  stock                        5,000
Net/(loss) for the
  year ended December
  31, 1991                                                                         (1,220,152)
                          -----------   -----------   -----------    -----------   ----------

Balance, December 31,
  1991                     78,476,182        78,476     4,507,305       126,750    (6,948,327)

Shares issued for
  services ($.20 per
  share)                      151,500           152        30,148
Shares issued for
  accrued liabilities
  ($.15/share)               250,000            250        37,250
Shares issued for cash
  ($.15 to $.20 per
  share)                   2,702,335          2,702       427,648
Shares issued in
  settlement of
  advances from and
  amounts due to
  stockholder ($.10
  per share)              13,118,619         13,119       800,248
Options exercised
  ($.50 per share)           250,000            250       124,750      (124,750)
Adjustment to accrued
  stock option
  compensation                (2,000)
Sale of subsidiary's
  stock                       81,100

Net/(loss) for the
  year ended December
  31, 1992                                                                            (649,941)
                         -----------    -----------   -----------    -----------   -----------

Balance, December 31,
  1992                    94,948,636    $    94,949   $ 6,008,449          --      $(7,598,268)
</TABLE>

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

                                  Page 9 of 33
<PAGE>
                 MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES
                          (A Development Stage Company)
       Interim Consolidated Statements of Changes in Stockholders' Equity
                  From the Date of Inception (January 31, 1986)
                        through June 30, 1996 (unaudited)

================================================================================

<TABLE>
<CAPTION>

                                                                                                  Deficit
                                                                                                Accumulated
                                                                  Additional        Accrued        During
                              Common Stock                          Paid-in      Stock Option   Development
     Shares                      Amount           Subscribed        Capital      Compensation      Stage
-----------------------       ------------       ------------     ----------     ------------   -----------

<S>                          <C>                <C>              <C>             <C>            <C>   
Balance, December
  31, 1992                       94,948,636     $     94,949     $  6,008,449         -         $   (7,598,268)
Cancelled shares
  previously issued
  in settlement of
  advances from and
  amounts due to
  stockholder ($.062/share)     (13,118,619)         (13,119)                         (800,248)
Shares issued for
  services from $.10
  to $.46/sh.)                    5,347,219            5,347                           542,859
Shares issued for
  cash (from $.15 to
  $.20/share)                     1,471,666            1,472                           269,528
Shares subscribed                                               $       2,619          259,296
Net/(loss) for the
  year ended December
  31, 1993                                                                                           1,598,342)
                              -------------    -------------    -------------    -------------    -------------
Balance, December
  31, 1993                       88,648,902           88,649            2,619        6,279,884      (9,196,610)

Shares issued for
  services ($.10 per
  share)                          1,431,590            1,431          141,727
Shares subscribed
  ($.10 per share)                                                      9,552          945,682
Shares subscribed
  for cancellation of
  indebtedness ($.10
  per share)                                                              417           41,234
Shares subscribed
  for cancellation of
  indebtedness to
  former management
  ($.18 per share)                                                     11,250        2,022,379
Issuance of
  subscribed stock               10,384,900    $      10,385    $     (10,385)
Issuance of shares to
  certain prior purchasers
  of common stock in
  recognition of disparity
  in purchase price in
  contemporaneous offering        1,125,834            1,126                    $      (1,126)
Prior period
  adjustment                                                                                         $     219,422
Net loss for the
  year ended December
  31, 1994                                                                                              (1,126,315)
                              -------------    -------------    -------------   ---------------      -------------  -----------
Balance, December
  31, 1994                      101,591,226          101,591           13,453        9,429,780            --        (10,103,503)
</TABLE>


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

                                  Page 10 of 33

<PAGE>
                 MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

================================================================================

<TABLE>
<CAPTION>

                                                                                                            Deficit
                                                                                                          Accumulated
                                                                            Additional        Accrued        During
                                   Common Stock                               Paid-in      Stock Option   Development
     Shares                           Amount                 Subscribed       Capital      Compensation      Stage
-----------------------    ---------------------------      ------------     ----------     ------------   -----------

<S>                       <C>                <C>              <C>             <C>            <C>           <C>

Balance, December
  31, 1994                101,591,226          101,591           13,453        9,429,780          -        (10,103,503)

Redeemable shares
  converted to common
  stock                       200,000              200                            39,800
Shares issued for
  services ($.10/sh)        2,050,000            2,050                           202,950
Issuance of
  subscribed stock         17,524,860           17,524          (17,524)
Cancelled shares
  previously issued
  to former
  management               (1,242,727)          (1,242)                          (70,563)
Shares subscribed
  ($.10 per share)                                                9,118          902,707
Prior period
  adjustment                                                                                                   71,806  
Sales of
  subsidiary's stock                                                              50,000
Net/(loss) for the
  year ended December
  31, 1995                                                                                                 (1,081,027)
                          -----------         --------       ----------    -------------    -----------  ------------

Balance, December
  31, 1995                120,123,359    $     120,123    $       5,047    $  10,554,674         -        (11,112,724)
Shares subscribed
  ($.10 per share)
Shares subscribed                                                 5,855          579,561
  ($.10 per share)
Issuance of                 8,685,530            8,686          (86,868)
  Subscribed Stock
Net/(loss) for six                                                                                           (563,711)
  months ended June
  30, 1996
Balance, June 30,       $ 128,808,889    $     128,809    $       2,216    $  11,134,235        -       $ (11,176,435)
  1996                   =============    =============    =============    =============   ============  =============
</TABLE> 


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

                                  Page 11 of 33

<PAGE>
                 MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

================================================================================
<TABLE>
<CAPTION>
                                                                       From the Date of
                                               For the Six Months     Inception (Jan. 31,
                                                 Ended June 30,         1986) through
                                              1996           1995       June 30, 1996
                                         -------------  ------------  ------------------

<S>                                        <C>          <C>             <C>   

OPERATING ACTIVITIES
Net loss of Madison Funding, Inc.                $-             $-    $      (310)
 Net loss                                  (563,711)      (682,827)    (9,714,302)
 Prior period adjustment                       --             --             --
 Adjustments to reconcile net loss
   to net cash in operating
   activities:
   Issuance of stock for services              --          185,000      1,171,306
   Stock subscription for services             --           13,380         13,380
   Compensation - stock options                --             --          924,975
   Write-off of license agreement              --             --                2
   Write-off of patent                         --             --          693,750
   Depreciation and amortization              1,274            604         19,451
   Minority interest in loss                   --             --          (26,091)
 Changes in assets and liabilities:
   Current and other assets                 (13,991)      (100,994)       (81,969)
   Accounts payable                         (17,438)       (76,583)       504,723
   Accrued liabilities                      (21,649)       (14,926)       127,122
                                        -----------    -----------    -----------
Net Cash Used in Operating Activities      (615,115)      (676,346)     6,367,967)
                                        -----------    -----------    -----------

INVESTMENT ACTIVITIES
 Additions to organization costs               --             --           (8,904)
 Additions to fixed assets                  (10,004)          --          (21,249)
 Additions to deposits                       (1,695)          --          (55,997)
                                        -----------    -----------    -----------

Net Cash Used in Investment                 (11,699)          --          (86,150)
                                        -----------    -----------    -----------
 Activities

