Edgar Filing: CTD HOLDINGS INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-KSB

(Mark One)

(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

For the fiscal year ended December 31, 2007

( ) 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.
(Name of small business issuer in its charter)

FLORIDA 59-3029743
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

27317 N. W. 78th Avenue, High Springs, FL 32643
(Address of principal executive offices) (Zip Code)

Issuer's telephone number: (386) 454-0887

Securities registered under Section 12(b) of the Exchange Act:

Title of each class Name of each exchange on which registered

None

Securities registered under Section 12(g) of the Exchange Act:

Class A Common Stock
(Title of class)

Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. (_)

Note - Checking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes (X)
No(_).

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB (_).

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act.) Yes (_) No (X)

State issuer's revenues for its most recent fiscal year: $751,176

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date within the past 60 days: $210,460 based on the average high
($.02) and low ($.02) price as of March 11, 2008, of $.02 per share. (See
definition of affiliate in Rule 12b-2 of the Exchange Act.)

Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 15,705,541 shares of Common
Stock as of March 11, 2008.

Transitional Small Business Disclosure Format (Check One): Yes (_) No (X)

PART I

Item 1. Description of Business.

CTD Holdings, Inc. ("Us" or "the Company") was organized as a Florida
corporation on August 9, 1990, with operations beginning in July 1992. We sell
cyclodextrins ("Cyclodextrins" or "CDs") and related products to the food,
pharmaceutical and other industries. We also provide consulting services in the
area of commercialization of CD applications.

CDs
Cyclodextrins are molecules that bring together oil and water and have
potential applications anywhere oil and water must be used together. Successful
applications have been made in the areas of agriculture, analytical chemistry,
biotechnology, cosmetics, diagnostics, electronics, foodstuffs, pharmaceuticals
and toxic waste treatment. Stabilization of food flavors and fragrances is the
largest current worldwide market for CD applications. The Company and others
have developed 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.

We believe 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.

We provide consulting services for the commercial development of new
products containing CDs. Our revenues are derived from consulting, the
distribution of CDs, the manufacturing of selected CD complexes, and sales of
our own manufactured and licensed products containing CDs.

CD Product Background

CDs are donut shaped circles of glucose (sugar) molecules. CDs are formed
naturally by the action of bacterial enzymes on starch. They were first noticed
and isolated in 1891 by a French scientist, Villiers, as he studied rotting
potatoes. The bacterial enzyme naturally creates a mixture of at least three
different CDs depending on how many glucose units are included in the molecular
circle; six glucose units yield Alpha CD ("ACD"); seven units, beta CD ("BCD");
eight units, gamma CD ("GCD"). The more glucose units in the circle, the bigger
the circle, or donut. The inside of this "donut" provides an excellent resting
place for "oily" molecules while the outside of the donut is significantly
compatible with water enabling clear stable solutions of CDs to exist in aqueous
environments even when an "oily" molecule is carried within the donut hole. The
net result is a molecular carrier that comes in small, medium, and large sizes
with the ability to transport and deliver "oily" materials using water as the
primary vehicle.

CDs are manufactured in large quantities by mixing appropriate enzymes with
starch solutions, thereby reproducing the natural process. ACD, BCD and GCD can
be manufactured by an entirely natural process and therefore are considered to
be natural products. Additional processing is required to isolate and separate
the CDs. The purified ACD, BCD, and GCD are referred to collectively as natural
CDs (NCDs).

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 ("CMCDs").
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.

Our strategy is to sell CDs and to introduce products with little or no
regulatory burden in order to minimize product expenses and create profitable
revenue.

We currently sell our products for use in the pharmaceutical, food and
industrial chemical industries.

CD Market

The food additive industry has been experimenting with CDs for many years.
Now that commercial supply of these materials can be assured and regulatory
approval is in place, the Company believes the food additive industry will
continue to increase its use of CDs.

CDs have been used in a variety of food products in Japan for over 25
years. In 1999 the economic impact of CD's on the Japanese economy was reported
to be $2.6 billion. Within the last five years, more European countries have
approved the use of CDs in food products. In the United States, major starch
companies are renewing their earlier interest in CDs as food additives. Oral
arguments for regulatory approval by the United States Food and Drug
Administration ("FDA") have been accepted. As of November 3, 1997, BCD use as a
food additive in 10 categories of food products was confirmed to be generally
recognized as safe (GRAS).

Applications of CDs in personal products and for industrial uses have
appeared in many patents and patent applications. Procter & Gamble uses CDs in
Bounce(R), a popular fabric softener and Febreze(R). Avon uses CDs in its dermal
preparations using its Age Protective System APS(R). These uses will grow as the
price of the manufactured CDs decrease or are perceived as acceptable in view of
the value added to the products. In 2001 Janssen Pharmaceutica, a subsidiary of
Johnson & Johnson received approval to market Sporanox(r), an oral and
injectable formulation containing hydroxypropyl BCD.

In Japan at least twelve pharmaceutical preparations are now marketed which
contain CDs. The CDs permit the use of all routes of administration. Ease of
delivery and improved bioavailability of such well-known drugs as nitroglycerin,
dexamethasone, PGE(1&2), and cephalosporin permit these "old" drugs to command
new market share and sometimes new patent lives. Because of the value added, the
dollar value of the worldwide market for products containing CDs and for
complexes of CDs can be 100 times that of the CD itself.

CD Products

Our CD products include Trappsol(R), Aquaplex(R), and AP(TM)-Flavor product
lines. The Trappsol product line consists of approximately 200 different
varieties of CDs and the Aquaplex product line includes more than 60 different
complexes of active ingredients with various CDs. In addition to these product
lines, the Company introduced Garlessence(R) in the fourth quarter of 1995.
Garlessence is the first ingestible product containing CDs to be marketed in the
U.S. The Company also provides consulting services, research coordination, and
the use of CD Infobase(TM), a comprehensive database of CD related information.
The Company has protected its service and trade marks by registering them with
the U.S. Patent and Trademark office. The following trademarks have been
approved and are in use: Trappsol(R), and Aquaplex (R). These properties add to
the intangible asset value of the Company. Since 2000, our Web Site at
http://www.cyclodex.com, a major tangible asset has grown to be a leading
Cyclodextrin information site on the Internet.

CTD purchases CD's from commercial manufacturers around the world
including: Wacker Chemie - Munich, Germany; Nihon Shokuhin Kako - Tokyo, Japan;
Roquette Freres - Le Strem, France; Cerestar Inc. - Hammond IN, USA. At the end
of 2002, CTD became the exclusive distributor in North America of the CD
products manufactured by Cyclolab R&D Labs in Budapest, Hungary. The Company
does not manufacture cyclodextrins.

We have introduced many new products into our 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.

Business Strategy

Our strategy has been and will continue to be to generate profitable
revenue through sales of CD related products.

From inception through the current year, sales of CDs and CD derivatives
have been sufficient to provide the necessary operational profitability to
sustain the Company. Since these materials were simply purchased and resold,
they had the least value-added attributes.

Presently, sales of CD complexes represent a majority of the Company's
product sales revenues. Transition to the more value-added complexes continues
and is desirable for increased profitability since higher margins can be
maintained for these products. We have increased our list of major customers
from 3 to 4 thereby continuing to reduce our dependency on sales to a very small
core of repeat purchases.

We intend to increase our business development efforts in the food additive
and personal products industries while continuing to build on our successes in
the pharmaceutical industry.

Business development on behalf of the Company's clients will include the
following: (i) negotiation of rights and/or licenses to CD-related inventions;
(ii) consultation with manufacturers to establish customized manufacturing
specifications; (iii) patentability assessments and strategic planning of patent
activities; (iv) trade secret strategies; (v) regulatory interface; and (vi)
strategic marketing planning.

The Company believes its competitive advantage lies in its experience and
know how in the use and application of CDs, areas in which it believes it has
few equals.

