10QSB 1 0001.txt 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, 2000. ____ 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.) 3713 S.W. 42nd Avenue, Suite 3, Gainesville, Florida, 32608-6581 (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: 352-375-6822 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 befiled by Section 12, 13 or 15 (d) of the Exchange Act after the distribution ofsecurities under a plan confirmed by a court. No. Applicable only to corporate issuers As of November 10, 2000, the Company had outstanding 3,979,195 shares of its common stock. Transitional Small Business Disclosure Format (Check One): No. PART I: Financial Information CTD HOLDINGS INC. CONSOLIDATED BALANCE SHEET (Unaudited) ASSETS September 30,2000 -------------- CURRENT ASSETS Cash and cash equivalents $ - Accounts receivable 54,044 Inventory 60,576 Deferred tax asset 15,000 Notes receivable 20,603 Other current assets 20,520 ------------ Total current assets 170,743 ------------ Property and equipment, net 436,028 ------------ OTHER ASSETS Intangibles, net 26,172 Deferred tax asset 180,000 ------------ Total other assets 206,172 ------------ TOTAL ASSETS $ 812,943 ============ (continued) F-1 CTD HOLDINGS, INC. CONSOLIDATED BALANCE SHEET (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY September 30, 2000 ------------------ CURRENT LIABILITIES Accounts payable and accrued expenses $ 188,117 Current portion of long-term debt 26,003 Line of Credit 25,501 Due to Shareholder 13,175 ------------- Total current liabilities 252,796 ------------- Long-Term debt, less current portion 179,309 ------------- STOCKHOLDERS' EQUITY Class A common stock, par value $.0001 per share, 9,900,000 shares authorized, 3,835,958 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 384 Additional paid-in capital 1,883,519 Accumulated deficit (1,503,065) -------------- Total stockholders' equity 380,838 ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 812,943 ============= 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, ---------------------- ---------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- PRODUCT SALES $ 76,302 $ 125,810 $ 313,130 $ 399,060 COST OF PRODUCTS SOLD 18,664 19,199 94,556 44,984 ---------- ---------- ---------- ---------- GROSS PROFIT 57,638 106,611 218,574 354,076 CONSULTING SERVICES AND OTHER - 431 - 8,221 OPERATING REVENUE SELLING, GENERAL AND 122,179 105,067 407,561 287,900 ADMINSISTRATIVE EXPENSE ---------- ---------- ---------- ---------- INCOME(LOSS)FROM OPERATIONS (64,541) 1,975 (188,987) 74,397 ---------- ---------- ---------- ---------- OTHER INCOME (EXPENSE) Investment and other income(loss) (159) 2,308 118 (695) Interest expense (3,224) (4,952) (14,633) (5,826) ---------- ---------- ---------- ---------- Total other income (expense) (3,383) (2,644) (14,515) (6,521) MINORITY INTERESTS IN - 1,239 - 1,558 SUBSIDIARY --------- ---------- --------- ---------- INCOME(LOSS)BEFORE INCOME TAX (67,924) 570 (203,502) 69,434 INCOME TAX EXPENSE - 0 - 17,000 ----------- ---------- ---------- ---------- NET INCOME (LOSS) $ (67,924) $ 570 $(203,502) $ 52,434 =========== ========== ========== ========== NET INCOME (LOSS) PER COMMON SHARE $ (.02) $ 0.00 $ (.06) $ 0.03 =========== ========== ========== ==========WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 3,763,440 1,551,577 3,639,392 1,516,724 =========== ========== ========== ========== 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, -------------------------- 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (203,502) $ 52,434 ------------ ------------ Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 16,444 10,923 Minority interests in subsidiary - (1,558) Loss on sale of investments - 3,122 Stock issued for services 30,000 23,656 Increase in accounts receivable (32,780) (59,083) Decrease (increase) in inventory 24,673 (57,675) Decrease (increase) in other current assets 25,500 (15,468) Decrease in deferred income taxes - 17,000 Increase in accounts payable and accrued expenses 129,351 61,521 ------------ ------------ Total adjustments 193,188 (17,562) ------------ ------------ NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (10,314) 34,872 ----------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (105,687) (116,012) Repayment of employee loan 15,387 - Proceeds from sale of investment - 10,261 ------------ ----------- NET CASH USED IN INVESTING ACTIVITIES (90,300) (105,751) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long term debt - 32,494 Payments on long term debt (18,243) (29,043) Net proceeds on line-of-credit 22,207 0 Payments on loan payable to stockholder (6,775) 0 Proceeds from sales of stock 30,000 44,721 Stock repurchase - (6,389) ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 27,189 41,783 ------------ ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (73,425) (29,096) CASH AND CASH EQUIVALENTS, beginning of period 73,425 36,883 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ - $ 7,787 ============ ============
(Continued) F-4 CTD HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWSIncrease (Decrease) in Cash and Cash Equivalents (Unaudited)
