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, 2000.
____ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Transition Period From ____ to ____
Commission file number: 0-24930
CTD HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Florida 59-3029743
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
3713 S.W. 42nd Avenue, Suite 3, Gainesville, Florida, 32608-6581
(Address of principal executive offices) (Zip Code)
352-375-6822
(Issuer's telephone number)
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 10, 2000, the Company had 3,730,786 outstanding shares of its
common stock.
Transitional Small Business Disclosure Format
(Check One):
No.
<PAGE>
Index to Form 10QSB
Part I - FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited)
Balance Sheet June 30, 2000.......................................4
Statements of Operations - Six Months
Ended June 30, 1999 and June 30, 2000.............................6
Statements of Cash Flows - Six Months
Ended June 30, 1999 and June 30, 2000.............................7
Notes to Financial Statements.....................................9
Item 2. Management's Discussion and Analysis or Plan
of Operation.....................................................11
Part II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........................14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description Page
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession...................................None
(4) Instruments defining the Rights of Security Holders.........None
(10) Material Contracts..........................................None
(11) Statement re: Computation of Per Share Earnings..........Note 3,
Financial
Statements
(15) Letter re: Unaudited Interim Financial Information.........None
(18) Letter re: Change in Accounting Principles.................None
(19) Report Furnished to Security Holders.......................None
(22) Published Report re: Matters Submitted to Vote of
Security Holders...........................................None
(23) Consents of Experts and Counsel............................None
(24) Power of Attorney..........................................None
* (27) Financial Data Schedule......................................16
(99) Additional Exhibits........................................None
(b) Reports on Form 8-K:
None
* Filed Herewith
Signatures................................................................3
2
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CYCLODEXTRIN TECHNOLOGIES DEVELOPMENT, INC.
/s/ C.E. Rick Strattan
-----------------------
C. E. RICK STRATTAN
President, Chief Executive Officer,
Chief Financial Officer
3
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited)
CTD HOLDINGS,INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
June 30, 2000
-------------
CURRENT ASSETS
Cash and cash equivalents $ 3,756
Accounts receivable 32,616
Inventory 62,669
Notes receivable 24,730
Deferred tax asset 15,000
Other current assets 31,021
-----------
Total current assets 169,792
-----------
PROPERTY AND EQUIPMENT, Net 425,863
-----------
OTHER ASSETS
Intangibles, Net 26,772
Deferred tax asset 180,000
-----------
Total other assets 206,772
-----------
TOTAL ASSETS $ 802,427
===========
(Continued)
F-1
<PAGE>
CTD HOLDINGS, INC.CONSOLIDATED BALANCE SHEET
(unaudited)
(Concluded)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
2000
-----------
<CAPTION>
<C>
<S>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 152,634
Current portion of long-term debt 23,920
Line of credit 3,711
Due to shareholder 11,567
-----------
Total current liabilities 191,832
-----------
Long-term debt, less current portion 176,833
-----------
STOCKHOLDERS' EQUITY
Class A common stock, par value $.0001 per share,
9,900,000 shares authorized, 3,730,786 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 373
Additional paid-in capital 1,868,529
Accumulated deficit (1,435,140)
-----------
Total stockholders' equity 433,762
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 802,427
===========
</TABLE>
See Accompanying Notes to Financial Statements
F-2
<PAGE>
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2000 1999 2000 1999
----------- ---------- ----------- ----------
PRODUCT SALES $ 55,279 $ 181,120 $ 236,828 $ 273,250
COST OF PRODUCTS SOLD 23,682 13,512 75,891 25,785
----------- ---------- ----------- ----------
GROSS PROFIT 31,597 167,608 160,937 247,465
CONSULTING SERVICES AND OTHER
OPERATING REVENUE - 1,290 - 7,790
SELLING, GENERAL AND 142,399 68,660 285,382 182,833
ADMINSISTRATIVE EXPENSE ----------- ---------- ----------- ----------
INCOME(LOSS)FROM OPERATIONS (110,802) 100,238 (124,445) 72,422
----------- ---------- ----------- ----------
OTHER INCOME (EXPENSE)
Investment and other
income(loss) 197 75 276 (3003)
Interest expense (5,121) (608) (11,409) (874)
----------- ---------- ----------- ----------
Total other income
(expense) (4,924) (533) (11,133) (3,877)
MINORITY INTERESTS IN
SUBSIDIARY - 319 - 319
------------ ---------- ----------- ----------
INCOME (LOSS) BEFORE INCOME
TAX (115,726) 100,024 (135,578) 68,864
INCOME TAX EXPENSE - 17,000 - 17,000
----------- ---------- ----------- ----------
NET INCOME (LOSS) $ (115,726) $ 83,024 $ (135,578) $ 51,864
=========== ========== =========== ==========
NET INCOME (LOSS) PER COMMON
