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: September 30, 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: 000-25466
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: 3713 SW 42nd Avenue, Gainesville, Florida, 32608
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 befiled
by Section 12, 13 or 15 (d) of the Exchange Act after the distribution
ofsecurities under a plan confirmed by a court. No.
Applicable only to corporate issuers
As of November 12, 2002, the Company had 4,791,220 outstanding shares of its
common stock.
Transitional Small Business Disclosure Format
(Check One):
No.
PART I: Financial Information
CTD HOLDINGS INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30, 2002
--------------
CURRENT ASSETS
Cash and cash equivalents $ 76,660
Accounts receivable 49,152
Inventory 74,176
Notes receivable 7,919
------------
Total current assets 207,907
PROPERTY AND EQUIPMENT, net 341,123
OTHER ASSETS
Intangibles, net 3,369
------------
TOTAL ASSETS $ 552,399
============
(continued)
F-1
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30,
2002
------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 63,848
Current portion of long-term debt 8,199
-------------
Total current liabilities 72,047
LONG-TERM LIABILITIES
Long-term debt, less current portion 154,601
Stockholder loan 100,284
-------------
Total long-term liabilities 254,885
-------------
STOCKHOLDERS' EQUITY
Class A common stock, par value $ .0001 per share,
100,000,000 shares authorized, 4,791,220 shares issued
and outstanding; Class B non-voting common stock, par
value $ .0001 per share, 10,000,000 shares authorized,
0 shares issued and outstanding 480
Additional paid-in capital 1,954,498
Accumulated deficit (1,729,511)
--------------
Total stockholders' equity 225,467
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 552,399
==============
See Accompanying Notes to Financial Statements
F-2
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
PRODUCT SALES $ 136,711 $ 61,262 $ 463,555 $ 234,043
COST OF PRODUCTS SOLD 10,131 4,899 71,018 22,788
---------- ---------- ---------- ----------
GROSS PROFIT 126,580 56,363 392,537 211,255
SELLING, GENERAL AND 48,151 74,892 168,325 213,575
ADMINISTRATIVE EXPENSE
---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 78,429 (18,529) 224,212 (2,320)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest expense (4,728) (3,771) (20,039) (25,454)
Gain (loss) on disposal
of equipment 1,578 - (24,100) -
Other 13,205 572 14,688 3,376
---------- ---------- ---------- ----------
Total other income (expense) 10,055 (3,199) (29,451) (22,078)
----------- ---------- ---------- ----------
Net income (loss) from continuing
operations - (21,728) 194,761 (24,398)
Loss from discontinued operations - (11,072) - (35,974)
Impairment allowance on assets of
discontinued operations - (20,113) - (20,113)
----------- ---------- ---------- ---------
NET INCOME (LOSS) $ 88,484 $(52,913) $ 194,761 $ (80,485)
=========== ========== ========== ==========
NET INCOME (LOSS) PER COMMON SHARE
From continuing operations $ 02 $ (.01) $ .04 $ (.01)
From discontinued operations $ - $ (.01) $ - $ (.01)
----------- ---------- ---------- ----------
Total income (loss) per share $ .02 $ (.02) $ .04 $ (.02)
=========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,791,220 4,753,720 4,791,220 4,272,239
=========== ========== ========== ==========
See Accompanying Notes to Financial Statements
F-3
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Nine Months Ended
September 30,
--------------------------
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 194,761 $ (80,485)
------------ ------------
Adjustments to reconcile net income (loss) to
net cash provided by (used in)operating activities:
Depreciation and amortization 17,943 38,036
Loss on disposal of equipment 24,100 -
Stock issued for services - 56,077
Increase in accounts receivable (23,392) (11,281)
Decrease (increase) in inventory (42,211) 9,137
Decrease in other current assets 1,305 4,286
Decrease in accounts payable
and accrued expenses (88,542) (44,951)
------------ ------------
Total adjustments (110,797) 51,304
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 83,964 (29,181)
CASH FLOWS FROM INVESTING ACTIVITIES ------------ ------------
Purchase of property and equipment (17,878) (3,595)
Repayment of employee loan 2,537 7,358
------------ -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (15,341) 3,763
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (6,788) (15,718)
Net payments on line-of-credit (19,631) (4,772)
Net proceeds from stockholder loan 4,389 34,162
Proceeds from sale of equipment 21,877 -
------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (153) 13,672
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 68,470 (11,746)
CASH AND CASH EQUIVALENTS, beginning of period 8,190 16,690
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 76,660 $ 4,944
============ ============
(Continued)
F-4
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Nine Months Ended
September 30,
--------------------------
2002 2001
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 20,039 25,454
============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Stock issued to officer for compensation $ - $ 56,077
========== ============
See Accompanying Notes to Financial Statements
F-5
CTD HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
The information presented herein as of September 30, 2002, and for the three and
nine months ended September 30, 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 recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 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) 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 "Earnings
Per Share" (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.
