10KSB 1 ctdh10ksb2004.txt CTD HOLDINGS 10-KSB 2003 U.S. 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 (Fee Required) For the fiscal year ended December 31, 2003 ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required) 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 (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 is not 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 ( ) State issuer's revenues for its most recent fiscal year: 396,428. State the aggregate market value of the voting stock held by non-affiliates computed by reference at the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days: $1,424,349 based on the average high ($.50) and low ($.40) price as of March 26, 2004, of $.45 per share. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: 5,791,220 shares of Common Stock as of March 26, 2004. DOCUMENTS INCORPORATED BY REFERENCE None 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 that the application of CDs in both OTC and ethical ophthalmic products provides the greatest financial opportunity in the pharmaceutical industry 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 its 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. The Company's strategy is to acquire companies that are just beginning to apply CD technology in current product lines. By applying CTD, Inc.'s expertise in all relevant areas of CD applications, providing new products from the Company's portfolio of CD-containing products, and assisting in the infusion of new capital for the marketing and distribution of the acquired business's products, the Company intends to grow the acquired business and then sell it or spin it off as a public company. The Company's current acquisition areas of interest are 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 that 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 and in Europe for at least 15 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). As of December 2002, BCD and GCD have been approved as GRAS for use in the United States; ACD will follow by 2005. BCD is acceptable for use in pharmaceuticals in the United States, Europe and Japan. Applications of CDs in personal products and for industrial uses have appeared in many patents and patent applications. Proctor & 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 are already growing as the price of the manufactured CDs decrease and are increasingly 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 two dozen 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 10 times that of the CD itself. CD Products CTD, Inc.'s CD products include Trappsol(R), Aquaplex(R), and AP(TM)-Flavor product lines. The Trappsol product line consists of approximately 250 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 the leading Cyclodextrin information site on the Internet. CTD purchases CD's from commercial manufacturers around the world including: Wacker Chemie - Munich, Germany; Ensuiko Sugar Refining Co., Ltd. - Yokohama, Japan; 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 and fine chemicals when those items are not proprietary or restricted by the customer. Business Strategy Our strategy is to generate substantial growth of revenues and assets through sales of acquired companies selling CD-related goods and services. From inception through the current year, sales of CDs and CD derivatives by CTD, Inc. (a wholly-owned subsidiary of the Company) 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 almost all of the Company's revenues. Transition to the more value-added complexes continues and is desirable for increased profitability since higher margins can be maintained for these products. While the bulk price of commercialized CD's has gone down, it appears that CTD, Inc.'s expanding the CD product line has compensated for the necessary competitive price reductions. CTD, Inc. had more than 30 customers in 2003, receiving more than $1,000 of products and four customers of that 30 that purchased an average of $70,000 of products. All were repeat customers of at least three years. The Company intends to concentrate its business development efforts in the ophthalmic pharmaceutical and environmental industries while continuing to solidify its technical leadership position. 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 with its acquisitions. 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 that the failure of businesses to exchange information about CD molecules has hindered a more rapid commercialization of CDs as safe excipients. We believe that our philosophy of partnering and sharing will act as a catalyst to create momentum overcoming the inertia created by the previous conservatism and secrecy. CTD, Inc.'s 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 WEB Page and "site" on the world-wide web and obtaining a unique and descriptive domain name: "cyclodex.com". We intend to work with clients in countries whose 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. The Company intends to generate additional revenue through obtaining rights to certain patents that it will sublicense to appropriate organizations or that it will use to help acquired companies to develop their own proprietary products. Revenue for these acquired companies 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 food-related 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 CDs) 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. We intend to form a more formal business relationship with Cyclolab in Hungary by creating a Cyclolab-USA laboratory facility and thereby strengthen our competitive advantage. Discussions between the principals of Cyclolab and CTD have been ongoing for more than 5 years. Potential relationships which have been discussed include joint venture arrangements, the Company's outright acquisition of Cyclolab and the employment of Cyclolab personnel to create Cyclolab-USA. There is no assurance that the Company will be able to reach a formal business relationship with Cyclolab. 