As filed with the Securities and Exchange Commission on June 28, 1996
Registration No. 333-1000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
Amendment No. 3
to
FORM SB-2
REGISTRATION STATEMENT
Under The Securities Act of 1933
____________
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
(Exact Name of Registrant as specified in its charter)
Florida 2869 59-3029743
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
3713 S.W. 42nd Avenue, Suite 3, Gainesville, Florida, 32608-6581 (352) 375-6822
(Address with zip code and telephone number with area code of registrant's
principal executive offices)
C.E. Rick Strattan, 3713 S.W. 42nd Avenue. Suite 3, Gainesville, Florida,
32608-6581 (352) 375-6822
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
Bruce Brashear
920 N.W. 8th Avenue, Suite A
Gainesville, Florida 32601
(352) 336-0800
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Proposed maximum Proposed
each class Amount offering price maximum Amount of
of securities to be per aggregate registration
to be registered registered unit <F1><F2> offering fee
price <F1><F2>
<S> <C> <C> <C> <C>
Units, 500
consisting of Units $687.50 $343,750 $119
(a) Voting Common 250,000
Stock, $.0001 Shares
par value
("Common Stock")
(b) Warrant to 125,000
purchase 1 share Warrants
of Voting Common
Stock at $5.50
Voting Common Stock
purchasable pursuant
to Warrants 500,000 $1.65/share $ 825,000 $288
<FN>
<F1>
Estimated solely for the purpose of determining the registration fee.
<F2>
Based on the average bid and asked price for the Voting Common Shares of the
Registrant on January 25, 1996.
</FN>
</TABLE>
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933, or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
Cyclodextrin Technologies Development, Inc.
Cross Reference Sheet
Between Items in Part I of Form SB-2 and the Prospectus
Item No. Caption or Page in Prospectus
1. Outside Front Cover
Page of Prospectus Outside Front Cover Page
2. Inside Front Cover and Outside
Back Cover Pages of Prospectus Inside Front Cover Page;
Outside Back Cover Pages
3. Summary Information; Risk Factors Prospectus Summary; Risk
Factors; Selected Financial
Information
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Inside Front Cover Page;
The Offering
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Directors,
Promoters and Control Persons Management
11. Security Ownership of Certain
Beneficial Owners and Management Principal Stockholders
12. Description of Securities Outside Front Cover;
Prospectus Summary;
Description of Securities;
Shares Eligible for Future
Sales, Comparative Market
Prices; Dividend Policy
13. Interests of Named Experts and Counsel Not Applicable
14. SEC Position on Indemnification Not Applicable
15. Organization within Last 5 Years Certain Transactions and
Related Matters
16. Description of Business Prospectus Summary; Risk
Factors; Business
17. Management's Discussion and Analysis Management's Discussion and
Analysis of Financial
Condition and Results of
Operations
18. Description of Property Business
19. Certain Relationships and Related
Stockholder Matters Certain Relationships and
Related Matters
20. Market for Common Equity and Related
Stockholder Matters Comparative Market Prices
21. Executive Compensation Management
22. Financial Statements Financial Statements
23. Changes in and Disagreements
with Accountants Not Applicable
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED June 28, 1996
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
500 Units
Each Unit Comprised of Five Hundred Shares of Voting Common Stock and
Two Hundred Fifty Redeemable Common Stock Purchase Warrants,
par value $.0001 per share
(the "Units")
Each Unit consists of five hundred (500) shares of Cyclodextrin
Technologies Development, Inc. (the "Company") Voting Common Stock ($.0001
par value) (the "Common Stock") and two hundred fifty (250) Common Stock
Purchase Warrants (the "Warrants"). Each Warrant entitles the holder to
purchase one (1) share of Common Stock at a purchase price of $5.50 if
exercised prior to December 31, 1997, two (2) shares of Common Stock at a
purchase price of $5.50 per share if exercised between January 1, 1998 and
December 31, 1998, four (4) shares of Common Stock at a purchase price of
$5.50 per share if exercised between January 1, 1999 and December 31, 1999.
The Warrants offered hereby are exercisable and detachable from the Common
Stock contained in the Units immediately on purchase. The Company
anticipates that the Warrants will be traded on the OTC Bulletin Board and in
the over-the-counter market "pink sheets" , but does not expect the Units to
be traded. The Warrants are redeemable in whole but not in part by the
Company at a redemption price of $.01 per Warrant upon thirty (30) days
written notice. The Warrants may be exercised any time prior to the
expiration of the 30-day redemption notice period.
All of the Units will be offered solely by the Company through its officers
on a "best efforts" basis. The offering will terminate 90 days from the date
of this Prospectus unless extended by the Company for an additional 90 day
period. No commissions will be paid with respect to the sale of the shares.
The proceeds of this offering will not be escrowed pending the sale of a
minimum number of Units. Any proceeds from this Offering will be immediately
available to the Company.
INVESTMENT IN THE SECURITIES OFFERED BY THIS PROSPECTUS INVOLVES MATERIAL
RISKS AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO ARE CAPABLE OF BEARING THE
ECONOMIC RISK OF SUCH AN INVESTMENT. (SEE "RISK FACTORS.")
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds
Public Discounts and Commissions to Issuer <F1>
<S> <C> <C> <C>
Per Unit $2,500 $-0- $2,500
Total $1,250,000 $-0- $1,250,000
<FN>
<F1>
Before deducting estimated expenses of $53,000.
</FN>
</TABLE>
The date of this Prospectus is June __, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities and Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports and other information with the Securities and
Exchange Commission. Reports, proxy and information statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission in Washington, D.C. at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities referred to above and at the Regional Offices of the SEC
as follows: the New York Regional Office, Room 1028, 26 Federal Plaza, New
York, New York 10278, and the Chicago Regional Office, Room 1204, Everett
McKinley Dirksen Building, 219 South Dearborn Street, Chicago, Illinois
60604. Copies of such material can be obtained from the Public Reference
Section of the Commission, Washington, D.C. 20549 at prescribed rates.
Cyclodextrin Technologies Development, Inc.
<PAGE>
PROSPECTUS SUMMARY
The following summary is intended only to supply certain facts and
highlights from the material contained in the body of the Prospectus. This
summary is qualified in its entirety by the detailed information, financial
statements and notes thereto appearing elsewhere in this Prospectus.
The Company
Cyclodextrin Technologies Development, Inc. (the "Company"), was formed
on August 9, 1990, under the laws of the State of Florida to develop, market
and sell cyclodextrins and drug/chemicals complexes with cyclodextrins to the
food, pharmaceutical, and other industries.
The Company's executive offices are located at 3713 S.W. 42nd Avenue,
Suite 3, Gainesville, Florida, 32608-6581; its telephone number is 352-375-
6822.
Risk Factors
An investment in the Shares offered hereby is speculative and involves a
high degree of risk and should be considered only by persons who can afford
the loss of their entire investment. Investors should carefully consider
various risk factors before investing in the Common Stock of the Company.
(See "Risk Factors" and "Business.")
The Offering
Securities Being Offered 500 Units, each Unit consisting of
500 shares of Voting Common Stock
par value $.0001 per share and 250
Voting Common Stock Purchase
Warrants. Each Warrant entitles
the holder to purchase one (1)
share of Voting Common Stock at a
purchase price of $5.50 if
exercised prior to December 31,
1997; two (2) shares of Voting
Common Stock at a purchase price of
$5.50 per share if exercised
between January 1, 1998 and
December 31, 1998; four (4) shares
of Voting Common Stock at a
purchase price of $5.50 per share
if exercised between January 1,
1999 and December 31, 1999 (See
"Description of Securities.")
Shares of Common Stock Outstanding
Before the Offering <F1> 1,100,100
Shares of Common Stock Outstanding
After the Completion of the
Offering <F1> 1,350,100
Use of Proceeds New Product Development and
Marketing
Risk Factors See "Risk Factors."
OTC Bulletin Board Symbols:
Shares of Common Stock CTDI
Common Share Purchase Warrants CTDI-W (proposed)
<F1>
Assumes all Units offered are purchased.
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data reflects the operations of
Cyclodextrin Technologies Development, Inc. The financial data included in
this table have been selected by the Company and have been derived from the
financial statements for those periods. None of the following selected
financial data is covered by the Independent Accountant's report.
<TABLE>
<CAPTION>
Income (Loss) For the Year Ended December 31,
Statement Data: 1995 1994
<S> <C> <C>
Revenue
Product sales $ 253,100 $ 154,842
Consulting Fees 534 4,150
Investment and other income 24,965 20,104
Total Sales and Revenue 278,599 179,096
Net Income (Loss) (193,609) $(1,133,970)
Net Income (Loss) per
common share and common
equivalent share (0.19) (1.19)
Balance Sheet Data:
Current Assets $ 170,400 $ 434,230
Property and equipment 48,679 38,963
Other Assets 108,025 18,557
Total Assets 327,104 491,750
Current Liabilities 57,041 $ 17,006
Long-term Liabilities 0 0
Common Stock Subject to
Repurchase 6,250 37,500
Stockholders' Equity $ 263,813 $ 437,244
</TABLE>
The foregoing selected financial data may not be indicative of the
future financial condition or results of operations of the Company.
THE COMPANY
Cyclodextrin Technologies Development, Inc. (the "Company"), was
organized as a Florida corporation on August 9, 1990, with operations
beginning July, 1992. The Company has been engaged since that time in the
marketing and sale of cyclodextrins (a new class of molecular carrier
molecules) and combinations of drugs/chemicals with cyclodextrins to the
food, pharmaceutical, and other industries. The Company is retained for its
expertise related to these new carrier molecules and for its ability to
develop proprietary applications of cyclodextrins.
Cyclodextrins (CDs) are molecules with the ability to make "oily"
compounds form indefinitely stable solutions with water. Successful
applications of this phenomenon have been made in the areas of agriculture,
analytical chemistry, biotechnology, cosmetics, diagnostics, electronics,
foods, pharmaceuticals, and toxic waste treatment. Stabilization of food
flavors and fragrances is currently the biggest commercial use of CDs in the
world. Two of the only non-food, commercial uses of CD's by major
companies in the U.S. known to CTD are by Proctor and Gamble Co. in its
fabric softener, Bounce(copyright) and by Avon Products in its APS (Age
Protectant System) for selected dermal products; the Company does not provide
CDs for either of these uses. Currently there are no commercial pharmaceutical
uses of CDs in the U.S. The Company was the first to launch a food-related
product in the U.S. containing CDs -- Garlessence(, a dietary supplement, in
November 1995.
Other countries of the world, especially in Europe and the Pacific Rim
have moved aggressively to commercialize uses of CDs in pharmaceuticals,
including injectables, topicals, and oral preparations in the last five
years.
In the pharmaceutical area the Company is presently engaged in the
development of topical ophthalmic formulations of generic drugs. The Company
anticipates the new formulations will enhance the following types of
pharmaceuticals:
(1) anti-inflammatory drugs
(2) antibiotic, antifungal drugs
(3) drugs which reduce intra-ocular pressure
The Company is also developing a non-barbiturate-based veterinary
euthanasia product.
In the non-pharmaceutical area the Company intends to use CDs to attempt
to achieve the following:
(a) standardize natural herbal remedies
(b) stabilize flavors for food products
(c) eliminate undesirable tastes and odors
(d) improve antifungal complexes for foods and toiletries.
(e) stabilize fragrances and dyes
(f) improve toxic waste removal, reduction and remediation
(g) improve quality, stability, and storability of foods
(See "Business.")
American Stock Transfer and Trust Co., 938 Quail Street, Lakewood,
Colorado 80215, is the Registrar and Transfer Agent of the Company's Common
Stock and Warrant Agent of the Company's Warrants.
The Company's executive offices are located at 3713 S.W. 42nd Avenue,
Suite 3, Gainesville, Florida, 32608-6581; its telephone number is 352-375-
6822.
RISK FACTORS
An investment in the Shares offered hereby is speculative and involves a
high degree of risk and should be considered only by persons who can afford
to lose their entire investment. Investors should carefully consider the
following factors, among others, before investing in the Shares.
Limited Operating History
The Company was incorporated under the laws of the State of Florida on
August 9, 1990, and has to date generated revenues of slightly more than
$700,000 . The Company must therefore be considered promotional and in its
formative stage. Potential investors should be aware of the difficulties,
delays and expenses normally encountered with an enterprise in its formative
stage, many of which are beyond the Company's control. These include, but
are not limited to, unanticipated developmental expenses, inventory costs,
employment costs, and advertising and marketing expenses that may exceed
current estimates. There can be no assurance that the Company's proposed
business plans as described herein will either materialize or prove
successful, or that the Company will ever be able to operate profitably and,
if not, investors may lose all or a substantial portion of their investment.
Operating Losses
Although the Company was profitable in 1993, it has incurred operating
losses since January, 1994. Its accumulated deficit as of December 31, 1995,
was $ (1,283,960). (See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Index to Financial Statements.")
Requirement for Additional Financing
The Company believes that the net proceeds from the sale of the Units
will enable it to increase its sales according to its business plan. (See
"Business") Upon completion of the offering, the Company may require
additional financing. No assurance can be given that such additional
financing will be available to the Company or if available, that it can be
obtained on terms satisfactory to the Company. In the event 50% of the Units
offered were sold, the Company would concentrate its resources on marketing
with minimal less new product development. In such event, likelihood that
the Company would require additional financing would increase
Dependence on a Few Significant Customers
The Company has been dependent on just a limited number of customers for
the majority of its business. For example, during 1995, four customers
accounted for approximately 84% of the Company's sales. The good news is
that these customers' orders are growing in size and regularity. However,
no assurance can be given that they will continue to do so or even recur.
Loss of these customers would have a materially adverse effect on the
Company's operations. In addition, there can be no assurance that the
Company will find comparable purchasers should these purchasers reduce or
discontinue their purchases. The Company believes that the business created
by the complexes purchased by these customers is growing and therefore does
not expect any interruption of orders by its customers.
By implementing the business strategy described in this offering
memorandum the Company intends to diversify its revenue base so that the
Company is less dependent on these few significant customers. Specifically
the Company expects to derive significant revenue from:
(1) Proprietary new products, e.g., Garlessence(tm)
(2) Captive sales of complexes and CDs for products produced by
affiliates - PRO-HIBIT, the Bite Patch(tm)
(3) Royalties for its molecular carrier logo
(4) Fees for development of CD related products outside of the
United States
Dependence on C.E. Rick Strattan
The success of the Company's business will be dependent upon C.E. Rick
Strattan, its President. The loss of the services of Mr. Strattan would have
a materially adverse effect upon the Company's business. Mr. Strattan has
not entered into a covenant not to compete against the Company. The Company
has not purchased "key man" insurance insuring the life of Mr. Strattan. The
Company's continued growth also will depend upon his ability to attract and
retain individuals skilled in the marketing and development of CDs. No
assurance can be given that the Company will be able to attract such
individuals.
Competition
As a component of its business, the Company currently acts as a
distributor and consultant for manufacturers of CDs as well as developing and
manufacturing CD related products. While the Company believes it presently
does not have significant competition in the distribution and sale of CD
complexes, it is possible that manufacturers of CDs could decide to market
and support with customer service the direct sales of CDs and CD complexes.
Moreover, the functions performed by CDs and the products with which CDs will
be combined are also fulfilled by other products, some of which are
manufactured and distributed by firms having greater resources. In the
estimation of the Company, these products do not have the advantages of CDs.
