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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, 1998
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, 1998 - 17,205,582 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 Months Ended August 31, 1998
The following financial statements and schedules of the registrant and
its consolidated subsidiaries are submitted herewith:
PART I - FINANCIAL INFORMATION
Page of
Form 10-QSB
Item 1. Financial Statements
Condensed Consolidated Balance Sheets.......................3
Condensed Consolidated Statements of Operations.............5
Condensed Consolidated Statements of Cash Flow..............7
Notes to Condensed Consolidated Financial Statements........8
Item 2. Management's Discussion and Analysis or
Plan of Operations.........................................12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .........................................16
Item 2. Changes in Securities......................................16
Item 3. Defaults Upon Senior Securities............................16
Item 4. Submission of Matters to a Vote of Security Holders........16
Item 5. Other Information..........................................16
Item 6. Exhibits...................................................16
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<PAGE>
CYCLO3PSS CORPORATION
Condensed Consolidated Balance Sheets
(UNAUDITED)
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August 31 February 28
1998 1998
------------ ------------
Assets
Current assets:
Cash $149,961 $573,161
Accounts receivable 75,880 113,090
Inventories 158,630 152,026
Prepaid expenses 61,938 75,526
Total current assets 446,409 913,803
Property and equipment, net 211,701 236,780
Other assets:
Goodwill, net 197,644 311,887
Acquired patents, net 347,818 368,941
Developed patents and other, net 132,022 128,730
$1,335,594 $1,960,141
============ ============
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<PAGE>
CYCLO3PSS CORPORATION
Condensed Consolidated Balance Sheets (continued)
(UNAUDITED)
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August 31 February 28
1998 1998
-------------------------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $103,779 $668,834
Accrued liabilities 78,188 112,789
Current portion of capital lease obligations 15,106 24,663
Total current liabilities 197,073 806,286
Long-term portion of capital lease obligations 9,735 13,278
Commitments and contingencies
Stockholders' equity:
Preferred stock:
Preferred stock issuable in series: par value $.01,
4,500,000 authorized:
Series "A" convertible preferred stock; 356,638 356 356
shares authorized; 356,638 shares issued and
outstanding
Series "B" convertible preferred stock; 30,000 18 19
shares authorized; and 1,932 shares issued and
outstanding
Class "A" preferred stock, par value $.01; 500,000
shares authorized; none issued or outstanding --- ---
Common stock, par value $.001; 55,000,000 shares
authorized; 15,145,868 shares issued at February 28,
1998 and 16,651,962 shares issued at August 31, 1998 16,652 15,146
Additional paid-in capital 17,545,900 16,034,785
Accumulated deficit (15,932,595)(14,408,184)
Less treasury stock, 264,000 common shares at cost (501,545) (501,545)
Total stockholders' equity 1,128,786 1,140,577
$1,335,594 $1,960,141
=========================
See accompanying notes to condensed consolidated financial statements
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<PAGE>
CYCLO3PSS CORPORATION
Condensed Consolidated Statements of Operations
(UNAUDITED)
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For the three months ended
August 31,
1998 1997
-------------- --------------
Net revenues $265,273 $249,228
Costs and expenses:
Cost of sales 182,591 178,184
Research and development 91,716 74,159
Selling and marketing 93,490 116,822
General and administrative 482,634 386,760
Depreciation and amortization 104,250 108,328
Total expenses 954,681 864,253
Loss from operations (689,408) (615,025)
Interest income 1,624 9,279
Interest expense (1,077) (42,852)
Net loss (688,861) (648,598)
Preferred stock dividends (38,958) (38,958)
-------------- --------------
Net loss applicable to common stock $(727,819) $(687,556)
Net loss per common share (.04) (.05)
-------------- --------------
Weighted average number of common shares
issued and outstanding 16,584,659 13,192,193
-----------------------------
See accompanying notes to condensed consolidated financial statements
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<PAGE>
Condensed Consolidated Statements of Operations
(UNAUDITED)
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For the six months ended
August 31,
1998 1997
-------------- --------------
Net revenues $588,664 $551,619
Costs and expenses:
Cost of sales 460,696 423,374
Research and development 206,538 152,023
Selling and marketing 203,650 164,274
General and administrative 1,035,698 657,867
Depreciation and amortization 207,921 217,159
Total expenses 2,114,503 1,614,697
Loss from operations (1,525,839) (1,063,078)
Interest income 3,929 23,490
Interest expense (2,501) (101,059)
Net loss (1,524,411) (1,140,647)
Preferred stock dividends (77,916) (77,916)
-------------- --------------
Net loss applicable to common stock $(1,602,327) $(1,218,563)
Net loss per common share (.10) (.09)
-------------- --------------
Weighted average number of common shares
issued and outstanding 16,298,977 13,027,136
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See accompanying notes to condensed consolidated financial statement
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<PAGE>