In addition to its licensing efforts, the Company intends to coordinate
research studies in which it will retain a portion of the rights created as a
result of the research work supported.

Assuming the availability of funds, the Company will negotiate licensing
rights to its own selected inventions. Because of its comprehensive technical
and patent database for CD-related inventions, the Company believes it is
uniquely positioned to take advantage of constantly evolving licensing
situations.

Marketing Plan

We believe the failure of businesses to exchange information about CD
molecules has hindered a more rapid commercialization of CDs as safe excipients.
We believe our philosophy of partnering and sharing will act as a catalyst to
create momentum overcoming the inertia created by the previous conservatism and
secrecy.

Our sales have always been direct, volatile and driven by the acceptance of
CD's as beneficial excipients. Arrangements with large laboratory supply
companies and several diagnostic companies have provided a strong sales base,
that continues to diversify.

The Company has taken advantage of the propensity of researchers to use the
Internet to gather information about new products by establishing a website with
the unique and descriptive domain name "cyclodex.com".

We intend to work with clients in countries where current regulatory views
include CDs as natural products acting as excipients to introduce beneficial
pharmaceuticals improved by CDs.

Along with the new products themselves, the Company has created a
licensable mark that may be used by other manufacturers wishing to take
advantage of the improved aqueous delivery afforded by Trappsol CDs.

We intend to generate additional revenue through obtaining rights to
certain patents that we will sublicense to appropriate organizations or that we
will use to develop our own proprietary products. Revenue would then be expected
to result from sub-licensing royalties, sales of CD complexes to be used in the
newly developed pharmaceuticals, and finally from the sales of the products to
end-users.

Assuming an ongoing successful process of development, approval and
adoption of CDs and CMCDs for pharmaceutical applications, the Company's
objective is to initiate dialogue and be well prepared for partnerships with
major food companies. Price is a primary concern in this market, but unlike
pharmaceuticals where FDA permission for clinical testing may be obtained before
actual FDA product approval, food companies cannot feed experimental
formulations to test panels of consumers until the ingredients, i.e., the CDs,
receive approval for human consumption. Therefore, the Company will work with
the food companies and key university food research groups to initially evaluate
non-taste applications. These questions will initially be explored using NCDs
since commercial adoption will depend heavily upon the price of the CD selected
and NCDs will always be the least expensive. The benefits derived from the use
of CDs with expensive ingredients (e.g., flavors, fragrances)have already become
accepted commercial uses for CMCDs (chemically modified CDs) and (naturally
modified CD's) NMCDs.

Competition

The Company is currently a leading consultant in determining manufacturing
standards and costs for CDs and CMCDs. 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.

In 2002 we became the exclusive North American distributor of the CD
products manufactured by Cyclolab. We intend to form additional business
relationships with Cyclolab in Hungary by creating a Cyclolab-USA laboratory
facility and thereby strengthen our competitive advantage. CTD Holdings
continues to consider Cyclolab as a potential acquisition, even after the failed
2006 effort due to misrepresentation by potential investors that has led to
continuing litigation. Cyclolab will certainly play a leading role in the future
Josef Szejtli Research Park at the Company's current corporate site.

Government Regulation

Under the Federal Food, Drug and Cosmetic Act ("Food and Drug Act"), the
Food and Drug Administration ("FDA") is given comprehensive authority to
regulate the development, production, distribution, labeling and promotion of
food and drugs. The FDA's authority includes the regulation of the labeling and
purity of the Company's food and drug products. In the event the FDA believes
any company is not in compliance with the law, the FDA can institute proceedings
to detain or seize products, enjoin future violations or assess civil and/or
criminal penalties against that Company.

The FDA and comparable agencies in foreign countries impose substantial
requirements upon the introduction of therapeutic drug products through lengthy
and detailed laboratory and clinical testing procedures, sampling activities and
other costly and time consuming procedures. The extent of potentially adverse
government regulations which might arise from future legislation or
administrative action cannot be predicted.

Under present FDA regulations, FDA defines drugs as "articles intended for
use in the diagnosis, cure, mitigation, treatment or prevention of disease in
man." The Company's product development strategy is to first introduce a product
that will not be regulated by the FDA as a drug because all of its ingredients
are natural products or is generally regarded as safe (GRAS) by the FDA. The
Company is continually updated by counsel as to changes in FDA regulations that
might affect the use of and claims for these products. There is no assurance
that the FDA will not take the position that the Company's food and nutritional
supplement products are subject to requirements relating to drug development and
sale. The effect of such determination could be to limit or prohibit
distribution of such products.

Employees

The Company employed three persons on a full time basis. None of the
Company's employees belong to a union. The Company believes relations with its
employees are good.

Item 2. Description of Property.

In 2000, the Company bought approximately 40 acres in western Alachua
County, Florida, (the "Property") for a purchase price of $210,000 which was
paid for in part by a new first mortgage of $150,000. The Property had been
developed in part as a mushroom growing facility. While the Company has
discontinued mushroom growing operations on the Property, the Company continues
to use the Property as its corporate headquarters. Its present 6,000 sq.ft.
facility is expected to be adequate to house the Company's operations for the
foreseeable future.

In March 2008, the Company paid off the mortgage in the first step to
create the research park. The Property is in a region that is experiencing
moderate population and development growth which has increased the market value
of the Property. Management believes the limits of insurance coverage are
adequate for the Property.

The Property has a 6,000 sq.ft. facility from which the Company operates
its corporate offices. The anticipated remaining useful life of the facility is
undetermined, but in Management's estimate exceeds 25 years. The Property's
federal tax basis, rate, and method are, respectively, $162,000, 40 years, and
straight-line. The realty tax rate and annual realty taxes assessed on the
Property for the year ended December 31, 2007, are 21.1152 mils and $2,890.68,
respectively.

Item 3. Legal Proceedings.

On February 7, 2007, Registrant and C.E. Rick Strattan filed suit in
Circuit Court in Palm Beach County, Florida, (Case Number 2007CA001818XXXXMB)
seeking the return of the Class A Preferred Share and damages from defendants
Eline Entertainment Group, Inc., Eline Holding Group, Inc., Yucatan Holding
Company, Steven T. Dorrough, Jayme Dorrough, and Barry Rothman, based on
representations made in connection with the Share Exchange Agreement dated
August 11, 2005, as amended and the enforcement of the agreement.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Part II

Item 5. Market for Common Equity and Related Stockholder Matters and Small
Business Issuer Purchases of Equity Securities.

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. In
2000, CTDI did a 2 for 1 split of its common shares from approximately 2.3
million to 4.6 million issued and outstanding. In conjunction with that
restructuring, we changed the name of CTDI to CTD Holdings, Inc; CTDI was then
incorporated as a Florida corporation and became a wholly owned subsidiary of
CTD Holdings, Inc. In 2000 CTD Holdings, Inc. changed its trading symbol to
CTDH.OB and currently trades on the OTC Bulletin Board as CTDH.OB. Since the
commencement of trading of the Company's securities, there has been an extremely
limited market for its securities. The following table sets forth high and low
bid quotations for the quarters indicated as reported by the OTC Bulletin Board.

High Low

2006 First Quarter $ 0.09 $ 0.03
Second Quarter $ 0.07 $ 0.04
Third Quarter $ 0.05 $ 0.03
Fourth Quarter $ 0.05 $ 0.02

2007 First Quarter $ 0.05 $ 0.02
Second Quarter $ 0.05 $ 0.02
Third Quarter $ 0.04 $ 0.02
Fourth Quarter $ 0.05 $ 0.02

Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions.

Holders

As of March 11, 2008, the number of holders of record of shares of common
stock, excluding the number of beneficial owners whose securities are held in
street name was approximately 78.