FINANCING ACTIVITIES
 Issuance of stock for cash                    --             --        1,867,977
 Stock issuance cost                           --             --         (105,312)
 Exercise of warrants                          --             --          781,719
 Exercise of stock options                     --             --            1,525
 Sale of stock of subsidiary                   --          150,000        421,847
 Proceeds of long-term debt                    --             --          191,657
 Proceeds of notes payable                   47,000           --          330,665
 Payment of notes payable                      --             --         (189,150)
 Redeemable common stock                       --             --           40,000
 Increase in minority interest                 --             --           14,470
 Common stock subscribed                    585,416        450,778      2,702,661
 Increase in notes and loans payable           --           50,000        399,896
                                        -----------    -----------    -----------

Cash Provided by Financing                  632,416        650,778      6,457,955
                                        -----------    -----------    -----------
Activities
</TABLE>


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

                                  Page 12 of 33
<PAGE>
                 MEDIZONE INTERNATIONAL, INC., AND SUBSIDIARIES
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

================================================================================

<TABLE>
<CAPTION>

                                                                      From the Date of
                                            For the Six Months      Inception (Jan. 31,
                                              Ended June 30,           1986) through
                                             1996         1995         June 30, 1996
                                       -------------  ------------  ------------------

<S>                                    <C>           <C>           <C>       
INCREASE (DECREASE) IN CASH AND CASH   $    5,602    $  (25,568)   $    3,842
 EQUIVALENTS

 Cash and cash equivalents,                (1,760)       25,568          --
   beginning of period

 Cash and cash equivalents, end of     $    3,842          $-0-    $    3,842
                                       ==========    ==========    ==========
   period

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION

 Cash paid for interest                      --            --      $   26,483

SUPPLEMENTAL SCHEDULE OF NONCASH
 ACTIVITIES

 Conversion of notes payable to              --            --      $2,091,980
   stock
 Conversion of long-term debt to             --            --         191,658
   stock
 Conversion of accrued liabilities           --            --         258,689
   to stock
 Conversion of accounts payable to           --            --           4,285
   stock
 Conversion due to stockholders to           --            --       1,103,263
   stock
 Issuance of stock for license               --            --               2
   agreement
 Issuance of stock for patent                --            --         693,750
 Cancellation of stock for                   --            --         813,367
   reinstatement due to
   stockholders
 Conversion of redeemable common             --            --          40,000
   stock to common stock
</TABLE>

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

                                  Page 13 of 33

<PAGE>

                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

1.     NATURE OF THE BUSINESS

Background
----------

Medizone International,  Inc., a Delaware corporation  ("Medizone-Delaware") was
formed on January 31, 1986.  Medizone  International,  Inc. (the  "Company") was
organized  under the laws of the State of Nevada on August  27,  1984 as Madison
Funding, Inc. ("Madison") for the purposes of investing in, acquiring, operating
and disposing of businesses or assets of any nature. On March 26, 1986,  control
of Madison was acquired by the  stockholders of  Medizone-Delaware,  and Madison
changed  its  name  to  Medizone  International,  Inc.  The  substance  of  this
transaction  was the  acquisition  of the net  monetary  assets  of  Madison  in
exchange for the equity of  Medizone-Delaware.  As a result of this transaction,
the stockholders of Medizone-Delaware acquired 87.2% of Madison.  Therefore, the
transaction was accounted for as a pooling of interests.

On November 18, 1987, Medizone Canada Ltd. ("MedCan") was incorporated under the
laws of the Province of British  Columbia with authorized  capital of 25,000,000
common  shares  without par value.  Shortly  thereafter,  MedCan  entered into a
license agreement with the Company wherein the Company transferred to MedCan the
licenses and rights  necessary to permit MedCan to hold  substantially  the same
rights  with  respect  to the  medical  applications  of ozone in  Canada as the
Company  does in the United  States.  As  consideration  for the  transfer,  the
Company  received  3,000,000  shares of MedCan and, in addition,  purchased  one
share for the sum of $1.00. Under a separate agreement among the Company, MedCan
and Australian Gold Mines Corporation  (AGMC),  (which later changed its name to
International Blue Sun Resource  Corporation),  a company incorporated under the
laws of the  Province of British  Columbia,  AGMC  purchased  130,000  shares of
MedCan for (U.S.) $100,000.  On December 23, 1988, MedCan was recapitalized in a
transaction in which the majority of its shares were exchanged for shares of KPC
Investments, a Utah corporation ("KPC"). Following this transaction, the Company
owned 25,029,921 shares of KPC,  representing 72% of the outstanding shares. KPC
then changed its named to Medizone  Canada,  Ltd. (MCL).  MedCan acquired all of
the  assets of KPC,  consisting  solely of cash in the  amount of  approximately
$89,000. KPC and its subsidiary MedCan are hereinafter referred to as MCL.

Formation of Joint Venture Subsidiary
-------------------------------------

On June 22, 1995, the Company  entered into a series of contracts  (collectively
the "Transaction  Documents") which resulted in the formation of a joint venture
subsidiary  incorporated in New Zealand,  Medizone New Zealand Limited  ("MNZ").
MNZ, a  privately  held  corporation  equally  owned by the  Company  and Solwin
Investments Limited ("Solwin"), a New Zealand corporation, was organized on June
22, 1995, and is a research and development  stage company whose objective is to
obtain  regulatory  approval  for the  distribution  of the  Company's  patented
technology  in New  Zealand,  Australia,  South East Asia and the South  Pacific
Islands.

Pursuant to the Transaction Documents, the Company purchased one hundred percent
of MNZ from Richard G. Soloman ("Solomon"),  a New Zealand citizen, who became a
director of the Company in January,  1996 and who caused the formation of MNZ on
June 22, 1995.  Contemporaneously with this transaction,  the Company sold fifty
percent of MNZ to Solwin, a corporation owned by Solomon, for U.S. $150,000,  of
which $50,000 was thereupon  loaned by the Company to MNZ on a demand basis. The
Directors of MNZ are Solomon and Dr. Joseph L. Latino,  the Company's  President
and Chief Executive Officer.

                                  Page 14 of 33
<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

1.    NATURE OF THE BUSINESS (continued)-

Formation of Joint Venture Subsidiary (continued)
-------------------------------------

Contemporaneous with the creation of the above share structure,  the Company and
MNZ  entered  into a  Licensing  Agreement  (the  "Licensing  Agreement")  and a
Managing Agent Agreement (the "Managing Agent Agreement) with MNZ.

Pursuant to the Licensing Agreement, the Company granted an exclusive license to
MNZ for its process and equipment patents and trademark in New Zealand.  MNZ has
agreed to apply for  corresponding  patent  protection  for the  patents  in New
Zealand  and to use its best  efforts  to  exploit  the  rights  granted  in the
agreement.  The License  Agreement shall terminate on the date of the expiration
of the last to expire of any  patent  obtained  in New  Zealand,  or, if no such
patents are obtained,  on June 22, 2010.  The Company is to receive a guaranteed
minimum royalty (the "Guaranteed  Minimum Royalty") in an amount to be agreed to
by the  Company  and MNZ,  commencing  in the third  year  after  all  necessary
regulatory  approvals  requisite to the  licenses,  use or  distribution  of the
Company's  proprietary  technology  have been  obtained in New  Zealand.  If the
Company  and MNZ are unable to agree upon the amount of the  Guaranteed  Minimum
Royalty,  the  Company  may  terminate  the  license  on  thirty  days'  notice.
Commencing on the first sale to a user by MNZ, the Company shall receive a sales
royalty in an amount  equal to ten percent of MNZ's gross annual sales under the
License Agreement.

