U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (Fee Required)
For the fiscal year ended December 31, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (No Fee Required)
For the transition period from _________ to _________
Commission file number 0-24930
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
(Name of small business issuer in its charter)
FLORIDA 59-3029743
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3713 S. W. 42nd Avenue, Suite 3, Gainesville, FL 32608-6581
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 352-375-6822
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
- - ----.
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB ( )
State issuer's revenues for its most recent fiscal year: $557,495.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference at the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: $1,099,363.13 based on the average high and low price as of March 29, 1999
of $1.3125 per share.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date: 1,687,610 shares of Common Stock
as of March 29, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (Check One): Yes No X
<PAGE>
PART I
Item 1. Description of Business
Cyclodextrin Technologies Development, Inc. ("the Company") was organized
as a Florida corporation on August 9, 1990, with operations beginning in July
1992. The Company sells cyclodextrins ("Cyclodextrins" or "CDs") and related
products to the food, pharmaceutical and other industries. The Company has
recently began growing and selling mushrooms. The Company also provides
consulting services.
CDs
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.
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.
Mushrooms
On May 7, 1999, the Company created Natural Spirit Mushroom Enterprise,
Inc., a Florida corporation, for the purpose of growing, developing and
marketing mushroom-based products, some of which would be combined with
cyclodextrin to be used in herbal, cosmetic and alternative medicines. Natural
Spirit acquired the rights to certain proprietary methods of exotic mushroom
cultivation from a defunct mushroom producing company. CTD issued 26,500 shares
of its common stock to investors and promoters of the defunct company for their
rights to certain processes expected to be used by Natural Spirit. 98% of the
outstanding shares of Natural Spirit are owned by the Company with 1% being
owned by C.E. Rick Strattan and 1% being owned by the Chief Operating Officer of
Natural Spirit, John Lindsay.
CTD believes that the addition of Natural Spirit to the CTD structure has
dual benefits for CTD. The direct benefit comes from the expectation that
Natural Spirit will become fully operational by year end, and will provide a
less volatile source of income from its sales of exotic mushrooms. The indirect
benefit lies complimentary nature of the respective products of CTD and Natural
Spirit. The exotic mushrooms and the expertise of Natural Spirit provide an
excellent opportunity for CTD to expand its own product line into dietary
supplements utilizing the active ingredients from the mushrooms and the
cyclodextrins of CTD. In 1999, the revenues obtained from the sale of mushrooms
by the Company were $1,582. The Company expects the sales of mushrooms by
Natural Spirit to increase to exceed $100,000 in 2000.
Natural Spirit's operations have been financed by CTD. CTD made an initial
direct investment of approximately $80,000 to acquire approximately 40 acres of
land, building and equipment formerly used as a Mushroom Farm. The funds came
from profits from operations and $50,000 in new CTD stock sold between March and
June of 1999. The offering, if completely sold, will result in the issuance of
650,000 shares of new CTD stock and the receipt by the Company of $1,287,500.
<PAGE>
CD 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.
CDs are manufactured 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 Company currently sells its products for use in the pharmaceutical,
food and industrial chemical industries.
<PAGE>
CD Market
The food additive industry has been experimenting with CDs for many years.
Now that commercial supply of these materials can be assured and regulatory
approval is imminent, 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 25
years. The market for the use of CDs in food products in 1997 in Japan was
estimated at $150 million. Within the last five years, more 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.
Oral arguments for regulatory approval by the United States Food and Drug
Administration ("FDA") have been accepted. As of November 3, 1997, BCD use as a
food additive in 10 categories of food products was confirmed to be GRAS.
Applications of CDs in personal products and for industrial uses have
appeared in many patents and patent applications. Proctor & Gamble uses CDs in
Bounce(R), a popular fabric softener. Avon uses CDs in its dermal preparations
using its Age Protective System APS(R). 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 twelve 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. Because of the value added, the
dollar value of the worldwide market for products containing CDs and for
complexes of CDs can be 2 to 3 to 4 times that of the CD itself.
<PAGE>
CD Products
The Company's CD products include its Trappsol(R), Aquaplex(R), and
AP(TM)-Flavor 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( R) 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 trademarks have been approved: Trappsol(R),
Garlessence(R), and Aquaplex (R). 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 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.
<PAGE>
Business Strategy
The Company's strategy has been and will continue to be to generate
profitable revenue through sales of CD related goods, natural medicines (using
the ingredients found in mushrooms, herbs and other medicinal natural sources)
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 and the development of its natural medicinal offerings based on
natural sources, especially mushrooms.
From inception through the current year, sales of CDs and CD derivatives
have been sufficient to provide the necessary operational profitability to
sustain the Company. Since these materials were simply purchased and resold,
they had the least value-added attributes.
Presently, sales of CD complexes represent 31% of the Company's product
sales revenues. Transition to the more value-added complexes continues and is
desirable for increased profitability since higher margins can be maintained for
these products. However, it appears that the distribution oriented business of
CD sales has eroded. Combined with price reductions dictated by the market, the
revenues from the sales of distributed products have decreased as much as the
revenue from CD complexes has increased. The Company continues to be dependent
on just a few major 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(R) B (beta cyclodextrin) Garlessence(R) 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(R)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(R)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(R)symbol is for artificially
sweetened products containing Nutrasweet(R).
(3) Growing mushrooms and other natural medicinal sources to create revenue
from direct sales and to create a source of raw materials for its
development of enhanced natural medicinals using CD's.
<PAGE>
The Company 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.
The Company believes its competitive advantage lies in its experience and
know how in the use and application of CDs, areas in which it believes it has a
significant lead.
In addition to its licensing efforts, the Company intends to 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 constantly evolving licensing
situations.
<PAGE>
Marketing Plan
The Company believes that the failure of businesses to exchange information
about CD 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, volatile and driven by the
acceptance of CD's as beneficial excipeints. Arrangements with large laboratory
supply companies and several diagnostic companies have provided a strong sales
base, but at the price of dependency on a few customers.
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".
<PAGE>
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 the next five years.
These products will address needs in the relatively unregulated areas of natural
medicine, topical OTC (over the counter) preparations, veterinary products, and
home gardening.
The Company intends to work with clients in countries whose current
regulatory views include CDs as natural products acting as excipients to
introduce beneficial pharmaceuticals improved by CDs.
Along with the new products themselves, the Company has created a
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(R) (artificial sweetener) and MLB(R) (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 would then be
expected to 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 successful 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. 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. The benefits derived from the use
of CDs with expensive ingredients (e.g., flavors, fragrances)have already become
accepted commercial uses for CMCDs (chemically modified CSk's) and (naturally
modified CD's) NMCDs.