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 that 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 at first to introduce products that will not be regulated by the FDA as drugs because all of its ingredients are natural products or are 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 In 2003, the Company employed four 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 Properties. In 2000, the Company bought approximately 40 acres in Alachua County, Florida, 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. The Company has discontinued mushroom growing operations, but 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. Item 3. Legal Proceedings. None Item 4. Submission of Matters to a Vote of Security Holders. None Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. 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. 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 2000 First Quarter $ $ Second Quarter $ 0.438 $ 0.313 Third Quarter $ 0.313 $ 0.203 Fourth Quarter $ 0.203 $ 0.203 2001 First Quarter $ 0.141 $ 0.141 Second Quarter $ 0.15 $ 0.11 Third Quarter $ 0.15 $ 0.07 Fourth Quarter $ 0.11 $ 0.10 2002 First Quarter $ 0.086 $ 0.086 Second Quarter $ 0.082 $ 0.076 Third Quarter $ 0.065 $ 0.065 Fourth Quarter $ 0.049 $ 0.047 2003 First Quarter $ 0.070 $ 0.085 Second Quarter $ 0.050 $ 0.050 Third Quarter $ 0.050 $ 0.050 Fourth Quarter $ 0.730 $ 0.050
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 December 31, 2003, 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 66. Dividend Policy The Company will not pay any cash dividends on its common stock in 2003 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. Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Our cash and cash equivalents decreased to approximately $8,000 as of December 31, 2003 compared to approximately $46,000 as of December 31, 2002. This decrease was simply a timing issue around the receipt of a large receivable payment as reflected in the $134,000 accounts receivable balance. Current assets as of December 31, 2003 were actually 50% higher than the year before. As of December 31, 2003, our net working capital was approximately $193,000 compared to approximately $115,000 at the end of 2002. The improvement in working capital resulted from net income for the year and $25,000 in a current deferred tax asset. We believe that working capital will continue to improve in 2004 as a result of the continued expansion of the Cyclodextrin industry while we maintain overhead costs at a minimum. During 2003, we began renovating and updating our corporate offices and have invested approximately $50,000 through December 31, 2003. We plan to invest an additional $15,000 to complete these renovations during 2004. We refinanced our mortgage on the 40-acre property at a more favorable variable interest rate, resulting in a 3% decline in the effective rate. This change reduced interest expense and increased cash flow. Results of Operations Sales of Cyclodextrins and related manufactured complexes are historically highly volatile. In efforts to offset this volatility, we continue to expand our revenue producing activities in Cyclodextrin related research and development services for unrelated companies while expanding our line of distributed products. Our product sales are primarily to large pharmaceutical, food, and diagnostics companies for research and development purposes. Total product sales for 2003 were approximately $395,000, a 24% decrease over 2002 sales of $522,000. This change can be attributed to the normal volatility of our sales. Our major customers continue to buy products consistently. In 2002, 4 companies accounted for 75% of our business. In 2003, 3 companies accounted for 74% of our sales revenues; one company alone accounted for 43% of sales. These major companies continue to buy from us and they're continuing to buy more. This growing business from repeat customers occurred with the smaller volume customers as well. In 2003, more than 50% of the Company's customers either increased or maintained their purchase levels. Our gross profit margin of more than 88% remained consistently strong for 2003 compared to 84% for 2002. Our SG&A expenses increased to approximately $264,000 in 2003 from approximately $240,000 in 2002 primarily as a result of the issuance of a stock bonus of $50,000 to the President/CEO and the one-time expenses of approximately $10,000 for PR/IR services, partially offset by further reductions in overhead. Total other expenses decreased to approximately $17,000 in 2003 compared to approximately $32,000 in 2002. This decrease due to our refinancing our mortgage during 2003 and reducing our interest expense. We also had a loss on equipment disposals in 2002 that did not reoccur in 2003. Based on our profitability for 2003 and 2002, we revaluated our valuation allowance on our deferred tax asset. Our deferred tax asset is based on our net operating loss carryforward. We determined that our valuation allowance should be reduced form 100% to 35%, resulting in an income tax benefit of $225,000 for 2003. 