The Company's products and the products of the Company's customers which
incorporate CDs will compete with a number of well established entities which
have significantly greater resources, distribution networks, technical,
maintenance and support staffs, manufacturing capabilities, sales and service
organizations, and wider recognition.
Federal and State Regulations for Drugs
Human therapeutic products are subject to rigorous pre-clinical and
clinical testing and approval by the Food and Drug Administration ("FDA") and
comparable agencies in other countries and, to a lesser extent, by state
regulatory authorities prior to marketing. Some animal health products also
require the approval of the United States Department of Agriculture ("USDA"),
the FDA or both. The Company's sales of CD's and CD complexes for research
and development purposes only (presently the majority of the Company's
revenue), are not subject to FDA review. However, FDA review may be required
for the Company's own products or other CD related products marketed by third
parties which the Company developed or for which the Company provides CDs.
The Company believes that because the product is a dietary supplement, FDA
review was not required prior to the sale of Garlessence(tm), CTD's (and in
fact the U.S.'s) first food-related CD containing product. The process of
obtaining such approval, especially for human therapeutic products, is likely
to take a number of years and will involve the expenditure of substantial
resources. Even if approval is granted, such approval is subject to
continual review, and later discovery of previously unknown problems may
result in restrictions on a product's future use or withdrawal of the product
from the market. There is no assurance additional or modified laws and
regulations will not come in effect which will have a materially adverse
effect on the Company or its activities. The effect of governmental
regulation may be to delay or prevent marketing of the Company's prospective
products and to furnish a competitive advantage to larger companies.
Patents
Certain of the Company's products and formulae may not be patentable.
While patent applications may be filed regarding the Company's veterinary
euthanasia product in development, there can be no assurance any patent will
be granted or will afford the Company commercially significant protection for
the licensed technology or have commercial application. The Company's
patents have not been tested in the courts and litigation may be necessary to
determine the validity and scope of those patents. Moreover, the patent laws
of foreign countries may differ from those of the United States and the
degree of protection afforded by foreign patents may therefore be different.
In the event the Company's products are successfully marketed, competitors
with greater financial resources and marketing abilities may copy the
Company's products or develop equivalent or superior products. In addition,
the Company may rely on unpatented know-how and there can be no assurance
others will not obtain access to or independently develop such know-how.
Although employees, prospective licensees and consultants are not given
access to the proprietary know-how of the Company until they have executed
confidentiality agreements, these agreements may not provide meaningful
protection in the event of any unauthorized use or disclosure of such know-
how. There is no assurance that any of the Company's products can be
maintained as a trade secret. (See "Business.")
Product Liability
The testing, marketing and manufacture of cyclodextrin related products
which may be manufactured and/or sold by the Company will entail risk of
product liability. Although the Company anticipates that it will obtain
indemnification agreements from pharmaceutical, food, cosmetic or chemical
companies which license or otherwise commercialize products developed by it,
there can be no assurance that such companies will be sufficiently insured or
have the sufficient net worth to protect the Company from product liability
claims. In any event, such indemnification agreements do not protect the
Company from liability arising from its own negligence. In addition, to the
extent the Company tests, markets or manufactures products, it will bear the
risk of product liability directly. The Company presently has product
liability insurance. Such insurance is increasingly difficult to obtain and
may be inadequate to protect the Company in the event of a successful product
liability claim. (See "Business.")
Dilution
Purchasers of the Units offered hereby will experience immediate and
proportionate dilution of the net tangible book value of the shares
outstanding in the amount of approximately $3.99 per share (dilution per Unit
will be $1,995) in the event all Units offered are sold. Additional dilution
to future book value per share may occur upon the exercise of certain of the
outstanding securities of the Company. Additionally, since its inception,
the Company has issued common shares in exchange for services. In the event
the Company continues to issue shares in order to acquire services, it is
possible that such transactions will increase the total number of outstanding
shares without correspondingly increasing the net tangible book value of the
Company thereby proportionately decreasing the net tangible book value per
share to stockholders. (See "Certain Transactions.")
Determination of Offering Price
The offering price of the Unit ($5.00 per Unit) has been determined
by the Company, based on its belief that in view of its development and
potential the value of the Common Stock should be greater than the $2.25 high
and the $.50 low experienced during the first quarter of 1996. The Company's
determination of the Unit Offering price does not bear any relationship to
the Company's assets, results of operations or book value, or to any other
generally accepted criteria of valuation.
Limited Trading Market
The Company's Voting Common Stock is not traded on an established
market, being traded on the OTC Bulletin Board. There is no prior trading
market for the Company's Warrants. There can be no assurance that a trading
market for the Warrants will develop or if developed will continue. There is
no assurance that the limited market for the Common Stock will continue.
No Dividends
The Company has paid no dividends since its creation and it is
anticipated that future earnings of the Company, if any, will be retained for
use in the Company's business rather than for the payment of cash dividends
on its Common Stock. Therefore, investors who anticipate the need of an
immediate income, in the form of dividends on their Common Stock should
refrain from the purchase of the securities being offered hereby. (See
"Dividend Policy" and "Description of the Securities.")
No Commitment to Purchase Units
The Units offered herein are offered on a best efforts basis by the
Company and no commitment exists by anyone to purchase all or any portion of
the Units being offered. The Company can give no assurance that all or any
Units will be sold. There is no minimum number of Units which must be sold
to enable the Company to close the Offering and therefore all proceeds of the
Offering will immediately be available to the Company for its use. To the
extent that less than all of the Units are sold, the Company will be
prevented from implementing all of its immediate business plans, absent
additional financing. (See "Use of Proceeds" and "Description of
Securities").
Shares Eligible for Future Sale
Of the 1,100,100 shares of Company's Voting Common Stock outstanding
on January 25, 1996, approximately 590,000 shares may be deemed "Restricted
Securities" as that term is defined in Rule 144 promulgated under the 1933
Act. Such shares may be sold without registration under the 1933 Act if sold
in compliance with Rule 144 or if the seller has available an exemption from
registration under the terms of the 1933 Act. Rule 144 provides, in essence,
that a person holding "Restricted Securities" for a period of two years may
sell those securities in unsolicited brokerage transactions or in
transactions with a market-maker, in an amount equal to the greater of one
percent (1%) of the Company's outstanding shares every three months or the
average weekly recorded volume during the four preceding calendar weeks,
whichever is greatest. Rule 144 also permits, under certain circumstances,
the sale of shares by a person who is not an affiliate of the issuer and who
has satisfied a three-year holding period, without any quantity limitation.
During 1996 a total of 500,000 restricted shares may become eligible for
sale.
Obligation to Repurchase Certain Shares
The Company adopted a stock issuance plan pursuant to which employees
named by the board of directors receive shares in amounts determined by the
board. Shares received pursuant to the 1994 plan are vested after five
years. During the third, fourth and fifth years the stock is held by an
employee, the employee may cause the Company to repurchase the stock at 50%
of the then current market value. Since its inception 35,000 shares have
been issued pursuant to the plan, of which 10,000 have been repurchased. The
assertion of plan participants of their rights to cause the Company to
repurchase their shares at a time the market price of the shares was high
could have a materially adverse effect on the Company's cash position and its
ability to conduct business.
Redeemable Warrants
The Warrants included in the Units are redeemable by the Company upon
thirty (30) days prior written notice at $.01 per Warrant, subject to prior
exercise. Redemption of the Warrants might force the Warrant holder to
exercise the Warrants, and pay the exercise price, at a time when it may be
disadvantageous for the holder to do so, to sell the Warrants at the current
market price of the Warrants when he might otherwise wish to hold the
Warrants for possible additional appreciation, or to accept the redemption
price which may be substantially less than the market value of the Warrants
at the time of redemption. There can be no assurance that the market price
of the Common Stock underlying the Warrants will be greater than $5.50 at
such time as the Company is required to file a post-effective amendment to
keep its prospectus current. Further, the Warrants cannot be redeemed unless
the registration statement filed with the Securities and Exchange Commission
registering the Warrants is current. As a result, it may be cost effective
and expedient for the Company to redeem such Warrants for $.01 per Warrant at
an early date rather than keep the prospectus current for the exercise of the
Warrants. Any holder who does not exercise his Warrants prior to their
expiration or redemption, as the case may be, will forfeit his right to
purchase the shares of Common Stock underlying the Warrants. (See
"Description of Securities -- Common Share Purchase Warrants.")
Penny Stock Regulations -- Restrictions on Marketability
The Securities and Exchange Commission (the "Commission") has adopted
regulations which generally define "penny stock" to be any equity security
that has a market price (as defined) less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exceptions. The
Company's Common Stock and Warrants are covered by the penny stock rules,
which impose additional sales practice requirements on broker-dealers who
sell such securities to persons other than established customers and
accredited investors (generally institutions with assets in excess of
$5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with spouse). For transactions
covered by the rule, the broker-dealer must make a special suitability
determination for the purchase and receive the purchaser's written agreement
to the transaction prior to the sale. Consequently, the rule may affect the
ability of broker-dealers to sell the Company's securities and also may
affect the ability of purchasers in this offering to sell their shares in the
secondary market.
Current Prospectus and State Blue Sky Registration Required to Exercise
Warrants
Purchasers of Units will have the right to exercise the Warrants
included therein only if a current prospectus relating to the shares
underlying the Warrants then in effect and only if such shares are qualified
for sale under applicable securities laws of the states in which the various
holders of the Warrants reside. There is no assurance that the Company will
be able to maintain a current prospectus covering such shares or be able to
register or qualify such shares in the states where such Warrant holders
reside. The Warrants will be deprived of any value if a current prospectus
covering such shares issuable in exercise thereof is not kept effective or if
such shares are not registered in the states in which holders of the Warrants
reside. (See "Description of Securities -- Common Stock Purchase Warrants.")
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Units offered hereby, assuming the sale of all units, after deduction of
expenses of the Offering (estimated to be $53,000) are estimated to be
$1,197,000.
Such net proceeds will be used by the Company for the purposes and in
the approximate amounts set forth below assuming all of the Common Shares
offered herein are sold. In the event less than all of the Common Shares
offered herein are sold the net proceeds of this offering will be applied to
the use of proceeds shown herein on a pro rata basis.
New Product Development $600,000
Marketing $300,000
Working Capital $297,000
Total $1,197,000
During the 24-month period following the offering, the Company plans to
spend a total of $600,000 to secure rights and to develop additional new
products making use of CDs. Additionally the Company intends to expend
$300,000 in the promotion of the Company's existing products with advertising
costs estimated at $120,000 (See "Business") and public relations estimated
at $180,000. During the 24-month period following the offering, the Company
may require additional working capital to fund the creation of additional
inventory.
The foregoing represents the Company's best estimate of its allocation
of the proceeds of this Offering, based upon the current state of the
Company's business operations and its current plans. In the opinion of
management, the net proceeds of this Offering, together with anticipated
revenues from operations, will satisfy the Company's anticipated cash
requirements for at least 24 months. There can be no assurance that the
proceeds of this Offering will be sufficient to finance the Company's
operations and future capital requirements.
Pending application of the net proceeds of this Offering, the Company
may temporarily invest such funds in interest-bearing accounts, certificates
of deposit, government obligations, short-term interest bearing obligations
and similar short-term investments.
DILUTION
As of March 31, 1996, the Company's Common Stock had a net tangible
book value of $172,065 or approximately $.16 per share. As a result of the
sale of 250,000 shares of the Company's Common Stock through the sale of
Units offered hereby and the receipt of net proceeds of approximately
$1,250,000 therefrom (but without giving consideration to the exercise of the
Common Share Purchase Warrants to be issued as part of the Units), and after
deduction of estimated expenses of the offering and underwriting discount,
assuming the sale of all the shares of Common Stock offered hereby, the pro
forma net tangible book value of the Company at March 31, 1996, would have
been $1,369,065 or approximately $1.01 per share. This represents an
immediate decrease in net tangible book value of approximately $3.99 per
share to new investors. Depending upon the net tangible book value of the
Company at the time of the exercise of any Warrants, there may be further
dilution to the investors when the Warrants are exercised.
The following table illustrates the resulting dilution to purchasers
of common shares and the average price per share paid by existing
stockholders and new investors, but does not take into account the exercise
of any Common Share Purchase Warrants issued as part of the Units offered
hereby:
<TABLE>
<CAPTION>
Assuming the Assuming the
sale of sale of
500 Units 250 Units
<S> <C> <C>
Assuming a Public offering price of $5.00 $5.00
Average net proceeds to Company 4.79 4.58
Net tangible book value
per share for existing share-
holders before offering <F1> .16 .16
Increase per share attributable
to payment for shares purchased
by new investors .85 .45
Pro Forma net tangible book value
after offering <F1> 1.01 .61
Dilution per share to new
investors <F2><F3> 3.99 4.39
<FN>
<F1>
"Pro Forma net tangible book value per share" is determined by dividing the
number of shares of Common Stock outstanding into the tangible net worth of
the Company (tangible assets less liabilities).
<F2>
Dilution means the difference between the public offering price per share and
the net tangible book value per share of Common Stock after giving effect to
the public offering.
<F3>
Does not include the effects of any options, stock appreciation rights or warrants. (See "Description of the Securities.")
</FN>
</TABLE>
The following table sets forth the number and percentage of shares of
Common Stock purchased from the Company and the amount and percentage of cash
consideration paid pursuant to this offering and by the existing shareholders
of the Company, as of March 31, 1996, after giving effect to the sale by the
Company of the Units offered hereby at an assumed offering price of $5.00 per
share. The following table does not take into account the exercise of any
Common Share Purchase Warrants issued as part of the Units offered hereby.
<TABLE>
<CAPTION>
If 500 Sold, Assuming Price of $2,500/Unit
Shares Purchased Total Consideration
Number Percent Number Percent
<S> <C> <C> <C> <C>
New Investors 250,000 18.52% 1,197,700 43.05%
Existing Stockholders 1,100,100 81.48% 1,584,701 56.95%
Total 1,350,100 100.00% 2,781,701 100%
</TABLE>
THE OFFERING
This offering is self-underwritten on a "best efforts" basis by the Company.
The Company has not employed an underwriter for the sale of Common Stock. All
of the Units offered herein will be sold exclusively through designated
officers and directors of the Company. This is a "no minimum" offering; sums
received by the Company from the sale of the Units are not subject to any
escrow requirement and may be used by the Company immediately on receipt.
The offering will terminate 90 days from the date of this Prospectus unless
extended by the Company for an additional 90 day period.
DIVIDEND POLICY
The Company has not paid cash dividends on its Common Stock since its
inception. The Company currently intends to retain any earnings for use in
the expansion of its business and therefore does not anticipate declaring any
cash dividends in the foreseeable future. The declaration and payment of cash
dividends, if any, will be at the discretion of the Board of Directors of the
Company and will depend, among other things, upon the Company's earnings
capital requirements, and financial condition.
BUSINESS
Cyclodextrin Technologies Development, Inc. (the "Company") was
originally formed to market and sell cyclodextrins ("CDs") and related
products to the food, pharmaceutical and other industries. The Company also
provides consulting services related to cyclodextrin technology.
Cyclodextrins are molecules that bring together oil and water and have
potential applications anywhere oil and water must be used together.
Successful applications have been made in the areas of agriculture,
analytical chemistry, biotechnology, cosmetics, diagnostics, electronics,
foodstuffs, pharmaceuticals and toxic waste treatment. Stabilization of food
flavors and fragrances is the largest current worldwide market for CD
applications. The Company and others are already developing CD-based
applications in stabilization of flavors for food products; elimination of
undesirable tastes and odors; preparation of antifungal complexes for foods
and toiletries; stabilization of fragrances and dyes; reduction of foaming in
foods; cosmetics and toiletries; and the improvement of quality, stability
and storability of foods.