<PAGE>
Competition
The Company is currently a leading consultant in determining what the
manufacturing standards and costs for CDs and CMCDs are. 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. 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.
<PAGE>
Government Regulation
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 any 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 that 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.
Employees
In 1999 the Company employed 9 persons on a full time basis. None of the
Company's employees belong to a union. The Company believes relations with its
employees are good.
<PAGE>
Item 2. Description of Properties.
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. In 1999, this lease was extended for an additional two-year period until
November 1999, at an annual rent of $21,888. 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.
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 haveincreased to about $20,000
per month with the creation of NSME.
On June 4, 1999, the Company bought approximately 40 acres in Alachua
County, Florida, for a purchase price of $210,000 which was paid for in part by
a new first mortgage of $150,000. The property had been developed in part as a
mushroom growing facility. Since the purchase of the property, the Company has
continued to develop the property and use the property to grow various types of
mushrooms. The property contains two grow-houses which the Company believes
are adequate to grow approximately 24,000 pounds of mushrooms per year. Two
additional grow-houses are under construction. There is a residential
building which is being used to house the operations of the Company's
mushroom-growing subsidiary.
Item 3. Legal Proceedings.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
<PAGE>
Part II
Item 5. Market for Registrant's 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.
<TABLE>
<S> <C> <C> <C>
High Low
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
Second Quarter $ 1.0625 $ .75
Third Quarter $ 2.25 $ .25
Fourth Quarter $ 1.00 $ .625
1997 First Quarter $ 3.00 $ .75
Second Quarter $ 1.50 $ .562
Third Quarter $ .562 $ .437
Fourth Quarter $ 1.062 $ .531
1998 First Quarter $ 0.875 $ 0.375
Second Quarter $ 0.625 $ 0.375
Third Quarter $ 0.500 $ 0.281
Fourth Quarter $ 0.260 $ 0.170
1999 First Quarter $ 0.406 $ 0.115
Second Quarter $ 0.437 $ 0.156
Third Quarter $ 0.25 $ 0.187
Fourth Quarter $ 0.468 $ 0.156
</TABLE>
Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions.
Holders
As of December 31, 1999, the number of holders of record of shares of
common stock, excluding the number of beneficial owners whose securities are
held in street name was approximately 56.
Dividend Policy
The Company does not anticipate paying any cash dividends on its common
stock in the foreseeable future because it intends to retain its earnings to
finance the expansion of its business. Thereafter, declaration of dividends will
be determined by the Board of Directors in light of conditions then existing,
including without limitation the Company's financial condition, capital
requirements and business condition.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
When used in this report, the words "believes," expects," "anticipates" and
similar expressions are intended to identify forward-looking statements.
Statements herein regarding sales and research performance, expected financing,
and expected regulatory approval of the Company's products further constitute
forward-looking statements under federal securities laws. Such statements are
subject to certain risks and uncertainties that could cause the actual
realization to be delayed or to not occur. Management has made certain
assumptions regarding each of the statements which may or may not be accurate.
Actual research and development results may vary significantly from the current
plans. Actual Company financing activities may vary significantly from the
current plans and may result in the Company changing its plan of the use of such
proceeds.
Liquidity and Capital Resources
As of December 31, 1999, the Company's net working capital was $120,186,
and $90,093 at the end of 1998; the Company's net working capital steadily grew
over the year to this level.
Total product sales for 1999 more than doubled ($557,495 vs. $276,325) from
the year before. This substantial increase resulted from the anticipated
emergence of new users of cyclodextrins (CD) resulting from the greater
regulatory acceptance of CD's for use in commercial products. More specifically
to the Company, the increase resulted from first time customers in addition to
its major customers buying more CD's more frequently during the year. The
Company's consulting revenues increased as well over the year before ($9,466 vs.
$350), and should continue to increase.
Inventory more than doubled from year-end 1998 to 1999 ($85,249 vs.
$32,786). These levels were increased in anticipation of the continued strong
sales expected for the first quarter of 2000.
In 1999, the company obtained $35,000 in a private placement of 70,000
shares of 144 restricted common shares of the company. An additional $15,000 was
raised by the sales of 20,000 shares as part of a 505D offering. The Company
used these funds and approximately $300,000 of debt equity to purchase 40 acres
of land, buildings, and equipment to be used by the Company's new subsidiary,
Natural Spirit Mushroom Enterprises, Inc. (Natural Spirit). If the offering is
sold out, an additional $1,272,500 from sales of an additional 630,000 shares of
the Company's stock is expected to be used in the development and expansion of
the Natural Medicinal Project underway at Natural Spirit.
The Company currently has a $25,000 credit line with approximately $ 3,000
outstanding balance as of December 31, 1999. The Company also has available
approximately $ 50,000 in combined credit card lines with less than $ 8,000
outstanding.
The Company's previous 5-year lease for its 3000 square feet of office and
laboratory space has been extended two years until November 2001. The company
expects to move its offices to its own facility during the year 2000 and will
sublet its current space for 2001. The two year lease extension provides the
Company considerable flexibility in the timing and expense of its move to new
offices.
The Company's web site (cyclodex.com) has contributed to the Company's
increase in CD product sales by providing companies and universities in the US
and the rest of the world a way to easily locate a source of CD supplies and
technology. The Company has received limited response to its subscription
service for its patent database. As the Company's financial resources grow,
management will allocate additional human resources to the management,
maintenance, and upgrading of its web site. As part of its commitment to its
presence on the Internet, the Company intends to allocate in 2000 financial
resources for a significant upgrade and expansion of its Web Site.
The Company's total assets more than doubled ($766,745 vs. $325,447) from
year end 1998 to year end 1999 as a result of its strong sales performance and
the acquisition of approximately $330,000 of property and equipment in 1999.
In the second quarter of 1999, the Company took its first step into the
direct production of a dietary supplement class of products by obtaining the
rights to certain trade secret technology, which dramatically improves the
production capabilities for mushroom cultivation, and purchased a site to
utilize this technology for the production of exotic mushrooms and other
medicinal plants. The acquisition marks the beginning of the Company's expansion
into a basic manufacturing role for all types of alternative medicines. The
immediate strategy is for the Company to grow selected exotic mushrooms in bulk
for the edible market, for research, and for its own development of alternative
medicines based on the natural ingredients in selected mushrooms. By the end of
December 1999 Natural Spirit had produced for sale approximately 1000 lbs. of
Shiitake mushrooms and had generated revenue of approximately $1000.
