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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED AUGUST 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-22720
CYCLO3PSS CORPORATION
(Name of Small Business Issuer as specified in its charter)
Delaware 87-0455642
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3646 West 2100 South
Salt Lake City, Utah 84120-1202
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 972-9090
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: $.001
Par Value Common Stock
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
.
Common Stock outstanding at October 14, 1996 - 12,683,949 shares of $.001
par value Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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<PAGE>
FORM 10-QSB
Financial Statements and Schedules
CyclO3PSS Corporation
For Three and Six Months Ended August 31, 1996
The following financial statements and schedules of the registrant and its
consolidated subsidiaries are submitted herewith:
PART I - FINANCIAL INFORMATION
Page of
Form 10-Q
Item 1. Financial Statements
Consolidated Balance Sheets - August 31, 1996 and
February 29, 1996..........................................3
Consolidated Statements of Operations --
for the three months and six months ended August 31, 1996
and 1995...................................................5
Consolidated Statements of Cash Flow --
for the six months ended August 31, 1996 and 1995..........7
Notes to Consolidated Financial Statements.....................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ...........................................15
Item 2. Changes in Securities.........................................15
Item 3. Defaults Upon Senior Securities...............................15
Item 4. Submission of Matters to a Vote of Security Holders...........15
Item 5. Other Information.............................................15
Item 6(a) Exhibits......................................................15
Item 6(b) Reports on Form 8-K...........................................15
Item 6(c) Reports on Form S-8...........................................15
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CYCLO3PSS CORPORATION
Consolidated Balance Sheets
(UNAUDITED)
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August 31, February 29,
1996 1996
-------------------------------
Assets
Current assets:
Cash $2,453,163 $252,113
Accounts receivable, less allowance for
doubtful accounts of $40,000 at
August 31, 1996 and February 29, 1996 108,450 77,130
Inventory 295,973 408,889
Prepaid expenses 13,057 37,474
Total current assets 2,870,643 775,606
Property and equipment, net 493,579 570,237
Other assets:
Goodwill, net 654,618 768,862
Acquired patents, net 432,311 453,456
Developed patents and other, net 108,505 110,457
$4,559,656 $2,678,618
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CYCLO3PSS CORPORATION
Consolidated Balance Sheets (continued)
(UNAUDITED)
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August 31, February 29,
1996 1996
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 103,168 162,414
Accrued liabilities 96,785 120,122
Deferred revenue 230,249 142,749
Current portion of capital lease obligations 12,312 16,351
Total current liabilities 442,514 441,636
Long-term debt obligations 1,312,150 889,663
Long-term portion of capital lease
obligations 62,976 54,626
1,375,126 944,289
Commitments and contingencies
Stockholders' equity:
Series "A" preferred stock, par value $.01;
4,500,000 shares authorized; 35,638 shares
issued and outstanding 356 356
Series "B" preferred stock, par value $.01;
30,000 shares authorized; 3,170 issued and
outstanding 24 ----
Class "A" preferred stock, par value $.01; 500,000
shares authorized; none issued and outstanding ---- ----
Common stock, par value $.001; 55,000,000 shares
authorized; 11,954,710 shares issued at
August 31, 1996, 10,169,932 shares issued at
February 29, 1996 11,775 10,170
Additional paid-in capital 13,076,061 10,305,955
Accumulated deficit (9,844,655) (8,522,243)
Less treasury stock, 264,000 common shares
at cost (501,545) (501,545)
Total stockholders' equity 2,742,016 1,292,693
$4,559,656 2,678,618
See accompanying notes to consolidated financial statements
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CYCLO3PSS CORPORATION
Consolidated Statements of Operations
(UNAUDITED)
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For the three months ended
August 31, 1996 August 31, 1995
Net revenues $122,925 $174,185
Costs and expenses:
Cost of sales 51,311 72,889
Research and development 166,676 165,664
Selling and marketing 33,384 212,492
General and administrative 257,028 437,189
Depreciation and amortization 116,883 102,377
Total expenses 625,282 990,611
Loss from operations (502,357) (816,426)
Interest income 9,520 14,910
Interest expense (39,449) ----