CDs can improve the solubility and stability of a wide range of drugs.
Many promising drug compounds are unusable or have serious side effects
because they are either too unstable or too insoluble in water. Strategies
for administering currently approved compounds involve injection of
formulations requiring pH adjustment and/or the use of organic solvents. The
result is frequently painful, irritating, or damaging. These side effects
can be ameliorated by CDs. CDs also have many potential uses in drug
delivery for topical applications to the eyes and skin.
The Company believes that the application of CDs in both OTC and ethical
ophthalmic products provides the greatest opportunity for the successful and
timely introduction of CD containing preparations for topical drug use. To
pursue this opportunity the Company has entered into a joint venture with a
small ophthalmic manufacturing company.
The Company provides consulting services for the commercial development
of new products containing CDs. The Company's revenues are derived from
consulting, the distribution of CDs, the manufacturing of selected CD
complexes, and sales of its own manufactured and licensed products containing
CDs.
Upon receipt of additional financing the Company intends to expand its
current, small manufacturing capability and concomitantly upgrade its
laboratory facility with state-of-the-art analytical and research equipment.
Additionally the Company intends to bring in-house, through the acquisition
or merger, graphics and design capability that can be used to support the new
product introductions.
The Company believes that the expansion as described above will allow it
to attain sufficient net worth ($4,000,000) to obtain inclusion on the NASDAQ
Small Cap Market. No assurance can be given, however, that the Company will
be able to achieve the profitability and/or the additional financing to
obtain such listing.
Product Background
CDs are donut shaped circles of glucose (sugar) molecules. CDs are
formed naturally by the action of bacterial enzymes on starch. They were
first noticed and isolated in 1891 by a French scientist, Villiers, as he
studied rotting potatoes. The bacterial enzyme naturally creates a mixture
of at least three different CDs depending on how many glucose units are
included in the molecular circle; six glucose units yield Alpha CD ("ACD");
seven units, beta CD ("BCD"); eight units, gamma CD ("GCD"). The more
glucose units in the circle, the bigger the circle, or donut. The inside of
this "donut" provides an excellent resting place for "oily" molecules while
the outside of the donut is significantly compatible with water enabling
clear stable solutions of CDs to exist in aqueous environments even when an
"oily" molecule is carried within the donut hole. The net result is a
molecular carrier that comes in small, medium, and large sizes with the
ability to transport and deliver "oily" materials using water as the primary
vehicle.
Research has established how to produce these natural CDs in large
quantities by mixing appropriate enzymes with starch solutions, thereby
reproducing the natural process. ACD, BCD and GCD can be manufactured by an
entirely natural process and therefore are considered to be natural products.
Additional processing is required to isolate and separate the CDs. The
purified ACD, BCD, and GCD are referred to collectively as natural CDs
(NCD's).
The chemical groups on each glucose unit in a CD molecule provide
chemists with ways to modify the properties of the CDs, i.e. to make them
more water soluble or less water soluble, thereby making them better carriers
for a specific chemical. The CDs that result from chemical modifications are
no longer considered "natural" and are referred to as chemically modified CDs
("CMCD's"). Since the property modifications achieved are often so
advantageous to a specific application, the Company does not believe the loss
of the "natural" product categorization will prevent its ultimate commercial
use. It does, however, create a greater regulatory burden.
The Company's strategy is to introduce products with little or no regulatory
burden in order to minimize product expenses and create profitable revenue.
The attached Table 1 illustrates the Company's approach to the introduction
of regulated products.
<TABLE>
<CAPTION>
Development
Priority CD's Product Description/Name Regulatory Burden <F1>
<S> <C> <C> <C>
1 Natural Dietary Suppl/
Garlessence(tm) 0
1 Natural Contact Lens Soak Solution
/Prohibit(tm) 0
1 Natural OTC Antiseptic/
Eye-O-Dine(tm) 0
1 Derivatized dermal patch/OTC benzocaine/
The Bite Patch(tm) 0
3 Derivatized Vet euthanasia/
Euthacaine(tm) 1
2 Derivatized Water soluble garlic
herbicide/N/A 0
3 Derivatized Chewing gum for removing
plaque/N/A 2<FN>
<F1>0-5, with 5 being greatest burden</FN>
</TABLE>
While its current applications are concentrated very heavily in the
pharmaceutical area, the Company intends to develop applications in other
markets, namely with food ingredients and industrial chemicals. A market the
Company has had success penetrating already with CD containing products is
natural health. The Company intends to provide many more products for this
market.
The Company's business plan projects it to become a manufacturer of CD
complexes for the research and development market in the short term, a
manufacturer of commercial products by 1996 and a fully integrated CD
applications company with research and development capability by the year
2000.
Industry
The food additive industry has been experimenting with CDs for many
years. Now that commercial supply of these materials can be assured, the
Company believes that the food additive industry will significantly increase
its use of CDs.
CDs have been used in a variety of food products in Japan for over 10
years. The market for the use of CDs in food products in 1990 in Japan was
estimated at $100 million. Within the last five years, many European
countries have approved the use of CDs in food products. In the United
States, major starch companies are renewing their earlier interest in CDs as
food additives and oral arguments for regulatory approval by the United
States Food and Drug Administration ("FDA") were resumed in December 1990.
In December of 1990, American-Maize Products, Inc. of Hammond, Indiana and
Roquette Freres of Le Strem, France jointly presented oral arguments to the
FDA for the addition of the natural CD's to the GRAS (generally recognized as
safe) list of excipients. American-Maize has proceeded alone with a request
for a GRAS confirmation letter from the FDA and/or a request for level 3
approval for the use of BCD in foods. The Company is not aware of the status
of these actions at this time.
Applications of CDs in personal products and for industrial uses have
appeared in many patents and patent applications. Proctor & Gamble uses CDs
in Bounce(copyright), a popular fabric softener. Avon uses CDs in its dermal
preparations using its Age Protective System APSr. These uses will grow as
the price of the manufactured CDs decrease or are perceived as acceptable in
view of the value added to the products.
In Japan at least nine pharmaceutical preparations are now marketed
which contain CDs. The CDs permit the use of all routes of administration.
Ease of delivery and improved bioavailability of such well-known drugs as
nitroglycerin, dexamethasone, PGE(1&2), and cephalosporin permit these "old"
drugs to command new market share and sometimes new patent lives.
There is little published data relating to the production or dollar
sales of CDs worldwide. The following estimates are based on the
investigation and estimates made by Mr. Strattan, which have included
discussions with Dr. Hitoshi Hashimoto of Ensuiko Sugar Refining Co., Ltd..
Mr. Strattan's estimates have been used by others including "April 1993 Food
Processing," CDs and Foods by Dean Ducksbury, and in "Food in Canada" edited
by Ron Waske in an article entitled "CDs for the Food Industry." The Company
believes the annual worldwide market for CDs is $150 million, which is
expected to increase to $800 million by the year 2000. Because of the value
added, the dollar value of the worldwide market for products containing CDs
and for complexes of CDs should be 2 to 3 1/4 times that of the CD itself.
Products
The Company's products include its Trappsol(tm) and Aquaplex(tm) product
lines. The Trappsol product line consists of approximately 15 different
varieties of CDs and the Aquaplex product line includes more than three dozen
different complexes of active ingredients with various CDs. In addition to
these product lines, the Company introduced Garlessence(tm) in the fourth
quarter of 1995. Garlessence is the first ingestible product containing CDs
to be marketed in the U.S. The Company believes that by marketing
Garlessence it has demonstrated industry leadership. The Company also
provides consulting services, research coordination, and the use of CD
Infobase(tm), a comprehensive database of CD related information. The
Company has protected its service and trade marks by registering them with
the U.S. Patent and Trademark office. The following U.S. trademarks and
service marks are pending since May, 1995.: Garlessence(tm), CTDSM ,CD
InfobaseSM, CTD ring design(tm), Trappsol(tm), Appromote(tm), Aquaplex(tm).
There is no assurance that any of these marks will be approved. These
properties add to the intangible asset value of the Company.
CTD purchases CD's from commercial manufacturers around the world including:
Wacker Chemie - Munich, Germany; Ensuiko Sugar Refining Co., Ltd. - Yokohama,
Japan; Nihon Shokuhin Kako - Tokyo, Japan; Roquette Freres - Le Strem,
France; American-Maize Products - Hammond IN, USA. CTD purchases specialty
CD's on occasion from Cyclolab R&D Company in Budapest, Hungary. The Company
does not manufacture cyclodextrins.
The Company's first new product, Garlessence, is manufactured by the
Company by Herbe Wirkstoffe (GmbH) of Berlin-Zehlendorf, Germany. Under the
terms of its agreement with Herbe-Wirkstoffe, CTD has exclusive rights to
sell the CD/garlic oil complex within the U.S., its territories and
possessions until December 31, 1997. After December 31, 1997, the Company
expects to negotiate for an extension of the original license, but Herbe-
Wirkstoffe has the right to license the use of the complex to others. At
least two other new products will be manufactured by the Company's joint
venture partner, Ocumed, and sold by the joint venture company, Ocudex. The
CDs and CD complexes used in these products will be purchased from the
Company.
The Company has also introduced new products into its basic line of CDs
and CD complexes--liquid preparations of CDs; relatively unprocessed, less
expensive mixtures of the natural CDs; naturally modified CDs (glucosyl and
maltosyl); and finally, excess production of custom complexes when those items
are not proprietary or restricted by the customer.
The Company has funded research to establish the efficacy of one of its
CD complexes as the first non-barbiturate veterinary euthanizing agent. This
research may result in a patented formulation and one of the Company's first
proprietary commercial products. Research monies have been provided to the
University of Florida Research Foundation, Inc. , a direct support
organization of the University of Florida in the amounts and for the
unrestricted use of the scientists below:
<TABLE>
<CAPTION>
Amount Scientist Activity
<C> <C> <C>
$10,000 Dr. James Simpkins Extravasation Study
$12,000 Dr. Alistair Webb Benzocaine complex
</TABLE>
Business Strategy
The Company's strategy has been and will continue to be to generate
profitable revenue through sales of CD related goods and services. The long
term success of this strategy depends on the smooth and continuous transition
into CD-related products with increasing value-added attributes.
From inception through the end of 1992, sales of CDs and CD derivatives
were enough to provide the necessary profitability to sustain the Company.
Since these materials were simply purchased and resold, they had the least
value-added attributes. Up until 1990 almost 100% of the revenue was
generated by these products with the least value-added attributes. During
the early 90's sales of complexes increased until they contributed
approximately 30% of the revenue.
Presently, sales of CD complexes represent 60 to 75% of the Company's
revenues. This transition to the more value-added complexes has been planned
and is desirable for increased profitability since higher margins can be
maintained for these products. However, it appears that the base business of
CD sales has eroded. Combined with price reductions dictated by the market,
the revenues from the sales of these products have decreased as much as the
revenue from CD complexes has increased. The result is an apparent stalling
of growth. The Company is also becoming dependent on just a few customers
for the majority of its revenue. In response to this situation the Company
has expanded its original business strategy of parlaying its leadership
position in the presently quite small CD industry as a supplier of CDs, CD
derivatives, CD complexes to include:
(1) Marketing and launching a dozen OTC and naturaceutical products
(e.g., dietary supplements) utilizing CD delivery benefits. For example, by
extracting specific ingredients from the garlic clove and complexing these
ingredients with Trappsol(tm) B (beta cyclodextrin) Garlessence(tm) was
created. Similar products can be created with any of the other herbal
ingredients such as ginseng, echinacea, ginkgo, cat's claw, and melatonin.
(2) Licensing the use of the Trappsol(tm) symbol for use by others wishing
to use CD delivery technology. This strategy is reflected in the Garlessence
package which, in addition to the Garlessence trademark, carries a Trapposol
trademark. This symbol will be promoted as an indication that a Trappsol(tm)
cyclodextrin is used with the product within and thereby assures the user of
the quality of the aqueous delivery system. This symbol will be licensed in
the same way as the MLB (Major League Baseball) symbol is for baseball
related products and the Nutrasweet symbol is for artificially sweetened
products containing Nutrasweet(copyright).
(3) Creating independent pharmaceutical organizations by merging basic
manufacturing capability with the Company's technical product development and
marketing expertise; these stand alone organizations will be captive
purchasers of CD complexes. CTD has already created one such Joint Venture
(JV) between itself and Ocumed (an ophthalmic manufacturing company located
in Roseland, NJ and Bradenton, FL) called Ocudex Inc. In the case of Ocudex,
CTD is bringing to it licensing rights and technology for the manufacture of
water soluble anti-inflammatory (hydrocortisone and dexamethasone) and drugs
for reducing intra-ocular pressure (glaucoma). These products are complexes
of the drug with a cyclodextrin. CTD will manufacture and sell these
complexes to the JV. Another JV that currently is being discussed is in the
treatment of waste water; this is being done with a small company also in
Bradenton, FL. Other JV's are being sought with manufacturing companies that
have a line of oncology products and/or anti-epileptic drugs. The drugs to
be complexed are mitomycin, busulfan, doxorubicin in the oncology area and
carbamazepine and phenytoin in the anti-epileptic area. There is no
assurance that the Company will be able to reach other JV agreements.
(4) In-licensing and out-licensing basic CD applications technology. CTD
is currently negotiating for licensing rights (in-licensing) with Cyclops (an
Icelandic company) for rights to ophthalmic products and with Cyclolab (a
Hungarian company) for rights to an antiseptic/antibacterial product based on
iodine. CTD is currently preparing a patent of its own for a veterinary
euthanasia product based on benzocaine. The euthanasia product is an example
of technology resulting from the Company's research and development which the
Company will seek to out-license.
The Company continues to market its comprehensive selection of CDs, CD
derivatives, and CD complexes to scientists and researchers around the world
through print media advertising, trade show participation, and direct mail.
The Company projects $1,000,000 revenue from product sales by 1997. In
order to achieve this goal the Company intends to hire a dedicated product
manager and acquire or merge with a qualified technical support laboratory.
The Company also intends to increase its business development efforts in
the food additive and personal products industries while continuing to build
on its successes in the pharmaceutical industry.
Business development on behalf of the Company's clients will include the
following: (i) negotiation of rights and/or licenses to CD-related
inventions; (ii) consultation with manufacturers to establish customized
manufacturing specifications; (iii) patentability assessments and strategic
planning of patent activities; (iv) trade secret strategies; (v) regulatory
interface; and (vi) strategic marketing planning.
Prior to the creation of CTD, Mr. Strattan had negotiated several sub-
licenses to current CD technology (US Patent 4,727,064), owned by the U.S.
Government. Most recently, in July of 1992, Mr. Strattan completed a major
CD licensing arrangement on behalf of Pharmatec, Inc. with Wyeth-Ayerst
Laboratories -- a division of American Home Products. The Company believes
these are the first sub-licenses granting use of the inventions in the above
cited U.S. government patent. While U.S. government ownership of US Patent
4,727,064 is available for licensing to all applicants on a non-exclusive
basis, the Company does not believe that this access to the basic CD
technology presents a competitive risk to the Company because the Company
believes its competitive advantage lies in its experience and know how in the
use and application of CD's, areas in which it believes it has a significant
lead.
In addition to in-licensing and out-licensing efforts, the Company will
coordinate research studies in which it will retain a portion of the rights
created as a result of the research work supported.