Results of Operations
Sales for the year ended December 31, 1999 ($557,495) were more than double
the sales for the same period in 1998 ($276,352). Sales of CD's and related
manufactured complexes have historically been highly volatile. This large
increase in 1999 was the result of first time customers and increased sales to
existing customers. The average size of the Company's sales increased in 1999
from 1998. These new customers significantly reduced the Company's dependence of
the past on just one or two major purchasers. In 1998 one company accounted for
48% of the Company's sales; in 1999 that same company, while buying more, only
accounted for 28% of the Company's total product sales in 1999. Management's
goal is to continue to diversify its sales base. Sales to three customers
represented 58% of 1999 sales while two customers accounted for 59% of 1998
sales.
The Company's gross profit margin on product sales increased from 80%
(1998) to 86% in 1999. This increase was primarily due to the advancement of
projects the Company has been nurturing for several years to stages where a
greater volume of CD's is required. The Company sold more of its higher gross
margin products in 1999 compared to 1998.
Selling, general and administrative (SG & A) expenses for 1999 ($392,492)
increased 124% over those of 1998 ($175,427), which doesn't include $127,876 of
one-time expenses that were reported in the total expenses of 1998. The Company
believes that the increase was due in large part to its acquisition and start up
of its subsidiary, Natural Spirit. While a 100% increase in expenses is not
unheard of to double sales, the Company's management is examining all aspects of
Natural Spirit operations to see that the expenses associated with Natural
Spirit are significantly reduced in 2000. One of management's goals is to keep
total SG & A expenses below $250,000 for the year 2000.
Consulting services were $9,466 in 1999 compared to $350 in 1998.
Management expects these revenues to grow slightly in 2000.
The Company has unused operating loss carryforwards and deductible
temporary differences totaling approximately $1,366,000 at December 31, 1999. If
not used, the carryforwards expire in years beginning in 2009. If all the
operating loss carryforwards and deductible temporary differences were used, the
Company would realize a deferred tax asset of approximately $314,000 based upon
expected income tax rates. The Company has previously recognized the benefit of
these deferred tax assets. Realization depends on generating sufficient taxable
income before the expiration of the loss carryforwards. Although realization is
not assured, Management believes that approximately 60% of the deferred tax
asset will be realized based upon anticipated profitability in the future. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
The Company recorded income tax expense of $20,000 and $35,000 in 1999 and
1998, respectively, although the Company was not required to pay income taxes in
these years. The income tax expense in 1999 was a result of reporting net income
for the year and a change in the deferred tax asset valuation allowance. The
income tax expense in 1998 was a result of a change in the deferred tax asset
valuation allowance.
The Company absorbed $150,512 of Natural Spirit start-up expenses (38% of
its total SG & A expenses) using operational revenue and still reported a
consolidated net income of $69,407 in 1999 compared to a loss of $109,583 in
1998.
The Company continues to develop new products, seek additional financing,
and implement its strategy of creating operational affiliates that will use CD's
in herbal medicines, waste water remediation, and pharmaceuticals.
Item 7. Financial Statements
[LETTERHEAD OF JAMES MOORE & CO.]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Cyclodextrin Technologies Development, Inc.:
We have audited the accompanying consolidated balance sheet of Cyclodextrin
Technologies Development, Inc. as of December 31, 1999, and the related
consolidated statements of operations, comprehensive income, stockholders'
equity and cash flows for the years ended December 31, 1999 and 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cyclodextrin
Technologies Development, Inc. as of December 31, 1999, and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998, in
conformity with generally accepted accounting principles.
/s/James Moore & Company
January 28, 2000
Gainesville, Florida
F - 1
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 73,425
Accounts receivable 21,264
Inventory 85,249
Current portion of note receivable 25,157
Deferred tax asset 15,000
Other current assets 6,021
-------------
Total current assets 226,116
-------------
PROPERTY AND EQUIPMENT 331,825
-------------
OTHER ASSETS
Notes receivable, less current portion 10,832
Deferred tax asset 180,000
Intangibles 17,972
-------------
Total other assets 208,804
-------------
TOTAL ASSETS $ 766,745
=============
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-2
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 58,766
Current portion of long term debt 23,920
Line of credit 3,294
Due to shareholder 19,950
-------------
Total current liabilities 105,930
-------------
Long Term debt, less current portion 186,475
-------------
Common stock payable 7,800
------------
STOCKHOLDERS' EQUITY
Class A common stock, par value $.0001 per share, 158
9,900,000 shares authorized, 1,587,610 shares issued
and outstanding;
Class B non-voting common stock, par
value $.0001 per share, 10,000,000 shares
authorized, 0 shares issued and outstanding
Additional paid-in capital 1,765,943
Accumulated deficit (1,299,561)
-------------
Total stockholders' equity 466,540
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 766,745
=============
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-3
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION> 1999 1998
------------- -------------
<S> <C> <C>
PRODUCT SALES $ 557,495 $ 276,325
COST OF PRODUCTS SOLD 74,832 55,856
------------- -------------
GROSS PROFIT 482,663 220,469
CONSULTING SERVICES AND OTHER OPERATING REVENUE 9,466 350
------------- -------------
TOTAL OPERATING REVENUE 492,129 220,819
------------- -------------
OPERATING EXPENSES
Selling, general and administrative 392,492 175,427
Public offering expenses - 70,689
Write down of inventory to net realizable
value - 57,187
------------- -------------
Total operating expenses 392,492 303,303
------------- -------------
INCOME (LOSS) FROM OPERATIONS 99,637 (82,484)
------------- -------------
OTHER INCOME (EXPENSE)
Investment and other income (792) 10,633
Gain due to change in redemption price
on common stock subject to repurchase 1,660 420
Interest expense (11,098) (3,152)
------------- -------------
Total other income (expense) (10,230) 7,901
------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES 89,407 (74,583)
INCOME TAX EXPENSE, net (20,000) (35,000)
------------- -------------
NET INCOME (LOSS) $ 69,407 $ (109,583)
============= =============
NET INCOME(LOSS)PER COMMON SHARE $ .05 $ (.08)
=========== =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,539,377 1,290,434
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
------------- -------------
NET INCOME (LOSS) $ 69,407 $ (109,583)
------------- -------------
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Unrealized holding losses arising during
the period - (4,164)
Less: Reclassification adjustment for previous
unrealized losses included in net income (loss) 4,164 3,755
------------- -------------
OTHER COMPREHENSIVE INCOME (LOSS) 4,164 (409)