SHARE $ (0.03) $ 0.05 $ (0.04) $ 0.04
=========== ========== =========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,655,341 1,522,175 3,567,767 1,383,269
=========== ========== =========== ==========
See Accompanying Notes to Financial Statements
F-3
<PAGE>
CTD HOLDINGS,INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
2000 1999
---------- ------------
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (135,578) $ 51,864
---------- -----------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 10,806 5,756
Minority interests in subsidiary - (319)
Loss on sale of investments - 3,122
Stock issued for services 15,000 23,656
Increase in accounts receivable (11,352) (103,734)
Decrease (increase)in inventory 22,580 (31,934)
Decrease (increase)in other current assets 15,000 (5,945)
Decrease in deferred income taxes - 17,000
Increase in accounts payable and
accrued expenses 93,868 52,214
---------- -----------
Total adjustments 145,902 (40,184)
---------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 10,324 11,680
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (103,644) (80,886)
Repayment of employee loan 11,259 -
Proceeds from sale of investment - 10,261
---------- -----------
NET CASH USED IN INVESTING ACTIVITIES (92,385) (70,625)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (payments) on long term debt (9,642) 32,494
Net payments on line of credit 417 -
Payments on loan payable to stockholder (8,383) -
Proceeds from sales of stock 30,000 35,000
Payment for stock repurchase - (6,389)
---------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,392 61,105
---------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (69,669) 2,160
CASH AND CASH EQUIVALENTS, beginning of period 73,425 36,883
---------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 3,756 $ 39,043
========== ===========
</TABLE>
(Continued)
F-4
<PAGE>
CTD HOLDING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(Concluded)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
2000 1999
---------- ---------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 11,409 $ 874
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Purchase of land, building and equipment with
debt financing $ - $ 204,756
========== =========
Purchase of rights to intellectual property
with obligation to issue common stock $ - $ 31,000
========== =========
Stock issued to officer in satisfaction of
bonus accrual $ 7,800 $ -
========== =========
Stock issued to consultant for prepaid
public relations services $ 40,000 $ -
========== =========
Stock issued for rights to intellectual
property $ 10,000 $ -
========== =========
</TABLE>
See Accompanying Notes to Financial Statements
F-5
<PAGE>
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
The information presented herein as of June 30, 2000, and for the three and six
months ended June 30, 2000, and 1999, is unaudited.
(1) BASIS OF PRESENTATION:
The accompanying financial statements include CTD Holdings, Inc., (formerly
known as Cyclodextrin Technologies Development, Inc.) and its subsidiaries.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Rule 10-01 of Regulations S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal required
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three and six month period's ended June 30, 2000, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report of Form
10-KSB for the year ended December 31, 1999.
(2) PRIVATE PLACEMENT OF STOCK:
Beginning in 1999, the Company began offering a total of 1,300,000 shares of
common stock under a private placement memorandum to expire September 10, 2000.
In 1999, 40,000 shares were sold for $15,000, less direct offering costs of $
5,279. For the six months ended June 30, 2000, 20,000 shares were sold for $
30,000.
In 1999, the Company also sold 160,000 of common stock for $35,000.
(3) NET LOSS PER COMMON SHARE:
Net loss per common share is computed in accordance with the requirements of
Statement of Financial Accounting Standards No. 128 (SFAS 128). SFAS 128
requires net loss per share information to be computed using a simple weighted
average of common shares outstanding during the periods presented. SFAS 128
eliminated the previous requirement that earnings per share include the effect
of any dilutive common stock equivalents in the calculation.
(4) COMMITMENTS AND CONTINGENCIES:
In February 2000, the Company entered into a construction contract to build two
additional mushroom growing houses for $55,510. This amount has been accrued as
of June 30, 2000.
F-6
<PAGE>
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(4) COMMITMENTS AND CONTINGENCIES: (Continued)
On March 1, 2000, the Company entered into a one year public relation contract
with a consultant. The Company issued the consultant 200,000 shares of common
stock. The Company valued the shares at $40,000, approximately 50% less than the
bid price on the contract date. The Company recorded a prepaid asset of $40,000,
which is being amortized over one year, the life of the contract.
On April 1, 2000, the Company adopted a stock bonus plan for the Company's
president. The amount of stock due each month is equal to $5,000 divided by 50%
of the lowest stock trade amount for that month. The Company issued 75,566
shares and expensed $15,000 during the three months ended June 30, 2000.