Assuming the availability of funds, the Company will negotiate licensing
rights to its own selected inventions. Because of its comprehensive
technical and patent database for CD-related inventions, the Company believes
it is uniquely positioned to take advantage of various licensing situations.
Marketing Plan
While at Pharmatec, Inc. in the late 1980's, Mr. Strattan pioneered the
marketing of derivatized CDs and their drug complexes. Mr. Strattan
contended that commercial use and development of CDs could only begin in
earnest as individuals and organizations became familiar with the truly
unique solubilizing and stabilizing properties of these starch molecules.
Mr. Strattan set about publicizing the benefits of CDs while other companies
continued to hoard new information in hopes of protecting imagined
exclusivity. The Company has continued this effort to market CDs. The
Company believes that the failure of businesses to exchange information about
these exciting molecules has hindered a more rapid commercialization of CDs
as safe excipients. The Company believes that its philosophy of partnering
and sharing will act as a catalyst to create momentum overcoming the inertia
created by the previous conservatism and secrecy.
The Company's sales have always been direct, highly cyclical and driven
by advertising and participation in trade shows. Arrangements with large
laboratory supply companies and several diagnostic companies have provided a
more stable sales base, but at the price of dependency on a few customers.
The objective in this unregulated target market of life science research is
to increase annual sales to $1,000,000 by 1997. This growth is forecasted to
occur as a result of the Company's expansion of its product line to include
value-added complexes of chemicals and CDs, increasing promotional efforts
and widespread acceptance of CDs by laboratories through word-of-mouth, white
paper circulation, and hiring of a dedicated product manager and acquisition
or merger with a qualified technical laboratory.
The Company has taken advantage of the propensity of researchers to use
the Internet to gather information about new products by establishing a WEB
Page and "site" on the world-wide web and obtaining a unique and descriptive
domain name: "cyclodex.com".
Historical Analysis
Research Markets
Historically the Company's revenues have been derived from sales to
individuals and companies which use the products in connection with research.
In 1995 those sales averaged approximately $20,000 per month; in 1994 those
sales averaged just $13,000 per month. In 1995 the Company looked more
closely at the "research" business and found that only 28.6% ($72,867) of
total sales could be attributed to the market the Company had originally
called its primary market. Sales to this market are driven by trade shows
and advertisements in trade journals. Customers typically purchase small
amounts of CDs and complexes at premium prices. The remainder of 1995 sales
were divided between diagnostics (30.0%) and complexes for resale (41.4%).
The Company expects sales to increase as a result of anticipated sales to
related joint venture organizations.
The Company believes the research market will continue to grow
accounting for 25-30% of the total revenues of the Company. The Company
expects that such growth will be stimulated by the effect of word-of-mouth
within and the availability of information electronically as national
advertising reaches more and more of these difficult to reach end users. The
Company believes current promotional efforts have reached less than 5% of the
potential end users.
Diagnostic Test Kits
CDs have proven useful in suspending the various immunochemical
components and extending the shelf life of many types of test kits. Initial
sales of $100,000 in 1993 were obtained by business development contacts with
research directors and formulation scientists. The Company had no sales in
this market in 1994 and 1995. Sales to this market are especially volatile
with single orders ranging between $100 and $50,000. The Company expects
more diagnostic manufacturers to use these materials to remain competitive,
providing more reliable sales projections.
Pharmaceutical Companies
The objective in this target market has been to promote the adoption of
CMCDs for those human health care compounds that are either too insoluble or
unstable in aqueous solutions for use in ethical, over-the-counter and
generic pharmaceutical preparations. There are a number of generic and
proprietary "problem" drugs where solubility has been improved in the lab by
CMCD complexing. All pharmaceutical companies have many problem drugs but
cannot generate enough solid pharmacological data (due to poor solubility and
stability) to justify extensive in-house formulation work. Many companies
are quite willing to contract out such work on their most promising
prospects.
Without a qualified technical laboratory of its own, the Company has not
been able to create a revenue stream from this important component of its
marketing plan. By merger with or acquisition of a suitable laboratory the
Company feels that this component will significantly contribute to the
projected $1,000,000 revenue goal in 1997.
Issues of regulatory requirements, clinical testing, and patent
restrictions have made this area of revenue generation very difficult for the
Company to break into.
Current and Near-Term Activity
1996-1997
The Company intends to show by example that products containing CDs may
be introduced into the U.S. market. Rather than trying to push companies to
introduce CD products, the Company intends to pull them into the market by
launching approximately seven new CD containing products of its own into the
U.S. market over this time period . These products will address needs in
the relatively unregulated areas of natural medicine, topical OTC
preparations, veterinary products, and home gardening. The present product
schedule is:
<TABLE>
<CAPTION>
Product Description/Name Proposed Market Entry
<S> <C>
Dietary supplement/Garlessence(tm) 11/95
Dermal Patch for pain and itching/The Bite Patch(tm) 6/96
Saline/Trappsol(tm) B contact lens soak solution
Prohibit 6/96
Garlic/BCD herbicide/insecticide/NA 6/96
No other naturaceuticals have been identified;
Cat's Claw was proposed
Iodine/CD ophthalmic antiseptic/Eye-O-Dine 9/96
Chlorhexidine/CD chewing gum for plaque
Softening/NA 12/96
</TABLE>
The Company intends to work with clients in countries whose current
regulatory views do not exclude CDs as natural products acting as excipients
to introduce beneficial pharmaceuticals improved by CDs. The terms for the
joint development of CD containing drugs with several medium-sized
pharmaceutical companies in South America, Australia and South Africa are
currently being negotiated.
Along with the new products themselves, the Company is creating a
legitimate, licensable mark that may be used by other manufacturers wishing
to take advantage of the improved aqueous delivery afforded by Trappsol CDs.
This protected mark has the capability of generating revenues in a manner
similar to the Nutrasweet(copyright) (artificial sweetener) and MLB(copyright)
(major league baseball) logos.
The Company intends to generate additional revenue through obtaining
rights to certain patents that it will sublicense to appropriate
organizations or that it will use to develop its own proprietary products.
Revenue will result from sub-licensing royalties, sales of CD complexes to be
used in the newly developed pharmaceuticals, and finally from the sales of
the products to end users.
Assuming an ongoing process of development, approval and adoption of CDs
and CMCDs for pharmaceutical applications, the Company's objective is to
initiate dialogue and be well prepared for partnerships with major food
companies. Price is a primary concern in this market, but unlike
pharmaceuticals where FDA permission for clinical testing may be obtained
before actual FDA product approval, food companies cannot feed experimental
formulations to test panels of consumers until the ingredients, i.e., the
CDs, receive approval for human consumption. Therefore, the Company will
work with the food companies and key university food research groups to
initially evaluate non-taste applications; e.g., "will CD complexes allow
microwave baked casseroles to brown? Will it provide crispness to certain
microwave foods?" These questions will initially be explored using NCDs
since commercial adoption will depend heavily upon the price of the CD
selected and NCDs will always be the least expensive. However, the benefits
derived from the use of other CDs with expensive ingredients (e.g., flavors,
fragrances) may justify the use of CMCDs and/or NMCDs.
There exist opportunities for CD applications in industrial applications
not associated with pharmaceuticals or foods. The Company believes that
developers of these other industrial applications will approach CTD because
of its leadership and partnering philosophy to help them commercialize their
products. Applications for which the Company has already received such
inquiries are:
(1) Cleaning agent ingredients
(2) Adhesive ingredients
(3) Paint surface finishing product ingredients
(4) Extrusion additives
(5) LED dye ingredients
Long Term View (1998-2000)
The Company believes that the sales of CDs, CD derivatives, and CD
complexes will always provide sufficient revenue to support a business of the
Company's present size. The Company intends to test its strategy of
augmenting these R&D derived revenues through the introduction of its own
products, e.g. Garlessence. Further, by allying itself with appropriate
manufacturing capabilities, the Company intends to introduce products which
it manufactures. Thus, the long-term goals of the Company are to:
(1) Sell CDs and related products and services to the R&D industry
(2) Produce a line of its own products utilizing CDs for unregulated
uses; e.g. - naturaceuticals, geriatric nutriceuticals, naturacides.
These products will carry a licensable trade mark that will provide
revenue when used on other products.
(3) Own a portion of companies for which it guarantees a significant
portion of that JV's business; e.g., a marketing/package design
company, a CD applications R&D/pilot plant manufacturing company.
(4) Form and operate joint ventures with companies to jointly develop
specific pharmaceutical applications of CDs.
The Company anticipates that revenues from direct sales of its products
and services along with its portion of the profits of jointly owned
businesses will create sufficient net worth to permit the Company to move
from the NASDAQ Bulletin Board up to the NASDAQ Small Cap Market. With such
a structure CD technology will be introduced from the inside. It is
anticipated that the Company will provide the CDs, CD complexes, and CD
technology to its joint venture companies at a profit.
Competition
The Company is currently a leading consultant in determining what the
manufacturing standards and costs for CDs and CMCDs are, and believes, at the
current time, no organization is manufacturing commercial quantities of any
CD complex for resale. However, there will always exist the potential for
competition in this area since no patent protection can be comprehensive and
forever exclusive. Nevertheless, there is a perceived barrier to entry into
the CD industry because of the lack of general experience with CD
complexation procedures. The Company has established a strong business
relationship with one of the experts in this field -- Cyclolab in Hungary --
and has utilized the services and expertise of this laboratory. The Company
believes this relationship provides a significant marketing lead time, and
combined with a strong marketing presence, will give the Company a two to
three year lead time advantage over its competitors..
The Company intends to form a more formal business relationship with
Cyclolab in Hungary by creating a Cyclolab-USA laboratory facility and
thereby strengthen its competitive advantage. Discussions between the
principals of Cyclolab and CTD have been ongoing for more than 5 years. The
current foreign ownership of Cyclolab increases the difficulty of reaching a
formal arrangement. Potential relationships which have been discussed
include joint venture arrangements, the Company's outright acquisition of
Cyclolab and the employment of Cyclolab personnel to create Cyclolab-USA.
There is no assurance that the Company will be able to reach a formal
business relationship with Cyclolab.
By copyrighting and registering its own name brands, CD logos, etc. the
Company intends to create licensable icons much like Nutrasweet and Major
League Baseball have. Such a strategy allows the Company to benefit
financially through licensing royalties from the efforts of its competition.
The Company intends to also benefit from competitors' efforts by having
ownership in the graphic design agency that is currently setting the standard
for the promotion and packaging of CD containing products. Because this
agency would also have access to the licensable CTD logos and icons, it
should enjoy a competitive advantage as well.
Property
The Company occupies a 3,000 sq. ft. building at 3713 S.W. 42nd Ave.,
Suite 3, Gainesville, Florida 32608, pursuant to a 5-year lease beginning
November 1, 1994. The lease provides for annual increases in rent ($18,000
for the first year, $18,900 for the second year, $19,848 for the third year,
$20,844 for the fourth year and $21,888 for the fifth year). The Company
also has an option to lease an additional 3,000 sq. ft. of space. The
Company houses its administrative offices in approximately 1,100 sq. ft. of
this space; an additional 550 sq. ft. is dedicated to
laboratory/manufacturing functions. The remaining 1,350 sq. ft. has been
prepared for additional laboratory and pilot plant manufacturing use. This
prepared space is suitable for housing Cyclolab-USA and the optioned 3,000
sq. ft. of space can be used to house graphic design functions and provide
space for future expansion of Cyclolab USA.
The current marketing and sales activities are implemented from that
site. The entire 6,000 sq. ft. could support a total of 12 - 15 people and
therefore is expected to be adequate for the foreseeable future. Current
total office and laboratory operating expenses excluding salaries have
stabilized at about $10,000 per month.
FDA Regulations
Under the Federal Food, Drug and Cosmetic Act ("Food and Drug Act"), the
Food and Drug Administration ("FDA") is given comprehensive authority to
regulate the development, production, distribution, labeling and promotion of
food and drugs. The FDA's authority includes the regulation of the labeling
and purity of the Company's food and drug products. In the event the FDA
believes that the Company is not in compliance with the law, the FDA can
institute proceedings to detain or seize products, enjoin future violations
or assess civil and/or criminal penalties against the Company.
The FDA and comparable agencies in foreign countries impose substantial
requirements upon the introduction of therapeutic drug products through
lengthy and detailed laboratory and clinical testing procedures, sampling
activities and other costly and time consuming procedures. The extent of
potentially adverse government regulations which might arise from future
legislation or administrative action cannot be predicted.
Under present FDA regulations, FDA defines drugs as "articles intended
for use in the diagnosis, cure, mitigation, treatment or prevention of
disease in man." The Company's product development strategy is at first to
introduce products that will not be regulated by the FDA as drugs because all
of its ingredients are natural products or are generally regarded as safe
(GRAS) by the FDA. The Company is continually updated by counsel as to
changes in FDA regulations that might affect the use of and claims for these
products. There is no assurance that the FDA will not take the position that
the Company's food and nutritional supplement products are subject to
requirements relating to drug development and sale. The effect of such
determination could be to limit or prohibit distribution of such products.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At March 31, 1996 the Company's main source of liquidity was in its
inventory holding of $76,469, which was 31% of total assets. The sources of
liquidity at December 31, 1995 were $46,773 in cash and $36,652 in accounts
receivable which represented 26% of total assets. The change in the source
of liquidity is expected since the Company has been active in the marketing
of Garlessence and other products. In anticipation of sales it has been
necessary to build up Garlessence inventory using cash.
The Company's main source of liquidity in 1994 and 1995 was a private
offering of the Company's common stock in March and April of 1994. The
Company received net proceeds of $814,595 (after offering costs of $153,905)
from this offering.
The primary reason for the private offering completed in 1994 was to
fund the expansion of the Company. Prior to 1994, the Company was profitable
and provided liquidity through operations. However, due mainly to the
extraordinary costs of becoming a public company and the expansion of its
operations, the Company incurred a net loss in 1994 and 1995, and therefore
used cash for operations.
Expansion has significantly increased the Company's outflow for
salaries, advertising, research and development, consulting fees,
professional fees, capital improvements, licenses and inventory. These costs
have been incurred to allow the Company to expand its sales and production
capabilities and search for new products. The Company has begun to realize
increases in sales as a result of those efforts. Sales in the last quarter
of 1995 met expectations at more than $54,000, bringing sales for the year to
almost $254,000, more than 1.6 times 1994 sales. Sales are expected to
increase in 1996 due to the introduction of a new product, Garlessence(tm).
The Company anticipates that cash will continue to be used for operations in
the immediate short-term due to the continued costs of the Company's expansion
and due to the cost of promoting its new products. However, the Company
expects that the rate at which cash is used for operations will decline now
that the bulk of the launch expenses for its new product have been incurred,
and sales of the new product have begun.
On November 11, 1993, the Company entered into a business consulting
agreement with Garrison Enterprises, Inc. ("Garrison") for various marketing
and management related services. The Company issued 300,000 shares of its
previously unissued common stock to the consultant as a prepayment for future
services valued at $750,000. In addition, upon successful completion of the
stock offering described above, the Company agreed to pay the consultant
$7,000 per month for three years and $10,000 per month for the following two
years. In addition, the shareholders of the Company entered into an
agreement that called for an annual salary to the President of the Company of
$7,000 per month for the three years after the closing of the stock offering,
increasing to $10,000 per month for the following two years. These payments
began in April, 1994. At the Company's urging, the business consulting
agreement with Garrison and the agreement related to the President's salary
were terminated September 1, 1994. In consideration of the cancellation of
the business consulting agreement, and as payment in full satisfaction of the
rights of Garrison, the Company paid Garrison $180,000. In addition, the
Company agreed that Garrison had earned and would retain the 300,000 shares
received as part of the agreement. The Company expensed the $222,000 in cash
payments and $750,000 of deferred compensation in 1994 as a result of this
agreement and its termination. See "Transactions with Management and
Others."