Pursuant to the Managing Agent Agreement, MNZ will act as the Company's agent in
the finding of other  licensees of the  Company's  patents and  trademark in the
following  countries:  Australasia  (including  Australia and New Zealand),  the
South Pacific Islands and South East Asia (including the Philippines,  Indonesia
and  Vietnam).  Licensing  fees  obtained  as a  result  of the  Managing  Agent
Agreement shall be divided between the Company and MNZ on a sliding scale as set
forth below: 

                                                            Medizone
                                                            Medizone New Zealand
                                        Limited             International, Inc.
                                        -------             --------------------

Initial license                           50%                        50%

Subsequent license
fees up to $500,000                       50%                        50%

Subsequent license fees
between $500,000 and $750,000             75%                        25%

Subsequent license fees in
excess of $750,000                        85%                        15%

MNZ and the  Company  will also  divide any net  royalties  paid to the  Company
pursuant to any license obtained pursuant to the Managing Agent Agreement,  with
MNZ being paid 10% of the net royalties and the Company receiving 90% of the net
royalties.

                                  Page 15 of 33
<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

1. NATURE OF THE BUSINESS (continued)-

Formation of Joint Venture Subsidiary (continued)
-------------------------------------

The Managing Agent  Agreement  shall expire on the  termination or expiration of
the  last  of  the  licenses  obtained  pursuant  thereto,  subject  to  earlier
termination by the Company upon an occurrence of certain events.

Pursuant  to  Emerging  Issues  Task  Force  Statement  No.  89-7,  the  Company
recognized a $100,000 gain on the sale of MNZ to Solwin.

Business Activities
-------------------

The Company's  objective is to gain regulatory  approval for the medical uses of
ozone to  inactivate  certain  viruses and to assist in the treatment of certain
diseases and to develop, promote and distribute  ozone--generating equipment and
related products for medical applications.

By letter agreement with the Italian Scientific Society for Oxygen-Ozone Therapy
("ISSOT") in Bergamo,  Italy,  dated March 23, 1993, the Company  entered into a
collaborative  arrangement to research and examine the efficacy of ozone therapy
and the Company's  technology in the  treatment of various  blood-related  human
diseases. The research is to be conducted by ISSOT in Italy, under the direction
of a research group  assembled by the Italian  Ministry,  to which the Company's
president was appointed in April, 1993.

On May 16, 1994, the Company announced that human trials were to commence at the
University of Naples on May 30, 1994 to study the effects of Medizone (the drug)
on patients  infected with either HIV or Hepatitis B (chronic  active).  The two
protocols,  either for HIV or Hepatitis B patients, were designed by the Company
as  classical  Phase  1  trials  of  the  Company's  patents  to  determine,  in
dose-ranging  study, the relative  toxicity of this treatment  against surrogate
markers of efficacy.  To date,  the  University of Naples  remains the only site
that has actually commenced these trials, with other university-based  hospitals
still  awaiting  approval by their Italian  university  authorities on a site by
site basis.  In that regard,  such  approvals have been received by San Raffaele
Hospital  of the  University  of Milan  (with  respect to HIV) and the  Regional
Oncology  Center and AIDS  Treatment  Center at Aviano (with  respect to chronic
active  Hepatitis  B).  Trials will not actually  begin at these sites until the
Company has the  financial  wherewithal  to make a binding  commitment to fund a
portion of the research  costs.  There can be no assurance  that any of the data
generated from the ISSOT research will be permitted to be utilized in connection
with the Company's applications to the FDA.

2.   CHANGES IN MANAGEMENT CONTROL AND LITIGATION AGAINST FORMER MANAGEMENT

Changes in Control
------------------

In November 1992,  four directors  resigned from the Board.  Two of the outgoing
directors,  who were the founding  shareholders  of the  company,  were also the
Company's sole officers  (former  management or former  officers and directors),
and they resigned from these  management  positions as well. Three new directors
were elected by the outgoing  directors and three new officers (new  management)
were then appointed on an interim basis,  to serve until the formal  election of
directors  and   appointment   of  officers  at  the  next  annual   meeting  of
shareholders.

                                  Page 16 of 33
<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

1. NATURE OF THE BUSINESS (continued)-

Formation of Joint Venture Subsidiary (continued)
-------------------------------------

2.     CHANGES IN MANAGEMENT CONTROL AND LITIGATION AGAINST FORMER
       MANAGEMENT

Litigation Against Former Management
------------------------------------

In November 1992, a derivative  action was filed in the U.S.  District Court for
the District of New Jersey by two shareholders of the Company against two of its
former officers and directors.  The Company was named as a nominal  defendant in
the action but in January 1993, the Company  substituted  itself as a real party
plaintiff.  The Company filed an amended complaint seeking damages and equitable
remedies  and  alleging,  among  other  things,  that the  former  officers  and
directors  defrauded  the  Company,   breached  fiduciary  duties  owed  to  the
shareholders, and committed violations of federal securities laws.

In November 1993, the defendants  replied to the  counterclaims  asserted by the
Company.  The reply  contained  additional  counterclaims  seeking  monetary and
injunctive  relief under various  provisions of the federal  securities laws and
the common law. The defendants also asserted a derivative counterclaim on behalf
of the Company against  certain current and former  directors based upon alleged
breaches of a written  agreement  between the defendants and the Company's board
of directors.  Although the claims originally  asserted by the defendants in the
New York action sought only declaratory relief, the newly asserted claims sought
damages in excess of $2.0 million.

On May 18, 1994, the parties reached  agreement in principle to settle all their
litigation.  On September 27, 1994, the parties  stipulated to  discontinue  the
action pending the  finalization  of the  settlement.  On December 28, 1994, the
written settlement  agreement was signed. The settlement  agreement provides (i)
that  Messrs.  McGrath  and  Watrous  will not  challenge  the  validity  of the
Company's  board of directors  resolution  to rescind  approximately  13,000,000
shares of the Company's stock previously issued to Mr. McGrath and approximately
1,200,000 shares previously issued to Mr. Watrous and to reinstate the Company's
debt to Messrs.  McGrath and Watrous  that had been  retired by the  issuance of
those shares; and (ii) for the Company to acknowledge the validity of $2,033,628
of debt to Messrs.  McGrath and Watrous. In connection with the settlement,  Mr.
McGrath  assigned his portion of the above mentioned debt to Mr. Watrous,  which
was thereupon  satisfied by the Company's  issuance to Mr. Watrous of 11,250,000
shares of the Company's  common stock  restricted  under the  Securities  Act of
1933.


