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: June 30, 2002.
____ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Transition Period From ____ to ____
Commission file number: 0-24930
CTD HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Florida 59-3029743
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
27317 N.W. 78th Avenue, High Springs, Florida 32643
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 386-454-0887
Former name, former address and former fiscal year, if changed since last
report: N/A.
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. No.
Applicable only to corporate issuers
As of August 13, 2002, the Company had outstanding 4,791,220 shares of its
common stock.
Transitional Small Business Disclosure Format (Check One):
No.
PART I: Financial Information
3
PART I: FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited)
CTD HOLDINGS,INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
June 30, 2002
-------------
CURRENT ASSETS
Cash and cash equivalents $ 26,602
Accounts receivable 100,464
Inventory 37,926
Note receivable 7,920
------------
Total current assets 172,912
PROPERTY AND EQUIPMENT, Net 347,195
OTHER ASSETS
Intangibles, Net 3,369
-----------
TOTAL ASSETS $ 523,476
===========
(Continued)
F-1
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(unaudited)
(Concluded)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
2002
-----------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 110,639
Current portion of long-term debt 8,199
-----------
Total current liabilities 118,838
-----------
Long-term Liabilities
Long-term debt, less current portion 157,370
Stockholder loan 110,284
-----------
Total long-term liability 267,654
-----------
STOCKHOLDERS' EQUITY
Class A common stock, par value $ .0001 per share,
9,900,000 shares authorized, 4,791,220 shares issued
and outstanding 480
Class B non-voting common stock, par value $ .0001 per
share, 10,000,000 shares authorized, 0 shares issued
and outstanding -
Additional paid-in capital 1,954,498
Accumulated deficit (1,817,994)
-----------
Total stockholders' equity 136,984
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 523,476
===========
See Accompanying Notes to Financial Statements
F-2
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2002 2001 2002 2001
----------- ---------- ----------- ----------
PRODUCT SALES $ 130,995 $ 84,814 $ 326,844 $ 176,996
COST OF PRODUCTS SOLD 25,796 6,195 60,887 22,300
----------- ---------- ----------- ----------
GROSS PROFIT 105,199 78,619 265,957 154,696
SELLING, GENERAL AND 56,758 64,043 120,174 138,452
ADMINISTRATIVE EXPENSES ----------- ---------- ----------- ----------
INCOME FROM OPERATIONS 48,441 14,576 145,783 16,244
----------- ---------- ----------- ----------
OTHER INCOME (EXPENSE)
Investment and other
income 1,108 451 1,483 2,804
Interest expense (6,877) (7,535) (15,311) (21,683)
Gain (Loss) on disposal
of equipment 10,000 - (25,678) -
----------- ---------- ---------- ----------
Total other income
(expense) 4,231 (7,084) (39,506) (18,879)
----------- ---------- ----------- ----------
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS 52,672 7,492 106,277 (2,635)
LOSS FROM DISCONTINUED
OPERATIONS - (7,406) - (24,937)
----------- ---------- ----------- ----------
NET INCOME (LOSS) $ 52,672 $ 86 $ 106,277 $ (27,572)
=========== ========== =========== ==========
NET INCOME (LOSS) PER COMMON
SHARE
From continuing operations $ .01 $ - $ .02 $ -
From discontinued
operations - - - (0.01) -----------
---------- ----------- ----------
Net income (loss) per
share $ .01 $ - $ .02 $ (0.01)
=========== ========== =========== ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,791,220 4,063,720 4,791,220 4,027,470
=========== ========== =========== ===========
See Accompanying Notes to Financial Statements
F-3
CTD HOLDINGS,INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Six Months Ended
June 30,
--------------------------
2002 2001
---------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 106,277 $ (27,572)
---------- -----------
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 11,870 17,132
Loss on disposal of equipment 25,678 -
Increase or decrease in:
Accounts receivable (74,704) (58,702)
Inventory (5,961) 9,649
Other current assets 1,305 3,617
Accounts payable and accrued expenses (41,751) (14,100)
------------ -----------
Total adjustments (83,563) (42,404)
------------ -----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 22,714 (69,976)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (17,877) ( 2,486)
Repayment of note receivable 2,536 4,913
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (15,341) 2,427
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (4,019) (13,806)
Net proceeds (payments) on line of credit (19,631) (3,705)
Net proceeds (payments) on loan payable to stockholder 14,389 69,010
Proceeds from sales of equipment 20,300 -
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,039 51,499
------------ -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 18,412 (16,050)
CASH AND CASH EQUIVALENTS, beginning of period 8,190 16,690
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 26,602 $ 640
============ ===========
(Continued)
F-4
CTD HOLDING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(Concluded)
Six Months Ended
June 30,
------------------------
2002 2001
---------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 15,311 $ 21,683
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Stock issued to officer for compensation $ - $ 44,687
========== =========
See Accompanying Notes to Financial Statements
F-5
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
The information presented herein as of June 30, 2002, and for the three and six
months ended June 30, 2002 and 2001, is unaudited.