Nine Months Ended September 30, -------------------------- 2000 1999 ------------ ------------ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest $ 14,633 $ 4,952 ============ ============ SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES Purchase of Land, building and equipment with debt financing $ 13,160 $ 204,756 =========== ============ Acquisition of goodwill by issuing common stock $ 10,000 $ 14,000 =========== ============ Common Stock issued for services $ 30,000 $ - =========== ============ Stock issued to officer in satisfaction of bonus Accrual $ 7,800 $ - ========== ============ Stock issued to consultant for prepaid public relations services $ 40,000 $ - ========== ============
See Accompanying Notes to Financial Statements F-5 CTD HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000(Unaudited) The information presented herein as of September 30, 2000, and for the six and nine months ended September 30, 2000, and 1999, is unaudited. (1) BASIS OF PRESENTATION: The accompanying financial statements include CTD Holdings, Inc., (formerly known as Cyclodextrin Technologies Development, 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 and nine month period's ended September 30, 2000, are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. 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, 1999. (2) PRIVATE PLACEMENT OF STOCK: Beginning in 1999, the Company began offering a total of 1,300,000 shares of common stock under a private placement memorandum to expire September 10, 2000. In 1999, 40,000 shares were sold for $15,000, less direct offering costs of $ 5,279. For the nine months ended September 30, 2000, 20,000 shares were sold for $ 30,000. In 1999, the Company also sold 160,000 of common stock for $35,000. (3) NET LOSS PER COMMON SHARE: Net 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 loss per share information to be computed using a simple weighted average of common shares outstanding during the periods presented. SFAS 128 eliminated the previous requirement that earnings per share include the effect of any dilutive common stock equivalents in the calculation. F-6 CTD HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (Unaudited) (4) COMMITMENTS AND CONTINGENCIES: On March 1, 2000, the Company entered into a one year public relation contract with a consultant. The Company issued the consultant 200,000 shares of common stock. The Company valued the shares at $40,000, approximately 50% less than the bid price on the contract date. The Company recorded a prepaid asset of $40,000, which is being amortized over one year, the life of the contract. On April 1, 2000, the Company adopted a stock bonus plan for the Company's president. The amount of stock due each month is equal to $5,000 divided by 50% of the lowest stock trade amount for that month. The Company issued 75,566 shares and expensed, $15,000 and $30,000 during the three months, and nine months ended September 30, 2000. (5) CORPORATE CHANGES: In April 2000, the Company changed its name to CTD Holdings, Inc. from Cyclodextrin Technologies Development, Inc. Also in April 2000, the Company effected a 2 for 1 stock split of its outstanding common stock. The accompanying financial statements and notes have been restated for all periods presented to reflect these changes. (6) SEGMENTS: During the second quarter of 1999, the Company began cultivating exotic mushrooms and herbs. The Company now has two segments, Cyclodextrin products and mushroom products. Information specific to these two segments follows: Nine Months Ended September 30, --------------------------------------------------------------- 2000 1999 ----------------------------- -------------------------------- Cyclodextrins Mushrooms Cyclodextrins Mushrooms ------------- --------- ------------- --------- Sales $ 289,052 $ 24,078 $ 399,060 $ - Income (loss) from operations $ 4,998 $(208,500) $ 74,397 $ - September 30, 2000 ------------------- Cyclodextrins Mushrooms ------------- --------- Total assets $ 425,000 $ 388,000
F-6 Item 2. Management Discussion and Analysis or Plan of Operation PART II: Other Information (MD&A) Management Discussion & Analysis As of 9/30/00 CTD Holdings, Inc. Liquidity and Capital Resources As of September 30, 2000, the Company's working capital was ($82,053) compared to $120,186 at December 31, 1999. Working capital continued to decrease as a result of continued losses in the third quarter ($68,000); however the magnitude of the third quarter loss was reduced significantly (41%)from the second quarter loss ($115,500. This loss reduction came about as a result of a $20,000 reduction in expenses (primarily personnel costs) and a $20,000 increase in sales over the previous quarter. Management intends to maintain this trend of increasing product sales and decreasing expenses in the fourth quarter, with the goal of achieving a near positive working capital situation by year end 2000. The Company operates two business segments, cyclodextrin products (CTD) and mushroom cultivation (NSME). The Company continues to experience volatility