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. In 2002, we became 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 that 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 law and regulations surrounding various matters, such as labeling disclosures; production and pricing levels of important raw materials; and difficulties of delays in the development, production, testing and marketing of products; product margins and customer product acceptance. Item 7. Financial Statements [LETTERHEAD OF JAMES MOORE & CO.] INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of CTD Holdings, Inc.: We have audited the accompanying consolidated balance sheet of CTD Holdings, Inc. and subsidiaries as of December 31, 2003, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 2003 and 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits 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 audits provides 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 subsidiaries as of December 31, 2003, and the results of its operations and its cash flows for the years ended December 31, 2003 and 2002, in conformity with accounting principles generally accepted in the United States of America. /s/James Moore & Company January 14, 2004 Gainesville, Florida F - 1 CTD HOLDINGS, INC. CONSOLIDATED BALANCE SHEET DECEMBER 31, 2003
ASSETS CURRENT ASSETS Cash and cash equivalents $ 7,757 Accounts receivable 134,022 Inventory 79,183 Deferred tax asset 25,000 Other 23,229 ------------- Total current assets 269,191 ------------- PROPERTY AND EQUIPMENT, NET 379,300 ------------- OTHER Intangibles, net 14,476 Deferred tax asset 200,000 ------------- Total other assets 214,476 ------------- TOTAL ASSETS $ 862,967 =============
The accompanying notes to consolidated financial statements are an integral part of this statement. F-2 CTD HOLDINGS, INC. CONSOLIDATED BALANCE SHEET DECEMBER 31, 2003 (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 45,791 Current portion of long-term debt 9,941 Current portion of stockholder loan 20,000 ------------- Total current liabilities 75,732 ------------- LONG-TERM LIABILTIES Long-term debt, less current portion 161,003 Due to stockholder, less current portion 59,967 ------------- Total long-term liabilities 220,970 ------------- STOCKHOLDERS' EQUITY Class A common stock, par value $.0001 per share, 100,000,000 shares authorized, 5,791,220 shares issued and outstanding 580 Class B non-voting common stock, par value $ .0001 per share, 10,000,000 shares - authorized, 0 shares issued and outstanding Additional paid-in capital 2,029,398 Accumulated deficit (1,463,713) ------------- Total stockholders' equity 566,265 ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 862,967 =============
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, 2003 AND 2002
2003 2002 ------------- ------------- PRODUCT SALES $ 394,532 $ 522,372 COST OF PRODUCTS SOLD 45,433 84,483 ------------- ------------- GROSS PROFIT 349,099 437,889 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 263,495 240,536 ------------- ------------- INCOME FROM OPERATIONS 85,604 197,353 ------------- ------------- OTHER INCOME (EXPENSE) Investment and other income 6,973 23,251 Interest expense (22,599) (30,924) Loss on disposal of equipment - (24,100) ------------- ------------- Total other income (expense) (15,626) (31,773) ------------- ------------- INCOME BEFORE INCOME TAXES 69,978 165,580 INCOME TAXES 225,000 - ------------- ------------- NET INCOME $ 294,978 $ 165,580 ============= ============ NET INCOME PER COMMON SHARE: $ .06 $ .03 ------------ ------------ Weighted average number of common shares outstanding 5,004,919 4,791,220 ============ ============
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, 2003 AND 2002 COMMON STOCK ADDITIONAL TOTAL PAID-IN ACCUMULATED STOCKHOLDERS' SHARES AMOUNT CAPITAL DEFICIT EQUITY ----------- ----------- ------------ ------------- ------------ Balance, December 31, 2001 4,791,220 $ 480 $ 1,954,498 $ (1,924,271) $ 30,707 Net Income - - - 165,580 165,580 ------------ ------------ ------------ ------------ ------------ Balance, December 31, 2002 4,791,220 480 1,954,498 (1,758,691) 196,287 Shares issued for services 1,000,000 100 49,900 - 50,000 Company expenses paid by Stockholder - - 25,000 - 25,000 Net Income - - - 294,978 294,978 ------------ ------------ ------------- ------------ ------------ Balance, December 31, 2003 5,791,220 $ 580 $ 2,029,398 $(1,463,713) $ 566,265 ============ ============ ============= ============ ============ The accompanying notes to consolidated financial statements are an integral part of these statements.