CYCLO3PSS CORPORATION
Condensed Consolidated Statements of Cash Flow
(UNAUDITED)
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For the six months ended
August 31,
1998 1997
--------------------------------
Cash flows from operating activities:
Net loss $(1,524,411) $(1,140,646)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 207,921 217,159
Accrued interest on convertible debt issuance -- 69,360
Issuance of warrant with convertible debt -- 27,380
Common stock issued for services -- 168,000
Changes in assets and liabilities:
Decrease in accounts receivable 37,210 14,218
Increase in inventories (6,604) (28,669)
Decrease in prepaid expense 13,588 38,065
Decrease in accounts payable and
accrued liabilities (599,656) (65,772)
Net cash used in operating activities (1,871,952) (700,905)
Cash flows from investing activities:
Purchase of property and equipment (39,944) (9,281)
Addition to developed patents and other (10,824) --
Net cash used in investing activities (50,768) (9,281)
Cash flows from financing activities:
Proceeds from issuance of common stock 1,500,820 --
Proceeds from exercise of stock options 11,800 --
Principal payments under capital lease obligations (13,100) (11,435)
Net cash provided by (used in) financing activities 1,499,520 (11,435)
Net decrease in cash (423,200) (721,621)
Cash at beginning of period 573,161 1,275,636
Cash at end of period $149,961 $554,015
Supplemental schedule of non-cash financing activities
Conversion of long term debt obligations to common stock --- $916,000
Conversion of interest payable on long term obligations
to common stock --- $174,430
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
CYCLO3PSS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
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1. Summary of Significant Accounting Policies
Financial Statements
The accompanying interim condensed 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 and
Regulation S-B. The balance sheet at February 28, 1998 represents the
Company's audited consolidated balance sheet at that date.
In the opinion of management, the accompanying condensed consolidated
financial statements contain all normal recurring adjustments necessary to
present fairly the financial position of Cyclo3pss Corporation ("Company") as
of August 31, 1998, and the results of its operations and its cash flows for
the interim periods ended August 31, 1998 and August 31, 1997. 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 audited consolidated financial statements and notes
thereto included in the Company's Annual Report to Stockholders for the year
ended February 28, 1998.
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 is primarily engaged in the
design, manufacture, assembly, sales and installation of ozone application
technologies and processes. The Company's principal technology provides an
alternative to address food safety concerns and laundry disinfection and
efficiency. Cyclo3pss also markets sorting and counting systems to the
laundry industry and manufactures and sells specialty chemicals. The Company
holds patents for medical sterilization processes and plans to resume
research and development activities in this field by the fiscal year 2000.
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.
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.
CYCLO3PSS CORPORATION
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<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited)
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1. Summary of Significant Accounting Policies (continued)
Net Loss per Common Share
Net loss per common share is calculated after deduction of preferred stock
dividends divided by the weighted average number of shares of common stock
issued and outstanding during the period. Loss per common share for preferred
stock dividends was immaterial (less than one cent per share). The Company
excluded 2,556,249 options and 2,296,140 warrants from the weighted average
shares outstanding computation as their effect would be anti-dilutive.
New Accounting Standard
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income". SFAS No.130
establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of this statement has no impact on
the Company's net income (loss) or stockholders' equity.
For the three and six months ended August 31, 1998 and 1997, total
comprehensive loss calculated in accordance to SFAS No. 130, amounted to
$727,819 and $1,602,327, and $687,556 and $1,218,563, respectively.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", establishes standards for reporting financial and descriptive
information about its reportable operating segments. SFAS No. 131 changes
current practice under SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise", by establishing a new framework on which to base
segment reporting (referred to as the management approach) and also requires
interim reporting of segment information. The Company has elected to apply
the Statement to its interim financial statements in the current year.
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 Company has sustained significant net losses which have resulted in an
accumulated deficit of $14,408,184 at February 28, 1998 and $15,932,595 at
August 31, 1998, and periodic cash flow difficulties, all of which raise
substantial doubt of the Company's ability to continue as a going concern.
The net loss for the year ended February 28, 1998 was $2,928,197 and
$1,524,411 for the six months ended August 31, 1998. To date, the Company has
funded its operations through the issuances of common and preferred stock.