Net loss $(532,286) $(801,516)
Net loss per common share $(.05) $(.08)
Weighted average number of common shares
outstanding 10,961,666 9,942,983
See accompanying notes to consolidated financial statements
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CYCLO3PSS CORPORATION
Consolidated Statements of Operations
(UNAUDITED)
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For the six months ended
August 31, 1996 August 31, 1995
Net revenues $215,980 $272,649
Costs and expenses:
Cost of sales 165,587 110,766
Research and development 400,947 375,594
Selling and marketing 84,621 310,735
General and administrative 571,191 975,533
Depreciation and amortization 234,377 198,164
Total expenses 1,456,723 1,970,792
Loss from operations (1,240,743) (1,698,143)
Interest income 11,623 19,022
Interest expense (93,292) ----
Net loss $(1,322,412) $(1,679,121)
Net loss per common share $(.12) $(.17)
Weighted average number of common shares
outstanding 10,727,593 9,823,669
See accompanying notes to consolidated financial statement
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CYCLO3PSS CORPORATION
Consolidated Statements of Cash Flow
(UNAUDITED)
For the six months ended
August 31, 1996 August 31, 1995
Cash flows from operating activities:
Net loss $(1,322,412) $(1,679,121)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 234,377 198,164
Accrued interest on convertible debt
issuance 71,487 --
Issuance of warrant with convertible debt 16,400 --
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (31,320) 32,752
(Increase) decrease in inventories 112,916 (122,771)
(Increase) decrease in prepaid expense,
developed patents, other 24,417 (29,629)
Decrease in accounts payable and
accrued liabilities (82,602) (71,251)
Increase in deferred revenue 87,500 10,181
Net cash used in operating activities (889,237) (1,661,675)
Cash flows from investing activities:
Purchase of property and equipment (12,028) (184,972)
Proceeds from sale of marketable
securities -- 1,018,473
Net cash provided by (used in) financing
activities (12,028) 833,501
Cash flows from financing activities:
Proceeds from issuance of common stock 354 1,336,059
Proceeds from issuance of preferred stock 2,755,000 --
Proceeds from issuance of convertible
debt obligation 351,000 --
Increase in obligations under capital
leases -- 54,130
Principal payments under capital lease
obligations (4,039) --
Net cash provided by financing activities 3,102,315 1,390,189
Net increase in cash 2,201,050 562,015
Cash at beginning of period 252,11 123,086
Cash at end of period $2,453,163 $685,101
Supplemental schedule of non-cash
financing activities:
Capital lease obligations incurred for
acquisition of property and equipment $8,350 $54,130
Acquisitions
Fair value of assets acquired ---- $175,000
Issuance of common stock ---- (175,000)
Liabilities assumed $---- $----
See accompanying notes to consolidated financial statements
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CYCLO3PSS CORPORATION
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Financial Statements
The accompanying interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of
Regulation SB. The balance sheet at February 29, 1996 represents the Company's
audited consolidated financial statements at that date.
In the opinion of management, the accompanying consolidated financial
statements contain all normal recurring adjustments necessary to present fairly
the financial position of CyclO3PSS Corporation ("Company") as of August 31,
1996 and the results of its operations and cash flows for the interim periods
ended August 31, 1996 and August 31, 1995. The operating results for the interim
periods are not necessarily indicative of the results for a full year. These
financial statements should be read in conjunction with the Company's
consolidated financial statements and notes included in the Company's Annual
Report to Shareholders and Annual Report or Form 10-KSB for the year ended
February 29, 1996.
Organization
The Corporation was formed in Delaware in 1927. In 1990, the Corporation
was reorganized as CyclO3PSS Medical Systems, Inc. In 1995, the Company changed
its name to CyclO3PSS Corporation (the Company). The Company is engaged in the
research and development of technologies for the sterilization and/or
disinfection of surgical and medical instruments, the manufacture, sale and
installation of ozone washing and laundry sorting and counting systems for
commercial and institutional laundries, and the manufacture and sale of
specialty chemicals.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany balances and transactions
have been eliminated.
Revenue Recognition
Revenue is recognized upon shipment, or in the case of washing and laundry
systems, upon installation and customer acceptance. Payments received from
customers prior to installation and customer acceptance are recorded as deferred
revenue.