Dividend Policy

The Company will not pay any cash dividends on its common stock in 2006
because it intends to retain its earnings to finance the expansion of its
business. Thereafter, declaration of dividends will be determined by the Board
of Directors in light of conditions then existing, including without limitation
the Company's financial condition, capital requirements and business condition.

Recent Sales of Unregistered Securities

None.

Item 6. Management's Discussion and Analysis or Plan of Operation.

Introduction

CTD Holdings, Inc. (referred to as the "Company," "CTD," or "we," "us," and
"our") began operations in 1990. Our revenues are principally derived from the
resale of cyclodextrins and cyclodextrin complexes. Our sales are primarily to
major chemical supply houses around the world, pharmaceutical companies, food
companies for research and development and to diagnostics companies. We acquire
our products principally from outside the United States, largely from Japan and
Hungary, but are gradually finding satisfactory supply sources in the United
States. While we enjoy lower supply prices from outside the United States,
shipping costs for our current order quantities are making domestic sources more
competitively priced. To add value to our products, we maintain a database of
patented and patent pending uses of cyclodextrins as recorded by the United
States Patent & Trademark Office. We also maintain a database that includes
patents issued in many other countries of the World. This information is
available to our customers. We also offer our customers our knowledge of the
properties and potential new uses of cyclodextrins and complexes.

As most of our customers use our cyclodextrin products in their research
and development activities, the timing, product mix, and volume of their orders
from us are unpredictable. We also have four major customers who have a
significant effect on our revenues when they increase or decrease their research
and development activities that use cyclodextrins. We keep in constant contact
with these customers as to their cyclodextrin needs so we can maintain the
proper inventory composition and quantity in anticipation of their needs. The
sales to major customers and the product mix and volume of products sold has a
significant effect on our revenues and gross profit. These factors contribute to
our potentially significant revenue volatility from quarter to quarter and year
to year.

In 2004, we authorized a series of "blank check" preferred stock consisting
of 5,000,000 shares and creating a series of Series A Preferred Stock. The more
significant right is Series A Preferred shareholders vote with the holders of
common stock on all matters submitted to a vote of our shareholders. Share of
Series A Preferred Stock are entitled to one vote more than one-half of all
votes entitled to be cast by all holders of voting capital stock of the Company
on any matter submitted to holders of common shares so as to ensure that the
votes entitled to be cast by the holder of the Series A Preferred Stock are
equal to at least a majority of the total of all votes entitled to be cast by
the holders of common shares. In 2004, we issued one share of Series A Preferred
Stock to C.E. Strattan, our majority shareholder in exchange for 1,029,412
shares of common stock held by him, which he voluntarily surrendered to the
Company and were cancelled. Effective August 11, 2005, C.E. Strattan
contractually transferred the one outstanding share of Series A Preferred Stock
to Eline Entertainment Group, Inc. (Eline). The agreement with Eline provides
for advances to the Company of up to an aggregate of $1,500,000 to acquire
Cyclolab, at Eline's sole discretion. Eline is an SEC reporting company
currently not in reporting compliance. In September 2006, the company's
President, Mr. Strattan, demanded, in accordance with the expired contract, the
return of the Series A Preferred Stock in the form of a stock power
authorization since the physical share never left the possession of its original
owner, Mr. Strattan. The demand letter was sent to the address given in the
contract and was never acknowledged nor responded to by Eline. The Company has
filed a legal action with regard to its agreement with Eline. See "Legal
Proceedings".

The Company's Board of Directors has decided to create an additional class
of preferred share to be referred to as the Series B Preferred Share. The Series
B Preferred Share would entitle the holder to vote, in addition to other shares
owned by the holder, the number of votes equal to the number of the authorized,
but unissued common shares of the Company. Action to approve the proposed
amendment would not occur until an Information Statement is filed and approved
by the Securities and Exchange Commission.

Liquidity and Capital Resources

Our cash, short-term investments and certificates of deposit increased to
$474,000 as of December 31, 2007, from $159,000 at December 31, 2006. Our cash
flow from operations for 2007 was $370,000 compared to $26,000 for 2006. The
increased cash flow from operations is due primarily to increased sales.

We have $1,300,000 in net operating loss carryforwards that can be used to
offset our current and future taxable net income and reduce our income tax
liabilities. In 2007, we recognized $450,000 in deferred tax assets as the
result of reducing our deferred tax asset valuation allowance to 0% from 100%.

Sales increased 39% to $751,000 from $542,000 in 2006. In addition, our
gross profit percentage increased to 84% from 76% in 2006. For 2007, we had net
income of $654,000 compared to a loss of $(102,000) in 2006.

We believe our working capital is sufficient to run our operations at
current and expected future operating levels into the near future. We do not
require capital in the next twelve months for normal operations.

Controlling cash expenses continues to be management's primary fiscal tool.
However, growth requires increased expenditures and while we feel it is
appropriate during the current growth stage to engage consultants that can help
the Company in financial areas outside its expertise, these consulting fees will
act to reduce profitability. We are working hard to increase revenues to balance
these new expenses, but cannot be sure such effort will be enough in the short
term to sustain financial performance like that of the recent past.

Beginning in 2003, we began improvements and renovations of our corporate
office and have invested $140,000 through December 31, 2006.

During 2007, we capitalized $51,000 of facility improvements, including
paving our limerock driveway and completing our office renovation. Currently we
are conducting an extensive survey of our 40 acres of property and existing
facilities in preparation for developing a total site plan for our Research Park
facility. In 2008, we plan to renovate three existing structures to be an
inventory warehouse and an educational auditorium at a estimated cost of
$60,000. These buildings have been previously idle. Over the next five years, we
plan to renovate or construct at least six buildings for an estimated cost of
$150,000.

Our plans for the research park are contingent on the Company's ability to
fund our building plan from operating profits and cash flow. We do not plan to
incur additional debt.

During 2007, we began a major upgrade and update of our searchable
cyclodextrin patent database. This database is an important resource for our
customers seeking information on existing U.S. patented applications of
cyclodextrins. We capitalized $33,000 for this database. We expect the initial
project to cost $55,000 and to be completed by March 31, 2008 and to begin
selling subscriptions to customers. In 2008, we will enter all U.S. patent
applications and continue to enhance the database for ease of use and
completeness. We expect enhancement and maintenance costs to be $20,000 annually
for the foreseeable future.

We issued 5,118,750 shares and 1,805,873 shares of our common stock to
officers and employees for compensation earned under employment agreements for
2007 and 2006, respectively.

We have no off-balance sheet arrangements as of December 31, 2007.

Results of Operations and Critical Accounting Policies and Estimates

The results of operations are based on the preparation of consolidated
financial statements in conformity with accounting principles generally accepted
in the United States. The preparation of consolidated financial statements
requires management to select accounting policies for critical accounting areas
as well as estimates and assumptions that affect the amounts reported in the
consolidated financial statements. The Company's accounting policies are more
fully described in Note 1 of Notes to Consolidated Financial Statements.
Significant changes in assumptions and/or conditions in our critical accounting
policies could materially impact the operating results. We have identified the
following accounting policies and related judgments as critical to understanding
the results of our operations.

Long-Lived Assets

The recoverability of long-lived assets is evaluated annually or more
frequently if impairment indicators exist. Indicators of impairment include
historical financial performance, operating trends and our future operating
plans. If impairment indicators exist, we evaluate the recoverability of
long-lived assets on an operating unit basis based on undiscounted expected
future cash flows before interest for the expected remaining useful life of the
operating unit. Recorded values for long-lived assets that are not expected to
be recovered through undiscounted future cash flows are written down to current
fair value, which is generally determined from estimated discounted future net
cash flows for assets held for use or net realizable value for assets held for
sale.