On July 7, 1994, the Company entered into a five-year lease for 3,000
square feet of space for an office, laboratory and manufacturing plant. The
Company moved into the building during October 1994. Rent payments are
$18,000 in year one, $18,900 in year two, $19,848 in year three, $20,844 in
year four and $21,888 in year five. Additionally, the lease called for an
initial deposit of $18,000. This deposit earns interest at 9% and is being
used to reduce rent payments beginning November, 1995 until fully utilized.
The Company also has a purchase option on this space in which ten percent of
the lease payments may be applied to the purchase price. The Company may
exercise an option to lease an additional 3,000 square feet of adjoining
space. The Company houses its administrative offices, laboratory and
manufacturing facility in this complex utilizing an aggregate of
approximately 1,650 sq. ft. This plant has been built and can be expanded
according to "GMP" (good manufacturing practices) specifications anticipating
the commercial needs of the markets the Company serves. During 1994 and
1995, the Company expended significant effort and $65,000 in capital
improvements to complete the facility. The remaining 1,350 sq. ft. of space
is for larger scale manufacturing in the future. However, this expansion
will require additional funds and there is no assurance that any additional
funding will be available. Management has no immediate plans for this
expansion.
On August 1, 1994, the Company entered into a five year consulting
agreement (renewable annually by mutual agreement) with Yellen Associates
("Yellen"), an unrelated company. Yellen agreed to provide ideas for new
products in the nutritional, geriatric and related health fields; to find
companies and/or products suitable for acquisition; to find products suitable
for manufacture and/or distribution; and to secure customers for Company
products. All products offered by Yellen and accepted by the Company will
belong exclusively to the Company with all related rights. In return, the
Company agreed to pay Yellen $2,000 per month based on milestone performance
criteria for nine months. In May 1995, the Company discontinued its monthly
payments to Yellen in accordance with the agreement. Additionally, the
Company will pay Yellen royalties of up to 5% of sales for products acquired
through Yellen or cyclodextrin sales made by Yellen for three to five years.
The Company also agreed to sell to Yellen over a period of three years from
August 1, 1994, up to 30,000 shares of Company stock at a discount of 50% of
the market price quoted at the time of purchase with the option remaining
(exercisable) of 20,000 shares within the next two years, reducing to 10,000
shares in the third year. The sale of this stock is not contingent upon
meeting any given sales amount. Yellen had not purchase any stock under
this agreement as of March 31, 1996.
Effective January 1, 1995, the Company obtained an exclusive right to
market a dietary supplement in the United States for three years. The Company
agreed to pay approximately $60,000 for this right. The agreement allows the
Company to recover this fee through discounts on inventory purchased through
December 31, 1997. Prior to December 31, 1995, the amortization of this
license fee was recognized as discounts were received. However, the license
fee is now being amortized on a straight-line basis over the three year period
of the contract. The total accumulated amortization expense under the
straight-line method since the inception of the contract is $25,000. Since
$7,200 has been recorded as of December 31, 1995, the remaining $17,800 has
been recognized as amortization expense in the first quarter of 1996. The
Company believes the effect of the change in the accounting for the
amortization of the license agreement during the first quarter of 1996 is not
material to an investment decision.
On May 1, 1995 the Company entered into a joint venture operating as
Ocudex, Inc. The Company and Ocumed, Inc., an unrelated company, each own
50% of Ocudex. The Company has agreed to fund on a best efforts basis up to
$10,000 per month for not more than 12 months operations that will result in
profitable sales revenues to be credited to Ocudex and used for subsequent
expansion of Ocudex. CTD has advanced Ocudex $34,000 in 1995 on which it
realized an operating loss of $1,506, but a taxable profit of $63 ($32
attributable to CTD). As of March 31, 1996, the Company advanced Ocudex an
additional $10,000 and has realized a loss of $5,487 for the first quarter
1996. The Company intends to apply additional funds during 1996 to be used
for inventory and production costs and also to defray the costs of raising
equity capital that will allow Ocudex to obtain FDA approval for proprietary
CD improved generic ophthalmic drugs using CD's brought to it by CTD.
The Company purchased 10,000 shares of its own common stock for
$25,000 from a former employee on May 3, 1995, payable over twelve months.
As of March 31, 1996, $6,421 of that obligation remained for satisfaction in
the second quarter of 1996.
The Company has established substantial inventory of Garlessence and
does not expect to expend more than an additional $10,000 in incidental costs
to distribute the product before substantial distributor sales are realized.
In the first quarter of 1996 the company sold directly about $500 of
Garlessence at more than a 70% gross profit. The Company has postponed
purchasing additional inventory of Garlessence until sales reach levels to
support such purchases. Therefore, no new expenditures are anticipated for
Garlessence(tm) or Appromote(tm) until sales revenue is generated to cover such
expenditures. Costs to promote another product, Appromote(tm), a flavor
enhancer, are expected to be minimal. In an effort to continue research and
development of new products, the Company is sponsoring validation testing at
the University of Florida on a new cyclodextrin-based veterinary euthanasia
product; approximately $12,500 has been spent in the initial studies required
to test this new product. The Company expects to spend an additional $10,000
to complete the project and plans to patent the product in 1996.
However, should the rate of expansion and volume of sales increase
substantially, the Company would require additional funds to finance
inventory and accounts receivable and to fund increased costs of advertising
and marketing, among other things. To meet the expected future growth, the
Company expects to raise up to $1.25 million in a private offering in 1996.
In addition, in June of 1995, the Company obtained a $75,000 line of credit
from a commercial bank. The Company expects to use this line of credit to
purchase inventory needed to support the launch of Garlessence and for other
short term production working capital. As of March 31, 1996, there is a
$5,000 outstanding balance on this line of credit.
In 1995, the Company sponsored validation testing at the University
of Florida on a new cyclodextrin-based veterinary euthanasia product;
approximately $12,500 has been spent in the initial studies required to test
this new product. No additional expenses were incurred for the new
cyclodextrin-based veterinary euthanasia product in the first quarter.
Additional formulation work and efficacy validation will be done along with
the writing and submission of the patent protecting the invention. The
expenses for this work will be spread out over the remainder of the year
with the greatest impact to be felt in the third and fourth quarter of 1996.
The Company spent $12,500 in the initial studies in 1995.
The Company continues to explore the acquisition and development of new
products through licensing and joint ventures in the area of waste treatment
and veterinary medicine with and without cyclodextrins to increase sales.
However, the acquisition and development of these new products may require
additional funds and there is no assurance that any additional funding will
be available.
Results of Operations
Sales of cyclodextrins and related products have historically been
volatile. Sales are primarily to large pharmaceutical and food companies for
research and development purposes. Sales have also been concentrated among a
few large customers. Despite the dependence on a small number of customers,
the Company's largest customer has increased its ordering frequency and
doubled its total purchases in 1995. Product sales were $253,634 and
$154,842 for the years ended December 31, 1995 and 1994, respectively and
$30,776 and $135,128 for the quarters ended March 31, 1996 and 1995,
respectively. The 64% increase in sales during 1995 is due primarily to
sales to the largest customer. Similarly, the 77% decrease is primarily due
to the ordering patterns of these few customers. Such volatility will
continue to make the Company's cash use planning from quarter to quarter
difficult. The Company is making consistent progress to moderate the
volatility by expanding its product line to more routinely purchased
products. Although sales have been much slower developing than anticipated,
as they grow, they will provide not only a substantial increase in sales
revenues but stability as well. The Company expects to increase sales from
Garlessence in 1996. The fact that these cyclodextrin complexes were
produced in the new laboratory, rather than contracted out as was done in the
past for this complexation work improved the gross profit margin
substantially. These sales are likely to continue and grow, although at
levels that are not predictable.
Despite the low first quarter sales, the Company continues to
experience a large gross profit margin. Gross profit for the first quarter
of 1996 is approximately 85%. The gross profit for the first quarter in 1995
was 84%. Profit margins on four large sales were higher than the average
sales margins in 1994. Costs of products sold as a percentage of sales
decreased to 17% in 1995 from 31% in 1994 due to a number of factors. The
Company is now able to produce cyclodextrin complexes internally in its new
lab/manufacturing facility rather then contracting to outsiders, thereby
reducing costs. Also, the Company was able to reduce product costs by
expanding its supplier base for its primary CD-derivatives (specifically
hydroxypropyl beta cyclodextrin, HPBCD and randomly methylated beta
cyclodextrin, RAMEB) that comprised about 80% of the Company's CD-derivative
sales. In 1994, the Company experienced reduced accessibility to the HPBCD-
derivative resulting in higher than normal cost of goods sold for that year,
a situation that was corrected by using alternate sources of supply.
Expenses increased in 1995 over 1994 due to personnel and operational
expansion of the Company and the change in the Company's strategic plan. The
Company intends to show other industries how sales of CD containing products
can produce revenue. The Company also increased legal and accounting expenses
in connection with becoming a reporting company, as a result of opinions
solicited about the regulatory status of its Garlessence product, and the
Company's expansion described above. The Company enjoyed a 55% decrease in
professional fees from the first quarter 1995 ($41,585) to the first quarter
1996 ($18,651) due to the non-recurrence of extraordinary legal and auditing
fees associated with the company becoming a reporting public company and
legal fees associated with the approval of Garlessence(tm). Consulting fees
were $978,100 for the year ended December 31, 1994, and $6,000 for the year
ended December 31, 1995. This decrease was a result of the Company canceling
the financial consulting agreement with Garrison at the end of 1994 as
described above. Financial consulting fees will increase in 1996 above 1995
levels as the Company seeks additional equity investments. Operating
expenses for such items as consulting and professional fees decreased 53%
from March 31, 1995 compared to March 31, 1996. Operating expenses for
advertising, travel & entertainment and research & development have increased
68% from the prior year first quarter. Expansion has significantly
increased the Company's outflow for these expenses. These costs have been
incurred to allow the Company to expand its sales, develop new products and
implement its strategy of creating operational affiliates that will use
cyclodextrins in herbal medicines and water treatment. The Company expects
the small increases already seen in sales of these new products to accelerate
as these expansion efforts begin to coalesce. Sales in the second quarter
are expected to bring the Company back to its budgeted levels and
significantly reduce the rate at which the Company uses cash.
In addition to its Trappsol(tm) and Aquaplex(tm) products, the Company
is currently promoting two new products. The first one promoted was
"Appromote(tm)" a food flavor enhancement product to be marketed to nursing
homes and similar institutions. The product enhances the flavor of food to
increase enjoyment by persons with diminished tasting abilities, primarily
the elderly. Response to this product has been poor; hence no additional
marketing support for this product is planned. The most important product is
a dietary supplement containing specific garlic-derived ingredients reported
by the licensor to attain and maintain naturally, levels of serum cholesterol
associated with good cardiovascular health. The advantages and benefits of
this product are made possible by the incorporation of cyclodextrins in a
proprietary formulation belonging to the German manufacturer. The Company
calls its new product "Garlessence(tm)" and is currently securing distribution
according to its marketing plan. Garlessence(tm) is the first cyclodextrin-
containing food-related product to be sold in the U.S. It represents the
first effort in the implementation of the Company's strategic business plan
to introduce cyclodextrin containing products to the broad U.S. market.
Investment and other income is $12,465 in 1995 and $24,254 for 1994. In
1994, the Company realized a gain of $5,287 from the sale of marketable
equity securities. There were no such gains in 1995. The decrease in other
income in 1995 is also due to less funds available to be invested in interest
bearing accounts in 1995 than in 1994. The Company has recorded a $1,506
loss on its investment in the Ocudex joint venture in 1995.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
In October 1994, the Company's securities began trading on the OTC
Bulletin Board and in the over-the-counter market "pink sheets" under the
symbol CTDI. Since the commencement of trading of the Company's securities,
there has been an extremely limited market for its securities. During the
fourth quarter of 1995, one of the Company's market makers ceased business.
The following table sets forth high and low bid quotations for the quarters
indicated as reported by the OTC Bulletin Board. At March 1, 1995, the
average per share bid and ask price of the Company's common stock was $4.50
and $7.50, The following table set forth the high and low sales prices for
the periods since October, 1994
<TABLE>
<CAPTION> High Low
<S> <S> <C> <C>
1994 Fourth Quarter $ 6.00 $ 3.00
1995 First Quarter $ 7.50 $ 3.00
Second Quarter $ 8.50 $ 4.25
Third Quarter $ 9.00 $ 4.00
Fourth Quarter $ 8.00 $ .50
1996 First Quarter $ 2.25 $ .50
</TABLE>
Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions.
MANAGEMENT
<TABLE>
<CAPTION>
Name Age Position Since
<S> <C> <C> <C>
C.E. Rick Strattan 50 President/CEO, Director August, 1990
David L. Southworth 48 Treasurer/CFO May, 1995
</TABLE>
C.E. Rick Strattan, has been President and a Director of the Company
since its formation. He served as treasurer of the Company from August, 1990
to May, 1995. From November 1987 through July 1992, Mr. Strattan was with
Pharmatec, Inc. where he became its Director of Marketing and Business
Development for CDs. He was responsible for CD sales and related business
development efforts. From November, 1985 through May, 1987 he served as Chief
Technical Officer for Boots-Celltech Diagnostics, Inc. He also served as
Product Sales Manager for American Bio-Science Laboratories, a Division of
American Hospital Supply Corporation. He is a graduate of the University of
Florida with a BS degree in chemistry and mathematics and has also received
an MS degree in Pharmacology and an MBA degree in Marketing/Computer
Information Sciences from the same institution. Mr. Strattan has written and
published numerous articles and a book chapter on the subject of
Cyclodextrins. Mr. Strattan's professional and technical experience are
deemed highly important to the Company. See "Business - General."
David L. Southworth, has served as Treasurer and Chief Financial Officer
of the Company since May, 1995. Mr. Southworth joined the Company in
February 1994. From mid-1992 until January 1994, Mr. Southworth served as
Controller for GCA Chemical Corporation in Bradenton, Florida. He retired
from the United States Air Force in 1992 after 20 years of active duty,
mostly in Europe and Southeast Asia, serving in various management and
financial budgeting positions. Mr. Southworth was Assistant Controller of
Tropical Garment Manufacturing Company from May 1979 to June, 1983. Tropical
Garment Manufacturing, a Tampa, Florida, manufacturer of men's clothing,
employs over 1,000 employees. Mr. Southworth graduated from the University
of South Florida in 1981 with a BS degree in Business Finance. He received
AA degrees from the University of Maryland (foreign languages) and the State
University of New York (math and sciences).
Executive Compensation
Executive compensation is determined by the Board of Directors. All
compensation paid by the Company for services rendered during the three
fiscal years ended December 31, 1993 1994, and 1995 for each executive
officer is set forth in the following table:
<TABLE>
SUMMARY COMPENSATION TABLE
(three fiscal years ended December 31, 1993, 1994 and 1995)
<CAPTION>
Annual Long Term
Compensation Compensation
------------------------------------ -------------
Other All
Annual Other
Name and Principal Position Year Salary Bonus Compensation Compensation
<S> <C> <C> <C> <C> <C>
C.E. Rick Strattan 1995 $36,000 -0- -0- -0-
Chief Executive Officer, 1994 $60,000 -0- -0- $500
President, Treasurer, 1993 $30,000 -0- -0- -0-
Secretary and Director
Steve Herschleb 1995 $12,500 -0- -0- $25,000 <F1>
Vice President 1994 $18,750 -0- -0- -0-
David L. Southworth 1995 $27,550 -0- -0- $2,500 <F2>
Treasurer/Chief Financial
Officer
<FN>
<F1>On May 1, 1995, Mr. Herschleb left CTD due to ill health and the Company
repurchased his shares for $2.50 per share.