(3) 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 September 30, 2001.
(4) INCOME TAXES:
The Company recorded no income tax expense for the three or nine months ended
September 30, 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
Liquidity and Capital Resources
As of September 30, 2002, the Company's working capital was $135,860 compared to
$54,074 in the previous quarter and ($102,544) at December 31, 2001. Working
capital continued to improve, and increased again this quarter because of
increasing profitability. By maintaining stringent expense reduction policies
and concentrating on sales of cyclodextrins (CD), management expects to maintain
liquidity at this level though the end of 2002 as a result of continued
profitability. However, the sustained increase in sales levels have required the
Company to significantly increase inventory levels and may result in increased
operating expenses needed to maintain the higher level of sales. Management
believes it can maintain profitability even with these increases.
In keeping with its commitment to use the Internet as its major advertising and
public relations outlet, the Company continues to improve and upgrade its
website. By increasing its catalog of CD products from 64 items to 154 items and
improving access to its databases, the Company has indeed strengthened its
leadership position in the expanding CD Industry.
Results of Operations
Sales of CD 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
new customers and expand its line of manufactured products. Product sales of the
Company are primarily to large pharmaceutical and food companies for research
and development purposes. Because of its leadership role over the past 10 years
in CD technology, the Company is beginning to enjoy substantial sales to
companies doing clinical trials with CD's.
The Company will continue to carefully manage its expenses, but does not expect
to see further large reductions in expenses; and may see increases in future
periods necessary to support the increases sales levels.
The Company continues 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 nine months ended September 30, 2002,
the Company had 4 customers that accounted for 75% of the year-to-date sales
compared to 3 customers that accounted for 63% of the Company's sales for the
same period in 2001. This increase in the number of major customers (= 10% of
sales) customers will continue to stabilize the Company's revenue.
Total product sales for the third quarter of 2002 were $136,711, about the same
as sales for the second quarter of 2002, but more than doubling sales of the
third quarter 2001 ($61,262). These increased sales levels for 2002 are due in
large part to market reaction to new FDA approvals of food and pharmaceutical
products containing CD's; with new approvals expected to continue for many
years.
The Company's gross profit margin for the third quarter of 2002 was 92.5%
compared to 92.0% reported for the same period in 2001. The Company expects its
gross profit margin for 2002 to be approximately 85%, which is within its
historical range.
The Company's SG&A expenses decreased to $48,151 in the third quarter of 2002
compared to $56,758 from the second quarter of 2002. This is a 36% decrease from
SG&A expense of $74,892 for the third quarter of 2001, which shows the effects
of management's continued emphasis on expense reduction. With expenses in check,
management has positioned itself to maintain profitability even if a year-end
slow-down in CD sales occurs. However, the Company does not anticipate a
reduction of sales in the near term.
As part of its expense reduction efforts, the Company sold certain laboratory
equipment during 2002. The sale of this equipment will further reduce
maintenance and depreciation expense associated with the sold equipment.
The Company 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
September, the Company became the exclusive North American distributor for a
major European CD products manufacturer.
In keeping with its commitment to utilize the full power of the Internet as a
major advertising and public relations outlet, the Company anticipates spending
an additional $2000-$5000 to improve its Web Site further in 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
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 2,
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
99.1 Certification of CEO and CFO *
* Filed herewith
(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
----------------------------- November 14, 2002
C.E. Rick Strattan, President
Chief Executive Officer,
Chief Operating Officer and
Chief Financial Officer