                                 Page 17 of 33
<PAGE>
                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

3. GOING CONCERN

Continuation  of the  Company as a going  concern is  dependent  upon  obtaining
additional  capital,  obtaining the requisite  approvals  from the Food and Drug
Administration   ("FDA")  for  the  marketing  of  ozone-related   products  and
equipment,  and ultimately,  upon the Company's attaining profitable operations.
The Company will require a substantial  amount of  additional  funds to complete
the development of its products, to establish manufacturing facilities, to build
a sales and  marketing  organization  and to fund  additional  losses  which the
Company expects to incur over the next several years.

The Company has filed with the FDA an  application  for an  Investigational  New
Drug ("IND") exemption.  Until such application is granted, the Company may only
provide  ozone-related   equipment  to  researchers  who  agree  to  follow  FDA
guidelines.  There can be no assurance that the FDA will grant such application.
The Company has been advised that clinical studies (i.e., on human subjects) may
not commence  unless and until the Company  complies with a number of conditions
which include  additional  studies,  in particular with regard to chronic animal
toxicity and other research,  which will require the expenditure of considerable
resources.  These  regulatory  restrictions  greatly  limit the  ability  of the
Company to generate  revenues.  The  financial  condition  of the  Company  will
continue to deteriorate  until profitable  operations are achieved or additional
capital is received, of which there can be no certainty.

The management of the Company intends to seek  additional  funding which will be
utilized  to fund  additional  research  and  continue  operations.  The Company
recognizes  that, if it is unable to raise  additional  capital,  it may find it
necessary to substantially reduce or cease operations.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------

The consolidated  financial statements include the accounts of the Company, MCL,
a  66.6%  owned  subsidiary  and   Medizone-Delaware   (an  inactive   company).
Intercompany transactions have been eliminated.

Cash and Cash Equivalents
-------------------------

The Company considers all highly liquid instruments purchased with a maturity at
the time of purchase of less than three months to be cash equivalents.

Fixed Assets
------------

Fixed  assets  are  stated  at  cost.   Depreciation   is  computed   using  the
straight-line  method  over five  years for office  equipment  and ten years for
furniture  and  fixtures.  Maintenance  and  repairs  are  charged to expense as
incurred.  Upon  retirement  or sale,  the cost of the assets  disposed  and the
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is credited or charged to income.


                                 Page 18 of 33
<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)-

Other Assets - Organization Costs
---------------------------------

Organization  costs were  deferred  and  amortized  over a 60-month  period on a
straight-line basis.

Loss per Share
--------------

The  computation  of  primary  loss per  share of  common  stock is based on the
weighted average number of shares outstanding during the period.

5. OTHER ASSETS

Patent
------

In  March  1987,  the  Company  acquired  a  patent  from  Immunologics  Limited
Partnership  ("Immunologics")  in exchange for 1,000,000 shares of the Company's
common stock. In 1988,  Immunologics purchased for $25,000,  5,000,000 shares of
the Company's common stock from the former Chairman and Chief Executive  Officer
of the Company.  The patent  covers a procedure  for "ozone  decontamination  of
blood  and blood  products"  through  the  treatment  of stored  blood and blood
components. The Board of Directors assigned a value of approximately $700,000 to
the  patent  based  upon  the  fair  market  value  of the  stock on the date of
acquisition  together with related legal costs.  The Company charged the cost of
the patent to  research  and  development  expense at  acquisition  because  the
technologies  covered  by  the  patent  have  not  been  approved  by  the  FDA.
Additionally,  the Company agreed to pay the seller a royalty fee equal to 3% of
the net  receipts  received  by the Company in  connection  with the sale of any
product, device or apparatus which embodies the patent. The Company's management
considers  the  acquisition  and  retention  of the patent to be material in its
development and prospects.  In 1992, the General Partner of Immunologics  became
chairman of the Company's Board of Directors and subsequently  resigned from the
Company's Board of Directors in September 1993.

License Agreement
-----------------

On February 4, 1986,  the Company,  in exchange for shares of its common  stock,
acquired  from a  principal  stockholder  his  interest  in a license  agreement
covering the distribution of ozone-generating  equipment.  The license agreement
was carried at $1.00 through  December 31, 1991;  as that was the  stockholder's
basis, and was written off as of December 31, 1992.

6. COMMITMENTS AND CONTINGENCIES (See also Note 10)

The Company  leases its main office  facilities  at a rental of $1,745 per month
through February 28, 1998.

During 1992, a financial  consulting entity agreed to raise equity financing for
Medizone. An agreement was executed requiring the Company to tender $50,000 to a
third party whose obligation was to hold the funds in escrow pending  completion
of the  financing;  however,  these sums were not tendered at that time.  In the
event of completion of the financing,  the $50,000 would be released from escrow


                                  Page 19 of 33

<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

6.     COMMITMENTS AND CONTINGENCIES (See also Note 10) (continued)

to the  consultant  to defray  legal  fees of the  consultant.  In the event the
financing failed to be completed,  the funds were to be returned to the Company.
In a separate transaction during 1992, the Company sold 250,000 shares of common
stock to five investors for $50,000, and caused the proceeds to be paid directly
to  the  third  party  in  the  pending  financing   transaction.   The  Company
acknowledged  constructive  receipt  of the funds by  executing  stock  purchase
agreements and the 250,000 shares were  subsequently  issued in 1993. The equity
financing  has not yet taken place and the Company  continues to seek the return
of the $50,000. However, the financial consulting entity intends to continue its
efforts to raise equity financing and has not refunded the $50,000.

On or about June 6, 1994,  Maureen Abato,  the Company's former outside counsel,
filed  suit in the  Supreme  Court of the State of New York,  County of New York
entitled Abato v. Medizone International, Inc., Medizone Canada, Ltd. and Joseph
S. Latino. The complaint contains thirteen causes of action. Three of the causes
of action are for breach of  contract,  account  stated and  quantum  meruit for
recovery of unpaid  legal fees  allegedly  due  plaintiff  by the Company in the
amount of $67,864.  The remaining  claims are for fraud,  wrongful  termination,
sexual  discrimination,  defamation,  tortious  interference  with  contract and
intentional  infliction  of  emotional  distress.  With respect to each of these
causes of action, plaintiff sought unspecified compensatory damages and punitive
damages of not less than $1 million.

On October 24,  1994,  the Company  and the other  defendants  moved for partial
summary judgment dismissing all of plaintiff's claims except her legal fee claim
based on quantum  meruit.  By decision and order dated  February  14, 1995,  the
Court dismissed all of the plaintiff's  claims except for breach of contract and
for an account  stated;  however,  the court  limited  plaintiff's  claim to her
actual damages and dismissed her claim for punitive damages on these counts.  In
addition, the court dismissed these claims in their entirety as against Medizone
Canada, Ltd. and Dr. Latino.

A Stipulation of Settlement was executed by the parties, dated October 30, 1995,
whereby the Company paid $61,000 in full settlement of all remaining claims.

7.   ISSUANCE OF COMMON STOCK AND WARRANTS

Under  the  terms  of the  settlement,  if the  Company  defaults  in any of the
payments,  the plaintiff can, after seven days' notice,  enter judgment  against
the Company for the balance due. On November 10, 1995, the plaintiff  executed a
release against Medizone International, Inc., Medizone Canada Ltd. and Joseph S.
Latino.