------------- -------------
COMPREHENSIVE INCOME (LOSS) $ 73,571 $ (109,992)
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
COMMON STOCK ADDITIONAL ACCUM. OTHER TOTAL
PAID-IN COMPREHENSIVE ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL INCOME (LOSS) DEFICIT EQUITY
----------- ----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 1,220,110 $ 120 $ 1,670,744 $ (3,755) $(1,259,385) $ 407,724
Shares issued for services 106,474 11 24,989 - - 25,000
Shares repurchased and retired (10,000) (1) (4,999) - - (5,000)
Other comprehensive income(loss) - - - (409) - (409)
Net loss - - - - (109,583) (109,583)
----------- ----------- ----------- ----------- ----------- ------------
Balance, December 31, 1998 1,316,584 130 1,690,734 (4,164) (1,368,968) 317,732
Shares issued for services 253,000 26 23,630 - - 23,656
Shares repurchased and
retired (106,474) (9) (6,380) - - (6,389)
Shares issued to acquire
rights 26,500 2 13,248 - - 13,250
Shares sold 90,000 9 44,711 - - 44,720
Expiration of repurchase
obligation 8,000 - - - - -
Other comprehensive income - - - 4,164 - 4,164
Net income - - - - 69,407 69,407
------------ ------------ ------------ ------------ ------------ -----------
Balance, December 31, 1999 1,587,610 158 1,765,943 - (1,299,561) 466,540
============ ============ ============= ============ ============ =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1999 AND 1998
Increase (decrease) in Cash and Cash Equivalents
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 69,407 $ (109,583)
----------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 18,684 14,282
Loss on sale of investments 3,122 2,019
Write down of inventory to net realizable value - 57,187
Gain based on redemption price of common
stock subject to repurchase (1,660) (420)
Stock issued for services 23,656 25,674
Decrease (increase) in accounts receivable (9,569) 29,841
Increase in inventory (52,463) (2,977)
Decrease (increase)in other current assets (2,956) 363
Decrease in deferred income taxes 20,000 35,000
Decrease in deferred offering costs - 35,000
Increase (decrease) in accounts payable and
accrued expenses 52,710 (23,240)
Increase in common stock payable 7,800 -
----------- -----------
Total adjustments 59,324 172,729
----------- -----------
Net cash provided by operating activities 128,731 63,146
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment 127,710) (3,733)
Loans to employees (41,603) -
Repayment of employees loan 5,614 2,467
Purchase of intangible assets (5,722) -
Proceeds from sale of investments 10,261 19,331
Purchases of investments - (13,382)
------------ -----------
Net cash provided by (used in) investing activities (159,160) 4,683
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (payments) on line-of-credit 3,294 (23,877)
Net proceeds (payments) on investment margin account - (10,400)
Proceeds from loan payable to stockholder 21,589 16,771
Payment to stockholder on loan (1,639) (16,771)
Proceeds from sale of stock 50,000 -
Offering costs of sale of stock (5,279) -
Repurchase of stock (6,389) (5,000)
Proceeds from long term debt 36,472 -
Payment on long term debt (31,077) -
----------- -----------
Net cash provided by (used for) financing activities 66,971 (39,277)
------------ -----------
The accompanying notes to financial statements are an integral part of these
statements.
F-7
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1999 AND 1998
Increase (decrease) in Cash and Cash Equivalents
(Continued)
1999 1998
------------ ------------
Net increase in cash and cash equivalents 36,542 28,552
CASH AND CASH EQUIVALENTS, beginning of year 36,883 8,331
------------ ------------
CASH AND CASH EQUIVALENTS, end of year $ 73,425 $ 36,883
============ ============
1999 1998
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 11,098 3,152
============ ============
Cash paid for income taxes - -
============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITY
Common stock issued for services $ 23,656 $ 25,674
============ ============
Common stock issued to acquire rights $ 13,250 $ -
============ ============
Acquisition of property and equipment with debt $ 205,000 $ -
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
F-8
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the more significant accounting policies of
Cyclodextrin Technologies Development, Inc. and Subsidiary (the Company) which
affect the accompanying consolidated 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 food, pharmaceutical and other industries. The Company also provides
consulting services related to cyclodextrin technology. In 1999, the Company
formed Nature Spirit Mushroom Enterprises, Inc. (NSME), a 98% owned subsidiary,
to grow mushrooms and to develop and market a line of mushroom based products.
The Company's current market is primarily within the United States.
(b) BASIS OF PRESENTATION - The consolidated financial statements include
the Company and its 98% owned subsidiary. All intercompany accounts and
transactions have been eliminated.
(c) 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.
(d)PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation on property and equipment is computed using primarily the
straight-line method over the estimated useful lives of the assets, which range
from five to forty 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.
(e) INVENTORY - Inventory consists of cyclodextrin products purchased for
resale and chemical complexes manufactured in-house and raw mushrooms in
process. Inventory is recorded at the lower of cost (first-in, first-out) or
market.
(f) INTANGIBLES - Intangible assets consist of loan costs and goodwill
recorded at cost. Intangible assets are amortized using the straight-line method
over their respective estimated useful lives.
(g) REVENUE RECOGNITION - Revenues are recognized when products are
shipped.
(h) ADVERTISING - Advertising costs are charged to operations when
incurred.
(i) START-UP COSTS - The initial costs incurred to organize the Company's
subsidiary were expensed as incurred.
(j) RECLASSIFICATIONS - Certain reclassifications have been made to the
1998 financial information to conform to the 1999 presentation.
(k) NET INCOME (LOSS) PER COMMON SHARE - Net income (loss) per common share
is computed in accordance with the requirements of Statement of Financial
Accounting Standards No. 128 (SFAS 128). SFAS 128 requires net income (loss) per
share information to be computed using a simple weighted average of common
shares outstanding during the periods presented.
F-9
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(l) 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.
(2) COMMITMENTS:
The Company's noncancelable operating lease for office space expires October 31,
2001. The Company has a purchase option in which ten percent of the lease
payments may be applied to the purchase price. The future minimum lease payments
under all operating leases for the next five years are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ -----------
2000 28,996
2001 25,348
2002 7,108
2003 3,947
2004 -
-----------
Total $ 65,399
===========
Rent expense under the foregoing lease and all other operating leases was
$27,315 and $23,391 for 1999 and 1998, respectively.
1994 Employee Stock Option Plan
The Company adopted a nonqualified employee stock issuance plan to provide
incentives to employees. The Company has reserved 100,000 shares of voting
common stock under this Plan. 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 three year 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.