The Company's ability to accomplish its business strategy and to ultimately
achieve profitable operations is dependent upon its ability to raise
CYCLO3PSS CORPORATION
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<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited)
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2. Basis of Presentation (continued)
additional financing.
The Company believes that these conditions have resulted from 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 attempting to improve these conditions by way of financial
assistance through collaborative partnering agreements, issuances of
additional equity, debt arrangements, and product sales.
3. 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, 1998.
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<PAGE>
CYCLO3PSS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
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4. Segment Information
During the three and six months ended August 31, 1998, the Company operated
in three principal industries; development, marketing and installation of
Eco-Pure Food Safety Systems for food decontamination in both aqueous and
gaseous forms ("food safety products"); the manufacture, sale and
installation of ozone washing and laundry sorting and counting systems for
commercial and institutional laundries ("textile products"); and the
manufacture and sale of specialty chemicals ("biochemical products").
Operating profit is total revenue less operating expenses, excluding interest
expense and general corporate expenses. Corporate assets consist primarily of
cash, property, and equipment.
For three months For six months
ended August 31, 1998 ended August 31, 1998
Net revenues
Food Safety products $118,436 $274,436
Textile products 27,020 129,914
Biochemical products 119,817 184,314
------------ --------------
Total consolidated Revenue $265,273 $588,664
------------ --------------
Operating loss (income)
Food Safety products $(73,078) $(86,076)
Textile products (345,134) (673,084)
Biochemical products 55,972 46,226
Total operating loss (362,240) (712,934)
Corporate expenses (327,168) (812,905)
Interest income 1,624 3,929
Interest expense (1,077) (2,501)
Consolidated net loss (688,861) (1,524,411)
----------- --------------
August 31, 1998 February 28, 1998
Identifiable assets
Food Safety products 92,898 --
Textile products 730,486 1,100,191
Biochemical products 278,168 373,434
General corporate assets 234,042 486,516
Total consolidated assets 1,335,594 1,960,141
------------- --------------
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<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
General
Cyclopss Corporation is primarily engaged in ozone application technologies
and processes. The Company's main product lines offer an alternative for food
safety, particularly microbial reductions on meat, poultry, fruits and
vegetables. Additional products offered by the Company enable manufacturers
to eliminate microbial build up in and on food processing equipment, while
other ozone-related products marketed by the Company to commercial and
institutional laundry markets enable users to reduce costs associated with
labor, water, energy, chemicals, and wastewater disposal.
The Company also markets an automated sorting and counting system for
commercial laundries. Other non-ozone based products offer by the Company
include more than 350 specialty chemicals and compounds.
The Company has developed but not marketed two medical sterilization products
to date. Due to the demand for alternative disinfection systems for food
safety and cost saving equipment for the commercial laundry markets, the
Company shifted its focus from medical sterilization, to more immediate, less
or non-encumbered target markets -- food, laundry and chemical compounds.
Results of Operations
The Company's revenues were $588,664 for the six months ended August 31, 1998
compared to $551,619 for the six months ended August 31, 1997. The revenues
for the three months ended August 31, 1998 were $265,273 compared to $249,228
for the three months ended August 31, 1997. Three of the Company's wholly
owned subsidiaries currently contribute to the Company's gross revenues,
Eco-Pure Food Safety Systems, Inc. (EPFS), Cyclopss Laundry Systems, Inc.
(CLS) and Cyclopss Biochemical Corporation (CBC). The Company's gross margin
for the six months ended August 31, 1998 was $127,968 compared to $128,245
for the six months ended August 31, 1997. The gross margin for the three
months ended August 31, 1998 was $82,682 compared to $71,044 for the three
months ended August 31, 1997. The Company expects revenue to continue to
increase.
Research and development expenses increased to $206,538 for the six months
ended August 31, 1998 from $152,023 for the six months ended August 31, 1997.
Research and development expenses for the three months ended August 31, 1998
were $91,716, a slight increase from $74,159 for the three months ended
August 31, 1997. The Company believes it is necessary and intends to increase
its research and development efforts in the current year in order to complete
the development process of food processing systems and to comply with USDA
protocols to validate these systems.
Selling and marketing expenses increased to $203,650 for the six months ended
August 31, 1998 from $164,274 for the six months ended August 31, 1997.
Selling and marketing expenses for the three months ended August 31, 1998
were $93,490, compared to $116,822 for the three months ended August 31,
1997. The Company placed its advertising in a variety of general business and
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<PAGE>
food-related trade publications, to maximize its exposure during what is
continuing to be a period of increased scrutiny over food safety issues.
