CONFORMED
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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 MAY 31, 2000
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
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3646 West 2100 South
Salt Lake City, Utah 84120-1202
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 972-9090
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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 July 14, 2000 - 27,782,853 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 May 31, 2000
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 Flows.............6
Notes to Condensed Consolidated Financial Statements........7
Item 2. Management's Discussion and Analysis or
Plan of Operations.........................................11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .........................................16
Item 2Changes in Securities and Use of Proceeds.................16
Item 3Defaults Upon Senior Securities...........................16
Item 4Submission of Matters to a Vote of Security Holders.......16
Item 5Other Information.........................................16
Item 6Exhibits and Reports on Form 8-K..........................16
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<PAGE>
CYCLO3PSS CORPORATION
Condensed Consolidated Balance Sheets
(UNAUDITED)
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May 31, February 29,
2000 2000
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Assets
Current assets:
Cash $ 42,111 $ 107,565
Accounts receivable 130,996 70,723
Inventories 17,930 17,930
Prepaid expenses 30,127 5,815
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Total current assets 221,164 202,033
Property and equipment, net 118,979 135,521
Other assets:
Acquired patents, net 63,706 72,807
Developed patents and other, net 51,022 56,623
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$ 454,871 $ 466,984
===========================
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<PAGE>
CYCLO3PSS CORPORATION
Condensed Consolidated Balance Sheets (continued)
(UNAUDITED)
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May 31, February 29,
2000 2000
---------------------------
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $ 92,597 $ 256,955
Accrued liabilities 249,366 449,440
Notes payable 500,000 250,000
Deferred revenue 100,000 100,000
Current portion of capital lease obligations 2,130 3,778
---------------------------
Total current liabilities 944,093 1,060,173
Commitments and contingencies
Stockholders' deficit:
Preferred stock:
Preferred stock issuable in series: par value $.01,
4,500,000 shares authorized:
Series "A" convertible preferred stock; 356,638
shares authorized; 356,638 shares issued and
outstanding 356 356
Series "B" convertible preferred stock; 30,000
shares authorized; 900 shares issued and
outstanding 9 9
Series "C" convertible preferred stock; 550 shares
authorized; none and 75 shares issued and
outstanding at May 31, 2000 and February 29,
2000, respectively -- 1
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; 27,313,297 shares issued at
May 31, 2000 and 25,226,066 shares issued at
February 29, 2000 27,313 25,225
Additional paid-in capital 19,405,259 19,028,410
Accumulated deficit (19,420,614) (19,145,645)
Less treasury stock, 264,000 common shares at
cost (501,545) (501,545)
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Total stockholders' deficit (489,222) (593,189)
---------------------------
$ 454,871 $ 466,984
============================
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
May 31,
2000 1999
-----------------------------
Net revenues $ 180,757 $ 316,732
Costs and expenses:
Cost of sales 89,292 129,999
Research and development 13,456 --
Selling and marketing 29,596 --
General and administrative 255,737 86,919
Depreciation and amortization 68,049 36,061
-----------------------------
Total expenses 456,130 252,979
Income (loss) from operations (275,373) 63,753
Interest income 491 15
Interest expense (87) (348)
-----------------------------
Net income (loss) (274,969) 63,420
Preferred stock dividends -- (8,499)
-----------------------------
Net income (loss) applicable to common
stockholders $ (274,969) $ 54,921
=============================
Net income (loss) per common share $ (.01) $ --
-----------------------------
Weighted average number of common shares
issued and outstanding 26,763,007 18,115,669
=============================
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See accompanying notes to condensed consolidated financial statements
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<PAGE>
CYCLO3PSS CORPORATION
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
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<TABLE>
<CAPTION>
For the three months ended
May 31,
2000 1999
--------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (274,969) $ 63,420
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 68,049 36,061
Common stock issued for services 177,060 --
Changes in assets and liabilities:
Increase in accounts receivable (60,273) (195,705)
Increase in inventories -- (241)
Increase in prepaid expenses (24,312) (3,120)
Decrease in accounts payable and accrued liabilities (364,432) (55,208)
--------------------------------
Net cash used in operating activities (478,877) (154,793)
--------------------------------
Cash flows from investing activities:
Purchase of property and equipment (7,043) --
Addition to developed patents and other (29,762) --
--------------------------------
Net cash used in investing activities (36,805) --
--------------------------------
Cash flows from financing activities:
Proceeds from issuance of preferred stock -- 156,825
Proceeds from exercise of warrants 196,000 --
Proceeds from exercise of stock options 5,875 18,000
Proceeds from notes payable 250,000 --
Principal payments under capital lease obligations (1,647) (4,120)
--------------------------------
Net cash provided by financing activities 450,228 170,705
--------------------------------
Net (decrease) increase in cash (65,454) 15,912
Cash at beginning of period 107,565 36,018
--------------------------------
Cash at end of period $ 42,111 $ 51,930
================================
</TABLE>
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 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 29, 2000 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 ("the
Company") as of May 31, 2000, and the results of its operations and its cash
flows for the interim periods ended May 31, 2000 and May 31, 1999. 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 29, 2000.