The Company reflects its obligation to repurchase the stock as a liability. Any
change in the valuation of this account is recorded as a gain or loss in the
accompanying statement of operations. The Company's repurchase obligation for
current employees is valued at 50% of the bid price of the stock on the balance
sheet date. The Company's repurchase obligation for stock held by former
employees is valued at 50% of the bid price on the date of the employee's
termination. The Company recorded a gain of $1,660 in 1999 from the expiration
of the repurchase obligation of 8,000 shares issued in 1994. There are no shares
subject to repurchase at December 31, 1999.
F-10
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(2) COMMITMENTS: (Continued)
1999 Incentive Stock Option Plan
The Company adopted a nonqualified employee stock option plan to provide
incentives to directors, employees and consultants. Up to 79,000 shares may be
issued under this plan. Options and condition of exercise are at the discretion
of the Board of Directors. The option price can be no less than fair market
value of the underlying stock on the date of award. On June 1, 1999, the Company
awarded an option to an employee for 20,000 shares under the plan. The
employee's vesting in the option is contingent on the Company fully completing
its current private placement of 650,000 shares of common stock (see Note 10).
The option will vest over three years; 6,000 after one year; an additional 6,000
after two years; and the remaining 8,000 after three years. The option price is
$.50 per share and the option expires the earlier of the employee leaving the
employ of the Company or five years. The option price is equal to private stock
sales of unregistered shares during 1999 which is deemed to be fair value.
Therefore, no compensation expense was recorded at issuance.
NSME Stock Bonus Plan
NSME adopted a stock bonus plan whereby an officer of NSME can receive NSME
common stock owned by the Company if certain financial targets are met. The
stock bonus plan terminates June 1, 2001 unless extended by both the officer and
NSME. The stock bonus is contingent on the Company fully completing its current
private placement offering as described in Note 10 and the officer being in the
employ of the Company for a minimum of two years and at the end of each calendar
year for which a stock bonus is due. The officer will be awarded 100 shares of
NSME stock owned by the Company for each $12,500 of net income earned by NSME,
in excess of net income required to repay intercompany loans due to the Company.
Up to 2,000 shares (20% of NSME outstanding stock) can be awarded per year and
the award is made annually for the prior year. There were no shares earned or
due under this plan at December 31, 1999.
The Company awarded 100,000 shares of common stock to its President in 1999.
These shares were not issued at December 31, 1999. The Company valued these
shares at $7,800, approximately 50% less than the bid price on the award date.
The Company has recorded an expense and a liability to issue common stock of
$7,800, at December 31, 1999.
(3) PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1999, consists of:
Land $ 80,000
Buildings and improvements 180,006
Machinery and equipment 112,794
Office furniture and equipment 42,372
------------
415,172
Less: accumulated depreciation 83,347
------------
Property and equipment, net $ 331,825
=============
F-11
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) CONCENTRATIONS OF CREDIT RISK:
Significant concentrations of credit risk for all financial instruments owned by
the Company, are as follows:
(a) DEMAND DEPOSITS - The Company has demand deposits in two local branch
banks which are insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 1999, the bank balance was $72,140. 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.
(5) MAJOR CUSTOMERS:
Sales to three customers in 1999 represented approximately 58% of total sales.
Of this, sales to the largest major customer was 28% of sales. Sales to two
customers in 1998 represented approximately 59% of total sales. Of this, sales
to the largest major customer was approximately 48% of sales.
(6) NOTES PAYABLE:
Long-term debt consists of the following:
Mortgage note payable to bank, payments of $1,782
due monthly including principal and interest
at 7.95%, collateralized by land and buildings
with a cost of $210,000 $ 183,598
Loan payable to individual, payments of $1,591 due
monthly including principal and interest at 8.5%,
collateralized by equipment with a cost of $35,000 26,797
-----------
210,395
Less current portion 23,920
-----------
Long - term debt, less current portion $ 186,475
===========
Maturities on long-term debt as of December 31, 1999 over the next five years
are as follows:
Year ending
December 31, Amount
2000 $23,920
2001 16,888
2002 8,199
2003 8,876
2004 9,607
=======
F-12
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The Company has a $25,000 unsecured line-of-credit with a local bank. The
monthly minimum payment is calculated based on the outstanding balance. The
interest rate is variable (11.50 % at December 31, 1999). The credit line can be
canceled and payment of the outstanding amount due can be required on demand by
the bank at any time.
(7) RELATED PARTY TRANSACTIONS:
The Company has the following notes receivables due from employees at December
31, 1999:
Mortgage receivable, payments of $1,263 due monthly
including principal and interest at 8%,
collateralized by a personal residence $ 24,512
Loan receivable, payments of $95 due weekly including
principal and interest at 8.5%, unsecured 6,691
Short-term loans, unsecured 4,786
---------
35,989
Less current portion 25,157
---------
Notes receivable, less current portion $ 10,832
=========
The majority shareholder advanced the Company $21,589 as a short term loan. The
balance is $19,950 at December 31, 1999. The Company is making payments of
$1,887 monthly including principal and interest at 8%. The advance is unsecured.
(8) 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,
1999:
CARRYING FAIR
AMOUNT VALUE
---------- ---------
FINANCIAL ASSETS
Cash and cash equivalents $ 73,425 $ 73,425
Accounts receivable 21,264 21,264
Notes Receivable 35,989 35,989
---------- ---------
Total financial assets $ 130,678 $ 130,678
========== =========
FINANCIAL LIABILITIES
Accounts payable and accrued expenses 58,766 58,766
Line of credit payable 3,294 3,294
Long-term debt 210,395 210,395
Due to shareholder 19,950 19,950
---------- ---------
Total financial liabilities $ 292,405 $ 292,405
========== =========
F-13
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The fair value of all financial instruments classified as current assets or
liabilities approximates carrying value due to the short-term maturity of the
instruments.
(9) INCOME TAXES:
The Company has available at December 31, 1999, unused operating loss
carryforwards totaling approximately $ 1,366,000 that may be applied against
future taxable income. If not used, the carryforwards will expire as follows:
Year Ending
December 31, Amount
----------------- -----------------
2009 $ 965,000
2010 195,000
2012 206,000
-----------------
Total $ 1,366,000
=================
The Company also has deductible temporary difference resulting from the
difference between financial and tax bases of inventory and stock issued for
services totaling approximately $75,000 at December 31, 1999.