At the end of 2007, we began to renovate three buildings in our corporate
office park that were idle from our former mushroom farming operation. The
carrying value of these long-lived assets is $75,000. During 2006, the Company
recorded a $12,500 impairment allowance for an autoclave not currently used in
the Company's operation. In 2007, we removed the autoclave from the building and
are attempting to sell it. We are currently renovating one building to be used
as an inventory warehouse and the other two are being combined and renovated to
make an auditorium.

Valuation Allowance on Deferred Tax Assets

SFAS 109, "Accounting for Income Taxes" requires that deferred tax assets
be evaluated for future realization and reduced by a valuation allowance to the
extent we believe a portion will not be realized. We consider many factors when
assessing the likelihood of future realization of our deferred tax assets
including our recent cumulative earnings experience, expectations of future
taxable income, the carry-forward periods available to us for tax reporting
purposes, and other relevant factors. Our net deferred tax assets are $450,000,
comprised principally of $1,300,000 of net operating loss carryforwards (NOLs),
with the remaining portion related to temporary timing differences between tax
and financial reporting. Classification of deferred tax assets between current
and long-term categories is based on the expected timing of realization, and the
valuation allowance is allocated on a prorata basis.

For 2007, we reported net income before taxes of $204,000. In 2007, we
reduced our valuation allowance of our deferred tax asset to 0% from 100% due to
our current and expected future profitability, and recorded a $450,000 income
tax benefit and deferred tax asset. Our sales level has increased to an amount
that supports expected profitability on a continuing basis for at least the next
three to five years. During 2006, we maintained our historical deferred tax
asset valuation allowance at 100% based on the Company's history of prior
losses, and our sales volatility that collectively reduces the chance of
realization of our deferred tax assets. The range of possible judgments relating
to the valuation of our deferred tax asset is very wide. For example, in 2005
and 2006, we have determined the weight of available evidence did not support a
decision that a portion of our deferred tax assets will be realized, resulting
in a valuation allowance of 100%. Alternatively, if we had concluded that the
weight of available evidence supported a decision that substantially all of our
deferred tax assets may be realized, we would have a substantial income tax
benefit in our statement of operations prior to 2007.

Significant judgment is required in making this assessment, and it is very
difficult to predict when, if ever, our assessment may conclude our deferred tax
assets are realizable.

2007 Compared to 2006

Total product sales for 2007 were $751,000, a 39% increase over 2006 sales
of $542,000. Our major customers continue to be repeat purchasers. In 2007, our
four largest customers accounted for 59% of our sales; the largest accounted for
20% of sales. In 2006, our four largest customers accounted for 58% of our
sales; the largest accounted for 22% of sales.

Our gross profit margin of 85% for 2007 increased significantly compared to
77% for 2006. For 2007, our product sales of Trappsol HPB increased, which
significantly increased our overall gross margin. Historically, changes in the
sales product mix has a significant effect on our overall gross profit
percentage from period to period. During our attempt to acquire CycloLab during
2006, we were buying most of our products from CycloLab. For 2006, this practice
resulted in temporary increased product costs and lower gross margins for some
products than we had experienced historically. For 2007, our gross profit has
increased to normal historical levels. Management expects our gross profit to
remain in the 80% range for 2008.

Our SG&A expenses increased to $439,000 in 2006 from $351,000 in 2005
(excluding $112,000 of costs in 2006 related to the attempted acquisition of
Cyclolab), primarily as a result of an increase in stock based compensation to
officers and employees and increased litigation expenses. Our stock compensation
was $150,000 in 2007 compared to $84,000 in 2006. In 2006, we incurred $112,000
in direct expenses related to consulting, legal and accounting fees incurred as
a result of the Company's attempted acquisition of Cyclolab.

For 2007 and 2006, the Company had employment agreements with two officers
for cash and stock compensation. For 2007, the Company awarded 5,118,750 shares
and recognized an expense of $150,000 for stock awarded under these
arrangements. For 2006, the Company awarded 1,805,873 shares and recognized an
expense of $84,000 for stock awarded under these arrangements.

In 2006, Management determined the sports memorabilia collection to be
fully impaired due to lack of marketability and recorded an impairment charge of
$50,402.

We may incur significant future legal fees as the result of our continuing
lawsuit with Eline Entertainment Group, Inc.

Interest income increased from the investment of cumulative positive cash
from operations.

In 2007, we reduced the valuation allowance of our deferred tax asset from
100% to 0% due to our current and expected future profitability, and recorded a
$450,000 income tax benefit and deferred tax asset. For 2006, we maintained the
valuation allowance of our deferred tax asset at 100% and did not have a net
income tax benefit or expense.

We recognized net income for 2007 of $654,000 compared to a net loss of
$(102,000) for 2006.

We will continue to introduce new products that will increase sales revenue
and implement a strategy of creating or acquiring operational affiliates and/or
subsidiaries that will use CD's in herbal medicines, waste-water remediation,
pharmaceuticals, and foods. We also intend to pursue exclusive relationships
with major CD manufacturer(s) and specialty CD labs to distribute their
products. We continue to be the exclusive distributor in North America of the CD
products manufactured by Cyclolab Research Laboratories in Budapest, Hungary.

In keeping with its commitment to use the internet as a major advertising
and public relations outlet, we continue to maintain our web site. This asset
has been instrumental in creating and maintaining a worldwide leadership role
for us in the implementation of research and commercialization of CD
applications. We believe the maintenance and growth of our web site will return
that investment many times.

Forward-looking Statement

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 Cyclodextrins; changes in governmental laws and regulations
surrounding various matters, such as labeling disclosures; production and
pricing levels of important raw materials; difficulties of delays in the
development, production, testing and marketing of products; and product margins
and customer product acceptance.

Item 7. Financial Statements.

BAUMANN, RAYMONDO & COMPANY, P.A.
405 NORTH REO STREET, SUITE 200
TAMPA, FL 33609

Report of Independent Registered Public Accounting Firm

To the Board of Directors
CTD Holdings, Inc.
High Springs, Florida

We have audited the consolidated balance sheet of CTD Holdings, Inc. and
subsidiary as of December 31, 2007, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended December 31,
2007 and 2006. 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 audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provided a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CTD Holdings, Inc.
and subsidiary as of December 31, 2007, and the results of their operations and
their cash flows for the years ended December 31, 2007 and 2006, in conformity
with U.S. generally accepted accounting principles.

We were not engaged to examine management's assertion about the effectiveness of
CTD Holdings, Inc. internal control over financial reporting as of December 31,
2007 included in the accompanying management's report on internal control and,
accordingly, we do not express an opinion thereon.

\s\ Baumann, Raymondo & Company, P.A.

Baumann, Raymondo & Company PA
Tampa, Florida
March 18, 2008

CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2007

ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 209,981
Certificate of deposit 100,000
Accounts receivable 85,434
Inventory 107,624
Deferred tax asset 75,000
Investment due from related party 853
Other current assets 2,442
------------
Total current assets 581,334
------------
PROPERTY AND EQUIPMENT, NET 437,435
------------
OTHER
Certificates of deposit 163,985
Deferred tax asset 375,000
Intangibles, net of accumulated amortization of $5,910 40,967
------------
Total other assets 579,952
------------
TOTAL ASSETS $ 1,598,721
============

The accompanying notes to consolidated financial statements are an integral part
of this statement.

F-2

CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2007
(Continued)

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses $ 73,664
Current portion of long-term debt 3,942
------------
Total current liabilities 77,606
------------
LONG-TERM LIABILTIES
Long-term debt, less current portion 136,132
Loan from officer 21,330
------------
Total long-term liabilities 157,462
------------

STOCKHOLDERS' EQUITY
Common stock, par value $.0001 per share,
100,000,000 shares authorized, 20,824,291 shares issued
and outstanding 2,083
Preferred stock, par value $.0001 per share,
5,000,000 shares authorized; Series A, 1 share
issued and outstanding -
Additional paid-in capital 3,030,737
Accumulated deficit (1,669,167)
------------
Total stockholders' equity 1,363,653
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,598,721
============

The accompanying notes to consolidated financial statements are an integral part
of this statement.