(1) BASIS OF PRESENTATION:
The accompanying financial statements include CTD Holdings, Inc. and its
Subsidiaries (the Company). 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 six month periods ended June 30, 2002, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2002. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report of Form
10-KSB for the year ended December 31, 2001.
(2) NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common share is computed in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 (SFAS 128).
SFAS 128 requires net income (loss) per share information to be computed using a
simple weighted average of common shares outstanding during the periods
presented. SFAS 128 eliminated the previous requirement that earnings per share
include the effect of any dilutive common stock equivalents in the calculation.
F-7
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
(Concluded)
(3) DISCONTINUATION OF MUSHROOM FARMING OPERATIONS:
During the first quarter of 2001, the Company discontinued its mushroom growing
operation. In accordance with Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," the Company reviewed the long-lived assets related to
the mushroom farming operation to determine if the carrying value of the assets
may not be recoverable. When an impairment is identified, the Company recognizes
a loss for the difference between the carrying amount and the estimated value of
the asset. The fair values of the assets evaluated were based on an estimate of
discounted cash flow analysis or recent sales information of similar assets.
During 2001, the Company determined there was an impairment in the carrying
value of goodwill and other intangible assets related to the mushroom farming
operations. Therefore, the Company recorded a write-down of $20,113, which
reduced the carrying value to zero at December 31, 2001.
(4) INCOME TAXES
The Company recorded no income tax expense for the three or six months ended
June 30, 2002 due to the availability of a net operating loss carry forward.
F-8
Item 2. Management's Discussion and Analysis or Plan of Operation
Management Discussion and Analysis
Liquidity and Capital Resources
As of June 30, 2002, the Company's working capital was $54,074 compared to
$13,202 in the previous quarter and ($102,544) at December 31, 2001. Working
capital continued to improve, and increased this quarter because of increasing
profitability. By maintaining stringent expense reduction policies and
concentrating on sales of cyclodextrins (CD), management expects liquidity to
continue to improve throughout 2002 as profitability is maintained.
In keeping with its commitment to use the Internet as its major advertising and
public relations outlet, the Company's upgrade of its Website was completed
early in the quarter at a cost of $4000. By increasing its catalog of CD
products from 64 items to 154 items and improving access to its databases, the
Company has indeed strengthened its leadership position in the expanding CD
Industry.
Results of Operations
Sales of CD and related manufactured complexes are historically highly volatile.
In efforts to offset this volatility, the Company continues to expand its
revenue producing activities in CD related research and development services for
new customers and expand its line of manufactured products. Product sales of CTD
are primarily to large pharmaceutical and food companies for research and
development purposes. Because of its leadership role over the past 10 years in
CD technology, the company is beginning to enjoy substantial sales to companies
doing clinical trials with CD's.
No financial ripples from the discontinued mushroom operation were realized in
the second quarter. The Company will continue to carefully manage its expenses,
but does not expect to see as large reductions in expenses; and may see
increases in future periods necessary to support the increased sales levels. The
Company's relocation from a leased facility to its own building is also
complete.