If all of the operating loss carryforwards and temporary deductible differences
were used, the Company would realize a deferred tax asset of approximately $
314,000 based upon expected income tax rates. Under Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, the deferred tax
asset should be reduced by a valuation allowance if it is likely that all or a
portion of it will not be realized. Realization depends on generating sufficient
taxable income before the expiration of the loss carryforwards. Although
realization is not assured, management believes that approximately sixty percent
of the deferred tax asset will be realized based upon anticipated future
profitability. Therefore, the Company has established a valuation allowance of $
119,000 at December 31, 1999. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced. The Company recorded
income tax expense of $35,000 as a result of an increase in the valuation
allowance on the deferred tax asset less the tax benefit of temporary
differences at December 31, 1998. The Company recorded income tax expense of
$20,000 on its taxable income for 1999. The Company has previously recognized
the benefits of its net operating loss carryforward.
1999 1998
----------- ------------
Current income tax expense $ 31,000 $ -
Tax benefit of temporary differences - (21,500)
Effect of increase (decrease) in valuation
allowance (11,000) 56,500
----------- ------------
Total net tax expense $ 20,000 $ 35,000
=========== ============
F-14
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(10) PRIVATE PLACEMENT OF STOCK :
Beginning in 1999, the Company began offering a total of 650,000 shares of
common stock under a private placement memorandum to expire April 30, 2000. In
1999, 20,000 shares were sold for $15,000, less direct offering costs of $5,279.
In 1999, the Company also sold 70,000 of common stock for $35,000.
The Company expensed $71,347 of costs related to an unsuccessful private
placement memorandum in 1998. Included in these costs was $40,000 paid to a
financial consultant and $25,000, the value of 106,474 shares of common stock
issued to a financial consultant.
(11) WRITE DOWN OF INVENTORY TO NET REALIZABLE VALUE:
During 1998 the Company determined that its quantity of Garlessence inventory
was in excess of current requirements based on lower than expected product
sales. Accordingly, the Garlessence inventory was written down to its estimated
net realizable value, and $57,187 was charged to expense in 1998.
(12) STOCK REPURCHASE:
In April 1999, the Company repurchased 106,474 shares of its outstanding common
stock for $6,389. These shares will be canceled. The Company has no plans to
repurchase additional shares.
(13) SEGMENTS:
During 1999, the Company began farming mushrooms. The Company now operates two
business segments; Cyclodextrin products and mushroom products. Information on
these two segments follows:
Cyclodextrin Mushroom
Assets $ 91,177 $ 323,995
Revenues $565,379 $ 1,582
Income (loss) from operations $245,781 $(146,144)
Income (loss) from operations by segment include intercompany allocations of
administrative expenses.
<PAGE>
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART III.
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
<TABLE>
<S> <C> <C> <C>
Name Age Position Since
C.E. Rick Strattan 54 President/CEO, Director August, 1990
</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."
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms furnished to the Company
and written representation from certain reporting persons, the Company believes
that during the fiscal year ended December 31, 1999, all filing requirements
applicable to the Company's executive officers, directors and more than 10%
shareholders were complied with.
<PAGE>
Item 10. 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, 1997, 1998 and 1999 for each executive officer is set
forth in the following table:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE (three
fiscal years ended December 31, 1997, 1998 and 1999)
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 1999 $42,000 -0- -0- -0-
Chief Executive Officer, President 1998 $15,500 $10,000 -0- -0-
1997 $34,750 -0- -0- -0-
Lisa Stephens(1) 1999 -0- -0- -0- -0-
Chief Financial Officer 1998 $25,000 $ 500 -0- -0-
David L. Southworth(2) 1999 -0- -0- -0- -0-
Treasurer/Chief Financial Officer 1998 -0- -0- -0- -0-
1997 $15,686 -0- -0- -0-
</TABLE>
(1) Ms. Stephens resigned in 1999.
(2) On June 30, 1997, Mr. Southworth resigned from the Company as
Treasurer/Chief Financial Officer.
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.
Natural Spirit adopted a stock bonus plan whereby an officer of Natural
Spirit can receive Natural Spirit common stock owned by the Company if certain
financial targets are met. The stock bonus plan terminates June 1, 2001 unless
extended by both the officer and Natural Spirit. The stock bonus is contingent
on the Company fully completing its current private placement of 650,000 shares
of common stock and the officer being in the employ of the Company for a minimum
of two years and at the end of each calendar year for which a stock bonus is
due. The officer will be awarded 100 shares of Natural Spirit stock owned by the
Company for each $12,500 of net income earned by Natural Spirit, in excess of
net income required to repay intercompany loans due to the Company. Up to 2,000
shares (20% of Natural Spirit: outstanding stock) can be awarded per year and
the award is made annually for the prior year. There were no shares earned or
due at December 31, 1999.
Performance-Based Stock Compensation
On January 28, 1999, the Board of Directors authorized a bonus of $10,000
and 250,000 common shares to Mr. Strattan and 1,500 shares to Lisa Stephens for
their work in 1998. The Company believes Ms. Stephens shares were issued in
error.
On April 5, 1999, the Board of Directors approved the repurchase of 106,474
common shares from Burckhardt and Company for a total consideration of
$6,388.44.
On November 3, 1999, the Board of Directors authorized a bonus of 100,000
common shares to C.E. Rick Strattan in consideration of his work in 1999. These
shares were issued in 2000.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table shows the ownership of the Common Stock of the Company
on March 29, 1999, by each person who, to the knowledge of the Company, owned
beneficially more than five (5%) of such stock, the ownership of each director,
and the ownership of all directors and officers as a group. Unless otherwise
noted, shares are subject to the sole voting and investment power of the
indicated person.
Names and Address of Individual or .........Amount and Nature of Approximate %
Identity of Group ..........................Beneficial Ownership of Class
C.E. Rick Strattan(1)....................... 850,000 50.37%
4123 N.W. 46th Avenue
Gainesville, FL 32606
All Officers and Directors as a group ...... 850,000 50.37%
(1) 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. Mr.
Strattan is the President/CEO and Director of the Company.
Item 12. Certain Relationships and Related Transactions.
On March 10, 1998, the Company adopted a resolution whereby 10,000 shares
of the Company's common stock, issued in the name of Gregory V. DeLong, be
returned to the Company's treasury stock as authorized but unissued shares,
pursuant to a Stock Power retained by the Company.
On August 10, 1998, the Company purchased 10,000 shares of common stock
from Atlanta Syndication Network, Inc. for $5,000. The shares were originally
issued in April 1997. The shares were canceled after the Company bought them.
On November 24, 1998, the Company issued 106,474 shares to Burckhardt and
Co. for its services performed in 1998.
