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: March 31, 1999.
____ 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
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, 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 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 May 13, 1999, the Company had outstanding 1,616,584 shares of its
common stock.
Transitional Small Business Disclosure Format
(Check One):
No.
<PAGE>
PART I: Financial Information
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
March 31, 1999
--------------
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 44,932
Accounts receivable 62,880
Inventory 37,574
Deferred tax asset 2,500
Other current assets 3,597
------------
Total current assets 151,483
-----------
Property and equipment
Furniture and equipment 61,915
Leasehold improvements 24,800
------------
86,715
Less: Accumulated depreciation 72,074
------------
Total property and equipment 14,641
OTHER ASSETS
Deferred tax asset 212,500
------------
TOTAL ASSETS $ 378,624
============
</TABLE>
(Continued)
F-1
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
BALANCE SHEET
(Unaudited)
(Concluded)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 1999
--------------
<S> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 37,572
-------------
COMMON STOCK SUBJECT TO REPURCHASE, par value $.0001
per share, 100,000 shares authorized,
11,000 shares issued and outstanding 1,660
-------------
STOCKHOLDERS' EQUITY
Class A common stock, par value $.0001 per share,
9,900,000 shares authorized, 1,616,584 shares
issued and outstanding
Class B non-voting common stock, per value $.0001
per share, 10,000,000 shares authorized, 0 shares
issued and outstanding 160
Additional paid-in capital 1,739,360
Accumulated deficit (1,400,128)
-------------
Total stockholders' equity 339,392
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 378,624
=============
</TABLE>
See Accompanying Notes to Financial Statements
F-2
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1999 1998
-------------- ------------
<S> <C> <C>
PRODUCT SALES $ 92,130 $ 44,284
COST OF PRODUCTS SOLD 12,273 8,667
-------------- ------------
GROSS PROFIT 79,857 35,618
CONSULTING SERVICES AND OTHER OPERATING REVENUE 6,500 -
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 114,173 57,529
-------------- ------------
LOSS FROM OPERATIONS (27,816) (21,912)
OTHER INCOME (EXPENSE)
Investment and other income (loss) (3,078) 2,532
Interest expense (266) (854)
-------------- ------------
Total other income (expense) (3,344) 1,678
-------------- ------------
NET LOSS (31,160) (20,234)
============== ============
NET LOSS PER COMMON SHARE $ (.02) $ (.02)
============== ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,491,584 1,220,110
============== ============
</TABLE>
See Accompanying Notes to Financial Statements
F-3
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (31,160) $ (20,234)
------------ ------------
Adjustments to reconcile net loss
to net cash used for operating activities:
Depreciation and amortization 2,158 3,571
Loss (gain)on sale of investments 3,122 (556)
Stock issued for services 23,656 -
Decrease (increase)in accounts receivable (51,185) 23,638
Decrease (increase)in inventory (4,788) 1,098
Increase in other current assets (532) (4,773)
Increase in deferred offering costs - (15,000)
Increase in accounts payable and
accrued expenses 31,517 8,047
------------ ------------
Total adjustments 3,948 16,025
------------ ------------
NET CASH USED FOR OPERATING
ACTIVITIES (27,212) (4,209)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment and leasehold improvements - (3,733)
Repayment of employee loan - 814
Proceeds from sale of investment 10,261 9,059
Purchases of investments - (8,202)
------------ ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 10,261 (2,062)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock subscription received 25,000 -
Net payments on line-of-credit - (6,141)
Payments on investment margin account - (2,556)
Proceeds from loan payable to stockholder - 16,770
Payment to stockholder on loan - (188)
------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 25,000 7,885
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,049 1,614
CASH AND CASH EQUIVALENTS, beginning of period 36,883 8,331
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 44,932 $ 9,945
============ ============
</TABLE>
(Continued)
F-4
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(Concluded)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 266 $ 854
============ ============
</TABLE>
See Accompanying Notes to Financial Statements
F-5
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
The information presented herein as of March 31, 1999, and for the three months
ended March 31, 1999 and 1998, is unaudited.
(1) BASIS OF PRESENTATION:
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Rule 10-01 of Regulations S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal required
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1999, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. 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, 1998.
(2) COMMITMENTS:
On July 7, 1994, the Company entered into a five year noncancelable operating
lease for office space, commencing November 1994. The Company has an option to
rent additional space and a purchase option in which ten percent of the lease
payments may be applied to the purchase price.
Rent expense under the foregoing lease and all other operating leases was $7,936
and $5,859 for the three months ended March 31, 1999 and 1998, respectively.
The Company has other commitments as discussed in Note 6.