The Company continues to reduce its dependency on a few major customers by
expanding its product line and capitalizing on the exposure from its website and
general growth in the CD market. In the second quarter of 2002, six customers
represented 88% of sales. For the year ended December 31, 2001, three customers
represented 63% of total sales. This diversification in customers will continue
to stabilize the Company's revenue.
Total product sales for the second quarter of 2002 were $130,995, an increase of
54% from 2001 sales of $84,814 for the same period; but was down by 1/3 from the
first quarter's sales, emphasizing the extraordinary nature of that quarter's
sales. This change is due in part to the normal volatility of the Company's
sales, and in large part to market reaction to new FDA approvals of food and
pharmaceutical products containing CD's.
The Company's gross profit margin for the second quarter of 2002 was 80%
compared to 93% reported for the same period in 2001. The Company expects its
gross profit margin in 2002 to stay between 80 and 85% through 2002.
The Company's SG&A expenses decreased to $56,758 in the second quarter of 2002
even from $64,043 in the same period of 2001 when expense reduction efforts were
in full force; even slightly less than the previous quarter ($63,416). With the
greatly reduced expenses maintained in 2001, management had improved the
financial condition for the Company to begin 2002, and it continues that
successful strategy even now. With expenses in check, management has positioned
itself to maintain profitability even if the expected summer slow-down in CD
sales occurs. However, the Company to date has seen no signs of such a
slow-down.
The Company incurred a $35,678 loss from the sale of certain laboratory
equipment during the first quarter of 2002 and a $10,000 gain in the second
quarter of 2002. In addition to generating cash for the Company, the sale of
this equipment will further reduce maintenance and depreciation expense
associated with the sold equipment. However, that loss was a major factor in the
increased net income of the company in the second quarter even with 1/3 less
sales than the first quarter.
The Company and its subsidiaries will continue to introduce new products that
will enhance profitability and continue to implement its strategy of creating or
acquiring operational affiliates and/or additional subsidiaries that will use
CD's in herbal medicines, waste-water remediation, pharmaceuticals, and foods.
The Company also intends to pursue exclusive relationships with major CD
manufacturer(s) and specialty CD labs to distribute their products.
In keeping with its commitment to utilize the full power of the Internet as a
major advertising and public relations outlet, the Company anticipates spending
an additional $2000-$5000 to improve its Web Site further in 2002. The Web Site
continues to reinforce CTD's role as the best-known CD technology provider in
the world.
Forward-looking Statements
All statements other than statements of historical fact in this report are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995, and are based on management's current expectations of the
Company's near term results, based on current information available and
pertaining to the Company. The Company assumes no obligation to update publicly
any forward-looking statements. Actual results may differ materially from those
projected in the forward-looking statements. These forward-looking statements
involve risks and uncertainties, including, but not limited to, the following:
demand for Cyclodextrin and mushrooms; changes in governmental laws and
regulations surrounding various matters, such as labeling disclosures; delays in
the development, production, testing and marketing of products; product margins
and customer product acceptance.
Item 6. Exhibits and Reports on Form 8-K
None.
(a) Exhibits
Exhibit Description Page
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession None
(4) Instruments defining the Rights of Security Holders None
(10) Material Contracts None
(11) Statement re: Computation of Per Share Earnings Note 2,
Financial
Statements
(15) Letter re: Unaudited Interim Financial Information None
(18) Letter re: Change in Accounting Principles None
(19) Report Furnished to Security Holders None
(22) Published Report re: Matters Submitted to Vote of
Security Holders None
(23) Consents of Experts and Counsel None
(24) Power of Attorney None
(27) Financial Data Schedule
(99) Additional Exhibits None
99.1 Certification of CEO
99.2 Certification of CFO
(b) Reports on Form 8-K:
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CTD HOLDINGS, INC.
DATE
/s/ C.E. "Rick" Strattan
----------------------------- August 14, 2002
C.E. Rick Strattan, President
Chief Executive Officer,
Chief Operating Officer and
Chief Financial Officer