in CTD sales. The Company's CTD sales at September 30, 2000 ($289,000) were only 72% of 1999 sales ($399,000), but management forecasts that a strong fourth quarter will allow the Company to achieve total sales for 2000 to exceed $400,000 but to be less than 1999 total sales of $557,000. Combined with continued reduction in expenses, management expects CTD sales to increase coupled with increased revenue from NSME sales for the remainder of 2000, to improve liquidity. The Company has completed a preliminary analytical study of the ingredients in its Shiitake and Reishi mushrooms extracts. The goal of these studies is to prove the existence in these extracts of certain natural ingredients that are known to have medicinal properties. Depending on the conclusions reached after evaluating the results of these analytical experiments, the Company hopes that it will be able to move to the next phase of its project to create complexes of these natural ingredients and begin clinical trials. The Company is in the first year of a two year extension of its lease for its existing 3000 square-foot office and lab facility. Rent for the space remains at just under $2000 per month. The Company will probably not move from this facility into the building on its newly purchased property until 2001. Part of the office staff has already moved to the new facility. The timing of the completed move will depend on the availability / allocation of funds necessary to complete the needed renovations. The Company intends to sublet its existing space when that move is completed, certainly before the end of the two year extension, November, 2001. In keeping with its commitment to use the Internet as its major advertising and public relations outlet, the Company has entered into an agreement with its current, local ISP and Web Site managing company, Livewire, to significantly upgrade its current Web Site. The Company has invested $30,000 for this upgrade, which includes substantial cosmetic and operational alterations and expansion of the revenue producing databases. The upgraded site became "live" in late October replacing the old site. As a result of this upgrade, the Company expects the site to begin generating revenue of approximately $1000 per month by the end of the year. In early May of this year, the Company responded to increased demand for its stock by authorizing and implementing a 2 for 1 forward split of its common stock (May 1 - date of record; May 20 - pay date; May 22 - execute date). Management believes that this action is a good way to begin to alleviate the mechanical trading problem of too small a float in the market of its common stock. Management believes that an increase in the Company's market capitalization will enhance the probability of the Company's success in acquiring other companies, implementing one part of its strategic plan to file for NASDAQ listing in 2001. To further enhance the successful implementation of its strategic plan, the Company changed the name of Cyclodextrin Technologies Development, Inc. to CTD Holdings, Inc. New stock symbol (CTDH). The Company created a new subsidiary, Cyclodextrin Technologies Development, Inc. (CTD) to operate its cyclodextrin business entity. The Company's other subsidiary, NSME, Inc. (NSME) operates a mushroom cultivating farm. The resulting holding company structure will facilitate the legal implementation of future acquisitions and stock transactions. Results of Operations Sales of cyclodextrin and related manufactured complexes are historically highly volatile. In efforts to offset this volatility, the Company continues to expand its revenue producing activities in CD related research and development services for unrelated companies and expand its line of manufactured products. During the last quarter of 1999, the Company began the start up of a mushroom farm that will ultimately provide products for the rapidly expanding $5 billion natural medicinals industry, thereby diversifying its revenue base into an even greater number of manufactured products. The Company has completed the start-up phase of its natural medicinals venture on its 40-acre farm in High Springs, Florida acquired in 1999. Through its subsidiary, NSME, Inc. (NSME), the company has successfully established a growing sales base for its edible exotic mushrooms. In the third quarter of 2000, NSME sold more than $9,000 of certified organic Shiitake mushrooms and produce. At the end of July, NSME had one of two new grow houses on line for a total of three; the fourth grow house became operational in early August. The added capacity will allow the Company to produce 2,000 lbs. of mushrooms per month by the end of 2000. The Company has instituted a new management structure that is responsible for meeting prescribed production quotas and is undertaking a new investigation of the demand that can be expected over the next two year for its mushroom production. Total product sales increased from $55,000 in the second quarter to $76,630 in the third quarter of 2000; however, year to date sales are only 78% of the sales total for the nine months of 