F-3

CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

2007 2006
------------- -------------
PRODUCT SALES $ 751,176 $ 542,313

COST OF PRODUCTS SOLD 118,403 125,188
------------- -------------
GROSS PROFIT 632,773 417,125
------------- -------------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative 400,488 345,772
Legal expenses 38,616 4,903
Acquisition Costs - Cyclolab - 112,353
------------- ------------
Total, selling, general and administrative 439,104 463,028
Expenses ------------- ------------

SPORTS MEMORABILIA COLLECTION
Other income (expense) _ (50,402)
------------- ------------

OTHER INCOME (EXPENSE)
Investment and other income 23,974 19,365
Interest expense (10,748) (11,049)
Loss on disposal of equipment ( 3,341) (13,836)
------------- ------------
Total other income (expense) 9,885 (5,520)
------------- ------------
NET INCOME (LOSS) BEFORE INCOME TAXES $ 203,554 $ (101,825)

INCOME TAX Benefit 450,000 -
------------- ------------
NET INCOME (LOSS) $ 653,554 $ (101,825)
============= ============

NET INCOME (LOSS) COMMON SHARE: $ .036 $ (.007)
============= ============
Weighted average number of
common shares outstanding 17,919,985 14,815,279
============= ============

The accompanying notes to consolidated financial statements are an integral part
of these statements.

F-4

CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

COMMON STOCK PREFERRED STOCK ADDITIONAL TOTAL
PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES PAR VALUE SHARES PAR VALUE CAPITAL DEFICIT EQUITY
----------- ----------- -------- ---------- ----------- -------------- ------------

Balance,
December 31, 2005 13,899,668 $ 1,390 1 $ - $ 2,797,298 $ (2,220,896) $ 577,792

Shares issued under
employment agreements 1,791,873 179 - - 83,406 - 83,585

Shares issued for services 14,000 2 - - 558 - 560

Net loss - - - - - (101,825) (101,825)

Balance, ----------- ----------- -------- ---------- ----------- -------------- ------------
December 31, 2006 15,705,541 1,571 1 - 2,881,262 (2,322,721) 560,112

Shares issued under
employment agreements 5,062,501 506 - - 148,097 - 148,603

Shares issued for services 56,249 6 - - 1,378 - 1,384

Net income - - - - - 653,554 653,554

Balance, ----------- ----------- -------- ---------- ----------- ------------ -----------
December 31, 2007 20,824,291 $ 2,083 1 $ - $ 3,030,737 $ (1,669,167) $ 1,363,653
=========== =========== ======== ========== =========== ============ ===========

F-5

CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
DECEMBER 31, 2007 AND 2006

2007 2006
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 653,554 ($ 101,825)
----------- -----------
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 24,368 27,463
Loss on disposal of equipment 3,341 13,836
Stock compensation to employees 149,987 84,145
Impairment adjustment-sports memorabilia col. - 50,402
Income tax benefit of deferred tax assets (450,000) -
Increase or decrease in:
Accounts receivable (26,325) (22,707)
Inventory (27,877) (25,162)
Other current assets 21,671 (24,113)
Accounts payable and accrued expenses 21,498 24,075
----------- -----------
Total adjustments (283,337) 127,939

----------- -----------
Net cash provided by operating
activities 370,217 26,114
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (51,388) (27,628)
Purchase of certificate of deposit (263,985) -
Redemption of certificate of deposit - 131,381
Patent database developed (32,913) -
Redemption (Investment) with related party 134,687 (110,540)
----------- -----------
Net cash used in investing (213,599) (6,787)
activities ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES

Payments on long-term debt (8,110) (6,743)
Payments on loan payable to stockholder - (3,467)
Payments (loan) to Shareholder 16,514 (16,514)
Loan from shareholder 21,330 -
----------- -----------
Net cash provided (used in) financing
activities 29,734 (26,724)
----------- -----------
Net increase (decrease) in cash and cash equivalents 186,352 (7,397)

CASH AND CASH EQUIVALENTS, beginning of period 23,629 31,026
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 209,981 $ 23,629
=========== ===========

F-6

CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
DECEMBER 31, 2007 AND 2006
(Continued)

2007 2006
------------ ------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 10,748 $ 11,049
=========== ============
Cash paid for income taxes $ - $ -
=========== ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITY

Common stock issued to employees for services $ 149,987 $ 84,145
=========== ============

The accompanying notes to consolidated financial statements are an integral part
of these statements.

CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The following is a summary of the more significant accounting policies of
CTD Holdings, Inc. and Subsidiary (the Company) that affect the accompanying
consolidated financial statements:

(a) ORGANIZATION AND OPERATIONS - The Company was incorporated in August
1990, as a Florida corporation with operations beginning in July 1992. The
Company is engaged in the marketing and sale of cyclodextrins and related
products to food, pharmaceutical and other industries. The Company also provides
consulting services related to cyclodextrin technology.

(b) BASIS OF PRESENTATION - The consolidated financial statements include
the Company and its wholly owned subsidiary. All intercompany accounts and
transactions have been eliminated.

(c) CASH AND CASH EQUIVALENTS - For the purposes of reporting cash flows,
the Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

(d) ACCOUNTS RECEIVABLE - Accounts receivable are stated at the amount
management expects to collect from outstanding balances. Based on management's
assessment of the credit history with customers having outstanding balances and
current relationships with them, it has concluded that realization losses on
balances outstanding at year-end will be immaterial.

(e) PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation on property and equipment is computed using primarily the
straight-line method over the estimated useful lives of the assets, which range
from three to forty years. 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 periodically reviews its
long-lived assets to determine if the carrying value of assets may not be
recoverable. If an impairment is identified, the Company recognizes a loss for
the difference between the carrying amount and the estimated value of the asset.

(f) INVENTORY - Inventory consists of cyclodextrin products purchased for
resale and chemical complexes. Inventory is recorded at the lower of cost
(first-in, first-out) or market.

(g) INTANGIBLES - Intangible assets consist of loan costs and other
intangibles recorded at cost. Intangible are amortized using the straight-line
method over their respective estimated useful lives. Intangible assets also
includes the cost of developing a database of patents applied for and issued
involving the use of cyclodextrins. Current costs consist primarily of one
computer database consultant. The costs of building the database and
manipulating the patent information for retrieval are capitalized. The cost of
adding new data (such as foreign patent information) is also capitalized.
Capitalized database costs are not amortized because there is no indication of
any loss of value. The costs of updating, maintaining and operating the patent
database are expensed as incurred. Capitalized patent data base costs were
$32,913 at December 31, 2007.

(h) REVENUE RECOGNITION - Revenues are recognized when products are
shipped.

(j) ADVERTISING - Advertising costs are charged to operations when
incurred.

(k) START-UP COSTS - Start-up costs are expensed as incurred.

(l) DEFERRED INCOME TAXES -- Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective income tax bases. Deferred tax assets and
liabilities are measured using enacted rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered
or settled.

(m) 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. For stock awarded under
employment agreements (see Note 2), the monthly stock awarded is treated as
issued on the 15th day of each month earned for purposes of computing the
weighted average outstanding shares.

(n) STOCK BASED COMPENSATION - The Company follows the requirements of
Statement of Financial Accounting Standard No. 123(R) "Share-Based Payment." The
Company has employment agreements which call for stock to be awarded to
employees each month. The Company recognizes an expense equal to the fair value
of the stock determined using the average stock closing trading price for the
month multiplied by number of shares awarded for that month. The Company also
issues periodic stock bonuses to employees. The Company records an expense equal
to the fair value of the stock on the closing trading price of the stock on the
day awarded.

(o) RECLASSIFICATIONS - Certain amounts in the 2006 financial statements
have been reclassified for comparative purposes to conform with the 2007
presentation.