F-5 CTD HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS DECEMBER 31, 2003 AND 2002 Increase (Decrease) in Cash and Cash Equivalents 2003 2002 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 294,977 $ 165,580 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 37,815 24,190 Deferred income taxes (225,000) - Loss on disposal of equipment - 24,100 Valuation allowance - 12,907 Stock issued for services 50,000 - Bad debts 4,854 - Increase in accounts receivable (97,741) (18,575) Increase in inventory (15,037) (32,181) Decrease (Increase) in other current assets (7,500) 1,305 Increase (decrease) in accounts payable and accrued expenses 22,596 (129,195) ---------- ---------- Total adjustments (230,013) (117,449) ---------- ---------- Net cash provided by operating activities 64,964 48,131 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (54,716) (17,877) Purchase of intangibles (11,174) - Other - 748 ----------- --------- Net cash used for investing activities (65,890) (17,129) ----------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Payment on long-term debt (8,628) (8,199) Payments on loan from stockholder, net (28,933) 13,005 Proceeds from sale of equipment - 21,877 Net payments on line of credit - (19,631) ---------- -------- Net cash provided (used for) by financing activities (37,561) 7,052 ---------- -------- Net increase (decrease) in cash and cash equivalents (38,487) 38,054 CASH AND CASH EQUIVALENTS, beginning of year 46,244 8,190 ------------ --------- CASH AND CASH EQUIVALENTS, end of year $ 7,757 $ 46,244 =========== ========== F-6 CTD HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS DECEMBER 31, 2003 AND 2002 Increase (Decrease) in Cash and Cash Equivalents (Continued) 2003 2002 ------------ ------------ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest $ 13,472 $ 30,924 =========== ============ SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITY Vehicle acquired with debt financing $ 14,881 $ - =========== ============ Common stock issued for services $ 50,000 $ - =========== ============ Company expenses paid by shareholder $ 25,000 $ - =========== ============ The accompanying notes to consolidated financial statements are an integral part of these statements. CTD HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2003 AND 2002 (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. (h) REVENUE RECOGNITION - Revenues are recognized when products are shipped. (i) ADVERTISING - Advertising costs are charged to operations when incurred. (j) START-UP COSTS - Start-up costs are expensed as incurred. (k) 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. F-8 CTD HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2003 AND 2002 (l) RECLASSIFICATIONS - Certain amounts in the 2002 financial statements have been reclassified for comparative purposes to conform with the 2003 presentation. (m) 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: Rent expense under all operating leases was $6,345 and $11,251 for 2003 and 2002, respectively. (3) PROPERTY AND EQUIPMENT Property and equipment as of December 31, 2003, consists of: Land $ 80,000 Buildings and improvements 211,606 Machinery and equipment 84,704 Office furniture and equipment 49,738 ------------ 426,048 Less: accumulated depreciation 97,564 ------------ 328,484 Construction in progress 50,816 ------------ Property and equipment, net $ 379,300 ============ The carrying value of remaining idle long-lived assets related to a former mushroom farming operation was approximately $ 120,000 at December 31, 2003. (4) CONCENTRATIONS OF CREDIT RISK: Significant concentrations of credit risk for all financial instruments owned by the Company, are as follows: (a) DEMAND DEPOSITS - The Company has demand deposits in a financial institution that are insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 2003, the bank balance was $8,444. 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. One major customer accounted for 90% of the accounts receivable balance at December 31, 2003. The Company has no policy requiring collateral or other security to support its accounts receivable. F-9 CTD HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2003 AND 2002 (5) MAJOR CUSTOMERS AND SUPPLIERS: Sales to three customers (Sigma Chemical Company, Dade Behring and AstraZeneca, Inc.) in 2003 represented approximately 74% of total sales. Sales to four customers (Ben Venue Laboratories, Sigma Chemical Company, Dade Behring and AstraZeneca, Inc.) in 2002 represented approximately 75% of total sales. Purchases from two suppliers in 2003 represented approximately 80% of total costs of products sold. Purchases from four suppliers in 2002 represented approximately 69% of total costs of products sold. (6) LONG-TERM DEBT: Long-term debt consists of the following as of December 31, 2003: Mortgage note payable to bank, payments of $1,263 due monthly including principal and interest at 5%, collateralized by land and buildings with a cost of $210,000 $ 157,796 Note payable to financing company, payments of $288 due monthly, including principal