<F2>
On November 11, 1995 Mr. Southworth received 4,000 shares of CTD common
stock having a value of $2,500 based on the market price of the shares at
that time.
</FN>
</TABLE>
On November 15, 1995, the Company adopted a non-qualified employee stock
purchase plan pursuant to which employees may purchase restricted shares of
the Company's common stock at a price of 50% of the current bid price of the
shares in amounts not to exceed the employee's gross pay. Pursuant to the
plan, employees have elected to purchase 33,400 shares, of which 15,800
shares have been purchased by Mr. Strattan.
Performance-Based Stock Compensation
The Company has adopted a resolution whereby up to 100,000 shares may
be transferred to Mr. Strattan based on his performance in the discretion of
the Board of Directors which is solely comprised of Mr. Strattan .
PRINCIPAL STOCKHOLDERS
The following table sets forth information, as of March 27, 1996, with
respect to all stockholders known by the Company to be the beneficial owners
of more than 5% of its outstanding Common Stock, all, and all directors and
officers as a group. Except as noted below, each person has sole voting and
investment powers with respect to the shares shown.
<TABLE>
<CAPTION>
NAMES AND ADDRESS OF INDIVIDUAL AMOUNT AND NATURE OF
OR IDENTITY OF GROUP BENEFICIAL OWNERSHIP APPROXIMATE % OF CLASS
<S> <C> <C>
C.E. Rick Strattan <F1>
4123 N.W. 46th Avenue
Gainesville, FL 32606 515,800 <F2> 46.89%
Stephen J. Herschleb
P.O. Box 1828
High Springs, FL 32643 -0- 0.00%
David L. Southworth
3142 N. E. 13th Street
Gainesville, FL 32609 10,000 0.91%
All Officers and Directors
as a group (2 Persons) 525,800 47.80%
<FN>
<F1>
Held by Strattan Associates, Ltd., of which Mr. Strattan is the general
partner. Strattan Associates, Ltd. is a limited partnership established by
Mr. Strattan for estate tax purposes and is not otherwise engaged in
business. Strattan Associates, Ltd. is the owner of the 500,000 shares of
CTD stock. <F2>
Includes 15,800 issuable to Mr. Strattan pursuant to employee stock purchase
plan.
</FN>
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1993, the Company entered into a Business Consulting
Agreement with Garrison Enterprises, Inc. ("Garrison") to provide consulting
services to the Company in the areas of the evaluation of managerial,
marketing and sales requirements; reviewing and analyzing proposed business
opportunities; consulting with the Company on strategic corporate planning
and long-term investment policies; and rendering advice with respect to
future fund raising and other financial arrangements. As compensation for
its services Garrison was issued 300,000 shares of the Company's Common Stock
and after completion of the Company's private placement offering in May,
1994, Garrison began receiving $7,000 per month for a period of 3 years and
$10,000 per month for the two-year period thereafter.
In November 1993, C.E. Rick Strattan, the President of the Company, and
Garrison entered into a Shareholder's Agreement. Pursuant to which Mr.
Strattan and Garrison (the "Shareholders") agreed to vote their shares so as
to provide that the Directors of the Company shall be C.E. Rick Strattan and
Michael A. Schub ("Schub"). In addition, the Shareholders agreed to an
annual salary to the President of the Company of $7,000 per month for the
three years after the closing of the stock offering, increasing to $10,000
per month in years four and five.
Subsequently, on June 16, 1994, Mr. Schub resigned as Vice President,
Secretary and Director of the Company. On June 23, 1994, Barry R. Klein
became Secretary and a Director of the Company. In addition, Mr. Schub was
president and a director of Garrison from inception to June 23, 1994, when
Mr. Schub resigned.
Upon Mr. Schub's resignation as an officer and director of the Company
and Garrison, the Company entered into a retainer agreement with Schub
thereby retaining Schub as special counsel, at a monthly retainer of $1,750
commencing July 1, 1994 and continuing until March 31, 1997. From April 1,
1997 to March 31, 1999, said retainer was to be increased to $2,500 per
month. Garrison thereafter agreed to reduce its compensation from the
Company in an amount equal to the monthly retainer paid to Schub.
On August 1, 1994, the Company entered into a five-year consulting
agreement (renewable annually by mutual agreement) with Yellen Associates
("Yellen"). Yellen agreed to provide ideas for new products in the
nutritional, geriatric, and related health fields; to find companies and/or
products suitable for acquisition; to find products suitable for manufacture
and/or distribution; and to secure customers for Company products. All
products offered by Yellen and accepted by the Company will belong
exclusively to the Company with all related rights. In return, the Company
agreed to pay Yellen $2,000 per month for nine months. If sales of Yellen
products had been at least $200,000 per year, this monthly payment would
have automatically continued for one year. Any other continuance of the
payment would be negotiated. Additionally, the Company would pay Yellen
royalties of up to 5% of sales for three to five years for products acquired
through Yellen or cyclodextrin sales made by Yellen . The Company also
agreed to sell to Yellen over a period of three years from August 1, 1994, up
to 30,000 shares of Company stock at a discount of 50% of the market price
quoted at the time of purchase. Having satisfied the guaranteed minimum
payments part of the agreement in April, 1995, the Company chose to
discontinue the monthly payments.
In September 1994, the Company prepaid its consulting agreements with
Garrison and Schub for an amount equal to $180,000. Garrison and Schub are no
longer providing services to the Company. The Company terminated these
agreements because it believed that the marketing and financial services of
Schub and Garrison would not be needed for the remaining term of five years.
Thus, the Company bought out of these agreements at a discount of $270,000.
Under the terms of the contracts, the Company was obligated to expend
approximately $450,000 over the next year term of the agreement.
On December 12, 1994, the Company adopted a stock issuance plan pursuant
to which employees named by the board of directors receive shares in amounts
determined by the board. Shares received pursuant to the 1994 plan are
vested after five years. During the third, fourth and fifth years the stock
is held by an employee, the employee may cause the Company to repurchase the
stock at 50% of the then current market value. Since its inception 35,000
shares have been issued pursuant to the plan, of which 10,000 have been
repurchased.
On May l, 1995, the Company agreed to purchase all of Mr. Herschleb's
common shares of the Company (10,000 shares) at a price of $2.50 per share
payable in 12 monthly installments without interest.
On May 1, 1995, the Company entered into a Joint Venture Agreement with
Ocumed, Inc. Under the terms of the Agreement, the parties have created a
separate entity called Ocudex, Inc. for the purpose of developing and selling
ophthalmic products manufactured by Ocumed and developed by the Company for
which the Company will provide funding of up to $120,000 over a 12-month
period. The Company and Ocumed each own 50% of Ocudex, Inc.
On November 15, 1995, the Company adopted a non-qualified employee stock
purchase plan pursuant to which employees may purchase restricted shares of
the Company's common stock at a price of 50% of the current bid price of the
shares in amounts not to exceed the employee's gross pay. Pursuant to the
plan, employees have elected to purchase 31,600 shares, of which 12,000
shares have been purchased by Mr. Strattan.
The Company has adopted a resolution whereby up to 100,000 shares may be
transferred to Mr. Strattan based on his performance in the discretion of the
Board of Directors which is solely comprised of Mr. Strattan.
The Company believes that the above-described transactions are as fair
to the Company as could have been made with unaffiliated parties. The
Company requires that transactions between the Company and its officers,
directors, employees or stockholders or persons or entities affiliated with
officers, directors, employees or stockholders of the Company be on terms no
less favorable to the Company than it could reasonably obtain in arms-length
transactions with independent third parties. Such transactions are approved
by a majority of the disinterested directors of the Company.
DESCRIPTION OF SECURITIES
Units
Each Unit offered hereby consists of one (1) share of Voting Common
Stock and one (1) redeemable Voting Common Stock Purchase Warrant (the
"Warrant"). Each Warrant entitles the holder to purchase one (1) share of
Voting Common Stock at a purchase price of $5.50 if exercised prior to
December 31, 1997, two (2) shares of Voting Common Stock at a purchase price
of $5.50 per share if exercised between January 1, 1998 and December 31,
1998, four (4) shares of Voting Common Stock at a purchase price of $5.50 per
share if exercised between January 1, 1999 and December 31, 1999. The
Warrants are exercisable and detachable from the Common Stock contained in
the Units immediately upon purchase. The Warrants are redeemable upon
thirty (30) days written notice by the Company. The redemption price shall
be $.01 per Warrant. The Warrants may be redeemed any time prior to the
expiration of the thirty-day notice period. The Warrants are subject to the
terms of a Warrant Resolution by the Company's Board of Directors which
defines the terms under which the Warrants may be exercised, called and
transferred.
All of the Units will be offered solely by the Company through its
officers on a "best efforts" basis. The offering will terminate 90 days from
the date of this Prospectus unless extended by the Company for an additional
90 day period. No commissions will be paid with respect to the sale of the
shares. The proceeds of this offering will not be escrowed pending the sale
of a minimum number of Units. Any proceeds from this Offering will be
immediately available to the Company. The Company does not expect the Units
to be traded.
Common Stock
The Company's Articles of Incorporation, as amended, authorize the
Company to issue 10,000,000 shares of Voting Common Stock and 10,000,000
shares of Non-voting Common Stock all stock having a par value of $.0001
per share, of which 1,100,100 shares of Voting Common Stock were issued and
outstanding as of April 22 , 1996. No shares of Non-voting Common Stock
have been issued.
Holders of shares of Voting Common Stock are entitled to one vote per
share on all matters to be voted on by stockholders and are not entitled to
accumulate their votes in the election of directors. As a result, persons
casting a majority of the votes in the election of directors will be entitled
to elect all directors, with the holders of remaining shares unable to elect
any person as a director. All holders of both classes of Common Stock are
entitled to receive such dividends as legally may be declared by the Board of
Directors and to share pro rata in any distribution to stockholders upon
liquidation of the Company.
The holders of Common Stock have no preemptive or other subscription or
conversion rights and there are no redemption provisions with respect to such
shares. All outstanding shares of Common Stock are fully paid and non-
assessable and the shares of Common Stock offered hereby upon payment
therefore will be fully paid and non-assessable.
American Securities Transfer, Inc., 938 Quail Street, Lakewood, Colorado
80215, is the Registrar and Transfer Agent of the Company's Common Stock.
Common Share Purchase Warrants
For each Unit purchased, the purchaser will receive one Common Share
Purchase Warrant (the "Warrants").
The Warrants constituting a part of the Units will be issued pursuant to
a resolution, dated as of the date of this Prospectus (the "Warrant
Resolution"). The following discussion of certain terms and provisions of
the Warrants is qualified in its entirety by reference to the detailed
provisions of the Warrants and the Warrant Resolution, the forms of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
Each Warrant entitles the holder to purchase one (1) share of Voting
Common Stock at a purchase price of $5.50 if exercised prior to December 31,
1997, two (2) shares of Voting Common Stock at a purchase price of $5.50 per
share if exercised between January 1, 1998 and December 31, 1998, four (4)
shares of Voting Common Stock at a purchase price of $5.50 per share if
exercised between January 1, 1999 and December 31, 1999. The Warrants may be
exercised by surrendering the warrant certificate with the subscription form
appearing on the reverse side thereof, duly completed and executed, together
with cash or a cashier's check in the amount of the exercise price to the
Warrant Agent, American Stock Transfer and Trust Co., 938 Quail Street,
Lakewood, CO 80215. The Warrants are exercisable and detachable from the
Common Stock contained in the Units immediately upon purchase. The Warrants
are redeemable upon thirty (30) days written notice by the Company. The
redemption price shall be $.01 per Warrant. The Warrants may be exercised
any time prior to the expiration of the 30-day period. The termination date
of the Warrants may be extended and the exercise price of the Warrants may be
reduced by the board of directors.
As long as any Warrants remain outstanding, shares to be issued upon the
exercise of Warrants will be protected against dilution in the event of one
or more stock splits, readjustments or reclassifications.
The holders of the Warrants as such are not entitled to vote, to receive
dividends or to exercise any of the rights of holders of Common Shares for
any purpose until such Warrants shall have been duly exercised and payment of
the purchase price shall have been made. There is no market for the Warrants
and there is no assurance that any such market will ever develop.
For the life of the Warrants, the Warrant holders are given the
opportunity to profit from a rise in the market value of the Common Shares of
the Company, if any, at the expense of the common stockholders; and the
Company might be deprived of favorable opportunities to secure additional
equity capital, if it should then be needed, for the purpose of its business.
A Warrant holder may be expected to exercise the Warrants at a time when the
Company, in all likelihood, would be able to obtain equity capital, if it
needed capital then, by a public sale of a new offering on terms more
favorable than these provided in the Warrants.
The Company anticipates that the Warrants will be traded on the OTC
Bulletin Board and in the over-the-counter market "pink sheets".
LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries are presently parties to
any litigation.
COUNSEL
The validity of the authorization and issuance of the Common Stock
offered hereby will be passed upon for the Company by Bruce Brashear, Esq.
Gainesville, Florida.
EXPERTS
The balance sheet of Cyclodextrin Technologies Development, Inc. as of
December 31, 1995 , and the related statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended December
31, 1995, have been incorporated herein in reliance on the report of James
Moore & Co., independent accountants, given on the authority of that firm as
experts in auditing and accounting.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Accountants F-1
Balance Sheet F-2
Statements of Operations F-3
Statement of Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 to F-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Cyclodextrin Technologies Development, Inc.:
We have audited the accompanying balance sheet of Cyclodextrin Technologies
Development, Inc. as of December 31, 1995, and the related statements of
operations, stockholders' equity and cash flows for the years ended
December 31, 1995 and 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cyclodextrin
Technologies Development, Inc. as of December 31, 1995, and the results of
its operations and its cash flows for the years ended December 31, 1995 and
1994, in conformity with generally accepted accounting principles.
Gainesville, Florida
February 5, 1996
F-1
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 8,449 $ 46,773
Accounts receivable 10,300 36,652
Inventory 76,469 78,281
Deposits and prepaid expenses 8,991 4,443
Note receivable - employee 4,326 4,251
Total current assets 108,535 170,400
Property and equipment
Furniture and equipment 48,528 48,398
Leasehold improvements 24,800 24,800
73,328 73,198
Less: Accumulated depreciation 28,722 24,519
Total property and equipment 44,606 48,679
Other assets
Note receivable - employee, less current
portion 4,639 5,749
Deposits 12,317 17,015
Advances to and investment in joint
venture 37,008 32,495
License fee, net of accumulated
amortization of $7,234 and $25,034 at
December 31, 1995 and March 31, 1996
respectively 34,966 52,766
Deferred charges 5,000 -
Total other assets 93,930 108,025
Total Assets $ 247,071 $ 327,104
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 28,619 $ 45,620
Note payable on line of credit 5,000 5,000
Payable to former stockholder 6,421 6,421
Total current liabilities 40,040 57,041
Common stock subject to repurchase, par
value $.0001 per share, 100,000 shares
authorized, 25,000 shares issued and
outstanding 6,250 6,250
Stockholders' equity
Common stock, par value $.0001 per share,
4,900,000 shares authorized, 993,700
shares issued and outstanding, 29,600
shares subscribed as of December 31,
1995 and 81,400 shares subscribed as of
March 31, 1996 $ 108 $ 102
Additional paid-in capital 1,586,940 1,571,921
Common stock issued for future services (22,813) (24,250)
Accumulated deficit (1,363,454) (1,283,960)
Total stockholders' equity 200,781 263,813
Total Liabilities and Stockholders' Equity $ 247,071 $ 327,104
</TABLE
The accompanying notes to financial statements
are an integral part of these statements.