Short-term Investments
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115)
which requires investment securities to be classified as
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CYCLO3PSS CORPORATION
Notes to Consolidated Financial Statements
either held to maturity, trading or available for sale. The Company
classifies its short-term investments as available-for-sale. Available-for-sale
securities are carried at fair value, with unrealized gains and losses, net of
tax, reported in a separate component of stockholders' equity. Realized gains or
losses and declines in value judged to be other-than-temporary on
available-for-sale securities are included in the statement of operations. The
cost of securities sold is based on the specific identification method. Interest
on securities classified as available-for-sale are included in interest income.
Inventories
Inventories consist of raw materials and work-in-process and are stated at
the lower of cost or market, cost being determined using the first-in, first-out
method. Inventories of the following:
August 31, February 29,
1996 1996
Raw materials $205,034 $288,450
Work-in-process 90,939 120,439
--------------------------------
$295,973 $408,889
--------------------------------
Other Assets
Other assets consist primarily of goodwill and acquired patents which are
recorded at the lower of cost or their net realizable value. Goodwill is
amortized over five years. Acquired and developed patents are amortized on a
straight-line basis over the shorter of their estimated useful lives or the
remaining life of the patent. The Company periodically reviews the
recoverability of these intangible assets in order to record them at their net
realizable value.
Net Loss per Common Share
Net loss per common share is calculated based on the weighted average
number of shares of common stock outstanding during the period. Common stock
equivalents are not included in the computation as their effect would be
anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
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CYCLO3PSS CORPORATION
Notes to Consolidated Financial Statements
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2. Basis of Presentation
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business. The net
loss for the quarter ended August 31, 1996 was $532,286. In the past the Company
has been able to receive funding necessary for its operations through the
issuance of common stock. The Company anticipates a net loss for the year ended
February 28, 1997.
The Company believes that its current conditions are a result of the inherent
risks associated with small technology companies. Such risks include, but are
not limited to, the ability to (a) generate sales of its product at levels
sufficient to cover its costs and provide a return for investors, (b) attract
additional capital in order to finance growth, (c) further develop and
successfully market commercial products and (d) successfully compete with other
technology companies having financial, production and marketing resources
significantly greater than those of the Company.
The Company is trying to improve these conditions by way of financial
assistance through collaborative partnering agreements, closely held common
stock issuances, debt arrangements, and product sales. Management is confident
that appropriate funding will be generated and future product sales will result
from these opportunities and that the Company will continue operations over the
next fiscal year.
During the three months ended August 31, 1996, the Company engaged in an
offering of Series "B" Preferred Stock. This Series "B" Preferred Stock was
designated by the Board of Directors on May 30, 1996. As of August 31, 1996, net
proceeds of $2,755,000 had been received in cash by the Company, and the
offering was closed.
3. Long-Term Debt
During the year ended February 29, 1996, the Company's Board of Directors
approved the issuance of $3,000,000 in convertible debt to individual investors.
Principal and interest are payable in full three years from the date of
execution of each note. Interest accrues at 12% per year on the principal
balance. The debt is secured by all the assets of the Company. The lender can
convert all or a portion of its outstanding principal and interest into shares
of common stock at $3.50 per share. Under the terms of the loan agreements, the
Company will issue each lender a warrant to purchase 1,000 shares of the
Company's common stock at a price of $4.00 per share for each $3,500 principal
amount loaned to the Company. Each warrant is exercisable for a period of 5
years from the date of the closing of each loan. The Board of Directors has
reserved 2,022,714 shares of the Company's common stock for the conversion of
debt and exercise of warrants offered with the convertible debt. As of August
31, 1996, the Company had issued $1,226,000 in convertible debt (described
above) to the Company's directors or major stockholders, with maturities between
December 1998 and February 1999. Interest expense of $71,487 was recorded for
the six months ended August 31, 1996.
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CYCLO3PSS CORPORATION
Notes to Consolidated Financial Statements
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The carrying amount of long-term debt approximates fair value. The fair
value of the Company's long-term debt was estimated using discounted cash flow
analysis, based on the Company's current incremental borrowing rates for similar
types of debt arrangements.