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 engaged in the manufacture,
sale and installation of ozone food processing products, ozone washing for
commercial and institutional laundries, the manufacture and sale of specialty
compounds and chemicals, and research and development of technologies for
sterilization and/or disinfection of medical and some consumer products.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. 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.
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<PAGE>
CYCLO3PSS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
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1. Summary of Significant Accounting Policies (continued)
Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", requires that all items that are recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The items of other comprehensive income that are
typically required to be displayed are foreign currency items, minimum
pension liability adjustments, and unrealized gains and losses on certain
investments in debt and equity securities. There have been no items of other
comprehensive income to date.
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 at May 31, 2000 of $19,420,614 and $19,145,645 at
February 29, 2000, 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 29, 2000 was $1,960,414 and the
Company recorded a net loss of $274,969 for the three months ended May 31,
2000. To date, the Company has funded its operations through the issuances of
common and preferred stock, and a loan as described further. The Company
anticipates a net loss for the year ended February 28, 2001, and with a cash
balance of $42,111 at May 31, 2000 and expected cash requirements for the
year, there is substantial doubt as to the Company's ability to continue
operations.
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. Management believes
that appropriate funding will be generated and future product sales will
result from these opportunities and that the Company will continue operations
through the next fiscal year; however, no assurance can be given that sales
will be generated or that the additional necessary funding will be raised.
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<PAGE>
CYCLO3PSS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
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2. Basis of Presentation (continued)
The severe financial condition of the Company was disclosed to Procter &
Gamble (" P&G") during the last week of November 1999. P&G responded
immediately and after conferring with the Company's management negotiated and
subsequently entered into a new Letter of Intent on December 10, 1999. The
agreement allows for two separate financings by P&G to the Company. The
first, an Unsecured Promissory Note for $250,000, was executed and funded in
concert with the signing of the new Letter of Intent in order to relieve the
immediate and critical cash requirements of the Company. The second financing
is a Convertible Secured Loan for $750,000 which provides long-term working
capital for the Company. As of May 31, 2000, $250,000 of the total was
received and recorded by the Company. On June 19, 2000, the balance of
$500,000 was received. The loan is secured by a first security interest in
all of the Company's Intellectual Properties and will be due and payable in
full on the one year anniversary date of its execution. The loan is non
interest bearing, but in the event of a default, it may accrue up to 15%
interest. The loan agreement grants a conversion right to P&G allowing for
the conversion of all or any part of the outstanding loan, including all or
any part of interest due into shares in the Company's common shares of stock
at anytime during the term of the loan, and at the sole discretion of P&G, at
the average closing bid price of the Company's common stock for ten
consecutive business days prior to the date of execution of the note,
February 2, 2000, which was $.27987. The Company contemplates engaging in
several diverse development and testing contracts within various departments
of P&G. In addition, under the terms of the agreement, P&G will be granted an
Exclusive First Right of Refusal for the Licensing of all the current and
future technologies of the Company.
3. Contingencies
The Company is not a party to and presently is not aware of any pending
claims or existing litigation. Previous settled matters are described in the
Company's Form 10-KSB for the year ended February 29, 2000.
4. Segment Information
On March 7, 2000 the Company internally realigned its ozone businesses,
collapsing these separate business units into a single entity. During the
three months ended May 31, 2000 the Company operated in two principal
industries; the manufacture, sale and installation of ozone products ("ozone
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 and cash equivalents, accounts receivables, prepaid expenses, property
and equipment and corporate payables.