F-2
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
STATEMENTS OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
Three Months Years Ended
Ended March 31, December 31,
1996 1995 1995 1994
(Unaudited) (Unaudited)
<S > <C> <C> <C> <C>
Product sales $ 30,776 $ 135,128 $ 253,634 $ 154,842
Cost of products sold 4,526 21,617 43,560 48,493
Gross profit 26,250 113,511 210,074 106,349
Operating expenses
Advertising 3,523 2,723 73,396 38,133
Depreciation and
amortization 22,002 3,557 17,220 7,067
Consulting fees 4,660 7,875 6,000 978,100
Office expenses 7,379 14,869 39,777 33,250
Professional fees 18,651 41,585 87,951 48,027
Travel and entertainment 4,002 2,916 8,596 15,928
Rent 5,373 5,478 21,087 20,467
Research and development costs 1,950 - 17,988 -
Personnel costs 28,495 31,759 137,994 112,418
Taxes and licenses 4,571 4,804 16,690 10,730
Bad debts - - 304 -
Total operating expenses 100,606 115,566 427,003 1,264,120
Loss from operations (74,356) (2,055) (216,929) (1,157,771)
Other income (expense)
Investment and other
income 606 3,389 12,465 24,254
Gain due to change in
redemption price on
common stock subject to
repurchase - - 12,500 -
Equity in loss from
unconsolidated joint
venture (5,487) - (1,506) -
Loss on disposal of equipment - - - (453)
Interest expense (257) - (139) -
Total other income
(expense) (5,138) 3,389 23,320 23,801
Net income (loss) $ (79,494) $ 1,334 $ (193,609) $ (1,133,970)
Net income (loss) per common
share $ (.07) $ - $ (0.19) $ (1.19)
Weighted average number of
common shares outstanding 1,099,008 1,018,700 1,020,957 50,908
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-3
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
Issued Total
Additional Issued for Retained Stock-
Common Stock Paid-in Future Earnings holders'
Shares Amount Capital Services (Deficit) Equity
<S> <C> <C> <C> <C> <C> <C>
Balance,
December
31, 1993 800,000 $ 80 $ 750,420 $(750,000) $ 43,619 $ 44,119
Shares issued
for cash, net
of offering
costs 193,700 19 814,576 - - 814,595
Compensation
earned - - - 750,000 - 750,000
Shares issued
under employee
stock plan - - - (37,500) - (37,500)
Net loss - - - - (1,133,970) (1,133,970)
Balance,
December
31, 1994 993,700 99 1,564,996 (37,500) (1,090,351) 437,244
Shares
subscribed 29,600 3 6,925 - - 6,928
Compensation
earned - - - 19,500 - 19,500
Shares issued
under employee
stock plan - - - (6,250) - (6,250)
Net loss - - - - (193,609) (193,609)
Balance,
December
31, 1995 1,023,300 102 1,571,921 (24,250) (1,283,960) 263,813
Shares
subscribed
(unaudited) 51,800 6 15,019 - - 15,025
Compensation
earned
(unaudited) - - - 1,437 - 1,437
Net loss
(unaudited) - - - - (79,494) (79,494)
Balance, March
31, 1996
(unaudited) 1,075,100 $108 $ 1,586,940 $ (22,813) $ (1,363,454) $ 200,781
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
F-4
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Years Ended
Ended March 31, December 31,
1996 1995 1995 1994
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from
operating activities
Net income (loss) $ (79,494) $ 1,334 $ (193,609) $ (1,133,970)
Adjustments to reconcile
net income (loss) to net
cash used for operating
activities:
Depreciation and
amortization 22,002 3,557 17,220 7,067
Decrease (increase) in
accounts receivable 26,185 (66,885) (27,746) 8,704
Decrease (increase) in
inventory 1,812 7,917 (42,176) (8,618)
Increase (decrease) in
accounts payable and
accrued expenses (17,001) 10,675 18,216 (7,072)
Loss on disposal of
equipment - - - 453
Gain based on redemption
price of common stock
subject to repurchase - - (12,500) -
Decrease (increase) in
deposits and prepaid
expenses 150 (1,304) 3,057 (19,439)
Gain on sale of investments - - - (5,287)
Stock issued for services 7,000 1,875 - -
Deferred compensation
earned 1,437 - 19,500 750,000
Equity in loss of
unconsolidated joint
venture 5,487 - 1,505 -
Total adjustments 47,072 (44,165) (22,924) 725,808
Net cash used for
operating activities (32,422) (42,831) (216,533) (408,162)
Cash flows from investing
activities
Proceeds from sale of
marketable securities - - - 12,268
Purchase of equipment and
leasehold improvements (130) (10,652) (28,017) (45,164)
Proceeds from sale of
equipment - - 1,180 -
Advances to joint venture (10,000) - (34,000) -
Cash paid for license - (38,742) (49,602) -
Cash loan to employee - (13,000) (13,000) -
Repayment of employee loan 1,203 - 3,000 -
Net cash used in
investing activities (8,927) (62,394) (120,439) (32,896)
Cash flows from financing
activities
Cash paid for common stock
redeemed - - (18,579) -
Proceeds from line of credit - - 5,000 -
Proceeds from issuance of
common stock, net of
offering costs 3,025 - 6,928 814,595
Net cash provided by (used
in) financing activities 3,025 - (6,651) 814,595
Net increase (decrease) in
cash and cash equivalents (38,324) (105,225) (343,623) 373,537
Cash and cash equivalents,
beginning of period 46,773 390,396 390,396 16,859
Cash and cash equivalents,
end of period $ 8,449 $ 285,171 $ 46,773 $ 390,396
Supplemental disclosure of
cash flow information
Cash paid during the
year for:
Interest $ 257 $ - $ 139 $ -
Supplemental schedule of
noncash investing and
financing activities
Common stock issued
for services $ 5,000 $ - $ 6,250 $ 37,500
Distribution of
marketable equity
securities - - - 50,000
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-5
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
The information presented herein as of March 31, 1996, and for the three month
periods ended March 31, 1996 and 1995, is unaudited.
(1) Summary of Significant Accounting Policies:
The following is a summary of the more significant accounting policies of
Cyclodextrin Technologies Development, Inc. (the Company) which affect the
accompanying financial statements:
(a) Organization and operations--The Company was incorporated in August
1990, as a Florida corporation with operations beginning in July 1992. The
Company is engaged in the marketing and sale of cyclodextrins and related
products to pharmaceutical, food, and other industries located in the United
States. The Company also provides consulting services related to cyclodextrin
technology to U.S. based food and pharmaceutical manufacturing companies.
(b) Cash and cash equivalents--For the purposes of reporting cash flows,
the Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
(c) Property and equipment-Property and equipment are recorded at cost.
Depreciation on equipment is computed using accelerated methods over the
estimated useful lives of the assets, which is approximately seven years.
Depreciation on leasehold improvements is computed on the straight-line method
over the lesser of the term of the related lease or the estimated useful lives
of the assets.
(d) Inventory--Inventory consists of products purchased for resale and is
recorded at the lower of cost (first-in, first-out) or market.
(e) License fee--License fee is recorded at cost. Amortization expense is
computed using the straight-line method over the term of the license, which is
three years. Periodically, management evaluates the estimated useful life of
the license to determine whether intervening economic events and circumstances
have affected the remaining useful life. Amortization expense was $7,243 and
$0 for the years ended December 31, 1995 and 1994, respectively, and $17,800
and $0 for the three months ended March 31, 1996 and 1995, respectively.
(f) Net loss per common share--Net loss per common share is computed based
on the weighted average number of common shares outstanding during the period.
Common shares include common stock subject to repurchase.
(g) Revenue recognition--Revenues are recorded when products are shipped.
(h) Advertising--The Company expenses the production costs of advertising
the first time the advertising takes place.
(i) Use of estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
(j) Management representations--In the opinion of management, all
adjustments necessary for a fair presentation of the financial position at
March 31, 1996, and the results of operations, cash flows and related note
disclosures for the three months ended March 31, 1996 and 1995, have been
made.
(2) Marketable Equity Securities:
In 1994, the Company sold its investment in common stock and recorded a gain
of $5,287 included in investment and other income in the accompanying
financial statements.
In 1994, the Company transferred its investment in preferred stock to a
shareholder in satisfaction of a $50,000 liability owed to the shareholder.
The recorded cost of the investment was $50,000 which approximated its fair
market value at the time of transfer. Therefore, no gain or loss was recorded
from this transaction in the accompanying financial statements.
(3) Commitments:
On November 11, 1993, the Company entered into a business consulting agreement
with an unrelated corporation for various marketing and management related
services. The Company issued 300,000 shares of its previously unissued common
stock to the consultant as a prepayment for future services valued at
$750,000. In addition, upon successful completion of the stock offering
described below, the Company had agreed to pay the consultant $7,000 per month
for three years and $10,000 per month for the following two years. In
addition, the shareholders of the Company entered into an agreement that
called for an annual salary to the President of the Company of $7,000 per
month for the three years after the closing of the stock offering, increasing
to $10,000 per month for the following two years. On September 1, 1994, the
business consulting agreement discussed above, and the agreement related to
the President's salary, was terminated. In consideration of the cancellation
of the business consulting agreement, and as payment in full satisfaction of
the rights of the consultant, the Company paid $180,000 to the consultant. In
addition, the Company agreed that the consultant had earned and would retain
the 300,000 shares received as part of the agreement. The remaining deferred
compensation of $500,000 as of September 1, 1994, has been expensed in the
year ended December 31, 1994.
On July 7, 1994, the Company entered into a five year noncancelable
operating lease for office space, commencing October 1994. The Company has
an option to rent additional space and a purchase option in which ten percent
of the lease payments may be applied to the purchase price. The future
minimum lease payments under operating leases as of December 31, 1995, are as
follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
<S> <C>
1996 $ 1,575
1997 20,014
1998 21,018
1999 18,240
2000 -
Total $60,847
</TABLE>
Rent expense under the foregoing lease and all other operating leases was
$18,150 and $18,062 for the years ended December 31, 1995 and 1994,
respectively, and $5,373 and $5,478 for the three months ended March 31, 1996
and 1995, respectively.
On August 1, 1994, the Company entered into a five year consulting agreement
(renewable annually by mutual agreement) with Yellen Associates (Yellen), an
unrelated company. Yellen agreed to provide ideas for new products in the
nutritional, geriatric, and related health fields; to find companies and/or
products suitable for acquisition; to find products suitable for manufacture
and/or distribution; and to secure customers for Company products. All
products offered by Yellen and accepted by the Company will belong exclusively
to the Company with all related rights. In return, the Company agreed to pay
Yellen $2,000 per month for nine months. If sales of Yellen products are at
least $200,000 per year, this monthly payment would automatically continue
for one year. Any other continuance of the payment would be negotiated. In
May, 1995, the Company discontinued its monthly payment to Yellen in
accordance with the agreement. Additionally, the Company agreed to pay
Yellen royalties of up to 5% of sales for products acquired through Yellen, or
cyclodextrin sales made by Yellen for three to five years. The Company also
agreed to sell to Yellen over a period of three years from August 1, 1994, up
to 30,000 shares of Company stock at a discount of 50% of the market price
quoted at the time of purchase, decreasing to 20,000 shares in year two and to
10,000 shares in year three. Consulting expense will be recognized during
the period in which Yellen elects to acquire shares of the Company's common
stock based on the difference between market price and the sales price of the
Company's common stock.
Effective January 1, 1995, the Company entered into a license agreement with a
manufacturer whereby the Company obtained an exclusive right to market a
dietary supplement in the United States for three years. The license fee of
$60,000 is nonrefundable, but recoverable through discounted purchases from
the manufacturer made before December 31, 1997. The Company made purchases
under the agreement at a discount of $7,273 for the year ended December 31,
1995. The Company has paid $49,602 of the license fee through December 31,
1995. The remaining amount is payable by April 30, 1996.
In June 1995, the Company entered into a $75,000 line of credit with a bank.
Interest is due monthly at prime plus 2%. Any outstanding principal and
interest is due in June 1996. The line is collateralized by accounts
receivable and inventory. As of December 31, 1995 and March 31, 1996, there
is an outstanding balance on this line of credit of $5,000.
(4) Concentrations of Credit Risk:
Significant concentrations of credit risk for all financial instruments owned
by the Company as of December 31, 1995 are as follows:
(a) Demand deposits--The Company has demand deposits in a local bank which
are insured by the Federal Deposit Insurance Corporation up to $100,000. At
December 31, 1995, the bank balance was $46,797, and at March 31, 1996 the
bank balance was $11,327. The Company has no policy of requiring collateral
or other security to support its deposits.
(b) Accounts receivable--The Company's accounts receivable consist of
amounts due primarily from food and pharmaceutical companies located primarily
in the United States. The Company has no policy requiring collateral or other
security to support its accounts receivable.
(c) Note receivable-employee--The Company's note receivable from employee
is uncollateralized. The Company's policy of requiring collateral on loans
made to employees is determined on a case-by-case basis.
(5) Income Taxes:
At December 31, 1995, the Company has a net operating loss carryforward
totaling approximately $1,331,000 that may be offset against future taxable
income through 2010. No tax benefit has been reported in the 1994 or 1995
financial statements, however, because the Company believes there is at least
a 50% chance that the carryforward will expire unused. Accordingly, the
$450,000 tax benefit of the loss carryforward has been offset by a valuation
allowance of the same amount. The expected tax benefit of $450,000 that would
result from applying federal statutory tax rates to the pre-tax loss differs
from amounts reported in the financial statements because of the increase in
the valuation allowance.
(6) Employee Stock Plans:
During 1994, the Company adopted a nonqualified employee stock issuance plan
to provide incentives to employees. Stock issued under this plan is at the
discretion of the Board of Directors of the Company and bears a restrictive
legend. All shares issued pursuant to this Plan must be held for a minimum of
two years and become fully vested after five years. During the period
beginning on the first day of the third year after issuance and ending five
years after issuance, the Company shall purchase all or any part of the shares
from the employee upon the employee's written request; the purchase price of
the shares shall be 50% of the then current market value of the shares.
Under extreme circumstances, the Company may choose to purchase the
employee's shares during the first two years.
In December, 1994, the Company issued 25,000 shares to employees for future
services under this plan. The Company valued the 25,000 shares at $37,500,
which was approximately 50% less than the bid price at the date of issuance.
The stock's quoted market price was not used because the Company's stock does
not trade freely in an established market. The Company recorded $37,500 as
stock issued for future services, which is classified as a reduction to
stockholders' equity in the accompanying financial statements. The Company is
amortizing this amount to expense over five years on the straight-line basis,
the estimated benefit period of the future services. The Company issued
10,000 shares held in treasury to employees under this plan in 1995. The
Company recorded $6,250 as stock issued for future services, which was
approximately 50% less than the bid price at the date of issuance, which will
be amortized over five years on a straight-line basis. The stock's quoted
market price was not used because the Company's stock does not trade freely in
an established market. Any unamortized amount will be charged to expense if
an employee terminates their employment with the Company. The Company
recognized $19,500 in compensation expense in 1995 under this Plan. There was
no expense recorded in 1994. The Company recognized $1,437 and $1,875 in
compensation expense under this plan for the three months ended March 31, 1996
and 1995, respectively.