Unless  otherwise  stated,  all  transactions  shown  below were with  unrelated
parties and the securities issued were restricted.

Madison initially issued 1,500,000 shares in a private  transaction for proceeds
of $3,000.

                                  Page 20 of 33
<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

7. ISSUANCE OF COMMON STOCK AND WARRANTS (continued)-

In May 1985, Madison sold in a public offering, 4,000,000 shares of common stock
and  8,000,000  warrants  to  purchase a common  stock at $0.10 per  share.  The
proceeds from the offering to Madison were  $200,000.  The costs of the offering
were offset against paid-in capital.

On  March  26,  1986,   Madison  issued   37,500,000  shares  of  common  stock,
representing  87.2% of the  then  outstanding  shares,  to the  stockholders  of
Medizone - Delaware,  including two officers and directors,  in exchange for all
of the shares of Medizone - Delaware.  The costs of the transactions were offset
against paid-in capital.

In July 1986,  the Company  issued 50,000 shares of common stock to  individuals
for services rendered.

During  the  period  from  August  1986  through  October  31,  1986,  the final
expiration  date for exercise,  warrants to purchase  7,814,600  shares together
with cash  totaling  $781,460  were  received by the  Company  which then issued
7,814,600  shares of new common stock.  In January  1987,  an  additional  2,600
shares were issued in exchange for warrants and cash of $259.

In March 1987, the Company issued  1,000,000  shares of common stock in exchange
for a patent (see Note 5).

In June 1987,  the  Company  issued  950,000  shares to  individuals  in private
transactions for aggregate proceeds of $150,000.

During the period from June 1987 through July 1987,  the Company  issued 203,167
shares of common stock to various vendors and individuals for services  rendered
in 1986 and 1987.

On August 26,  1987,  an officer of the  Company  exercised  options to purchase
250,000  shares of common stock.  In January 1988, two holders  exercised  their
options and acquired an aggregate of 200,000 shares of common stock.

On September  26, 1988,  the Company  sold,  in a private  placement,  1,000,000
shares of common stock at $0.08 per share to an individual.

During  1988,  the Company  issued a total of 35,000  shares of common stock for
services.  During 1989,  the Company  issued  261,889  shares of common stock to
various vendors and individuals for services rendered in 1988 and 1989.

During 1989,  the Company  issued  5,790,000  shares to  individuals  in private
transactions for aggregate proceeds of $291,500.

Also during 1989,  the Company  satisfied  obligations  for notes payable to and
accrued interest due to unrelated  individuals totaling $377,539 by the issuance
of 3,899,532 shares of common stock. The Company issued 250,000 shares of common
stock to an officer and 600,000  shares of common stock to three advisors to the
Company  as  additional  compensation  for  work  done  for the  Company.  These
issuances  were ascribed  values of $60,650 and $145,539,  respectively,  by the
Company.  Also during 1989, two holders  exercised their options and acquired an
aggregate of 375,000 shares of common stock.

                                  Page 21 of 33
<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

7. ISSUANCE OF COMMON STOCK AND WARRANTS (continued)-


During 1990,  the following  equity  transactions  occurred:  The Company issued
4,250,000 shares to individuals in private  transactions for aggregate  proceeds
of $179,500;  the Company satisfied  obligations totaling $125,000 to the former
vice president, secretary and treasurer as well as director by issuing 2,272,727
shares of common stock at $0.55 per share; the Company  satisfied an outstanding
account payable to an unrelated  individual  totaling $15,000 by the issuance of
150,000 shares of common stock at $0.10 per share;  and the Company issued to an
employee and four other unrelated  persons as compensation or payment a total of
880,000 shares of common stock to which it ascribed a value of $88,000.

During 1991,  the following  equity  transactions  occurred:  The Company issued
4,366,667 shares to individuals in private  transactions for aggregate  proceeds
of $310,000;  the Company  issued a total of 425,000  shares of common stock for
services and accrued  liabilities  of which an aggregate of 100,000  shares were
issued to two directors;  and three holders exercised their options and acquired
an aggregate of 450,000 shares of common stock.

During 1992,  the following  equity  transactions  occurred:  The Company issued
2,702,335 shares to individuals in private  transactions for aggregate  proceeds
of $430,350;  the Company  issued a total of 401,500  shares of common stock for
services  and accrued  liabilities;  holders  exercised  options and acquired an
aggregate of 250,000  shares of common  stock.  Also,  during  1992,  13,118,619
restricted  shares of the Company's stock were issued pursuant to an approval by
the Company's board of directors in December 1989 to the former president, chief
executive  officer and board chairman for the settlement of $813,367 of advances
made to the Company.

During 1993,  the following  equity  transactions  occurred:  The Company issued
1,471,666 shares to individuals in private  transactions for aggregate  proceeds
of $271,000;  the Company issued a total of 5,347,219 shares of common stock for
services;  the Company canceled the 13,118,619  shares of common stock issued in
1992 to the former president,  chief executive officer and board chairman.  As a
result  of this  cancellation  of  shares,  the debt that was  removed  from the
Company books when the shares were issued,  was restored.  The restored debt was
$813,367.  Also,  during  1993,  a total of  $261,915  was  received in cash for
2,619,150  shares  subscribed  as a  result  of  a  private  placement  offering
(Offering).  The Offering  commenced as of November 26, 1993,  with a maximum of
$700,000 to be raised in gross proceeds from the sale of up to 7,000,000 shares.


                                 Page 22 of 33
<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

7.  ISSUANCE OF COMMON STOCK AND WARRANTS (continued)-

During 1994, the following equity  transactions  occurred:  The Company issued a
total of 1,431,590  shares of common stock for  services;  the Company  issued a
total of 1,125,834  shares of common stock to certain prior purchasers of common
stock in recognition of disparity in purchase in contemporaneous  Offering. Also
during  1994,  a total of $680,040  was  received in cash for  6,800,499  shares
subscribed  as a  result  of  the  Offering.  Subsequent  to  the  Offering,  an
additional  $316,860 was received in cash from foreign investors  subscribing to
3,168,600  shares of common stock.  On December 28, 1994, the Company  settled a
dispute  regarding  the validity of notes  payable to former  management  in the
amount of $2,033,628 (see Note 2) by agreeing to issue 11,250,000  common shares
(recorded as shares subscribed) in satisfaction of the total amount of the debt.

Also in 1994,  $40,000 of notes  payable (a portion of loans  totaling  $60,000)
together with interest was satisfied by issuing  416,500 shares of common stock.
(See Note 10.)

During 1995, the following equity  transactions  occurred:  The Company issued a
total of 2,050,000  shares of common stock for  services.  $911,825 was received
from investors  subscribing to 9,118,260 shares of common stock. Also, 7,524,860
common  shares,  previously  recorded as shares  subscribed,  were  issued,  and
1,242,727 were retired in accordance  with the settlement  agreement with former
management  (see  Note 2).  Two  hundred  thousand  of  redeemable  shares  were
converted  into  common  stock.  The  Company  sold  shares  of its New  Zealand
subsidiary for aggregate proceeds of $150,000.

During the first six months of 1996, the Company received  $585,416 in cash from
investors subscribing to 5,854,160 shares of the Company's common stock.