4. Stockholders' Equity
On May 30, 1996 the Board of Directors designated series "B" preferred
stock which consists of 30,000 shares of non-voting stock with a par value of
$.01. The stated value is $1,000 per share. As of August 31, 1996, 3,170 shares
of series "B" preferred stock had been issued with net proceeds of $2,755,000
and net issuance cost of $415,000. As of August 31, 1996, 800 shares of series
"B" preferred stock has been converted into 1,248,566 shares of common stock.
These conversions were made at 70% of the "Average Stock Price" as designated by
the Board of Directors and further defined as the average daily closing bid
prices of common shares for the period of five consecutive trading days
immediately proceeding the date of conversion of the series B shares. As of
August 31, 1996, 19,498 shares of common stock are to be issued for dividends on
all series "B" preferred stocks issued and outstanding. Dividends are accrued at
the rate of 8% percent per annum, commencing on the date of issuance thereof.
5. Contingencies
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. Management believes, based on advice of legal
counsel, that such litigation and claims will be resolved without material
effect on the Company's consolidated financial position, results of operations
or cash flows. These matters are described in the Company's Form 10-KSB for the
year ended February 28, 1996.
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<PAGE>
PART I - ITEM 2
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company was an inactive corporation from the 1930's to 1987. From the
commencement of operations in 1987 until July of 1994, the Company was in the
development stage engaged primarily in the research and development of its
products. From the period since reactivation (March 2, 1987) to August 31, 1996,
the Company has incurred cumulative net losses of approximately $9,844,655. The
Company expects to continue to incur losses into next year.
The Company's future operating results will depend on many factors,
including the timing of the FDA marketing clearance, the demand for the
Company's medical sterilization products at that time, and industry acceptance
of the Company's laundry technologies, system equipment and attendant products.
Additional factors include the Company's ability to manufacture and market its
products on a cost-effective basis, the level of competition and the ability of
the Company to develop product enhancements and new products and to obtain the
required financing.
Results of Operations
The Company's revenues were $215,980 for the six months ended August 31,
1996, and $272,649 for the six months ended August 31, 1995. The revenue for the
three months ended August 31, 1996, were $122,925 compared to $174,185 for the
three months ended August 31, 1995. Only two of the Company's wholly owned
subsidiaries are currently contributing to the Company's revenues, CyclO3PSS
Textile Systems, Inc. ("CTS") and CyclO3PSS Biochemical Corporation (CBC). The
Company's gross margin for the six months ended August 31, 1996 was $50,393
compared to $161,883 for the six months ended August 31, 1995. The gross margin
for the three months ended August 31, 1996, was $134,103 compared to $263,004
for the three months ended August 31, 1995. This decrease in gross margin is
primarily attributable to the reduction of CTS sales as the result of the
Company's decision to interrupt the direct sale of systems until the redesign
effort was completed and dependable systems could be reintroduced to the market.
The Company incurred research and development expenses of $400,947 for the
six months ended August 31, 1996 and $375,594 for the six months ended August
31, 1995. Research and development expenditures were $166,676 for the three
months ended August 31, 1996, and $165,664 for the three months ended August 31,
1995. Management sees no continued overall reduction of research and development
expenses. These costs will continue to be expended as certain products complete
the development process and are commercialized.
The Company incurred general and administrative expenses of $571,191 for
the six months ended August 31, 1996, compared to $975,533 for the six months
ended August 31, 1995. General and administrative expenses for the three months
ended August 31, 1996 were $257,028 and $437,189 for the three months ended
August 31, 1995. This decrease is due generally to decrease in staffing. Also,
Management has taken aggressive steps to reduce current monthly expenses. As the
Company completes development on certain products and prepares for
commercialization, the human resource requirements of the Company will change.
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<PAGE>
The Company incurred selling and marketing expenses of $84,621 for the six
months ended August 31, 1996, compared to $310,735 for the six months ended
August 31, 1995. The selling and marketing expenses for the three months ended
August 31, 1996 were $33,384 and $212,492 for the three months ended August 31,
1995. This decrease is mainly attributed to the Clean Show '95 expenses incurred
by the Company in June of 1995. The Company anticipates marketing expenses to
increase slightly in the fiscal year 1997 due to the hiring and training of
additional marketing personnel and the attendant costs related to their
endeavors. The Company will also increase marketing activity and incur
additional expenses should it receive positive indications from the FDA as to
marketing clearance for its medical sterilization systems during the year 1997.