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<PAGE>
CYCLO3PSS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
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4. Segment Information (continued)
For the three months ended
May 31, 2000 May 31, 1999
------------------------------
Net revenues
Ozone products $ 76,087 $ 208,299
Biochemical products 104,670 108,433
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Total Revenue $ 180,757 $ 316,732
============ ============
Operating income (loss)
Ozone products $ (28,018) $ 69,910
Biochemical products 49,035 32,218
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Total operating income (loss) 21,017 102,128
Corporate expenses (296,390) (38,375)
Interest income 491 15
Interest expense (87) (348)
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Net income (loss) $(274,969) $ 63,420
============ =============
Identifiable assets
Ozone products $ 258,441 $ 513,938
Biochemical products 132,723 160,284
General corporate assets 63,707 98,302
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Totals assets $ 454,871 $ 772,524
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<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
General
Cyclopss Corporation (the "Company") historically has been engaged in a fully
integrated business model providing the design, manufacturing, 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. Ozone technology is proven
to reduce microbial counts on food products without the potential for the
development of immunity or resistance by the organism. Ozone laundry systems
enable users to reduce costs associated with labor, water, energy, chemical,
textile replacement and wastewater. The Company has recently changed its
business model to include the licensing of proprietary technologies to
partners who have resources and infrastructures better suited to successfully
commercialize certain of the Company's technologies or products. The Company
has entered into a Technology Licensing Agreement with Consolidated Stills
and Sterilizers of Boston, MA. The agreement licenses the ozone medical
instrument sterilization technology developed and patented by the Company for
an initial licensing fee and future royalties. The Company anticipates
negotiating like arrangements on other of its proprietary technologies when
the circumstances are beneficial. Cyclopss will continue to engage in all
integrated functions required in the synthesis, manufacturing and marketing
of its specialty chemicals.
Consumers, food producers and processors, both large and small, are searching
for new technologies to address food safety and sterilization concerns. Both
consumers and food processors, who have relied heavily on chlorination and
other chemicals to decontaminate foods and household items, are being forced
to consider alternatives to chlorine and those other toxic chemicals. The
Company believes that ozone products offer a lower cost and more
environmentally-friendly and consumer accepted form of decontamination and
sterilization than many other chemical treatments and irradiation.
These statements are forward-looking and involve matters which are subject to
a number of risks and uncertainties that could cause actual results to differ
materially from those expressed in or implied by such forward looking
statements. These risks and uncertainties include product development or
production difficulties or delays due to supply constraints, technical
problems or other factors; technological changes; the effect of global,
national and regional economic conditions; the impact of competitive products
and pricing; changes in demand; increases in component prices or other costs;
and a number of other risks including those identified by the Company
throughout Form 10- KSB for February 29, 2000, and other risks identified
from time to time in the Company's filings with the Securities and Exchange
Commission, press releases and other communications. The Company assumes no
obligation to update forward-looking statements.
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<PAGE>
Results of Operations
The Company's revenues were $180,757 for the three months ended May 31, 2000
compared to $316,732 for the three months ended May 31, 1999. This decrease
was mainly due to the Company's shift in the use of its employees and
resources from the generation of short term revenues, required to cover
operating expenses, to research and design efforts in developing long term
future product and application royalty receipts as described further. The
Company's gross margin for the three months ended May 31, 2000, was $91,465
compared to $186,733 for the three months ended May 31, 1999. This reduction
is due to a decrease in product sales as described above. The Company
continues to closely monitor expenses to minimize all unnecessary operating
costs. The Company expects to start receiving royalty payments from the sale
of consumer products as described further in this section.
Research and development expenses increased to $13,456 for the three months
ended May 31, 2000 from $0 for the three months ended May 31, 1999. The
Company eliminated all research and development costs during the three months
ended May 31, 1999, due to lack of necessary funds for this function. The
Company resumed its research and development efforts in the second quarter
fiscal 2000 when funds and personnel were available for these activities.
Selling and marketing expenses increased to $29,596 for the three months
ended May 31, 2000 from $0 for the three months ended May 31, 1999. In 1999,
the Company took steps to eliminate marketing staff and eliminated all
advertising in order to help conserve cash. Management believes that it is
critical to periodically support and supplement its sales efforts through
advertising, public relations and trade-show participation when sufficient
funds are available, and started to dedicate limited funds to selling and
marketing expense in year 2000.