8.  STOCK OPTIONS

During 1986, the Company  granted  nonqualified  options to a number of persons,
consisting of an officer,  employee and consultants to the Company,  to purchase
an aggregate  of  l,150,000  shares of common stock of the Company at an initial
exercise price of $.25 per share, the estimated fair value at the date of grant.

During 1988,  the Company  granted a  nonqualified  option to a newly  appointed
member of the Board of  Directors  of the Company to purchase  an  aggregate  of
150,000  shares of common stock of the Company at an exercise price of $.001 per
share. The options were exercisable  50,000 shares on each of November 29, 1989,
1990 and 1991 and were to expire on November 29, 1994.  This director  exercised
the option which became exercisable on November 29, 1989 and resigned on January
22, 1990.

During 1989, in consideration  for services rendered over the prior three years,
the Company  granted to a member of it Scientific  Advisory Board a nonqualified
option to purchase  325,000 shares of common stock of the Company at an exercise
price of $.001 per share. This option was exercised in 1989.

                                  Page 23 of 33
<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

8.  STOCK OPTIONS (continued)-

During 1990, in consideration  for services  rendered over the prior four years,
the Company granted to a member of its Scientific  Advisory Board a nonqualified
option to purchase  150,000  shares of common stock of the Company at an initial
exercise price of $.10 per share. This option was exercised in 1991.

All options were  exercisable for a period of five years beginning one year from
the date of  grant.  Compensation  expense,  measured  as to the  excess  of the
estimated  fair value over the  exercise  price,  was  accrued  over the service
period. If, on the date of exercise,  the estimated fair value of a share of the
Company's  common  stock  exceeded the exercise  price,  the exercise  price was
decreased by a like amount (but not below the par value of $.001). At the end of
each fiscal period,  total accrued  compensation  was recorded as the difference
between the adjusted  exercise price and the fair market value at the end of the
period for all exercisable  shares. The total accrued  compensation was adjusted
each year for changes in the fair market  value of the  Company's  stock and for
option exercises and cancellations.

The shares issued in connection with the exercise of the options were restricted
shares to be held for investment purposes only.

In 1995, as part the their employment  agreements,  the Company's  president and
chief executive  officer,  and  vice-president  and chief financial  officer and
treasurer,  were granted options to purchase an aggregate of 4,500,000 shares of
the Company's  common stock at an exercise  price of $.20 per share,  which vest
fully on January l, 1998 over the following vesting schedule;  33% on January 1,
1996, 33% on January 1, 1997, and 33% on January 1, 1998.

       The following is a summary of option transactions:


                                              Shares under Option
                                           1995      1994        1993

Outstanding, beginning of year              -          -           -
Granted                                 4,500,000      -           -
Canceled                                    -          -           -
Exercised                                   -          -           -
                                        ---------  ---------  ----------
Outstanding, end of year 4,500,000

Eligible, end of year, for current
exercise                                    -          -           -
                                        =========  =========  ==========

                                  Page 24 of 33
<PAGE>
                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================


9.  MINORITY INTEREST

In June 1988, MCL issued 2,000,000 units consisting of one share of common stock
and two  warrants  which allow the holder to purchase  one share of common stock
per warrant.  The warrants are exercisable at $.125 per share.  The net proceeds
of this offering were $84,024.  The warrants were originally scheduled to expire
on December 31, 1992 but were extended to December 31, 1995. In 1988, MCL issued
1,938,000 shares of common stock at $.005 per share to a consultant for services
rendered.  Following  these  transactions,  the  Company's  ownership of MCL was
72.2%.

In 1990,  MCL issued  983,333 shares of common stock at prices ranging from $.05
to $.075 in private  offerings to two individuals  unrelated to MCL for proceeds
of $57,400.  MCL also issued 850,000 shares to five individuals,  550,000 shares
to the three directors of MCL, 50,000 shares to an employee,  and 250,000 shares
to a consultant  for  services  rendered to which MCL assigned the value of $.05
per share  for an  aggregate  of  $42,500.  Following  these  transactions,  the
Company's  ownership of MCL was 68,6%.  These  transactions  had previously been
incorrectly  reported as minority  interest.  Minority  interest should not have
been recorded on the balance sheet because of the magnitude of the stockholders'
deficiency of these  stockholders.  Accordingly,  amounts  previously  stated as
minority interest have been restated to additional paid-in capital.

10. TRANSACTIONS WITH RELATED PARTIES (See also Note 6)

On April 7, 1988,  a group of ten  stockholders  advanced  funds to the  Company
totaling  $60,815.  The loans bear simple  interest at 10%;  due on demand.  The
Company is obligated  to accept the note at face value plus accrued  interest as
partial  payment  for  shares  the lender may  purchase  from the  Company  upon
exercise of the lender's option to acquire shares from the Company.

During 1994 the Company  received  loans of $37,000.  Of this amount $28,000 was
received from directors of the Company and $9,000 from a third party.  The loans
bear simple  interest  at 8%. All  principal  and  interest is due on August 22,
1995.  Each  lender has the right to convert any  portion of the  principal  and
interest  into  common  stock at a price per share  equal to the price per share
under the most recent private placement transaction.

During 1995, the Company  received loans of $50,000 from a director and a family
member of the same director.  Also in 1995, the Company  advanced  approximately
$50,000 to its joint venture partner in New Zealand. (See Note 1.)

During the first  quarter of 1996,  the Company  received  loans of $47,000 from
directors.

11. RESTATEMENTS OF PRIOR PERIODS (Unaudited)

Beginning in 1991,  the Company  began  selling off its holdings of MCL to raise
cash for operations. The Company sold 100,000 and 610,000 shares of MCL's common
stock  during  1991 and 1992,  respectively,  through a broker  for  $5,000  and
$81,100  at $.05 per share in 1991 and per share  prices  ranging  from $.093 to
$.179 in 1992.  Because the Company's  investment in MCL was only $2, the entire
$5,000  and  $81,100  were  recorded  as gains  in the  Company's  statement  of
operations  during the fourth  quarter of 1991 and the first  three  quarters of
1992, respectively. During the fourth quarter of 1992, an adjustment was made to
classify these sales as equity transactions.

                                  Page 25 of 33
<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

================================================================================

11.    RESTATEMENTS OF PRIOR PERIODS (Unaudited) (continued)-

The effect of these restatements is as follows:

<TABLE>
<CAPTION>
                                                        Three Months Ended
                  ----------------------------------------------------------------------------------------------
                  December 31, 1991  March 31, 1992      June 30, 1992      September 30, 1992 December 31, 1992

<S>                   <C>                <C>               <C>                <C>                <C>
Net loss:
Previously
Reported              $1,215,200         $ 151,930         $ 173,496           $ 147,905         $  89,510
Adjustment                 5,000            24,555                 -              24,470            32,075

As adjusted           $1,220,200         $ 176,485         $ 173,496           $ 172,375         $ 121,585
                       =========           =======           =======             =======           =======
</TABLE>

These  restatements do not affect previously  reported loss per share because of
rounding.

See Note 9 for restatement of minority interest in prior years.