On January 28, 1999, the Board of Directors authorized a bonus of $10,000
and 250,000 common shares to Mr. Strattan and 1,500 shares to Lisa Stephens for
their work in 1998.
On April 5, 1999, the Board of Directors approved the repurchase of 106,474
common shares from Burckhardt and Company for a total consideration of
$6,388.44.
On November 3, 1999, the Board of Directors authorized a bonus of 100,000
common shares to C.E. Rick Strattan in consideration of his work in 1999. These
shares were issued in 2000.
On June 1, 1999, Natural Spirit entered into an employment agreement with
John Lindsay. Under the terms of the agreement, Mr. Lindsay will be able to
purchase 79% of the shares of Natural Spirit if a certain net annual profit is
obtained each year while he is still employed as President ( 1% of the shares of
Natural Spirit for every $12,500 in net profit). According to the schedule upon
which Mr. Lindsay's share rights may vest, CTD may lose control of Natural
Spirit within four years of its creation. Mr. Lindsay will also receive a salary
of $1,000 per month. On October 1, 1999, Mr. Lindsay's salary increased to
$2,000 per month. His salary will be $3,000 per month through the year 2,000 and
then increase to $4,000 the following year. Mr. Lindsay and Mr. Strattan are the
sole directors of Natural Spirit. CTD has certain buy-out rights with regard to
a possible spin-off of Natural Spirit. Neither John Lindsay nor Mr. Strattan
will receive compensation for their positions as directors of Natural Spirit.
On March 13, 2000, CTD entered into an agreement with Randy "Lazarus"
McAtee d/b/a "Small Potatoes" to provide financial public relatiosn serices for
CTD for one year. CTD has compensated Mr. McAtee by the transfer of 100,000
restricted shares.
<PAGE>
PART IV.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits Page
(1) Reports of Independent Certified Accountants F-1
(2) Financial Statements F-2
Exhibits required by Item 601, Regulation S-B:
(3) Articles of incorporation and by-laws
(a) Articles of Incorporation filed August 9, 1990 * None
(b) By-Laws. * None
(c) Certificates of Amendment to the Articles of
Incorporation filed November 18, 1993 and
September 24, 1993. * None
(4) Instruments defining the rights of security
holders, including indentures
(a) Specimen Share Certificate for Common Stock. * None
(9) Voting Trust Agreement None
(10) Material Contracts
(10.1) Agreement of Shareholders dated November 11, 1993
by and among C.E. Rick Strattan, Garrison Enterprises,
Inc. and the Company. * None
(10.2) Lease Agreement dated July 7, 1994**. None
(10.3) Consulting Agreement dated July 29, 1994 between
the Company and Yellen Associates. * None
(10.4) License Agreement dated December 20, 1994 between
the Company and Herbe Wirkstoffe GmbH. * None
(10.5) 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.** None
(10.6) Extension of Agreement between the Company and Herbe
Wirkstoffe GmbH.*** None
(10.7) Lease Extension
(10.8) Loan Agreement with John Lindsay
(10.9) Small Potatoes Contract
(11) Statement re: Computation of Per Share Earnings Note 1 to
Financial
Statements
(16) Letter on changes in certifying accountant*** None
(18) Letter on change in accounting principles None
(22) Subsidiaries of Registrant None
(23) Published Report re: Matters Submitted to Vote of
Security Holders None
(24) Consents of Experts and Counsel None
(25) Power of Attorney None
(27) Financial Data Schedule
(28) Additional Exhibits None
(29) Information from reports furnished to state insurance
regulatory authorities None
(b) Reports on Form 8-K:
No Form 8-K was filed for the quarter ended December 31, 1999.
* Incorporated by reference to the Company's Form 10-SB filed with the
Securities and Exchange Commission on February 1, 1994.
** Incorporated by reference to the Company's Form 10-KSB filed with the
Securities and Exchange Commission on March 29, 1997.
*** Incorporated by reference to the Company's Form 10-KSB filed with the
Securities and Exchange Commission on March 28, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
(Registrant) CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
/S/ C.E. Rick Strattan
By (Signature and Title) _______________________________________
C.E. RICK STRATTAN, President,
Chief Executive Officer, Chief
Operating Officer and
Director
Date: March 30, 1999
October 8, l999
C.E. "Rick" Strattan
Cyclodextrin Technologies Development Inc.
3713-3 SW 42nd Avenue
Gainesville, FL 32608
Dear Mr. Strattan:
You may extend your lease for the above premises for two additional years at the
current rate of $21,888 per year, beginning November 1, l999. This extension
includes the purchase option.
If you agree, please sign below.
Sincerely,
/s/ Lowell D. Chesborough 10/7/99
- - --------------------------------- -------------------
Lowell D. Chesborough
General Partner
The Activity Center, Ltd.
I Agree,
/s/ C.E. Rick Strattan 10/7/99
- - --------------------------------- ------------------
C.E. "Rick" Strattan
Individually and as President, CTD, Inc.
[Natural Spirit Logo]
Natural Spirit Mushroom Enterprise Inc.,
27327 NW 78th Avenue
High Springs, FL 32643
Loan Agreement between NSME & Mr. John Lindsay, President
NSME agrees to loan its President, John Lindsay, $8000 at an annual interest
rate of 8% to be paid back on or before May 31, 2001, under the following terms:
(l) The payments will be deducted from Mr. Lindsay's pay
(2) These funds are to be used exclusively for the resolution of
Mr. Lindsay's legal problems; Specifically, financial
restitution and community service requirements. Each use will
be documented by receipts. Copies of these receipts will be
provided to the NSME Board of Directors.
(3) Any breach of or failure to adhere to these terms will result
in the automatic and immediate removal of Mr. Lindsay from
NSME's Board of Directors and the balance to the loan will
become immediately due and payable.
By my signature affixed below, I acknowledge that I have read and understood the
above and agree to be so bound.
/s/ John S. Lindsay
---------------------------------
John S. Lindsay
President
NSME, Inc.
8/14/99
-----------------
Date
PUBLIC RELATIONS SERVICES AGREEMENT
THIS AGREEMENT is made and entered into this 1st day of March,
2000, by and between RANDY "LAZARUS" McATEE d/b/a "SMALL POTATOES" (hereinafter
referred to as "Lazarus") and CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
(hereinafter referred to as "Client").
RECITALS:
A. Lazarus offers a variety of Internet and e-mail public
relations services designed to educate and inform individuals
and/or companies about Client's business and the investment
opportunity represented by an investment in Client's publicly
traded stock.