Management believes that it is critical to periodically support and
supplement its sales efforts through advertising, public relations campaigns
and trade- show participation.
General and administrative expenses increased to $1,035,698 for the six
months ended August 31, 1998 from $657,867 for the six months ended August
31, 1997, due to an increase in management employment, shareholder relations
and legal fees. General and administrative expense for the three months ended
August 31, 1998 were $482,634, an increase to $386,760 for the three months
ended August 31, 1997 for the same reasons. Management took steps to reduce
general and administrative costs to help conserve cash in August, 1998.
Interest expense declined to $2,501 for the six months ended August 31, 1998
compared to $101,059 for the six months ended August 31, 1997, and it
declined to $1,077 for the three months ended August 31, 1998 compared to
$42,852 for the three months ended August 31, 1997, due to the conversion of
long-term debt to common stock.
The Company believes that three of its divisions, namely Eco-Pure Food Safety
Systems, Inc., Cyclopss Laundry Systems, Inc., and Cyclopss Biochemical, Inc.
will be the major contributors to the Company's future revenue stream. In
order to achieve sales growth acceptable to management, the Company will
primarily focus on these three areas of the Company.
Liquidity and Capital Resources
As of August 31, 1998 the Company had insufficient funds on hand to continue
its operations for the entire fiscal year ending February 28, 1999. Under
direction from the Board of Directors, in August, 1998 the Company eliminated
several non-essential positions, reducing the number of employees by roughly
half and overhead by 80%. Also, on September 1, 1998 chairman/CEO Gary
Bratcher resigned to help the Company conserve cash and reduce overhead. On
September 10, 1998 the board of directors authorized issuance of Series "C"
convertible preferred stock with a $.01 par value and a stated value of
$1,000 per share. These shares are convertible into common shares at 70% to
90% of the average stock price. The shares provide for payment of cumulative
dividends at 10% annually, paid in stock. The offering was opened on October
1, 1998. The Company is currently in process of closing this offering.
Despite the additional funds that may be raised from the issuance of
preferred stock, currently in progress, the Company under it's present plan
of operations, does not have sufficient liquidity and capital resources to
continue in operation through February 28, 2000.
On October 2, 1998 the Company was de-listed from the Nasdaq Small-Cap
Market, since it did not meet the new quantitative maintenance requirements
for continued listing on the Nasdaq Stock Market. This decision was made by a
Nasdaq Listing Qualification Panel and the Company appealed this decision on
October 12, 1998. Because the Company has funded its operations through the
sale of its securities, the failure to be listed on Nasdaq will likely have
an adverse effect on the ability of the Company to raise additional capital.
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<PAGE>
Cash used in operating activities was $1,871,952 for the six months ended
August 31, 1998 compared to $700,905 for the six months ended August 31,
1997. The Company's use of cash has been more aggressive this year, as the
Company experienced significant general and administrative and marketing
expenses associated with the development and promotion of its Eco-Pure Food
Safety Systems.
Cash expenditures for property and equipment and other assets were $50,768
for the six months ended August 31, 1998 compared to $9,281 for the six
months ended August 31, 1997. This increase was the result of the Company
increasing purchases of research equipment, patent fees and certain leasehold
improvements.
During the period of March 9, 1998 to June 15, 1998, the Company authorized
and offered its restricted common shares to accredited investors in an
offering made pursuant to a Board Resolution on February 27, 1998 through
First Financial Investment Securities Inc. Subscribers purchased 1,395,140 of
such shares in this offering for a total of $1,743,925 or $1,500,820 after
costs. These shares were sold for $1.25 each and each share carries a
warrant. This redeemable warrant entitles the holder to purchase one share of
common stock at a price of $3.75 per share. This offering resulted an
increase in net cash provided by financing activities for the six months
ended August 31, 1998 to $1,499,520 compared to cash used in financing
activities of $11,435 for the six months ended August 31, 1997.
Total assets decreased to $1,335,594 for the six months ended August 31, 1998
from $1,960,141 for the year ended February 28, 1998, due to a decrease in
the Company's cash position and a decrease in accounts receivable from
$113,090 at February 28, 1998 to $75,880 at August 31, 1998.
Total current liabilities decreased to $197,073 at August 31, 1998 from
$806,286 at February 28, 1998, a decrease of $609,213. Long term liabilities
decreased to $9,735 for the three months ended August 31, 1998 from $13,278
for the year ended February 28, 1998. This decrease was due to
reclassification of long term lease obligations to current obligations and
reflects the efforts of management to reduce the debt burden of the Company
and pay down existing obligations.