(p) NEW ACCOUNTING PRONOUNCEMENTS - The Financial Accounting Standards
Board ("FASB") has issued several new standards, which have implementation dates
subsequent to the Company's year end. Management does not believe that any of
these new standards will have a material impact on the Company's financial
position, results of operations or cash flows.

(q) USE OF ESTIMATES - The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.

(2) COMMITMENTS AND CONTINGENCIES

For 2008, the Company has employment agreements with two officers for total
monthly salaries of $10,000. In addition, the officers are awarded shares of
common stock each month. The number of shares due is equal to $13,500 divided by
eighty percent of the closing price of the Company's common stock on the last
day of each month. The Company recognizes an expense equal to the fair value of
the stock determined using the average stock closing trading price for the month
multiplied by number of shares awarded for that month. Also, for 2008, the
Company plans to issue shares to one of its employees. The number of shares due
is equal to $500 divided by eighty percent of the closing price of the Company's
common stock on the last day of each month. The stock is subject to trading
restrictions under Rule 144.

For 2007, the Company had employment agreements with two officers for total
monthly salaries of $5,500. In addition, each month the President was awarded
shares of common stock. The number of shares awarded was equal to a specified
dollar amount divided by eighty percent of the closing price of the Company's
common stock on the last day of each month. For the period January 1, 2007,
through June 30, 2007, the amount was $6,500. For the period July 1, 2007,
through December 31, 2007, the amount was $11,500. The Company recognized an
expense equal to the fair value of the stock determined using the average stock
closing trading price for the month multiplied by number of shares awarded for
that month. The stock is subject to trading restrictions under Rule 144.
Beginning July 2007, the Company also issued shares to one of its employees. The
number of shares due was equal to $200 divided by eighty percent of the closing
price of the Company's common stock on the last day of each month. For 2007, the
Company awarded 5,118,750 shares and recognized an expense of $150,000 for stock
awarded under these arrangements.

For 2006, the Company had employment agreements with two officers for total
monthly salaries of $4,900. In addition, the officers were awarded shares of
common stock each month. The number of shares due was equal to $6,000 divided by
eighty percent of the closing price of the Company's common stock on the last
day of each month. The Company recognized an expense equal to the fair value of
the stock determined using the average stock closing trading price for the month
multiplied by number of shares awarded for that month. The stock is subject to
trading restrictions under Rule 144. For 2006, the Company awarded 1,805,873
shares and recognized an expense of $84,145 for stock awarded under these
arrangements.

(3) PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2007, consists of:

Land $ 80,000
Buildings and improvements 413,565
Machinery and equipment 22,218
Office furniture and equipment 51,256
-----------
567,039

Less: accumulated depreciation 129,604
-----------
437,435

Construction in progress -
-----------

Property and equipment, net $ 437,435
===========

(4) CONCENTRATIONS OF CREDIT RISK:

Significant concentrations of credit risk for all financial instruments
owned by the Company, are as follows:

(a) DEMAND AND CERTIFICATE OF DEPOSITS - The Company has demand and
certificate of deposits in financial institutions that are insured by the
Federal Deposit Insurance Corporation up to $100,000. At December 31, 2007, the
demand and certificate deposit bank balance was $472,763, plus accrued interest
of $1,985. 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 and the United Kingdom. Two customers accounted for 82% of
the accounts receivable balance at December 31, 2007. The Company has no policy
requiring collateral or other security to support its accounts receivable.

(c) INVESTMENT WITH RELATED PARTY - The Company has an oral agreement for
investment services with a nonprofit organization. The Company's president is
also the president of the nonprofit organization. The funds are invested by the
nonprofit in a money market account. The Company earns a proportional share of
the interest earned in the account. The Company has no policy of requiring
collateral or other security to support this amount.

F-8

CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006

(5) MAJOR CUSTOMERS AND SUPPLIERS:

In 2007, three major customers accounted for 49% of total sales.
In 2006, three major customers accounted for 49% of total sales.

Substantially all 2007 and 2006 inventory purchases were from three
vendors.

The Company has only one source for certain manufacturing inventory.
However, the Company has manufactured these products in the past and could do so
again, if necessary. There are multiple sources for its other inventory
products.

(6) LONG-TERM DEBT:

Long-term debt consists of the following as of December 31, 2007:

Mortgage note payable to bank, payments of $1,163
due monthly including principal and interest
at 7.25%, collateralized by land and buildings
with a cost of $210,000 $ 140,074

Less current portion (3,942)
----------
Long-term debt, less current portion $ 136,132
==========

Maturities on long-term debt as of December 31, 2007, over the next five
years and thereafter are as follows:

Year ending
December 31, Amount
------------ ---------
2008 $ 3,942
2009 4,238
2010 4,556
2011 4,897
2012 5,659
2013 and thereafter 116,782
---------
$ 140,074
=========

(7) RELATED PARTY TRANSACTIONS:

During 2007, the President (who is also the majority common stockholder)
loaned the Company $29,000 plus accrued interest of $131. The loan is unsecured
and interest accrues at 5%. The loan has been reduced by $7,801 due to the
Company by the President.

During 2006, the President (who is also the majority common stockholder)
borrowed $16,514. The loan is unsecured and interest accrues at 5%. This loan
was a prohibited transaction under Section 402 of the Sarbanes-Oxley Act and was
repaid on February 2, 2007.

(8) FAIR VALUE OF FINANCIAL INSTRUMENTS:

Statement of Financial Accounting Standards No. 107 "Disclosures about Fair
Value of Financial Instruments" requires disclosure of fair value to the extent
practicable for financial instruments, which are recognized or unrecognized in
the consolidated balance sheet. The fair value of all financial instruments
approximates carrying value due to the short-term maturity of the instruments.
The fair value of the financial instruments 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.

(9) INCOME TAXES:

The Company follows the provisions of Statement of Financial Accounting
Standard No. 109 "Accounting for Income Taxes." Differences between accounting
rules and tax laws cause differences between the basis of certain assets and
liabilities for financial reporting purposes and tax purposes. The tax effect of
these differences, to the extent they are temporary, is recorded as deferred tax
assets and liabilities. Income tax expense is the tax payable or refundable for
the period plus or minus the change during the period in deferred assets and
liabilities. Temporary differences which give rise to deferred tax assets and
liabilities consist of net operating loss carryforwards, accelerated
depreciation methods for income tax purposes and interest accrued to related
parties but not for tax purposes until paid.

The Company has available at December 31, 2007, unused operating loss
carryforwards totaling approximately $ 1,300,000 that may be applied against
future taxable income. If not used, the carryforwards will expire as follows:

Year Ending

December 31, Amount
------------ -----------

2009 $ 445,000
2010 195,000
2017 206,000
2020 280,000
2021 71,000
2024 66,000
2025 37,000
-----------
Total $ 1,300,000
===========

If all of the operating loss carryforwards and temporary deductible
differences were used, the Company would realize a deferred tax asset of
approximately $450,000 based upon expected income tax rates. Under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", the
deferred tax asset should be reduced by a valuation allowance if it is likely
that all or a portion of it will not be realized. Realization depends on
generating sufficient taxable income before the expiration of the loss
carryforwards.

For 2007, management reduced the valuation allowance of our deferred tax
asset to 0% from 100% due to our current and expected future profitability, and
recorded a $450,000 income tax benefit and deferred tax asset. For 2006,
management determined that a 100% valuation allowance was appropriate, resulting
in no income tax expense or benefit for change in its deferred tax asset.

Because of the inherent uncertainties in estimating the valuation allowance
on the deferred tax asset, it is at least reasonably possible that the company's
estimate deferred tax asset will change in the near term and be material to the
financial statements.