In June 1995, the Company purchased 10,000 shares of its own common stock for
$25,000 from a former employee, payable over the next twelve months. This
stock was held in treasury and re-issued under the employee stock plan as
noted above.
Effective November 15, 1995, the Company adopted an employee stock purchase
plan. Under this plan, employees may purchase shares of Company stock up to
the amount of their gross pay for the period. These shares will be restricted
from sale for two years. The stock's quoted market price was not used because
the Company's stock does not trade freely in an established market. They will
be sold to employees at 50% of the most recent trading price at the date of
purchase. This plan will expire at the next private/public offering of
Company stock. As of December 31, 1995 and March 31, 1996, employees had
purchased 29,600 shares for $6,928 and 3,800 shares for $3,025, respectively
under this plan. These shares, totaling 33,400, had not been issued as of
December 31, 1995 and March 31, 1996 and are reflected as common stock
subscribed in the accompanying financial statements.
(7) Common Stock Subject to Repurchase:
As detailed in Note 6 above, the Company established a nonqualified employee
stock plan in 1994, and issued shares under this plan in December, 1994.
Also, as noted above, the stock issued under this Plan is redeemable by the
Company at the option of the employee, at 50% of the then current market
value. The employee can demand redemption at any time beginning on the first
day of the third year after issuance ending five years after issuance.
The Company has reserved 100,000 of its common shares authorized of 5,000,000
to be used under this Plan.
The common stock subject to repurchase is reflected on the balance sheet at
50% of the market value as of the balance sheet date. Changes in the
redemption amount are recognized in the accompanying statement of operations
as "Gain due to change in redemption price on common stock subject to
repurchase."
Common stock subject to repurchase activity comprises the following:
<TABLE>
<CAPTION>
Three Months Years Ended
Ended March 31, December 31,
1996 1995 1994
<S> <C> <C> <C>
Balance, beginning of period $ 6,250 $ 37,500 $ -
Common stock issued - 6,250 37,500
Common stock redeemed - (25,000) -
Market changes in redemption price - (12,500) -
Balance, end of period $ 6,250 $ 6,250 $ 37,500
</TABLE>
Common stock subject to repurchase are redeemable by the holder
as follows:
<TABLE>
<CAPTION>
Year Ending Shares Amount
<S> <C> <C>
1996 - $ -
1997 15,000 3,750
1998 10,000 2,500
25,000 $ 6,250
</TABLE>
(8) Common Stock Transactions:
During March and April 1994, the Company completed a private offering of its
previously unissued common stock. The Company received net proceeds of
$814,595 (after offering costs of $153,905) from the issuance of 193,700
shares of its common stock.
(9) Major Customers and Suppliers:
Sales to four customers in 1995 consisted of approximately 84% of total sales.
The aggregate accounts receivable balances at December 31, 1995 for the major
customers were $33,700. Sales to three customers in 1994 consisted of
approximately 61% of total sales. The aggregate accounts receivable balances
at December 31, 1994 for the major customers were $1,500.
Sales to three customers for the three months ended March 31, 1996, consisted
of approximately 56% of total sales. Sales to these three customers were 84%
of total sales for the three months ended March 31, 1995.
The Company currently purchases all its inventory of Garlessence, a dietary
supplement, from one supplier.
(10) Investment in Joint Venture:
Effective May 1, 1995, the company entered into a joint venture agreement with
Ocumed, Inc. (Ocumed), an unrelated company. The joint venture is organized
as Ocudex, Inc. (Ocudex) with the Company and Ocumed each owning 50% of
Ocudex. The Company has committed to funding Ocudex up to $120,000. The
Company has advanced Ocudex $34,000 as of December 31, 1995, and $44,000 as of
March 31, 1996.
Following is a summary of the financial position and results of operations of
Ocudex which is included in the accompanying financial statements as of and
for the eight months ended December 31, 1995.
<TABLE>
<S> <C>
Cash $ 1,777
Equipment 28,000
Other assets 1,212
Total assets $ 30,989
Advances from stockholder $ 34,000
Stockholders' deficit (3,011)
Total liabilities and stockholders' deficit $ 30,989
Sales $ -
Net loss $ 3,011
Company's proportionate share of loss $ 1,506
</TABLE>
(11) Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107 requires disclosure of
fair value to the extent practicable for financial instruments which are
recognized or unrecognized in the balance sheet. The fair value of the
financial instruments disclosed herein is not necessarily representative of
the amount that could be realized or settled, nor does the fair value amount
consider the tax consequences of realization or settlement. The following
table summarizes financial instruments by individual balance sheet account as
of December 31, 1995:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 46,773 $ 46,773
Accounts receivable 36,652 36,652
Note receivable - employee 10,000 10,000
Total financial assets $ 93,425 $ 93,425
Financial liabilities:
Note payable on line of credit $ 5,000 $ 5,000
Accounts payable and accrued expenses 45,620 45,620
Treasury stock payable 6,421 6,421
Total financial liabilities $ 57,041 $ 57,041
</TABLE>
The fair value of financial instruments classified as current assets or
liabilities approximates carrying value due to the short-term maturity of the
instruments. The fair value of the note receivable-employee was estimated
using current interest rates.
(12) Subsequent Events:
On January 1, 1996, the Company resolved to issue 48,000 shares of its common
stock to various unrelated parties for services performed in connection with
the Company's anticipated self-underwritten stock offering as noted below.
Furthermore, two of these parties acknowledge that in the event the gross
proceeds of the offering are less than $500,000, then one-half of their shares
(20,000) shall be returned to the Company. The shares issued will bear a
restrictive legend. The Company valued these shares at $12,000, which is
approximately 50% less than the bid price at the date of issuance. The
stock's quoted market price was not used because the Company's stock does not
trade freely in an established market. These shares have not been issued as
of March 31, 1996, and are reflected as subscribed in the accompanying
financial statements.
Effective February 5, 1996, the Company filed Form SB-2 Registration
Statements with the Securities and Exchange Commission for a proposed
securities offering of 250,000 shares of common stock and 125,000 common stock
purchase warrants with a combined proposed maximum aggregate offering price of
$1,250,000.
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and if given or made, such information or representations must
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct
as of any time subsequent to the date hereof or that there has been no change
in the affairs of the Company since such date. This Prospectus does not
constitute an offer to sell or solicitation of an offer to buy any of the
securities offered hereby to anyone to whom it is unlawful to make such an
offer.
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary 3
Selected Financial Data 4
The Company 4
Risk Factors 5
Use of Proceeds 9
Dilution 10
The Offering 11
Dividend Policy 11
Business 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operation 21
Comparative Market Prices 24
Management 24
Principal Stockholders 26
Certain Relationships and Related
Transactions 26
Description of Securities 28
Legal Proceedings 29
Counsel 29
Experts 29
Index to Financial Statements 30
500 Units
(250,000 Shares & Warrants)
of
Common Stock,
par value $.0001 per share
Cyclodextrin Technologies Development, Inc.
P R O S P E C T U S
June __, 1996
<PAGE>
Part II
Information Not Required in Prospectus
Item 24. Indemnification of Directors and Officers
The Articles of Incorporation of the Company, contain a provision under
which the officers and directors of the Company would be indemnified to the
full extent permitted by law. Also, Section 607.0850 FLA. STAT. (1995),
permits indemnification against expenses actually and reasonably incurred by a
director, officer, employee or agent to the extent that such person has been
successful in the defense of a matter eligible for indemnification under the
statute. Under certain circumstances, expenses may be paid by a corporation
in advance, subject to repayment, unless the defendant ultimately is
determined to be ineligible for indemnification. In addition, the statute
permits a corporation to indemnify directors and officers against certain
liabilities and to purchase and maintain director and officer liability and
reimbursement insurance against liabilities, whether or not the corporation
would have the power of indemnification against such liabilities.
Item 25. Other Expenses of Issuance and Distribution
It is estimated that the expenses incurred in connection with
distribution of the shares of Common Stock offered hereby will be as follows:
<TABLE>
<CAPTION>
Item Amount Payable by Company
<S> <C>
SEC Registration Fee $ 191
Printing and Engraving 3,000
Legal Fees and Expenses 30,000 <F1>
Accounting Fees and Expenses 12,500
Fees and Expenses for
Qualification Under
State Securities Laws 3,500
Transfer Agent Fees and Expenses 2,000
Miscellaneous 1,809
Total $ 53,000
<FN>
<F1>
Paid by transfer of 20,000 restricted common shares valued at market
value as of January 25, 1996.
</FN>
</TABLE>
Item 26. Recent Sales of Unregistered Securities
The following table sets forth information concerning unregistered sales
of common stock of the Company from October 1, 1990 through January 25, 1996:
<TABLE>
<CAPTION>
Purchaser Date of Issue Number of Shares Consideration
<S> <C> <C> <C>
C.E. Rick Strattan 10-01-90 500,000 <F1> $500
Garrison Enterprises 11-11-94 300,000 Consulting Services
David L. Southworth 12-31-94 10,000 Employee Bonus
Daniel W. Gardiner 12-31-94 5,000 Employee Bonus
Stephen J. Herschleb 12-31-94 10,000 Employee Bonus
Daniel W. Gardiner 11-15-95 2,000 $1,000 (50% of market )
C.E. Rick Strattan 11-15-95 2,000 $1,000 (50% of market)
Daniel W. Gardiner 12-06-95 15,600 $3,003 (50% of market )
C.E. Rick Strattan 12-06-95 10,000 $1,925 (50% of market)
Gregory V. DeLong 1-1-96 20,000 Services
Bruce Brashear 1-1-96 20,000 Services
Michael B. Dolan 1-1-96 1,500 Services
Raul Febles 1-1-96 1,500 Services
C. Bradley Dilger 1-1-96 1,500 Services
Christopher M. Renick 1-1-96 1,500 Services
Chris Brazda 1-1-96 2,000 Services
C.E. Rick Strattan 1-2-96 2,000 $1,000 (50% of market)
C.E. Rick Strattan 2-13-96 1,800 $2,025 (50% of market)
<FN>
<F1>
Reflects 1,000 for 1 stock split; originally issued as 500 shares for a consideration
of $1.00 per share
</FN>
</TABLE>
No underwriter was involved in any of the foregoing transactions. The
issuance of all shares was considered exempt as securities issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended, because no public
offering was involved. Each of the recipients of the securities issued by
the Company represented that the securities were being acquired without a
view to the distribution thereof and appropriate legends were affixed to the
share certificates.
Item 27. Exhibits
Exhibit No. Page
(1) Underwriting agreement None
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession None
(3) Articles of incorporation and by-laws
(a) Articles of Incorporation filed August 9, 1990. <F2>
(b) By-Laws. <F2>
(c) Certificates of Amendment to the Articles of Incorporation
filed November 18, 1993 and September 24, 1993. <F2>
(4) Instruments defining the rights of security holders, including
indentures
(a) Specimen Share Certificate for Common Stock. <F2>
(b) Specimen Common Share Purchase Warrant
(c) Warrant Resolution
(5) Opinion re: legality
(10) Material Contracts
(a) Agreement of Shareholders dated November 11, 1993 by and among C.E. Rick
Strattan, Garrison Enterprises, Inc. and the Company. <F2>
(b) Lease Agreement dated July 7, 1994, incorporated by reference to the
Company's Form 10-KSB for the year ended December 31, 1995.
(c) Consulting Agreement dated July 29, 1994 between the Company and Yellen
Associates. <F2>
(d) License Agreement dated December 20, 1994 between the Company and Herbe
Wirkstoffe GmbH. <F2>
(e) Joint Venture Agreement between the Company and Ocumed, Inc. dated May 1,
1995, incorporated by reference to the Company's Form 10-QSB for the quarter
ended June 30, 1995.
(11) Statement re: Computation of Per Share Earnings
(22) Subsidiaries of Registrant None
(24) Consents of Experts and Counsel
(a) Consent of James Moore & Co.
(b) Consent of Bruce Brashear, esq.
(25) Power of Attorney
(27) Financial Data Schedule
<F2>
Incorporated by reference to the Company's Form 10-SB filed with the U.S.
Securities and Exchange Commission on February 1, 1994.
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies it has reasonable grounds to believe it
meets all the requirements for filing this Amendment No. 3 to Form SB-2 and
authorized this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Gainesville, State of
Florida, on the 28th day of June, 1996.
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
By: /s/ C.E. Rick Strattan
C.E. Rick Strattan,
Chairman of the Board
President/CEO/COO
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in
the capacities and on the dates stated.
Signature Title
/s/ C.E. Rick Strattan Chairman of the Board, President
C.E. RICK STRATTAN
Date: June 28, 1996
/s/ David Southworth Chief Financial Officer, Treasurer
DAVID SOUTHWORTH
Date: June 28, 1996
June 28, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Amendment No. 3 to Registration Statement on Form SB-2
Cyclodextrin Technologies Development, Inc.
Gentlemen:
I have acted as counsel for Cyclodextrin Technologies Development, Inc.
(the "Company") in connection with the proposed public offering by the
Company of up to Five Hundred (500) units, each unit being comprised of
500 common shares (par value $.0001) and warrants to purchase up to One
Thousand (1,000) common shares. In connection with the proposed public
offering and above-described registration statement, I have reviewed the
following:
1. The Certificate of Incorporation and amendments thereto of the Company;
2. The By-Laws and amendments thereto of the Company;
3. The minute books of the Company; and
On the basis of such investigation and the examination of such other
records as I deemed necessary, I am of the opinion that:
a) the Company has been duly incorporated and is validly existing under
the laws of the State of Florida; and
b) The 500 units have been duly authorized and the underlying shares
purchasable pursuant to the warrants, when issued, will be legally issued
by the Company and will be fully paid and nonassessable.
I consent to the filing of this opinion as an Exhibit for the purpose of
registering all or a portion of the Common Shares described in Amendment
No. 3 to Registration Statement on Form SB-2 under the relevant federal and
state securities laws.
Sincerely,
/s/ Bruce Brashear
Bruce Brashear, Esq.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 (File
No.333-1000) of our report dated February 5, 1996, on our audit of the
financial statements of Cyclodextrin Technologies Development, Inc. We
also consent to the reference to our firm under the caption "Experts."
JAMES MOORE & CO. P.L.
Gainesville, Florida
June 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from Financial Statements for the three months ended March 31, 1996, and is
qualified in its entirety by reference to such form 10QSB for quarterly period
ended March 31, 1996.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Mar-31-1996
<CASH> 8,449
<SECURITIES> 0
<RECEIVABLES> 10,300
<ALLOWANCES> 0
<INVENTORY> 76,469
<CURRENT-ASSETS> 108,535
<PP&E> 73,328
<DEPRECIATION> 28,722
<TOTAL-ASSETS> 247,071
<CURRENT-LIABILITIES> 40,040
<BONDS> 0
<COMMON> 108
0
0
<OTHER-SE> 1,586,940
<TOTAL-LIABILITY-AND-EQUITY> 247,071
<SALES> 30,776
<TOTAL-REVENUES> 30,776
<CGS> 4,526
<TOTAL-COSTS> 100,606
<OTHER-EXPENSES> 5,744
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (79,494)
<INCOME-TAX> 0
<INCOME-CONTINUING> (79,494)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (79,494)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