and interest, at 6%, collateralized by vehicle with a cost of $14,881 13,148 ----------- Total long-term debt 170,944 Less current portion 9,941 ----------- Long-term debt, less current portion $ 161,003 =========== Maturities on long-term debt as of December 31, 2003 over the next five years are as follows: Year ending December 31, Amount 2004 $ 9,941 2005 10,713 2006 11,294 2007 11,907 2008 10,504 2009 and thereafter 116,585 --------- $ 170,944 ========= (7) RELATED PARTY TRANSACTIONS: The majority stockholder periodically advances the Company loans. The Company owes the stockholder $79,967 at December 31, 2003. The loan is unsecured and interest accrues at 5%. Interest expense related to the loan totaled $9,127 and $11,263 for the years ended December 31, 2003 and 2002, respectively. Principal payments are $5,000 per quarter. F-10 CTD HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2003 AND 2002 (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 the financial instruments disclosed herein 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. The following table summarizes financial instruments by individual balance sheet account as of December 31, 2003: CARRYING FAIR AMOUNT VALUE ---------- --------- FINANCIAL ASSETS Cash and cash equivalents $ 7,757 $ 7,757 Accounts receivable 134,022 134,022 ---------- --------- Total financial assets $ 141,779 $ 141,779 ========== ========= FINANCIAL LIABILITIES Accounts payable and accrued expenses $ 45,791 $ 45,791 Long-term debt 170,944 170,944 Due to stockholder 79,967 79,967 ---------- --------- Total financial liabilities $ 296,702 $ 296,702 ========== ========= The fair value of all financial instruments approximates carrying value due to the short-term maturity of the instruments. (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, 2003, unused operating loss carryforwards totaling approximately $ 1,483,000 that may be applied against future taxable income. If not used, the carryforwards will expire as follows: Year Ending December 31, Amount ----------------- ----------------- 2009 $ 730,000 2010 195,000 2017 206,000 2020 281,000 2021 71,000 ----------------- Total $ 1,483,000 ================= F-11 CTD HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2003 AND 2002 If all of the operating loss carryforwards and temporary deductible differences were used, the Company would realize a deferred tax asset of approximately $ 350,000 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. At December 31, 2002, management determined that a 100% valuation allowance was appropriate. For 2003 and 2002, the Company realized net income and utilized approximately $260,000 of its net operating loss carryforward to offset its current income tax liabilities. Management expects to maintain continued profitability in the future and realize additional benefits of its net operation loss carryforwards. At December 31, 2003 Management determined that a reduction in the valuation allowance to 35% from 100% of the future tax benefit is appropriate. Accordingly, the Company has recognized a $225,000 deferred tax asset and the resulting income tax benefit in 2003 to reflect this change in estimate. 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 estimated deferred tax asset will change in the near term and be material to the financial statements. 2003 2002 ----------- ------------ Current income tax expense $ (17,000) $ (53,000) Tax benefit of temporary differences - 5,000 Tax benefit of operating loss carryforwards 17,000 48,000 Effect of decrease in valuation allowance 225,000 - ----------- ------------ Total net tax benefit (expense) $ 225,000 $ - =========== ============ (10) SIGNIFICANT FOURTH QUARTER ADJUSTMENTS During the fourth quarter of 2003, the Company determined its valuation allowance on its deferred tax asset resulting from net operating loss carryforwards to be lower than previously recorded and reduced the valuation allowance from 100% to 35%, resulting in an income tax benefit of $225,000 in the fourth quarter of 2003. (11) CAPITAL TRANSACTIONS The Company engaged a consultant to perform services over a six month period. The majority stockholder (and President) transferred 500,000 shares of CTDH stock valued at $25,000 to the consultant on behalf of the Company. The consulting fee was recorded by the Company as an other current asset and a capital contribution by the stockholder. The consulting fee is expensed over the life of the contract. The Company issued 1,000,000 shares registered under Form S-8 to its President as a bonus. The stock was valued at $50,000 when awarded and was expensed. F-12 Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None PART III. Item 9. Directors, Executive Officers, Promoters and Control Persons; 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 57 President, CEO and Chairman 1990 George L. Fails 58 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 Viet Nam, 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 therefore 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. Item 10. Executive Compensation.