The Company has restated its  financial  statements  to reflect  adjustments  to
write off  liabilities  which were accrued and expended in years prior to fiscal
1992. These adjustments  increased  previously reported  accumulated deficit and
reduced  previously  reported  results of operations (for the period January 31,
1986,  date of  inception,  through  December 31, 1994) by $219,422.  During the
first quarter of 1995, the Company  recorded a further  reduction to accumulated
deficit  in the  amount  of  $71,806  relating  to the  cancellation  of  shares
previously issued to former management.

12.      INCOME TAXES

Effective  January 1, 1993,  the Company  adopted  Statement  of  Financial
Accounting Standards No. 109, Accounting for Income Taxes. The cumulative effect
of the change in accounting principle is immaterial.

At December 31, 1995, the Company has a net operating loss ("NOL")  carryforward
totaling  approximately  $7,450,000  that may be offset  against  future taxable
income in varying amounts through 2004. No benefit has been reported in the 1995
or 1994 financial statements,  however, because the Company believes there is at
least a 50% chance that the carryforward  will expire unused.  Accordingly,  the
tax benefit of the loss carryforward has been offset by a valuation allowance of
the same  amount.  The  expected  tax benefit  that would  result from  applying
federal  statutory tax rates to the pretax loss differs from amounts reported in
the financial statements because of the increase in valuation allowance.

Under certain  circumstances,  Section 382 of the Internal  Revenue Code of 1986
restricts a  corporation's  use of its NOL  carryforward.  Due to the  Company's
issuance of additional  stock the Company's use of its existing NOL carryforward
could be limited.  Therefore,  the Company may have to pay federal  income taxes
sooner than if the use of its NOL carryforward were not restricted.

                                  Page 26 of 33

<PAGE>


                  MEDIZONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



13. REDEEMABLE COMMON STOCK

On February 12,  1993,  per a settlement  agreement  ("Agreement"),  the Company
issued  200,000  shares of restricted  common stock to an unrelated  third party
("Party").  According to the  Agreement,  if net funds  available to the Company
totaled at least $1.75 million prior to the shares becoming  unrestricted,  then
the Party would have the continuing right to require the Company to purchase all
or a portion of the shares pursuant to a formula specified in the Agreement.  If
the Company filed a registration statement for an offering of its securities, it
was required to use its best efforts to include such shares in the  registration
statement.  If all, or any portion of the shares had not been  purchased  by the
Company  pursuant to the exercise of the put option  described above, or all the
shares had not been covered by an effective registration, then the Company would
have been  required to pay, no later than April 13, 1995, an amount equal to the
lesser of $50,000 minus the aggregate  purchase  price amount  payable under the
formula set forth in the Agreement,  or $25,000.  In September 1995, the Company
paid $5,000 and issued  200,000  shares of  restricted  common stock in full and
final settlement of the Agreement.


                  (Remainder of page intentionally left blank)

                                  Page 27 of 33
<PAGE>



Item 2.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS



RESULTS OF OPERATIONS

General
-------

From  its  commencement,  the  Company  has  been a  development  stage  company
primarily engaged in retaining research  consultants and sponsoring  research to
investigate the medical uses of ozone.  The Company has not generated and cannot
predict when or if it will generate sufficient cash flow from operations to fund
its  continuing  operations.  Since its  organization,  the  Company has paid or
accrued a total of $2,399,497 for research and development.

By letter agreement with the Italian Scientific Society for Oxygen-Ozone Therapy
(ISSOT) in Bergamo,  Italy,  tested March 23, 1993,  the Company  entered into a
collaborative  arrangement to research and examine the efficacy of ozone therapy
and the Company's  technology in the  treatment of various  blood-related  human
diseases. The research is to be conducted by ISSOT in Italy, under the direction
of a research group  assembled by the Italian  Ministry,  to which the Company's
president  was  appointed  in April 1993.  The  research is to be  conducted  in
accordance with the FDA's protocols for human clinical trials.

Litigation Against Former Management
------------------------------------

In November 1992, a derivative  action was filed in the U.S.  District Court for
the District of New Jersey by two shareholders of the Company against two of its
former officers and directors.  The Company was named as a nominal  defendant in
the action,  but in January 1993 the Company  substituted itself as a real party
plaintiff.  The Company filed an amended complaint seeking damages and equitable
remedies  and  alleging,  among  other  things,  that the  former  officers  and
directors  defrauded  the  Company,   breached  fiduciary  duties  owed  to  the
shareholders and committed violations of federal securities laws.

In November 1993, the defendants  replied to the  counterclaims  asserted by the
Company.  The reply  contained  additional  counterclaims  seeking  monetary and
injunctive  relief under various  provisions of the federal  securities laws and
the common law. The defendants also asserted a derivative counterclaim on behalf
of the Company against  certain current and former  directors based upon alleged
breaches of a written  agreement  between the defendants and the Company's board
of directors.  Although the claims originally  asserted by the defendants in the
New York action sought only declaratory relief, the newly asserted claims sought
damages in excess of $2.0 million.



                                  Page 28 of 33
<PAGE>



On May 18, 1994, the parties reached  agreement in principle to settle all their
litigation.  On September 27, 1994, the parties  stipulated to  discontinue  the
action pending the  finalization  of the  settlement.  On December 28, 1994, the
written settlement  agreement was signed. The settlement  agreement provides (i)
that  Messrs.  McGrath  and  Watrous  will not  challenge  the  validity  of the
Company's  board of directors  resolution  to rescind  approximately  13,000,000
shares of the Company's stock previously issued to Mr. McGrath and approximately
1,200,000 shares previously issued to Mr. Watrous and to reinstate the Company's
debt to Messrs.  McGrath and Watrous  that had been  retired by the  issuance of
those shares; and (ii) for the Company to acknowledge the validity of $2,033,628
of debt to Messrs.  McGrath and Watrous. In connection with the settlement,  Mr.
McGrath assigned his portion of the above-mentioned  debt to Mr. Watrous,  which
was thereupon  satisfied by the Company's  issuance to Mr. Watrous of 11,250,000
shares of the Company's  common stock  restricted  under the  Securities  Act of
1933.

Six-month periods ended June 30, 1996, and June 30, 1995
--------------------------------------------------------

The Company has had no sales since  January  1989.  Sales  commenced in May 1986
and, except for incidental  items,  ceased in October 1987. In cooperation  with
the FDA,  the Company has  assisted in  deactivating  ozone-generating  machines
owned by several  practitioners/researchers who formerly purchased supplies from
the Company,  and the Company does nor intend to sell  equipment or supplies for
ozone-generating purposes until it receives FDA approval to do so.

Expenditures for research and development  performed by independent  contractors
was $70,923 during the 1996 period and was $9,000 during the 1995 period.

General and administrative expenses were $487,084 in the 1996 period as compared
to $668,223 in the 1995 period.

Interest  was $5,704 in the first six months of 1996,  as compared to $5,598 for
1995.

Net cash  used in  operating  activities  was  $615,115  in the 1996  period  as
compared to $676,346 in the 1995  period.  The  decrease  was due  primarily  to
decreased general and administrative expenses.

Cash provided by financing  activities  decreased in the 1996 period by $18,362.
The decrease was due primarily to common stock subscriptions received during the
period.