2007 2006
---------- ----------
Current income tax benefit (expense) $ (45,000) $ 28,000

Tax benefit (expense) of temporary (21,000) (32,000)
differences

Tax benefit of operating loss carryforwards 66,000 4,000

Decrease (increase) in valuation allowance 450,000 -

---------- ----------
Total net tax benefit (expense) $ 450,000 $ -
========== ==========

(10) SPORTS MEMORABILIA COLLECTION

In 2006, Management determined the sports memorabilia collection to be
fully impaired due to lack of marketability and recorded an impairment charge of
$50,402.

(11) PREFERRED STOCK

In 2004, the Company amended its Articles of Incorporation authorizing a
class of "blank check" preferred stock consisting of 5,000,000 shares thus
creating a series of Series A Preferred Stock and set forth its designations,
rights and preferences. The more significant right is the Series A share votes
together with the holders of the common stock on all matters submitted to a vote
of Company holders of common stock, with the share of Series A Preferred Stock
being entitled to one vote more than one-half of all votes entitled to be cast
by all holders of voting capital stock of the Company on any matter submitted to
common shareholders so as to ensure that the votes entitled to be cast by the
holder of the Series A Preferred Stock are equal to at least a majority of the
total of all votes entitled to be cast by the common shareholders. Each share of
Series A Preferred Stock has a liquidation preference of $.0001. In 2004,the
Company issued one share of the Series A Preferred Stock to its majority common
shareholder in exchange for 1,029,412 shares of common stock held by the
majority common shareholder, which were surrendered to the Company and
cancelled. Effective August 11, 2005, the outstanding share of the Company's
Series A Preferred Stock was acquired by Eline Entertainment Group, Inc. In
September 2006, the Company's majority common shareholder demanded the transfer
to him of the one share of Series A preferred stock in exchange for 100,000
shares of Eline Entertainment Group, Inc. alleging breach of contract. The share
certificate of Series A Preferred Stock is in the possession of the Registrant.

(12) SIGNIFICANT FOURTH QUARTER ADJUSTMENTS

Management reduced its valuation allowance to 0% from 100% due to our
current and expected future profitability, and recorded a $450,000 income tax
benefit and deferred tax asset in the fourth quarter of 2007.

F-12

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.

None.

Item 8A(T). Controls and Procedures.

a. Management's annual report on internal control over financial reporting.

1. Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules
13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our
internal control over financial reporting is a process designed to provide
reasonable assurance that assets are safeguarded against loss from
unauthorized use or disposition, transactions are executed in accordance
with appropriate management authorization and accounting records are
reliable for the preparation of financial statements in accordance with
generally accepted accounting principles.

2. Internal control over financial reporting is a process tailored to
the Company's unique circumstances, designed under the supervision of the
Company's Chief Executive and Principal Accounting Officer, and effected by
the Company's Board of Directors, its consultants and other personnel,
taking into account the small size of the Company, small number of
employees and others involved in the Company's finances. The process uses a
system of checks and balances to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures that:

- pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the Company's assets and the review of those transactions and
dispositions by the Company's compliance officer;

- provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that the Company's receipts and expenditures are being made only
in accordance with authorizations of management or the Company's
Board of Directors; and

- provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Company's assets that could have a material adverse effect on the
Company's financial statements.

3. As required by Rule 13a-15(b) under the Exchange Act, our Chief
Executive Officer who is also our Principal Accounting Officer carried out
an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by
this report. The Company's Chief Executive Officer has concluded that the
Company's internal control over financial reporting, as of December 31,
2007 was effective.

4. This annual report does not include an attestation report of the
Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by
the Company's registered public accounting firm pursuant to temporary rules
of the Securities and Exchange Commission that permit the Company to
provide only management's report in this annual report.

b. Changes in internal controls.

The Company made no changes in its internal control over financial
reporting that occurred during the Company's fourth fiscal quarter
that has materially affected, or which is reasonably likely to
materially affect the Company's internal control over financial
reporting.

Item 8B. Other Information.

PART III.

Item 9. Directors, Executive Officers, Promoters, Control Persons and Corporate
Governance; Compliance With Section 16(a) of the Exchange Act.

Two (2) directors, constituting the entire Board of Directors, serve until
the next Annual Meeting of shareholders, or until a successor shall be elected
and shall qualify:

Name Age Principal Occupation Year First Became
Director

C.E. Rick Strattan 62 President, CEO and Chairman 1990

George L. Fails 63 Operations Manager 2001

C.E. Rick Strattan, President, CEO and Director since its 1990. Mr.
Strattan 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 served as Director of Marketing and Business Development for CDs. Mr.
Strattan was responsible for CD sales and related business development efforts.
From November, 1985 through May, 1987, Mr. Strattan 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. Mr. Strattan is a graduate of the University of Florida
receiving a B.S. 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.

George L. Fails, Operations Manager CTD, Inc. since 2000. Mr. Fails
currently serves as Operations Manager for CTD, Inc. Prior to joining the
Company, Mr. Fails served as a Detective Sergeant with the Veterans
Administration Hospital in Gainesville, Florida, with special duties as a
Predator Officer with the US Marshall's Service. From 1965 until his retirement
in 1986, Mr. Fails served with the US Army Special Forces, including several
tours in Vietnam, Salvador, and Angola. Mr. Fails also served two years with a
United States intelligence arm. Mr. Fails received his BA from the University of
the Philippines, and has also received degrees from 43 Military schools, as well
as the Federal police Academy in Little Rock, Arkansas.

Directors, including directors also serving the Company in another capacity
and receiving separate compensation therefor shall be entitled to receive from
the Company as compensation for their services as directors such reasonable
compensation as the board may from time to time determine, and shall also be
entitled to reimbursements for any reasonable expenses incurred in attending
meetings of directors. To date, the Board of Directors has received no
compensation, and no attendance fees have been paid.

Audit Committee Financial Expert

No one on our Board of Directors can be deemed to be an audit committee
financial expert. Our business model is not complex and our accounting issues
are straightforward. Responsibility for our operations is centralized within our
executive management, which is comprised of two persons. We recognize that
having a person who possesses all of the attributes of an audit committee
financial expert would be a valuable addition to our Board of Directors,
however, we are not, at this time, able to compensate such a person therefore,
we may find it difficult to attract such a candidate.

Code of Ethics

We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. Our code of ethics will be
provided to any person without charge, upon request. Requests should be
addressed to Investor Relations Department, c/o CTD Holdings, Inc., 27317 N.W.
78th Avenue, High Springs, Florida 32643.

Item 10. Executive Compensation.

SUMMARY COMPENSATION TABLE

Long-term compensation
........................................................
Annual compensation Awards Payouts
--------------------------------------------- ------------------------------- -------
Securities
Other annual Restricted underlying LTIP All other
Name & principal Year Salary Bonus compensation stock awards options/SARs payouts compensation
($) ($) ($) ($) (#) ($) ($)
=================== ======== ======== =========== ============ ============== ============ ======= ============

C.E. Rick Strattan 2007 $ 36,000 $ 25,000 -0- $ 60,000.00 (2) -0- -0- -0-
President, CEO 2006 $ 36,000 -0- -0- $ 60,000.00 (6) -0- -0- -0-
Chairman 2005 $ 36,000 $ 30,000 (5) -0- $ 76,290.00 (1) -0- -0- -0-

George L. Fails 2007 $ 30,000 -0- -0- -0- -0- -0- -0-
Operations Manager 2006 $ 22,800 -0- -0- $ 12,000.00 (4) -0- -0- -0-
2005 $ 16,478 -0- -0- $ 15,384.00 (3) -0- -0- -0-

(1) Reflects grant of 1,202,626 shares
(2) Reflects grant of 5,062,501 shares
(3) Reflects grant of 240,525 shares
(4) Reflects grant of 298,644 shares
(5) Reflects grant of 500,000 shares
(6) Reflects grant of 1,493,229 shares

On October 14, 2003, the Company entered into a one-year Employment
Agreement with C.E. Rick Strattan, the Company's president, with an annual
salary of $36,000 and $5,000 per month in restricted common shares of the
Company through June 30, 2007. For the period January 1, 2007 though June 30,
2007, the number of shares was $6,500 per month. For the period July 1, 2007,
though December 31, 2007, the number of shares was $11,500 per month. The number
of shares awarded is based on the closing value of the Company's shares on the
last day of the month in which the shares are awarded. The Company has agreed to
register Mr. Strattan's shares awarded pursuant to his employment contract. This
contract was extended through December 31, 2008, at a base annual salary of
$84,000 and $12,500 per month in stock.