SUMMARY COMPENSATION TABLE (three fiscal years ended December 31,2000, 2001 and 2003) Annual Long Term Compensation Compensation -------------------------------------------------------------------------- Year Salary Bonus Compensation Compensation Name and Principal Position C.E. Rick Strattan 2003 $ 36,000 -0- $50,000 $ -0-(1) President, CEO 2002 $ 33,346 -0- -0- $ -0- Chairman 2001 $ 835 -0- -0- $ 59,687(2) George L. Fails 2003 $ 20,836 -0- -0- $ -0- Operations Manager 2002 $ 20,000 -0- -0- $ -0- 2001 $ 20,000 -0- -0- $ -0-
(1)Reflects grants of 1,000,000 shares (2)Reflects grants of 800,000 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 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 under the Employment Agreement in 2003. As of March 1, 2004, 38,267 shares have been awarded pursuant to the Employment Agreement. The Company has agreed to register Mr. Strattan's shares awarded pursuant to his employment contract. Effecitve 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. As of March 1, 2004, 7,654 shares have been awarded pursuant to the Employment Agreement. On November 17, 2003, the Company entered into an agreement with Big Apple Consulting of Longwood, Florida, to provide PR/IR and financial consulting services. The term of the contract was for six months. Mr. Strattan transferred 500,000 common shares held by him to Big Apple as a consulting fee. Item 11. Security Ownership of Certain Beneficial Owners and Management. The following table shows the ownership of the Common Stock of the Companyon March 26, 2004, 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 or .........Amount and Nature of Approximate % Identity of Group ..........................Beneficial Ownership of Class C.E. Rick Strattan ....................... 2,574,267(1)(2) 44.16% 4123 N.W. 46th Avenue Gainesville, FL 32606 George L. Fails............................. 47,654(3) 0.82% 2420 N.W. 142nd Avenue Gainesville, FL 32609 All Officers and Directors as a group ...... 2,621,921 44.98% (1) Held by Strattan Associates, Ltd., of which Mr. Strattan is the generalpartner. Strattan Associates, Ltd. is a limited partnership established by Mr.Strattan for estate tax purposes and is not otherwise engaged in business. Strattan Associates, Ltd. is the owner of the 500,000 shares of CTD stock. Mr. Strattan is the President/CEO/CFO and Director of the Company. (2)Includes 38,267 shares issuable pursuant to Employment Agreement. (3)Includes 7,654 common shares pursuant to Employment Agreement. Item 12. Certain Relationships and Related Transactions. Mr. Strattan periodically advances the Company short-term loans and defers receipt of salary. The Company owes the shareholder $89,202 at December 31, 2003. The loan is unsecured, long-term, and interest accrues at 5%. Interest expense related to the loans totaled $9,127 and $11,263 for the years ended December 31, 2003 and 2002, respectively. PART IV. Item 13. Exhibits and Reports on Form 8-K. (a) Exhibits Page (1) Reports of Independent Certified Accountants F-1 (2) Financial Statements F-2 Exhibits required by Item 601, Regulation S-B: (3) Articles of incorporation and by-laws (a) Articles of Incorporation filed August 9, 1990 * None (b) By-Laws. * None (c) 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 (9) Voting Trust Agreement 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 (16) Letter on changes in certifying accountant*** None (18) Letter on change in accounting principles None (22) Subsidiaries of Registrant None (23) Published Report re: Matters Submitted to Vote of Security Holders None (24) Consents of Experts and Counsel None (25) Power of Attorney None (27) Financial Data Schedule (28) Additional Exhibits None (29) Information from reports furnished to state insurance regulatory authorities None (99.1) Certificate of Chief Executive Officer and Chief Financial Officer**** (99.2) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**** (b) Reports on Form 8-K: None * 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. Controls and Procedures (a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c) as of a date (the "Evaluation Date") within 90 days before the filing of this annual report, have concluded that, as of the Evaluation Date, our disclosure controls and procedures were adequate and designed to ensure that the information required to be disclosed in the reports filed or submitted by us under the Securities Exchange Act of 1934 is recorded processed, summarized and reported with in the requisite time periods. (b) Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the Evaluation Date. SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 30, 2004. CTD. HOLDINGS, INC. By:__________/s/____________________ C.E. RICK STRATTAN, Chief Executive Officer Chief Operating Officer SIGNATURE TITLE ____________/s/___________________ Chief Executive Officer C.E. RICK STRATTAN Chief Operating Officer, Director ____________/s/_____________________ Director GEORGE L. FAILS