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, 2003.
____ 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 September 30, 2003, the Company had outstanding 4,791,220 shares of its
common stock.
Transitional Small Business Disclosure Format (Check One):
No.
PART I: FINANCIAL INFORMATION
Item 1 Financial Statements
CTD HOLDINGS INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
September 30, 2003
--------------
CURRENT ASSETS
Cash and cash equivalents $ 63,387
Accounts receivable 15,552
Inventory 74,824
------------
Total current assets 153,763
PROPERTY AND EQUIPMENT, net
371,215
OTHER ASSETS
Intangibles, net 3,018
------------
TOTAL ASSETS $ 527,996
============
(continued)
F-1
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30,
2003
------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 29,816
Current portion of long-term debt 12,112
Current portion of stockholder loan 20,000
-------------
Total current liabilities 61,928
-------------
LONG-TERM LIABILITIES
Long-term debt, less current portion 156,492
Stockholder loan, less current portion 76,495
-------------
Total long-term liabilities 232,987
-------------
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
Additional paid-in capital 1,954,498
Accumulated deficit (1,721,897)
--------------
Total stockholders' equity 233,081
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 527,996
==============
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,
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
PRODUCT SALES $ 85,516 $ 136,711 $ 225,545 $ 463,555
COST OF PRODUCTS SOLD 8,816 10,131 33,954 71,018
---------- ---------- ---------- ----------
GROSS PROFIT 76,700 126,580 191,591 392,537
SELLING, GENERAL AND 45,507 48,151 141,494 168,325
ADMINISTRATIVE EXPENSE
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 31,193 78,429 50,097 224,212
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest expense (4,697) (4,728) (17,456) (20,039)
Gain (loss) on disposal
of equipment - 1,578 - (24,100)
Investment and other income 1,146 13,205 4,203 14,688
---------- ---------- ---------- ----------
Total other income (expense) (3,551) 10,055 (13,253) (29,451)
----------- ---------- ---------- ----------
NET INCOME BEFORE INCOME TAXES 27,642 88,484 36,844 194,761
Income Taxes - - - -
----------- ---------- ---------- ----------
NET INCOME $ 27,642 $ 88,484 $ 36,844 $ 194,761
=========== ========== ========== ==========
NET INCOME PER COMMON SHARE $ .01 $ .02 $ .01 $ .04
----------- ---------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,791,220 4,791,220 4,791,220 4,791,220
=========== ========== ========== ==========
See Accompanying Notes to Financial Statements
F-3
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Nine Months Ended
September 30,
--------------------------
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 36,844 $ 194,761
------------ ------------
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Bad debt 4,854 -
Depreciation and amortization 18,939 17,943
Loss on disposal of equipment - 24,100
Increase or decrease in:
Accounts receivable 20,730 (23,392)
Inventory (10,678) (42,211)
Other current assets - 1,305
Accounts payable and accrued expenses 14,166 (88,542)
------------ ------------
Total adjustments 48,011 (110,797)
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 84,855 83,964
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (54,927) (17,878)
Repayment of note receivable - 2,537
------------ -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (54,927) (15,341)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on long-term debt 14,881 -
Payments on long-term debt (7,666) (6,788)
Net proceeds (payments) on line-of-credit - (19,631)
Net proceeds on loan payable to stockholder (20,000) 4,389
Proceeds from sale of equipment - 21,877
------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (12,785) (153)
------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 17,143 68,470
CASH AND CASH EQUIVALENTS, beginning of period 46,244 8,190
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 63,387 $ 76,660
============ ============
(Continued)
F-4
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease in Cash and Cash Equivalents
(Unaudited)
Nine Months Ended
September 30,
--------------------------
2003 2002
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 9,777 $ 20,039
============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Purchase of vehicle with note payable $ 14,881 $ -
============ ============
See Accompanying Notes to Financial Statements
F-5
CTD HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003
(Unaudited)
The information presented herein as of September 30, 2003, and for the three and
nine months ended September 30, 2003 and 2002, 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 and nine month periods ended September 30,
2003, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2003. 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, 2002.
(2) NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common share is computed in accordance with the
requirements of the 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.
(3) INCOME TAXES
The Company recorded no income tax expense for the three and nine months ended
September 30, 2003 and 2002 due to the availability of a net operating loss
carryforward.
(4) SUBSEQUENT EVENTS
The following events occurred subsequent to September 30, 2003:
The Company's majority shareholder sold 500,000 shares of common stock to the
Company for a $25,000 note payable, with interest at 5%. The Company entered
into a six-month agreement with a financial consultant to provide public
relations services. The Company will issue 500,000 shares to the financial
consultant and expense the fair value of the stock issued ($25,000) over the six
month term of the agreement. The Company's majority shareholder also granted
options to the financial consultant to purchase an additional 500,000 shares of
CTD stock through April 30, 2004 at per share prices ranging from $.10 to $1.00.