For the six months ended August 31, 1996, the Company had interest income
of $11,623 as compared to interest income for the six months ended August 31,
1995, of $19,022. The interest income for the three months ended August 31, 1996
was $9,520 compared to interest income of $14,910 for the three months ended
August 31, 1995. The Company anticipates that this amount will continue to
increase due to the increase in the company's cash resources which earns
interest. New funds received by the Company will be allocated to short term
investments.
The Company's net loss for the six months ended August 31, 1996 was
$1,322,412, as compared to the six months ended August 31, 1995 of $1,679,121.
The Company's net loss for three months ended August 31, 1996 was $532,286 as
compared to the three months ended August 31, 1995 of $801,516. The Company
anticipates that it will operate at a loss for the year ended February 28, 1997.
However, it is anticipated that the losses should begin to diminish if and when
the revenues of CyclO3PSS Textile Systems, Inc. begin to accelerate.
Liquidity and Capital Resources
During the three months ended August 31, 1996, the Company offered its
series "B" preferred stock, as designated by the Board of Directors on May 30,
1996. As a result, $2,755,000 has been received in cash by the Company, net of
issuance cost of $415,000. The offering was closed on August 16, 1996. There are
no assurances that future efforts to locate and secure additional financing will
be successful. The failure to secure additional financing could substantially
alter the management's assumptions as presented in the remainder of this
section.
No investment activities were recorded for the six months ended August 31,
1996 compared to $1,018,473 for the six months ended August 31, 1995. This
decrease is due to the sell of all the Company's short term investments.
Cash used in operating activities was $889,237 for the six months ended
August 31, 1996, compared to $1,661,675 for the six months ended August 31,
1995. Cash used for the six months ended August 31, 1996 was comprised of cash
on hand and collections of accounts receivable, which is comprised of service
and part sales from CyclO3PSS Textile Systems, Inc. and contract development and
chemical compound sales from CyclO3PSS Biochemical Corporation.
Total assets increased to $4,559,656 for six months ended August 31, 1996
from $3,374,425 for the six months ended August 31, 1995, primarily due to the
increase in the Company's cash as a result of net proceeds of $2,755,000 from
the issuance of series B preferred stock.
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<PAGE>
Total current liabilities increased slightly to $442,514 for the six months
ended August 31, 1996 from $417,300 for the six months ended August 31, 1995.
All of the Company's current liabilities at August 31, 1996 were attributed to
accounts payable, accruals and deferred revenues, and the current portion of
certain capital equipment leases. Long term liabilities increased to $1,375,126
for the six months ended August 31, 1996 from $944,289 for the year ended
February 29, 1996. Of the total, $1,312,150 represents principal and interest
debt generated on one of the Company's financing which was an offering of
convertible debt instruments. The additional $62,976 represents the long term
portion of leases payable for certain leased equipment, compared to $54,626 for
the years ended February 29, 1996.
On October 17, 1995 the Board of Directors approved the issuance of a up
to $3,000,000 of Convertible Secured Promissory Notes to investors.
The Convertible Notes which include warrants to purchase shares of the
Company's restricted common stock at $4.00 per share, also bear
interest at a rate of 12% per annum. Both the interest and principal
are convertible to shares of the Company's restricted common stock at
$3.50 per share. The conversion shares and warrants carry certain
registration rights and requirements. These notes are secured by all
assets of the Company. As of August 31, 1996, $1,226,000 had been
received from this offering.
Plan of Operation
The anticipated plan of operation during the next twelve (12) months is to
complete the following:
1. The continued review of the engineering and design elements of
the STER-O3-ZONETM 100 in order to determine an efficient and
cost effective manner in which to correct certain process
controls of the system. 2. Evaluate and determine the time line
required to execute the design changes to the STER- O3-ZONETM
100. Determine what action to take with the FDA in respect to the
current pending application of the Company's 510(k) Premarket
Notification for the STER-O3-ZONETM 100. The Company will not
engage in any pre-approval sales under the Investigational Device
Exemption (IDE) of the STER-O3-ZONETM 100 until the design
changes have been fully resolved.