General and administrative expenses increased to $255,737 for the three
months ended May 31, 2000 from $86,919 for the three months ended May 31,
1999. The unusually low general and administrative expenses last year were
due to a refund of $138,875 for insurance premiums that was received and
recorded against administrative expenses. Excluding the refund of insurance
premiums, the general and administrative expenses for the first quarter of
this year are comparable to the same period last year. Management is closely
monitoring and controlling these expenses. However legal and accounting
expenses related to newly enacted SEC requirements continue to escalate, and
new regulations are being adopted with increasing regularity. These expenses
while burdensome are crucial to providing and maintaining a market for the
Company's securities. These expenses are expected to increase in fiscal 2001,
with other potential increases due to management and human resource
requirements for the Company should commercial activities increase, and more
funds become available for this use.
The Company recorded net loss applicable to common stock for the three months
ended May 31, 2000 of $274,969. The income recorded for the three months
ended May 31, 1999 was $54,921. This change is due partly to a refund of
$138,875 for insurance premiums that was received and recorded last year.
A toothbrush and a kitchen sponge sanitizer were developed by Otres, a
strategic partner, in collaboration with the Company and are the subject of a
co-marketing agreement with the Crest and Dawn divisions of P&G. The products
are designed to kill 99.9% of germs found on toothbrushes and kitchen sponges
using ozone technology, and they address a growing consumer concern, that of
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<PAGE>
reducing the spread of germs and microorganisms, such as streptococci and
staphylococci on toothbrushes and e-coli, salmonella and listeria on kitchen
sponges. The Company will receive ongoing royalty revenues from the sale of
those products. The products were expected to be available to the consumer
market in February 2000, and the Company had been relying, in part, on those
royalty revenues to offset operating expenses. However due to a series of
situations over which the Company had no control, product introduction has
been delayed until July 2000. The OTRES products, when released will be
available for purchase on the Company's website (www.cyclopss.com), as well
as grocery, appliance and hardware stores, mass merchandisers and drug
stores.
Liquidity and Capital Resources
In December 1999, the Company entered into an Unsecured Promissory Note for
$250,000 with P&G. In February 2000, the Company received a second financing
of a Convertible Secured Loan for $750,000 which provides long-term working
capital for the Company. $250,000 of this total was received and recorded in
the first quarter ended May 31, 2000. The balance of $500,000 was received on
June 19, 2000. The loan is secured by a first security interest in all of the
Company's Intellectual Properties and will be due and payable in full on the
one year anniversary date of its execution. The loan agreement grants a
conversion right to P&G allowing for the conversion of all or any part of the
outstanding loan, including all or any part of interest due, into shares of
the Company's common stock at anytime during the term of the loan, and at the
sole discretion of P&G. The Company has, and continues to engage in several
diverse development and testing contracts within various departments of P&G.
In addition, under the terms of the agreement, P&G will be granted an
Exclusive First Right of Refusal for the licensing of all the current and
future technologies of the Company. There are no assurances that cash
received from these arrangements will be sufficient to meet the Company's
operating needs through February 28, 2001.
Cash used in operating activities was $478,877 for the three months ended May
31, 2000 compared to $154,793 for the three months ended May 31, 1999. A
large portion of this increase was due to the Company paying off accrued
liabilities and extremely aged accounts payables that had been accumulating
for a substantial amount of time, decreasing accrued liabilities by $364,432
this year compared to $55,208 last year.
Cash expenditures for property, equipment and developed patents were $36,805
for the three months ended May 31, 2000 compared to $0 for the three months
ended May 31, 1999. This increase was due primarily to Company updating,
maintaining and filing new patents.
Net cash provided by financing activities for the three months ended May 31,
2000, was $450,228. $196,000 of this total was received from the exercise of
certain "Series A" warrants in connection with an offering of 1,000,000
"Series A" preferred shares made in October of 1997. These warrants were
exercisable at $.50 each, and 392,000 common shares were issued for $196,000
upon the exercise of the same number of warrants. $250,000 was received from
P&G during this quarter, as part of the loan described earlier. Cash provided
by financing activities for the three months ended May 31, 1999 was $170,705,
due mainly to issuance of 157 shares of "Series C" preferred shares.
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<PAGE>
Total assets decreased to $454,871 for the three months ended May 31, 2000
from $466,984 for the year ended February 29, 2000, due to a decrease in the
Company's cash position, after paying down a considerable portion of accounts
payable and accrued liabilities.
Total current liabilities decreased to $944,093 at May 31, 2000 from
$1,060,173 at February 29, 2000, mainly due to decreases in accounts payable
and accrued liabilities.