Three-month periods ended June 30, 1995, and June 30, 1994
----------------------------------------------------------

The Company has had no sales since  January  1989.  Sales  commenced in May 1987
and, except for incidental  items,  ceased in October 1987. In cooperation  with
the FDA,  the Company has  assisted in  deactivating  ozone-generating  machines
owned by several  practitioners/researchers who formerly purchased supplies from
the Company,  and the Company does not intend to sell  equipment or supplies for
ozone-generating purposes until it receives FDA approval to do so.

Expenditures for research and development  performed by independent  contractors
was $9,000 during the 1995 period and was $18,924 during the 1994 period.

General and administrative expenses were $668,229 in the 1995 period as compared
to $394,507 in the 1994 period.

Interest expense decreased from 1994 to 1995 by approximately  $83,000 to $5,598
due to the  elimination of the notes payable to former  management in accordance
with the settlement agreement.

                                  Page 29 of 33
<PAGE>




Net cash  used in  operating  activities  was  $676,346  in the 1995  period  as
compared to $579,500 in the 1994  period.  The  increase  was due  primarily  to
increased general and administrative expenses.

Cash provided by financing  activities  increased in the 1995 period by $81,746.
The increase was due primarily to common stock subscriptions received during the
period.

Liquidity and Capital Resources
-------------------------------

At June 30, 1996, the Company had a working  capital  deficiency of $411,175 and
stockholders'  deficiency of $526,822.  At December 31, 1995,  the Company had a
working capital deficiency of $538,102 and stockholders' deficiency of $432,880.

From January 1, 1996, through June 30, 1996, the Company received  subscriptions
to purchase 5,854,16 shares of its common stock at a per share price of $.10 for
aggregate proceeds of $585,416.

The  management  of the Company  continues to require funds to enable it to fund
requisite  research  necessary  to  gain  regulatory  approval(s)  and  continue
operations.  The Company is engaged in a number of research initiatives which it
believes may enable it to successfully  achieve its primary goals, which include
the  submission  of  appropriate  research  data to the FDA Center for Drugs and
Biologics for the approval of its blood  decontamination  process and to the FDA
Division of Antiviral Drug Products for approval of Phase I human clinical trial
status for the treatment of AIDS.

The Company recognizes that, if it is unable to raise additional capital, it may
find it necessary to substantially reduce, or cease, operations.




                  (Remainder of page intentionally left blank)

                                  Page 30 of 33
<PAGE>

                           PART II - OTHER INFORMATION
                           ---------------------------


Item 4.           Submission of Matters to a
                  Vote of Securities Holders
                  --------------------------

     On July 10, 1996, Medizone International,  Inc. (the "Registrant") held its
annual meeting of shareholders,  at which the matters described below were voted
upon by the Registrant's shareholders.

A.   Election of Directors

     Five  directors,   comprising  the  entire  board,   were  elected  to  the
Registrant's Board of Directors. These individuals will serve as directors until
the Registrant's  next annual meeting of shareholders and until their successors
have been elected and shall have been qualified.

These individuals, and their tabulated votes, are as follows:

                                                         Votes
                                    Votes for           Against      Abstentions
                                    ---------           -------      -----------
Joseph S. Latino                    65,873,181             0          12,603,552
George Handel                       65,865,381             0          12,611,352
John D. Pealer                      65,865,381             0          12,611,352
Kenneth Gropper                     77,133,181             0           1,343,552
Richard G. Solomon                  77,083,384             0           1,397,352

     There were no other nominations for director.


B.   Enlarging the Period During Which Notice
     of a Shareholders' Meeting May Be Provided
     ------------------------------------------

     The Registrant's  stockholders  approved a resolution amending Registrant's
By-Laws to provide that notice of an annual or a special meeting of shareholders
may be delivered up to 60 days prior to such meeting.

     The vote for this measure was as follows:

Votes for               Votes Against                       Abstentions
---------               -------------                       -----------
77,652,041                 967,292                            117,480

                                  Page 31 of 33

<PAGE>

C.   Eliminating the Personal Liability of Directors
     -----------------------------------------------

     The   Registrant's   stockholders   approved  a  resolution   amending  the
Registrant's  Articles of Incorporation  to eliminate the personal  liability of
directors to the extent permitted by law.

     The vote for this measure was as follows:

Votes for               Votes Against                       Abstentions
---------               -------------                       -----------
65,245,057                14,086,470                          235,286

D.   Indemnification of Officers and Directors
     -----------------------------------------

     The   Registrant's   stockholders   approved  a  resolution   amending  the
Registrant's ByLaws to authorize indemnification  agreements between the Company
and its officers and  directors  and  authorized  the  Registrant  to enter into
indemnification agreements with its present officers and directors and with each
future  officer  and  director  when  and as the  Board  of  Directors  deems it
appropriate.

     The vote for this measure was as follows:

Votes for               Votes Against                       Abstentions
---------               -------------                       -----------
65,276,077                13,295,870                           264,866


E.   Ratification of appointment of Independent Public Accountant
     ------------------------------------------------------------

     The Registrant's stockholders ratified the selection of Andersen Andersen &
Strong,  L.C. as the  Registrant's  independent  public  accountant for the 1996
calendar year by the following vote:

Votes for              Votes Against                       Abstentions
---------              -------------                       -----------
77,262,043                668,550                            51,142


Item 6. Exhibits and Reports on Form 8-K
        --------------------------------

     (b) (i) In a report on Form 8-K dated July 1, 1996, the Registrant reported
that the Italian  Ministry of Health has  approved the  commencement  of Phase I
clinical trials to study the effects of Medizone (the drug) on patients infected
with HIV, at San Raffaele  Hospital of the  University of Milan  ("Milan"),  and
Hepatitis B (chronic active), at the Regional Oncology Center and AIDS Treatment
Center at Aviano  ("Aviano"),  which  confirmed  the earlier  approvals of these
trials.  Commencement by the respective  ethics  committees of Milan and Aviano.
The Registrant further reported that the actual commencement of these trials was
contingent  upon  the  Registrant's  commitment  to  pay  for  laboratory  tests
performed by each  institution that are outside the scope of the normal realm of
clinical analysis performed by the testing institutions. The Registrant reported
that it is  presently  without  the  financial  wherewithal  to enter  into such
binding  commitments  (estimated  at an aggregate of $330,000) and neither trial
will commence until the respective  commitments are made by the Registrant.  The
Registrant  also  reported  on the  progress  of its  agreement  with an Italian
manufacturer to provide ozone generating devices for use in the Italian trials.

                                  Page 32 of 33
<PAGE>



     (ii) In a report on Form 8-K dated August 1, 1996, the Registrant  reported
that, on July 31, 1996,  the  Registrant's  Board of Directors,  pursuant to the
Registrant's  By-laws,  appointed  Howard L.  Feinsand and Lawrence J. Sosnow as
directors.



                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934,  Registrant
has duly  caused  this  report  to be signed  on its  behalf by the  undersigned
thereunto duly authorized.

                                      MEDIZONE INTERNATIONAL, INC.
                                      ------------------------------------------
                                              (Registrant)


                                      /s/ Arthur P. Bergeron
                                      ------------------------------------------
                                      Arthur P. Bergeron
                                      Vice President and
                                      Chief Financial Officer
November 12, 1996

                                  Page 33 of 33
<PAGE>