Plan of Operation
The Company's Plan of Operation is subject to the availability of
additional capital, of which there can be no assurance. As stated elsewhere
in the Form 10-QSB, the Company continues to operate at a significant loss
and continues to have insufficient capital for its operations.
Food Safety Systems
In June of 1997, ozone was granted the status as "generally recognized as
safe" or "GRAS", allowing food processors to use ozone in the processing of
certain food items. This, together with a period of increased scrutiny over
food safety issues, created a groundswell of demand for alternative food
decontamination technologies. One Cyclo3pss designed food safety system is
already in the process of being installed for a major food company. The
Company believes this sale will result in further opportunities with this and
other food related companies.
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<PAGE>
One major challenge that the Company faces is that of educating government,
industry and the end consumer about the benefits of ozone. Ozone is a
naturally-occurring phenomenon that is usually associated with
photochemical smog or an eroding level of protection in our atmosphere. It
is the Company's intent to provide this education and show the beneficial
side of ozone: decontamination without residual chemicals. For industry,
ozone is a cost competitive and environmentally-friendly answer to
microbial decontamination. For the consumer, ozone kills harmful
microorganisms quickly and leaves behind no chemical residue.
Laundry Systems
The Company will continue to market its ozone laundry washing systems,
Eco-Wash. The Company will also continue to upgrade existing customers'
sorting and counting system, (VAC Soil Counting System) with recent
technological changes. The Company believes the products developed and
marketed by this subsidiary will enjoy increased market potential in coming
years due to:
* Competitive laundry markets will create a need for cost reduction and
increased productivity;
* Further environmental restrictions placed on discharge water quality;
* Increased emphasis on sanitation and disinfection in the laundry industry;
and
* Increased concern regarding environmental issues associated with the
laundry industry.
Specialty Chemicals
The Company's Biochem subsidiary will be provided additional marketing and
promotional assistance in order to increase sales and product development.
Current sales activities will be evaluated and alternatives sought to improve
profit margins. Joint efforts will continue with Foster Miller, Inc., to
market Biochem's monomer to the aerospace industry.
The focus for the fiscal year 1999 will be sales in the three target areas
and the Company will apply the resources necessary to accomplish this. The
Company anticipates a spending level of approximately $1,000,000 on research
and development activities required to continue with product validation and
food trials. Sales and marketing activities will be budgeted at $1,500,000 to
allow for sales staff, advertising and trade shows. General and
administrative expenses should be in the $2,000,000 range for the year.
The Company had 11 full time employees as of August 31, 1998. The Company
anticipates additional employees will be required in engineering and sales
during the next twelve months. The impact of the above will be determined by
the market demand for food safety and textile systems and specialty
chemicals.
The information set forth herein as to anticipated research and development
costs, equipment purchases and increase in employees are management's best
estimates based upon current plans. Actual expenditures may be greater or
less than such estimates depending on many factors including, but not limited
to the availability of new technologies, the completion or lack of completion
of certain strategic alliances, and the timing and successful completion of
the Company's stated requirement to acquire additional operating and growth
capital, industry
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<PAGE>
initiatives, success of the Company's research and development efforts, and
other factors.
From time to time, the Company publishes forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. The private Securities litigation Reform Act of 1995
provides a safe harbor for such forward looking statements. In order to
comply with the terms of the safe harbor, the Company notes that a variety of
factors could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in
the Company's forward looking statements. The risks and uncertainties that
may affect the operations, performance, development and results of the
Company's business include, but are not limited to, the following:
1. Market acceptance of the Company's products;
2. Obtaining sufficient additional operating capital in the form of debt or
equity;
3. The existence of an orderly market in the Company's securities;
4. Increased sales of the various products of the Company;
5. Continued success in the Company's research and development activities;
and
6. Successful completion of strategic alliances.
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. None
Item 6. Exhibits and Reports on Form 8-K. None.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CYCLO3PSS CORPORATION
Date: October 14, 1998 By/s/ William R. Stoddard
William R. Stoddard
Chief Executive Officer
Principal Executive Officer
Date: October 14, 1998 By/s/ Mondis Nkoy
Mondis Nkoy
Controller, Corporate Secretary
Principal Financial Officer
- 17 -
<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-28-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<CASH> $149,961
<SECURITIES> 0
<RECEIVABLES> 75,880
<ALLOWANCES> 61,938
<INVENTORY> 158,630
<CURRENT-ASSETS> 446,409
<PP&E> 211,701
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356
18
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</TABLE>