F-6
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
(3) COMMON STOCK SUBJECT TO REPURCHASE:
During 1994, the Company adopted a nonqualified employee stock issuance plan to
provide incentives to employees. Stock issued under this plan is at the
discretion of the Board of Directors of the Company and bears a restrictive
legend. All shares issued pursuant to this Plan must be held for a minimum of
two years and become fully vested after five years. During the three year period
beginning on the first day of the third year after issuance and ending five
years after issuance, the Company shall purchase all or any part of the shares
from the employee upon the employee's written request; the purchase price of the
shares shall be 50% of the then current market value of the shares.
The Company has reserved 100,000 of its 10,000,000 voting common stock shares
authorized to be used under this Plan.
The Company reflects its obligation to repurchase the stock as a liability under
the caption Common Stock Subject to Repurchase in the accompanying financial
statements. Any change in the valuation of this account is recorded as a gain or
loss in the accompanying statement of operations. The Company's repurchase
obligation for current employees is valued at 50% of the bid price of the stock
on the balance sheet date. The Company's repurchase obligation for stock held by
former employees is valued at 50% of the bid price on the date of the employee's
termination.
F-7
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
(4) MAJOR CUSTOMERS AND SUPPLIERS:
Sales to the three largest customers were approximately 58% and 67% of total
sales for the three months ended March 31, 1999 and 1998, respectively.
(5) NOTES PAYABLE:
The Company has a $25,000 line-of-credit with a local bank. The monthly minimum
payment is calculated based on the outstanding balance. The interest rate varies
monthly at prime plus 3.5% (currently 11.25%). The credit line can be canceled
and payment of the outstanding amount due can be required on demand by the bank
at anytime.
F-8
<PAGE>
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
(6) INCOME TAXES:
During the three months ended March 31, 1999 and 1998, the Company provided a
100% valuation allowance for the income tax benefit resulting from the
respective net loss for the periods presented. Therefore, no income tax expense
or benefit is provided in the accompanying statement of operations.
(7) NET LOSS PER COMMON SHARE:
Net loss per common share is computed in accordance with the new requirements of
Statement of Financial Accounting Standards No. 128 (SFAS 128) at March 31, 1999
and 1998. 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.
Common shares outstanding do not include common stock subject to repurchase.
F-9
<PAGE>
Item 2. Management Discussion and Analysis or Plan of Operation
(MD&A) Management Discussion & Analysis
As of 3/31/99
CTD, Inc.
Management Discussion and Analysis
Liquidity and Capital Resources As of March 31, 1999, the Company's working
capital was $116,579 compared to $90,093 at December 31, 1998. This increase is
due primarily to $25,000 collected from the sale of 50,000 shares of stock.
Total product sales increased during the first quarter of 1999 by $47,846 (108%)
compared to the first quarter of 1998. This increase in sales is due to general
sales volatility as historically experienced by the Company. Selling, General
and Administrative expenses (SG&A) increased $56,644 due principally to officer
salaries and professional fees.
While product sales have increased, management has continued to maintain
appropriate inventory levels in response to the normal customer sales. The
company realized $6,500 in consulting revenue in the first quarter of 1999.
There was no consulting revenue in the first quarter of 1998. Management expects
consulting fee revenues to continue to contribute to 1999 revenues.
During 1998, Rick Strattan, the Company's President, made short term loans to
the Company totaling $16,800. These loans were repaid prior to December 31,
1998. Management is currently seeking additional financing to develop new
products.
The Company is exploring and evaluating opportunities for marketing its
products and expertise within the dietary supplement industry. The Company is
investigating developing a business which would grow and process mushrooms for
use in food and dietary supplements. It is expected that any capital
needs for such development would be met through a private offering.
The Company is in the last year of a five-year lease for 3,000 square feet of
space for an office, laboratory, and manufacturing plant. The Company moved into
the building during October 1994. Rent payments are $18,000 in year one, $18,900
in year two, $19,484 in year three, $20,844 in year four, and $21,888 in year
five. The Company also has a purchase option on this space in which ten percent
of the lease payments may be applied to the purchase price. The Company may
exercise an option to lease an additional 3,000 square feet of adjoining space.
The Company houses its administrative offices, laboratory, and manufacturing
facility in this complex, utilizing an aggregate of approximately 1,650 square
feet. This facility has been built, and can be expanded, according to "GMP"
(good manufacturing practices) specifications in anticipation of the commercial
needs of the markets the Company serves. The remaining 1,350 square feet of
space is for pilot plant manufacturing and an analytical laboratory. However,
this expansion will require additional funding and there is no assurance that
any additional funding will be available. Management has no immediate plans for
this expansion. The Company plans to negotiate a new lease on the existing
building or to begin evaluations of alternative properties during 1999.
During the eight years of its existence the Company has created a
comprehensive database on patents involving cyclodextrins. Currently, management
is in the process of adding this database to the Company's existing web site.
