SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
__X__ Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934 for the Quarterly Period Ended: March 31, 2002.
____ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Transition Period From ____ to ____
Commission file number: 0-24930
CTD HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Florida 59-3029743
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
27317 N.W. 78th Avenue, High Springs, Florida 32643
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 386-454-0887
Former name, former address and former fiscal year, if changed since last
report: N/A.
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. No.
Applicable only to corporate issuers
As of May 1, 2002, the Company had outstanding 4,791,220 shares of its
common stock.
Transitional Small Business Disclosure Format (Check One):
No.
PART I: Financial Information
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
March 31, 2002
--------------
CURRENT ASSETS
Cash and cash equivalents $ 43,457
Accounts receivable 79,547
Inventory 29,224
Note receivable 7,974
--------
Total current assets 160,202
PROPERTY AND EQUIPMENT, NET 337,749
OTHER ASSETS
Intangibles, net 3,439
--------
TOTAL ASSETS $ 501,390
=========
(Continued)
F-1
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Concluded)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 2002
--------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 119,659
Current portion of long-term debt 8,199
Line of credit 19,142
---------
Total current liabilities $ 147,000
---------
LONG-TERM LIABILITIES
Long-term debt, less current portion 159,398
Stockholder loan 110,680
----------
Total long-term liabilities $ 270,078
----------
STOCKHOLDERS' EQUITY
Class A common stock, par value $ .0001 per share, 9,900,000 shares authorized,
4,791,220 shares
issued and outstanding 480
Class B non-voting common stock, par value $.0001 per share, 10,000,000 shares
authorized, 0 shares
issued and outstanding -
Additional paid-in capital 1,954,498
Accumulated deficit (1,870,666)
-----------
Total stockholders' equity 84,312
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 501,390
===========
See Accompanying Notes to Financial Statements.
F-2
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
-----------------------------
2002 2001
-------------- ------------
PRODUCT SALES $ 195,849 $ 88,040
COST OF PRODUCTS SOLD 35,091 11,694
----------- ---------
GROSS PROFIT 160,758 76,346
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 63,416 74,678
----------- ---------
INCOME FROM OPERATIONS 97,342 1,668
----------- ---------
OTHER INCOME (EXPENSE)
Investment and other income 375 2,353
Interest expense (8,434) (14,148)
Loss on disposal of equipment (35,678) -
----------- ---------
Total other income (expense) (43,737) (11,795)
----------- ---------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS 53,605 (10,127)
LOSS FROM DISCONTINUED OPERATIONS - (17,531)
----------- ---------
NET INCOME (LOSS) 53,605 (27,658)
=========== =========
NET INCOME (LOSS) PER COMMON SHARE
From continuing operations (.01) -
From discontinued operations - (.01)
----------- ----------
Net income (loss) per common share (.01) (.01)
=========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,791,220 3,991,220
========== ==========
See Accompanying Notes to Financial Statements.
F-3
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Three Months Ended
March 31,
--------------------------
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 53,605 $ (27,658)
------------ ------------
Adjustments to reconcile net income (loss) to net cash provided by (used for)
operating activities:
Loss on disposal of equipment 35,678 -
Depreciation and amortization 6,189 8,711
(Increase)in accounts receivable (53,787) (33,347)
Decrease in inventory 2,741 5,374
Decrease in other current assets 1,305 6,670
Increase (decrease) in accounts payable and
accrued expenses (32,731) 19,449
----------- -----------
Total adjustments (40,605) 6,857
---------- ------------
NET CASH PROVIDED BY (USED FOR) OPERATING
ACTIVITIES 13,000 (20,801)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (2,820) -
Repayment of note receivable 2,482 2,463
Proceeds from sale of equipment 10,300 -
---------- ----------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 9,962 2,463
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on line-of-credit (489) (2,031)
Payment on notes payable (1,991) (6,697)
Proceeds from stockholder loan 14,785 21,628
------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 12,305 12,900
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 35,267 (5,438)
CASH AND CASH EQUIVALENTS, beginning of period 8,190 16,690
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 43,457 $ 11,252
============ ============
(Continued)
F-4
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(Concluded)
Three Months Ended
March 31,
--------------------------
2002 2001
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 5,391 $ 7,638
============ ============
See Accompanying Notes to Financial Statements.
F-5
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
The information presented herein as of March 31, 2002, and for the three months
ended March 31, 2002 and 2001, is unaudited.
(1) BASIS OF PRESENTATION:
The accompanying financial statements include CTD Holdings, Inc. and its
subsidiaries.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Rule 10-01 of Regulations S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal required
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 2002, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2002. For further information, refer to the financial statements
and footnotes thereto included in the Company's annual report of Form 10-KSB for
the year ended December 31, 2001.
(2) GOING CONCERN:
The Company incurred a net loss for the years ended December 31, 2001 and 2000,
and as of December 31, 2001, the Company's current liabilities exceeded its
current assets by $102,544. Those factors, create an uncertainty about the
Company's ability to continue as a going concern. Management of the Company is
reducing expenses and attempting to increase revenues to return the Company to a
profitable position. Additionally, management is working with creditors to work
out agreeable payment plans, until the cash flow position improves. The ability
of the Company to continue as a going concern is dependent on the Company
achieving these plans. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
(3) NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common share is computed in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 (SFAS 128).
SFAS 128 requires net income (loss) per share information to be computed using a
simple weighted average of common shares outstanding during the periods
presented. SFAS 128 eliminated the previous requirement that earnings per share
include the effect of any dilutive common stock equivalents in the calculation.