B. Client is a corporation with publicly traded stock.
C. Client desires to engage Lazarus for the purpose of having
Lazarus perform Internet and/or e-mail public relation
services to the end that individuals and companies become more
knowledgeable about Client, Client's business and the
opportunity presented by an investment in Client's publicly
traded stock.
NOW, THEREFORE, the parties agree as follows:
1. Client hereby engages Lazarus and Lazarus accepts such engagement
for the purpose of rendering Internet and/or e-mail public relations services as
described herein.
2. Lazarus is the web host of the "small potatoes" website
(www.smallpotatoes.net) and agrees to post information concerning Client,
Client's business and Client's publicly traded stock on the "Small Potatoes"
website. Lazarus further agrees to distribute a business profile of Client and
other business information concerning Client to individuals and companies
through and by way of an e-mail newsletter periodically published and
transmitted by Lazarus. Without limiting the generality of the foregoing,
Lazarus agrees to make a good faith effort to increase public awareness of
Client, Client's business and Client's stock by distributing accurate and
updated information by way of the "Small Potatoes" website and Lazarus's e-mail
newsletter.
3. Client agrees to provide Lazarus with accurate and timely
information concerning Client, Client's business and Client's stock. Client
acknowledges and is aware that Lazarus will rely upon the accuracy and
timeliness of all information provided to Lazarus by Client. Client agrees and
warrants that all information provided to Lazarus will be accurate in all
respects and will not in any way, directly or indirectly be misleading. Client
agrees and understands that any and all information provided to Lazarus may
become public information. Lazarus agrees that the Client's information posted
on his web site will be subject to the Client's attorney's review for purposes
of compliance with State and Federal Securities Laws and regulations and that if
Lazarus receives notice from the Client that any part of the posted information
is in violation of a law or regulation, that he will modify or remove that
information within one day of notification. Lazarus agrees to post with the
Client's information, a list of states in which viewers of the information may
not purchase securities of the Client.
4. Lazarus shall be compensated by Client as follows: On or before
March 16, 2000, Lazarus shall receive One Hundred Thousand (100,000) shares of
restricted stock of Client.
5. The term of this Agreement shall be twelve (12) calendar months
commencing March 13, 2000, and ending March 13, 2001. Lazarus shall perform the
services set forth in paragraph 2 above during the term of this Agreement and
only during the term of this Agreement. At the end of the term of this
Agreement, Lazarus shall remove all references to Client from the "Small
Potatoes" website. The Client may terminate this Agreement at any earlier time
upon written notice to Lazarus.
6. Client understands that this is a "best efforts" agreement and that
Lazarus makes no guarantee of any kind to Client. Client understands that
Lazarus is responsible for taking information provided by Lazarus by Client and
utilizing that portion of such information as Lazarus, in Lazarus's sole
discretion, may deem suitable for publication on the "Small Potatoes" website
and/or on Lazarus's e-mail newsletter. Client understands that Lazarus makes no
guarantees and/or recommendations to prospective investors in Client's stock,
that Lazarus does disclose and will disclose all compensation to be received by
Lazarus pursuant to this Agreement, that Lazarus will disclose that Lazarus is a
shareholder of Client and that Lazarus will make a best efforts and good faith
effort to increase public awareness of Client, Client's business and Client's
stock. Client further understands and acknowledges that Lazarus does not receive
payment from individuals viewing the "Small Potatoes" website nor does Lazarus
charge for Lazarus's e-mail newsletter. Lazarus agrees that he will comply with
all applicable federal, state and local regulations regarding the publication of
information on his website.
7. This Agreement shall be interpreted pursuant to the Laws of the
State of California. Should a dispute arise between the parties to this
Agreement, the parties hereto specifically acknowledge that jurisdiction shall
lie within the State of California and exclusive venue for any lawsuit shall lie
within Alachua County, Florida. In the event an action is brought for the
purpose of enforcing and/or interpreting this Agreement, the prevailing party in
any such action shall be entitled to such reasonable attorneys' fees and/or
court costs as the court hearing such action may award.
8. Notwithstanding any other provision of this Agreement, Client hereby
unconditionally guarantees the accuracy of any and all information provided to
Lazarus by Client. Client further acknowledges that any and all information
given to Lazarus pursuant to this Agreement is given to Lazarus with the
understanding that such information may be disclosed to the public information.
Client, therefore, agrees to give Lazarus any confidential insider information
not otherwise available or to be made immediately available to the public.
9. The person signing this Agreement on behalf of Client hereby
acknowledges that (s)he is authorized by Client to bind Client to this
Agreement.
10. The content of the "Small Potatoes" website is determined in the
sole discretion of Lazarus, excepting those provisions discussed above and
required by law. Client understands that mistakes or errors may occur and that
Lazarus agrees to utilize Lazarus's best efforts to correct any and all mistakes
when discovered. Lazarus, in the sole discretion of Lazarus, shall control the
timing within which the "Small Potatoes" website is updated and the timing of
releasing any and all e-mail newsletters. The parties hereto agree that nothing
in this Agreement will require Lazarus to divulge Lazarus's methods of
disseminating information and/or any trade secrets or mailing lists maintained
by Lazarus.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement on the date and year first above written.
LAZARUS: CLIENT:
/s/ Randy McAtee
_______________________________ CYCLODEXTRIN TECHNOLOGIES
RANDY "LAZARUS" McATEE DEVELOPMENT, INC.
d/b/a "Small Potatoes"
/s/C.E. Rick Strattan
By:______________________________
President
Title:_____________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Financial Statements for the 12 months ended December 31, 1999, and is
qualified in its entirety by reference to such form 10KSB for annual period
ended December 31, 1999.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-START> JAN-01-1999
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 73,425
<SECURITIES> 0
<RECEIVABLES> 21,264
<ALLOWANCES> 0
<INVENTORY> 85,249
<CURRENT-ASSETS> 226,116
<PP&E> 415,172
<DEPRECIATION> (83,347)
<TOTAL-ASSETS> 766,745
<CURRENT-LIABILITIES> 105,930
<BONDS> 0
<COMMON> 158
0
0
<OTHER-SE> 466,382
<TOTAL-LIABILITY-AND-EQUITY> 766,745
<SALES> 557,495
<TOTAL-REVENUES> 566,961
<CGS> 74,832
<TOTAL-COSTS> 74,832
<OTHER-EXPENSES> 391,624
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,098
<INCOME-PRETAX> 89,407
<INCOME-TAX> 20,000
<INCOME-CONTINUING> 69,407
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,407
<EPS-BASIC> .05
<EPS-DILUTED> .05
</TABLE>