The Company has recorded no compensation expense related to these options as the
option prices exceeded the market price of the stock at the time of issuance.
The Company awarded its president $50,000 in common stock for services rendered
at the then market price. The Company expects to issue approximately 1,000,000
registered common shares under Form S-8.
F-6
Item 2. Management's Discussion and Analysis or Plan of Operation
Management Discussion and Analysis
Liquidity and Capital Resources
Our cash and cash equivalents increased to more than $63,000 as of September 30,
2003 compared to approximately $46,000 as of the end of 2002. The increase
resulted from improvement of our cash flows due to increased gross profit
margins and continued reduction of expenses (3%) from the previous quarter.
As of September 30, 2003, our working capital was approximately $92,000 compared
to approximately $115,000 at the end of 2002. We have generated approximately
$85,000 from operations during 2003 and have used our additional funds to reduce
debt and make improvements to our operating facilities. We will continue to
closely monitor our working capital and maintain a good liquidity position and
capital resources for the remainder of 2003 while holding overhead costs at a
minimum.
We have invested approximately $36,000 and anticipate and additional $15,000 to
complete the current improvement projects to our business operation's physical
facilities. These improvements primarily involve the renovation of our office
structure.
Subsequent to September 30, 2003, Mr. Strattan, the Company's president, was
awarded a bonus of stock equal in value to $50,000 for the Company's profitable
performance over the past two years. Mr. Strattan agreed to take the bonus in
the Company's common stock at the value of the stock at the end-of-the-day,
October 14, 2003.
The Company also refinanced its mortgage on the 40-acre property at a more
favorable variable interest rate (a drop of 2.95%) interest and thereby reduced
its future interest expense and improved cash flow.
Results of Operations
Sales of Cyclodextrins and related manufactured complexes in the 3rd quarter,
provided a respite to the usual volatility. We expect the volatility to resume,
however. In efforts to offset this volatility, we continue to expand our revenue
producing activities in Cyclodextrin-related research and business development
services for the Company and other outside companies while expanding our line of
distributed products. Our product sales are primarily to large chemical supply
and pharmaceutical companies for research and development purposes. To manage
this volatility, we have begun to market more aggressively the business
development aspect of our CD expertise with existing and new customers.
Total product sales for the third quarter 2003 were more than $85,000 compared
to approximately $89,000 in the prior quarter. While our YTD 2003 sales are
significantly less compared to the same time period last year ($225,545 vs.
$463,555), the continued improvement on an annualized basis to 58% of 2002's
sales brings the Company's product sales in line with an annual average sales
calculated over the last 5 years of $300,000.
Our gross profit margin of 90% remains consistently strong for 2003. Our SG&A
expenses further decreased to approximately $46,000 from approximately $47,000
in the prior quarter. The decrease in our SG&A expenses results primarily from
controlling overhead costs and reducing interest expense whenever possible.
Total other expenses were lower ($4,000) than the prior quarter ($6,000); 2003
YTD other expenses are approximately $13,000 compared to approximately $29,000
for the same period in the prior year.
While we were successful at holding our gross profit margin and selling, general
and administrative expenses constant, with lower sales we recognized a decrease
in net income to approximately $28,000 during the third quarter of 2003 compared
to net income of approximately $88,000 during the same period in 2002.
In 2003 we continue to utilize the CTD Website to emphasize the company's
unmatched knowledge of the emerging CD industry; we have included in our Website
(What's New) how CTD's customers are using CD's and what evidence we have that
major industries have focused on CD's for products now being commercialized. We
will continue to identify new products and new uses for CD's. We intend to
create even closer ties with our new European partner, Cyclolab; in 2003
management intends to aggressively pursue an even more formal relationship that
may include ownership.
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; 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 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
The Company's principal executive officer and principal financial officer, after
evaluating the effectiveness of the Company's disclosure controls and procedures
(as defined in Exchange Act Rule 13a-14(c)) within 90 days prior to the filing
of this report, has concluded that, based on such evaluation, the Company's
disclosure controls and procedures were adequate and effective to ensure that
material information relating to the Company, including its consolidated
subsidiaries, was made known to them by others within those entities,
particularly during the period in which this Quarterly Report on Form 10-QSB was
being prepared. Changes in Internal Controls. There were no significant changes
in the Company's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation, nor were there
any significant deficiencies or material weaknesses in the Company's internal
controls. Accordingly, no corrective actions were required or undertaken.
(b) Changes in internal controls.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, nor were there any significant deficiencies or material
weaknesses in the Company's internal controls. Accordingly, no corrective
actions were required or undertaken.
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 CFO and CEO *
99.2 Section 1350 certification *
* 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 13, 2003
C.E. Rick Strattan, President
Chief Executive Officer,
Chief Operating Officer and
Chief Financial Officer