F-6
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
(UNAUDITED)
(4) DISCONTINUATION OF MUSHROOM FARMING OPERATIONS:
During the first quarter of 2001, the Company discontinued its mushroom growing
operation. In accordance with Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," the Company reviewed the long-lived assets related to
the mushroom farming operation to determine if the carrying value of the assets
may not be recoverable. When an impairment is identified, the Company recognizes
a loss for the difference between the carrying amount and the estimated value of
the asset. The fair values of the assets evaluated were based on an estimate of
discounted cash flow analysis or recent sales information of similar assets.
During 2001, the Company determined there was an impairment in the carrying
value of goodwill and other intangible assets related to the mushroom farming
operations. Therefore, the Company recorded a write-down of $20,113, which
reduced the carrying value to zero at December 31, 2001.
(5) INCOME TAXES
The Company recorded no income tax expense for the three months ended March 31,
2002 due to the availability of a net operating loss carry forward.
F-7
Item 2. Management's Discussion and Analysis or Plan of Operation
Management Discussion and Analysis
Liquidity and Capital Resources
As of March 31, 2002, the Company's working capital was $13,202 compared to
($201,105) a year ago and ($102,544) at December 31, 2001. Working capital
continued to improve and became positive this quarter because of continuing
strong sales resulting in profitability in the face of tight expense controls.
By maintaining stringent expense reduction policies and concentrating on sales
of cyclodextrins by CTDI, management expects liquidity to continue to improve
with profitability.
In keeping with its commitment to use the internet as its major advertising and
public relations outlet, the Company has entered into an agreement with its
current, local ISP and web site managing Company, Livewire, to significantly
upgrade its current web site, which is expected to cost $4,000. By increasing
its catalog of CD products from 64 items to 154 items and improving access to
its databases, the Company expects to strengthen its leadership position in the
expanding CD Industry.
Results of Operations
Sales of Cyclodextrin and related manufactured complexes are historically highly
volatile. In efforts to offset this volatility, the Company continues to expand
its revenue producing activities in CD related research and development services
for unrelated companies and expand its line of manufactured products. Product
sales of CTD are primarily to large pharmaceutical and food companies for
research and development purposes.
During 2001, the Company discontinued its mushroom farming operations, greatly
reducing its overhead and operation expenses. The Company also relocated from a
leased facility to its own building, further reducing expenses.
The Company expects to continue to reduce its dependency on a few major
customers by expanding its product line and capitalizing on the exposure from
its website and general growth in the CD market. For the first quarter of 2002,
five customers represented 86% of sales. For the year ended December 31, 2001,
three customers represented 63% of total sales in 2001. This diversification in
customers will continue to stabilize the Company's revenue.
Total product sales for the first quarter of 2002 were $195,849, an increase of
122% from 2001 sales of $88,040 for the same period. This change is due in part
to the normal volatility of the Company's sales, and in part to market reaction
to new FDA approvals of food and pharmaceutical products containing CD's.
8
The Company's gross profit margin of 82% for the first quarter of 2002 is
comparable to the 87% effort for the same period in 2001. The Company expects
its gross profit margin in 2002 to remain consistent.
The Company's SG&A expenses decreased to $63,416 in the first quarter of 2002
from $74,978 in the same period of 2001. With the greatly reduced expenses
maintained in 2001, management has improved the financial condition for the
Company to begin 2002. Management will continue to hold expenses to a minimum in
2002. With expenses in check, management has positioned itself to maintain
profitability even if the expected summer slow-down in CD sales occurs. However,
the Company to date has seen no signs of such a slow-down.
The Company incurred a $35,678 loss from the sale of certain laboratory
equipment during the first quarter of 2002. In addition to generating cash for
the Company, the sale of this equipment will further reduce maintenance and
depreciation expense associated with the sold equipment.
The Company and its subsidiaries will continue to introduce new products that
will enhance profitability and continue to implement its strategy of creating or
acquiring operational affiliates and/or additional subsidiaries that will use
CD's in herbal medicines, waste-water remediation, pharmaceuticals, and foods.
The Company also intends to pursue exclusive relationships with major CD
manufacturer(s) and specialty CD labs to distribute their products.
In keeping with its commitment to utilize the full power of the Internet as a
major advertising and public relations outlet, the Company is allocating
approximately $4000 more to improve its Web Site further in the second quarter
of 2002. The Web Site continues to reinforce CTD's role as the best-known CD
technology provider in the world.
Forward-looking Statements
All statements other than statements of historical fact in this report are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995, and are based on management's current expectations of the
Company's near term results, based on current information available and
pertaining to the Company. The Company assumes no obligation to update publicly
any forward-looking statements. Actual results may differ materially from those
projected in the forward-looking statements. These forward-looking statements
involve risks and uncertainties, including, but not limited to, the following:
demand for Cyclodextrin and mushrooms; changes in governmental laws and
regulations surrounding various matters, such as labeling disclosures; delays in
the development, production, testing and marketing of products; product margins
and customer product acceptance
9
Item 6. Exhibits and Reports on Form 8-K
None.
(a) Exhibits
Exhibit Description Page
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession None
(4) Instruments defining the Rights of Security Holders None
(10) Material Contracts None
(11) Statement re: Computation of Per Share Earnings Note 3,
Financial
Statements
(15) Letter re: Unaudited Interim Financial Information None
(18) Letter re: Change in Accounting Principles None
(19) Report Furnished to Security Holders None
(22) Published Report re: Matters Submitted to Vote of
Security Holders None
(23) Consents of Experts and Counsel None
(24) Power of Attorney None
(27) Financial Data Schedule
(99) Additional Exhibits None
(b) Reports on Form 8-K:
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CTD HOLDINGS, INC.
DATE
/s/ C.E. "Rick" Strattan
----------------------------- May 2, 2002
C.E. Rick Strattan, President
Chief Executive Officer,
Chief Operating Officer and
Chief Financial Officer