Effective January 1, 2004, the Company entered into a one-year Employment
Agreement with George L. Fails to serve as Operations Manager. Mr. Fails is
compensated $1,900 monthly, plus $1,000 per month in restricted common shares of
the Company, based on the closing value of the Company's shares on the last day
of the month in which the shares are awarded. No shares were awarded in 2006.
This contract was extended through December 31, 2008, at a base annual salary of
$36,000 and $1,000 per month in stock.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.

The following table shows the ownership of the Common Stock of the Company
on March 11, 2008, by each person who, to the knowledge of the Company, owned
beneficially more than five percent (5%) of such stock, the ownership of each
director, and the ownership of all directors and officers as a group. Unless
otherwise noted, shares are subject to the sole voting and investment power of
the indicated person.

Names and Address of Individual Amount and Nature of Approximate %
or Identity of Group Beneficial Ownership of Class

C.E. Rick Strattan ....................... 4,441,466 33.88%
4123 N.W. 46th Avenue
Gainesville, FL 32606

George L. Fails............................. 741,091 5.65%
2420 N.W. 142nd Avenue
Gainesville, FL 32609

Aspatuck Holdings, Inc. .................... 2,750,000 20.98%

Kiaran Nicole Brooks ...................... 830,000 6.33%
4123 N.W. 46th Avenue
Gainesville, FL 32606

All Officers and Directors as a group ...... 5,182,557 39.53%

Equity Compensation Plan Information

Number of Number of
securities to be securities remaining
issued upon exer- available for future
cise of outstand- Weighted-average issuance under equity
ing options, exercise price of compensation plans
warrants, and outstanding options, (excluding securities
Plan category and rights warrants and rights reflected in column (a))
(a) (b) (c)
-------------------- ------------------- -------------------- ------------------------

Equity compensation
plans approved by None Not Applicable Not Applicable
security holders

Equity compensation
plans not approved * * * * * * * * * * * See Note 1 to Table (below) * * * * * * * * * * *
by security holders
------------------- -------------------- ------------------------
Total
=================== ==================== ========================

Notes to Equity Compensation Plan Table:

Note 1 -- The Company has employment agreements terminating on December 31, 2007
with two employees. These agreements require the Company to compensate these
employees, collectively, with $6,000 per month in restricted common shares of
the Company based on the closing value of the Company's shares on the last day
of the month in which the shares are awarded

Item 12. Certain Relationships and Related Transactions, and Director
Independence.

Mr. Strattan periodically advances the Company short-term loans and defers
receipt of salary. The Company owes the stockholder $21,330 at December 31,
2007. The loan is unsecured and interest accrues at 5%. Interest expense related
to the loan totaled $131 for the year ended December 31, 2007.

Item 13. Exhibits.

Exhibits Page

(2) Plan of purchase, sale, reorganization, arrangement,
liquidation, or succession

(3) Articles of incorporation and by-laws

(i) Articles of Incorporation filed August 9, 1990 * None

(ii) By-Laws. * None

(iii) Certificates of Amendment to the Articles of
Incorporation filed November 18, 1993 and
September 24, 1993. * None

(4) Instruments defining the rights of security
holders, including indentures

(a) Specimen Share Certificate for Common Stock. * None

(6) No exhibit required N/A

(9) Voting Trust Agreement and amendments None

(10) Material Contracts

(10.1) Agreement of Shareholders dated November 11, 1993
by and among C.E. Rick Strattan, Garrison Enterprises,
Inc. and the Company. * None

(10.2) Lease Agreement dated July 7, 1994**. None

(10.3) Consulting Agreement dated July 29, 1994 between
the Company and Yellen Associates. * None

(10.4) License Agreement dated December 20, 1994 between
the Company and Herbe Wirkstoffe GmbH. * None

(10.5) Joint Venture Agreement between the Company and
Ocumed, Inc. dated May 1, 1995, incorporated by
reference to the Company's Form 10-QSB for the
quarter ended June 30, 1995.** None

(10.6) Extension of Agreement between the Company and Herbe
Wirkstoffe GmbH.*** None
(10.7) Lease Extension+

(10.8) Loan Agreement with John Lindsay+

(10.9) Small Potatoes Contract+

(10.10) Employment Agreement with C.E. Rick Strattan dated
May 30, 2001++

(10.11) Employment Agreement of C.E. Rick Strattan dated
October 14, 2003+++

(10.12) Employment Agreement of George L. Fails dated
October 14, 2003****

(11) Statement re: computation of per share earnings Note 1(k)
to Financial
Statements

(12) No exhibit required N/A

(13) Annual report to security holders for the last
fiscal year, Form 10-Q or 10-QSB or quarterly report
to security holders

(14) Code of Ethics

(16) Letter on changes in certifying accountant*** None

(18) Letter on change in accounting principles None

(21) Subsidiaries of the small business issuer None

(22) Published Report regarding matters submitted to vote of
security holders None

(23) Consent of experts and counsel None

(24) Power of Attorney None

(31) Rule 13a-14(a)/15d-14a(a) Certifications****

(32) Section 1350 Certifications****

(99) Additional Exhibits

(100) XBRL-Related Documents

* Incorporated by reference to the Company's Form 10-SB filed with the
Securities and Exchange Commission on February 1, 1994.

** Incorporated by reference to the Company's Form 10-KSB filed with the
Securities and Exchange Commission on March 29, 1997.

*** Incorporated by reference to the Company's Form 10-KSB filed with the
Securities and Exchange Commission on March 28, 2000.

**** Filed herewith.

+ Incorporated by reference to the Company's Form 10-KSB filed with the
Securities and Exchange Commission on April 2, 2001.

++ Incorporated by reference to the Company's Form 10-KSB filed with the
Securities and Exchange Commission on April 1, 2002.

+++ Incorporated by reference to Form S-8 filed December 1, 2003.

Item 14. Principal Accountant Fees and Services.

Audit Fees

The aggregate fees billed for the last fiscal year for professional
services rendered by the principal accountant, Baumann, Raymondo & Company for
the audit of the Company's annual financial statements and review of financial
statements included in the Company's Form 10-QSB or services that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for those fiscal years was $33,250.00.

Audit-Related Fees

No fees were billed during the last fiscal year for any assurance and
related services by Baumann, Raymondo & Company that are not reported under the
caption "Audit Fees".

Tax Fees

No fees were billed during the last fiscal year for professional services
rendered by Baumann, Raymondo & Company for tax compliance, tax advice, or tax
planning.

All Other Fees

No other fees were billed during the last fiscal year for professional
services provided by Baumann, Raymondo & Company.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

CTD HOLDINGS, INC.

By: /s/ C.E. Rick Strattan
---------------------------------
C.E. RICK STRATTAN,
Chief Executive Officer
Chief Operating Officer
Principal Accounting Officer
Date: April 4, 2008

In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

By: /s/ C.E. Rick Strattan
---------------------------------
C.E. RICK STRATTAN
Chief Executive Officer
Chief Operating Officer
Principal Accounting Officer
Director
Date: April 4, 2008

By: /s/ George L. Fails
---------------------------------
GEORGE L. FAILS
Director
Date: April 4, 2008