3. Continuation of validation testing of the Company's liquid
chemical sterilant, SterOxTM, preparatory to submission of the
510(k) Premarket Notification to the FDA. To be determined is
whether this will be completed by the Company or with an existing
market leader of liquid disinfectants resulting in a possible
licensing agreement to complete the testing on this product as
well as formalization of the application and presentation of
SterOxTM to the FDA.
4. Continued development of products and enhancements for the
Company's textiles subsidiary which include:
(1) Completion of validation testing for the application for cold
water ozone disinfection of health care textiles, both
domestically and abroad.
(2) Reintroduction and sales of the Company's revised and
modified Vacuum Soils Counting System (VAC) and ozone washing
systems.
(3) Aggressive marketing of the revised and modified textile
products. Additional plans to market
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<PAGE>
through proposed strategic alliances with parties currently in
negotiation.
5. Continuation of contract research and development within the
Biochemical subsidiary and the ongoing manufacture and sales of
its existing and future specialty chemicals product line.
6. With appropriate financing in place, there may be additional
diversification of the Company's business activities through
future acquisitions.
Although the Company will be primarily engaged in the aggressive sales and
support of its completed products, it anticipates that research and development
expenses will be ongoing, and could range from $800,000 to $1,000,000 during the
next twelve months in support of the completion of key future products.
The Company currently anticipates that its expenditures on equipment will
range from $200,000 - $400,000 during the next twelve months based upon current
manufacturing assumptions. Management has taken aggressive steps to reduce
current monthly expenses by reducing personnel and other expenses. The Company
anticipates that no more than six additional employees will be hired during the
next twelve months, unless: (1). the market acceptance of the textile systems is
accelerated; (2). the sterilizer products are approved by the FDA in a more
timely manner than management predicts. It is anticipated that general and
administrative expenses would not increase by more than $600,000 on an
annualized basis as a result of any such increase in employees. The information
set forth herein as to anticipated research and development costs, equipment
purchases and increase in employees are management's best estimate based upon
current plans. Actual expenditures may be greater or less than such estimates
depending on many factors including, but not limited to: the FDA review process,
the availability of new technologies, and the success of the marketing efforts
for existing products.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. On May 30, 1996, the Board of Directors
designated a Series "B" Preferred Stock for an offering to
raise capital for ongoing cash requirements. As of the
quarter ended August 31, 1996 $2,755,000 (net) has been
received pursuant to this offering and it has been closed.
Item 6(a). Exhibits. None.
Item 6(b). Reports on Forms 8 - K. A Form 8-K was filed on August 16,
1996, to report $1,400,000 capital raised from sale of
Company's equity securities, accompanied by consolidated
financial statements as of June 30, 1996
Item 6(c). Reports on Form S 8. A registration of 300,000 shares of
common stock was filed on form S-8 on August 20, 1996, to
register shares which were authorized to Mr. John Sloan in
consideration of a consulting contract and the related
services to be provided.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CYCLO3PSS CORPORATION
Date: October 14, 1996 By/s/ John M. Williams
John M. Williams
Chief Executive Officer
Chairman
Principal Executive Officer
Date: October 14, 1996 By/s/ William R. Stoddard
William R. Stoddard
President
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CYCLO3PSS CORPORATION'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> AUG-31-1996
<CASH> $2,453,163
<SECURITIES> 0
<RECEIVABLES> 108,450
<ALLOWANCES> 0
<INVENTORY> 295,973
<CURRENT-ASSETS> 2,870,643
<PP&E> 493,579
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,559,656
<CURRENT-LIABILITIES> 442,514
<BONDS> 0
0
370
<COMMON> 11,775
<OTHER-SE> 2,742,016
<TOTAL-LIABILITY-AND-EQUITY> 4,559,656
<SALES> 0
<TOTAL-REVENUES> 122,925
<CGS> 51,311
<TOTAL-COSTS> 625,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 502,357
<INTEREST-EXPENSE> (39,449)
<INCOME-PRETAX> (532,286)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (532,285)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