Customers will have access to the patent database through a subscription service
with a monthly fee. The cost of the database is expected to be less than $5,000
and is being paid out of operations. However, the subscriptions fee revenue will
provide continuing income at little or no further cost to the company. The
original $5,000 expense will be recovered within the first two years of
operation. The Company plans to add additional subscription databases on other
cyclodextrin information in the future. These databases can be added with little
cost to the company.
Management has completed its evaluation of Year 2000 (y2k) issues on internal
computer systems. Management has also completed its initial assessment of y2k
issues related to the company's external vendors and suppliers. The Company
relies on a few large customers and suppliers outside the United States, which
are believed to be at greater y2k risk than domestic companies with which the
Company does business. While there are no assurances that y2k issues will not
affect the company, Management does not believe its internal or external y2k
issues, if any, will have a material effect on the company's business, results
of operations, or financial condition. Although management has sought and
obtained assurances from its major suppliers and customers regarding operational
continuity in light of y2k problems, supply or demand interruptions in these key
relationships would cause a resulting interruption in the business of the
company.
Results of Operations
Sales of cyclodextrins and related manufactured complexes are historically
highly volatile. In efforts to offset this volatility, the Company continues to
expand its revenue producing activities to include providing research and
development services for unrelated companies and its inventory line to include
more routinely purchased products. While sales are still volatile, Management
feels that these efforts will reduce the volatility and that total product and
service sales will continue to grow through the year 2000.
Total product sales for the quarter ended March 31, 1999 were $92,130 compared
to $44,284 for the same period in 1998. Sales for the first quarter of 1998 were
unusually low based on historical sales of the Company. Management expects the
food industry's interest in cyclodextrins to continue due to the Food and Drug
Administration's (FDA) announcement in 1998 that Beta cyclodextrin is now
Generally Recognized As Safe (GRAS) in certain food related applications.
Product sales are primarily to large pharmaceutical and food companies for
research and development purposes. Sales of both products and services have been
concentrated among a few large customers.
The Company's gross profit margin on product sales increased from 80% to 87% for
the first quarter of 1998 and 1999, respectively. This increase in gross profit
margin is due to the sale of more products with substantial gross profit margins
than is historically experienced by the Company Management expects future gross
profit margins to return to historical levels.
Selling, general and administrative (SG&A) expenses for the first quarter 1999
($114,173 vs. $57,529) increased from the first quarter 1998. Specifically, the
President was awarded a $10,000 bonus and 250,000 shares of common stock valued
at $23,375 in the first quarter of 1999. Also, the Company incurred additional
professional fees in the first quarter of 1999 related to the 1998 audit and
filing of the annual Form 10-KSB as well as fees and expenses related to
exploring possible merger candidates. Management does not believe these unusual
expenses represent a trend to increased future operating expenses. Management
will continue to monitor operating expenses in efforts to keep these expenses
minimized.
The Company's net loss from operations for the three months ended March 31, 1999
was $31,160 versus $20,233 for the same period in 1998 due to an increase in
selling, general and administrative expenses in excess of the increase in sales
over 1998 amounts for the three months ended. The Company will continue to
develop new products, and implement its strategy of creating operational
affiliates that will use CD's in herbal medicines, wastewater remediation, and
pharmaceuticals.
PART II: Other Information
Item 2. Changes in Securities and Use of Proceeds
On March 30 1999, the Company entered into an agreement with two individuals
for 50,000 shares of the Company's common stock for $25,000. The Company
received the $25,000 but had not issued the shares as of March 31,1999. These
shares were sold pursuant to the exemptions from registration under Regulation
D and Section 4(2) of the Securities Act.
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 8,
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
<PAGE>
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.
Dated: May 6, 1999
/s/ C. E. RICK STRATTAN
C. E. RICK STRATTAN
President, Chief Executive Officer,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Financial Statements for the 3 months ended March 31, 1999, and is qualified
in its entirety by reference to such form 10QSB for three months ended March
31, 1999.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-START> JAN-01-1999
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 44,932
<SECURITIES> 0
<RECEIVABLES> 62,880
<ALLOWANCES> 0
<INVENTORY> 37,574
<CURRENT-ASSETS> 151,483
<PP&E> 86,715
<DEPRECIATION> 72,074
<TOTAL-ASSETS> 378,624
<CURRENT-LIABILITIES> 37,572
<BONDS> 0
<COMMON> 160
0
0
<OTHER-SE> 339,232
<TOTAL-LIABILITY-AND-EQUITY> 378,624
<SALES> 92,130
<TOTAL-REVENUES> 98,630
<CGS> 12,273
<TOTAL-COSTS> 126,446
<OTHER-EXPENSES> 3,076
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 266
<INCOME-PRETAX> (31,160)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,160)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,160)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