1999. Again, the volatility of CTD's sales continues to be unpredictable and primarily responsible for the decrease. Sales of CTD products for the fourth quarter are expected to exceed $100,000 . Even so, management expects to reach only 80-85% of 1999 sales levels for the year 2000. Product sales of CTD are primarily to large pharmaceutical and food companies for research and development purposes. Sales of both products and services continue to be concentrated among a few large customers. Sales of NSME products are currently to local restaurants and produce distributors. The demand by these users will exceed NSME's ability to supply them for the immediate future. Even so, NSME is beginning to introduce its products to national distributors and larger supermarkets. NSME is also selling its exotic mushrooms through an Internet portal at www.mushroomshoppe.com to high-end customers including one 5-star restaurant. The Company's gross profit margin (GPM) increased from the second quarter (57 %) to the third quarter (75%); however, for the nine months ended September 30,2000, the GPM was 69% versus 89% for the same period in 1999 This decrease is due to a combination of a change in the Company's product mix from 1999 to 2000, and as a result of lower margins on the NSME products. The Company does not expect its GPM to decrease below 50% for the remainder of 2000 as a result of these changes. SG&A expenses decreased ($121,179, vs. $ 142,399) from the second quarter 2000 to the third quarter 2000. SG&A for 2000 is up significantly compared to 1999 due to the addition of the NSME operations at the end of 1999. Management intends to use the existing levels of expenses as a not-to-exceed target for future growth of subsidiaries and addition of new subsidiaries. The Company's operating loss for the three months ended September 30, 2000 was $67,924 compared to the loss of $115,726 for the three months ending June 30,2000. The decrease in loss is due to the slight increase in sales experienced by CTD from the second quarter to the third quarter ($55,000 vs. $76,630) combined with the $20,000 reduction in expenses (primarily personnel costs)for the same period. The Company had a loss of ($203,502) for the nine months ended September 30, 2000 compared to net income of $52,434 for the nine months ended September 30, 1999. The primary reason for the decrease in profitability is due to the impact of start-up of the NSME operations beginning at the end of 1999. Management has moved NSME out of the start-up phase into the operating phase and will maintain expenses at a level necessary to support efficient operations; combined with increased revenues from greater production of mushrooms, management intends to reduce NSME's losses substantially during the remainder of 2000 to a level that will permit the company to realize a net profit for the fourth quarter. The Company will continue to introduce new products through its subsidiaries that will enhance profitability; and it will continue to implement its strategy of creating or acquiring operational affiliates and/or subsidiaries that will use CD's in herbal medicines, waste-water remediation, pharmaceuticals, and foods. 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 statement. Actual results may differ materially from those projected in the forward-looking statements. These forward-looking statements involve risks and uncertainties, including, but not limited to, the following: demand for cyclodextrin and mushrooms; changes in governmental laws and regulations surrounding various matters, such as labeling disclosures; production and pricing levels of important raw materials; and difficulties or delays in the development, production, testing and marketing of products; product margins and customer product acceptance. Item 2. Changes in Securities and Use of Proceeds The following common shares were sold by the company on the date shown and for the consideration stated in reliance on Section 4(2) of the Securities Act of 1933: Shareholder No. Shares Consideration Date C.E. Rick Strattan 32,051 Bonus 7/13/2000 C.E. Rick Strattan 31,250 Bonus 8/5/2000 C.E.Rick Strattan 35,461 Bonus 9/7/2000 C.E. Rick Strattan 38,461 Bonus 10/3/2000
Item 6. Exhibits and Reports on Form 8-K None. (a) Exhibits Exhibit Description Page (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession None (4) Instruments defining the Rights of Security Holders None (10) Material Contracts None (11) Statement re: Computation of Per Share Earnings Note 3, Financial Statements (15) Letter re: Unaudited Interim Financial Information None (18) Letter re: Change in Accounting Principles None (19) Report Furnished to Security Holders None (22) Published Report re: Matters Submitted to Vote of Security Holders None (23) Consents of Experts and Counsel None (24) Power of Attorney None (27) Financial Data Schedule (99) Additional Exhibits None (b) Reports on Form 8-K: None SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC. SIGNATURE TITLE DATE _______ /S/_______ President, November 4, 1999 C.E. Rick Stratton Chief Officer, Chief Financial Officer