Plan of Operation
Under the Company's new plan of operations it will no longer attempt to act
as a manufacturer or marketer of its technologies but will instead act as a
technology provider. Its efforts will be directed toward the creation of
technology bridges for companies providing products and services. The Company
will utilize its technology products to produce new complete processes. These
ventures will include suppliers of equipment and appliances and suppliers of
disposable or consumable products modified to utilize the Company's
proprietary technologies under licensing and royalty agreements. The end
result will create interlocking process systems that will be both effective
and economic. Additionally the process systems will be sold and serviced by
vendors and suppliers already accepted by the target markets. This model
provides the manufacturers with technology and new product offerings and
provides the Company with royalty revenue and commercialization of its
technologies through already existing manufacturing, sales and service
infrastructures.
In the near future the Company will continue to provide low volume production
of ozone systems to the US Navy, however, the Company has entered into an
exclusive relationship with Alliance Laundry to jointly furnish Eco-Wash
ozone laundry systems to the Navy. The Company anticipates the manufacturing
activity will become the function of Alliance or some other contract
manufacturer as demand from the Navy dictates. The Company and Alliance are
currently in discussions in regards to co-venturing other commercial laundry
markets other than the Navy. The Company continues to seek industry
participants for design and development work required in modifying their
existing products to accommodate the incorporation of the Company's
proprietary technologies. This model allows the Company to keep the number of
employees limited to specific requirements of the technology application, and
converts the Company into a technology purveyor.
This business model is illustrated by the current business relationship
between the Company, P&G and Otres, Inc. Cyclopss had established a working
relationship with P&G early in 1999. In May of 1999, the Company was
approached by the principals of Otres to assist in the development and
validation of a toothbrush sanitizer and a kitchen sponge sanitizer utilizing
ozone. The management of the Company determined the products could be of
great interest to P&G and, after having appropriate confidentiality documents
executed, Otres agreed to allow the Company to introduce the product concepts
to P&G. P&G determined they had products that would lend themselves to a
co-marketing relationship with the Otres appliances as long as the product
development was responsibly executed and the technology application proved
safe and effective. Both Otres and P&G engaged the Company for these
activities. The Company manages the relationship with P&G for Otres under
contract, and contributed to the execution of co-marketing agreements between
Otres and CREST(R) for the toothbrush sanitizer, and Otres and DAWN(R) for
the kitchen sponge sanitizer that were announced at the International Home
Appliance Show in Chicago on January 16, 2000. The Company negotiated to
receive an ongoing royalty from the sale of these appliances, which provides
the potential for significant future revenues with minimal related costs.
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<PAGE>
To better provide the personnel required under this business model the
Company moved its Research and Development activities to New Mexico in
February 2000. The Company maintains a limited administrative staff in its
current offices in Salt Lake City, Utah, as well as the Biochem division.
The Company anticipates its revenues as well as the source of those revenues
to change significantly through establishment of these types of
relationships. However, there can be no assurance that the financing as
completed with P&G will be sufficient to offset cash demands, nor can there
be any assurance that any of the Company's products will be accepted in such
numbers as to make the royalty revenues significant enough to cover the cost
of operation.
Even with sufficient funds available, the ongoing challenge facing the
Company is that of educating potential partners, 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. For
industry, ozone is a cost competitive and environmentally-friendly answer to
microbial contaminates. For the consumer, ozone kills harmful microorganisms
quickly and leaves behind no chemical residue.
The Biochem products will continue to be driven by customer requests and
increased sales will be derived from contract product development. Current
sales activities will be evaluated and alternatives looked for to improve
profit margins. Joint efforts will continue with Foster Miller, Inc., in
order to create a market for Biochem's monomer to the aerospace industry.
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 initiatives, success of the Company's research and
development efforts, and other factors.
From time to time, the Company may publish 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 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.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.None.
Item 2. Changes in Securities and use of proNone.
Item 3. Defaults Upon Senior SecuritieNone.
Item 4. Submission of Matters to a Vote of Security HoldNone.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form S-8. To register Executive
Employee Stock Option Agreements, register shares for director
fees, legal and consulting fees.
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: July 14, 2000 By/s/ William R. Stoddard
-----------------------
William R. Stoddard
Chief Executive Officer
Principal Executive Officer
Date: July 14, 2000 By/s/ Mondis Nkoy
----------------------------------
Mondis Nkoy
Controller, Corporate Secretary
Principal Financial Officer
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