-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QIJlkXyC31eJh+cx6u2tUQmT0ll1wrMn+p6ayQ7OHEl6zoC+fQzfWFUEvPwyndIW DhV2raWRo9dI3IsNhVzUwg== 0000922247-96-000005.txt : 19960701 0000922247-96-000005.hdr.sgml : 19960701 ACCESSION NUMBER: 0000922247-96-000005 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960628 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT INC CENTRAL INDEX KEY: 0000922247 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 593029743 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-01000 FILM NUMBER: 96588476 BUSINESS ADDRESS: STREET 1: 3713 SW 42ND AVE STREET 2: STE 3 CITY: GAINESVILLE STATE: FL ZIP: 32608-6581 BUSINESS PHONE: 3523756822 SB-2/A 1 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] CALCULATION OF REGISTRATION FEE
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 offering fee price 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 Estimated solely for the purpose of determining the registration fee. Based on the average bid and asked price for the Voting Common Shares of the Registrant on January 25, 1996.
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. 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 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.
Price to Underwriting Proceeds Public Discounts and Commissions to Issuer Per Unit $2,500 $-0- $2,500 Total $1,250,000 $-0- $1,250,000 Before deducting estimated expenses of $53,000.
The date of this Prospectus is June __, 1996. 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. 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 1,100,100 Shares of Common Stock Outstanding After the Completion of the Offering 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) Assumes all Units offered are purchased. 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.
Income (Loss) For the Year Ended December 31, Statement Data: 1995 1994 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
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:
Assuming the Assuming the sale of sale of 500 Units 250 Units 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 .16 .16 Increase per share attributable to payment for shares purchased by new investors .85 .45 Pro Forma net tangible book value after offering 1.01 .61 Dilution per share to new investors 3.99 4.39 "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). 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. Does not include the effects of any options, stock appreciation rights or warrants. (See "Description of the Securities.")
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.
If 500 Sold, Assuming Price of $2,500/Unit Shares Purchased Total Consideration Number Percent Number Percent 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%
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.
Development Priority CD's Product Description/Name Regulatory Burden 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 0-5, with 5 being greatest burden
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:
Amount Scientist Activity $10,000 Dr. James Simpkins Extravasation Study $12,000 Dr. Alistair Webb Benzocaine complex
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:
Product Description/Name Proposed Market Entry 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
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
High Low 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
Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions. MANAGEMENT
Name Age Position Since C.E. Rick Strattan 50 President/CEO, Director August, 1990 David L. Southworth 48 Treasurer/CFO May, 1995
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: SUMMARY COMPENSATION TABLE (three fiscal years ended December 31, 1993, 1994 and 1995)
Annual Long Term Compensation Compensation ------------------------------------ ------------- Other All Annual Other Name and Principal Position Year Salary Bonus Compensation Compensation 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 Vice President 1994 $18,750 -0- -0- -0- David L. Southworth 1995 $27,550 -0- -0- $2,500 Treasurer/Chief Financial Officer On May 1, 1995, Mr. Herschleb left CTD due to ill health and the Company repurchased his shares for $2.50 per share. 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.
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.
NAMES AND ADDRESS OF INDIVIDUAL AMOUNT AND NATURE OF OR IDENTITY OF GROUP BENEFICIAL OWNERSHIP APPROXIMATE % OF CLASS C.E. Rick Strattan 4123 N.W. 46th Avenue Gainesville, FL 32606 515,800 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% 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. Includes 15,800 issuable to Mr. Strattan pursuant to employee stock purchase plan.
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. 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 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 CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC. BALANCE SHEETS
March 31, December 31, 1996 1995 (Unaudited) ASSETS 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
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC. STATEMENTS OF OPERATIONS
Three Months Years Ended Ended March 31, December 31, 1996 1995 1995 1994 (Unaudited) (Unaudited) 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
The accompanying notes to financial statements are an integral part of these statements. F-3 CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC. STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Issued Total Additional Issued for Retained Stock- Common Stock Paid-in Future Earnings holders' Shares Amount Capital Services (Deficit) Equity 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
The accompanying notes to financial statements are an integral part of this statement. F-4 CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC. STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents
Nine Months Years Ended Ended March 31, December 31, 1996 1995 1995 1994 (Unaudited) (Unaudited) 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
The accompanying notes to financial statements are an integral part of these statements. F-5 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:
Year Ending December 31, Amount 1996 $ 1,575 1997 20,014 1998 21,018 1999 18,240 2000 - Total $60,847
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:
Three Months Years Ended Ended March 31, December 31, 1996 1995 1994 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
Common stock subject to repurchase are redeemable by the holder as follows:
Year Ending Shares Amount 1996 - $ - 1997 15,000 3,750 1998 10,000 2,500 25,000 $ 6,250
(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. 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
(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:
Carrying Fair Amount Value 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
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. 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 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:
Item Amount Payable by Company SEC Registration Fee $ 191 Printing and Engraving 3,000 Legal Fees and Expenses 30,000 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 Paid by transfer of 20,000 restricted common shares valued at market value as of January 25, 1996.
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:
Purchaser Date of Issue Number of Shares Consideration C.E. Rick Strattan 10-01-90 500,000 $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) Reflects 1,000 for 1 stock split; originally issued as 500 shares for a consideration of $1.00 per share
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. (b) By-Laws. (c) Certificates of Amendment to the Articles of Incorporation filed November 18, 1993 and September 24, 1993. (4) Instruments defining the rights of security holders, including indentures (a) Specimen Share Certificate for Common Stock. (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. (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. (d) License Agreement dated December 20, 1994 between the Company and Herbe Wirkstoffe GmbH. (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 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 EX-5 2 LEGAL OPINION AND CONSENT 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. EX-25 3 ACCOUNTANTS' CONSENT 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 EX-27 4 ARTICLE 5 FDS
5 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. 1 3-MOS Dec-31-1995 Mar-31-1996 8,449 0 10,300 0 76,469 108,535 73,328 28,722 247,071 40,040 0 108 0 0 1,586,940 247,071 30,776 30,776 4,526 100,606 5,744 0 0 (79,494) 0 (79,494) 0 0 0 (79,494) (0.07) (0.07)
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