(5) CORPORATE CHANGES:
In April 2000, the Company changed its name to CTD Holdings, Inc. from
Cyclodextrin Technologies Development, Inc.
Also in April 2000, the Company effected a 2 for 1 stock split of its
outstanding common stock.
The accompanying financial statements and notes have been restated for all
periods presented to reflect these changes.
(6) SEGMENTS:
During the second quarter of 1999, the Company began cultivating exotic
mushrooms and herbs. The Company now has two segments, Cyclodextrin products and
mushroom products. Information specific to these two segments follows:
Six Months Ended
June 30,
---------------------------------------------------------------
2000 1999
----------------------------- --------------------------------
Cyclodextrins Mushrooms Cyclodextrins Mushrooms
------------- --------- ------------- ---------
Sales $ 222,228 $ 14,600 $ 236,828 $ -
Income (loss)
from operation $ 32,555 $(157,000) $ 72,422 $ -
June 30, 2000
-------------
Cyclodextrins Mushrooms
------------- ---------
Total assets $ 425,000 $ 375,000
F-7
<PAGE>
Item 2. Management Discussion and Analysis or Plan of Operation
(MD&A) Management Discussion & Analysis
As of 06/30/00
CTDH, Inc.
Management Discussion and Analysis
----------------------------------
Liquidity and Capital Resources
-------------------------------
As of June 30, 2000, the Company's working capital was ($22,040) compared to
$120,186 at December 31, 1999. This decrease is attributable to a decrease in
sales resulting in a net loss of ($135,578) for the six months ending June 30,
2000, the construction of two new mushroom grow houses ($55,000), and the
development of a new website ($30,000).
The Company operates two business segments, cyclodextrin products (CTD) and
mushroom cultivation (NSME). The Company continues to experience volatility in
CTD sales. Management believes sales will stabilize to last year's levels during
the remainder of 2000.. CTD's sales are only 19% lower ($273,250 vs. $222,218)
than the same six month period last year. With the return of CTD sales to normal
levels and increased revenue from NSME sales for the remainder of 2000,
management expects liquidity to improve.
The Company has begun an analytical study of the ingredients in its Shiitake and
Reishi mushrooms. The goal of these studies is to prove the existence in these
extracts of certain natural ingredients that are known to have medicinal
properties. From that point, complexes with CD's will be made and clinical
trials will be started, contingent on the availability of the necessary funds.
The Company is in the first year of a two year extension of its lease for its
existing 3000 square-foot office and lab facility. Rent for the space remains at
just under $2000 per month. The Company hopes to move from this facility into
the building on its newly purchased property some time in the fourth quarter of
this year. The timing of that move will depend on the availability / allocation
of funds necessary to complete the needed renovations. The Company intends to
sublet its existing space when that move is completed, certainly before the end
of the two year extension, November, 2001.
In keeping with its commitment to use the Internet as its major advertising and
public relations outlet, the Company has entered into an agreement with its
current, local ISP and Web Site managing company, Livewire, to significantly
upgrade its current Web Site. The Company has created an asset of $30,000 for
this upgrade, which includes substantial cosmetic and operational alterations
and expansion of the revenue producing databases.
In early May of this year, the Company responded to increased demand for its
stock by authorizing and implementing a 2 for 1 forward split of its common
stock (May 1 - date of record; May 20 - pay date; May 22 - execute date).
Management believes that this action is a good way to begin to alleviate the
mechanical trading problem of too small a float in the market of its common
stock. Management believes that an increase in the Company's market
capitalization will enhance the probability of the Company's success in
acquiring other companies, implementing one part of its strategic plan to file
for NASDAQ listing in the fourth quarter of this year.
To further enhance the successful implementation of its strategic plan, the
Company changed the name of Cyclodextrin Technologies Development, Inc. to CTD
Holdings, Inc. (CTDH). The Company created a new subsidiary, Cyclodextrin
Technologies Development, Inc. (CTD) to operate its cyclodextrin business
entity. The Company's other subsidiary, Natural Spirit Mushroom Enterprises,
Inc. (NSME) operates a mushroom cultivating farm. The resulting holding company
structure will facilitate the legal implementation of future acquisitions and
stock transactions.
1
<PAGE>
Results of Operations
---------------------
Sales of cyclodextrin and related manufactured complexes are historically highly
volatile. In efforts to offset this volatility, the Company continues to expand
its revenue producing activities in CD related research and development services
for unrelated companies and expand its line of manufactured products. During the
last quarter of 1999, the Company began the start up of a mushroom farm that
will provide future products for the rapidly expanding $5 billion natural
medicinals industry, thereby diversifying its revenue base into an even greater
number of manufactured products.
The Company has completed the start-up phase of its natural medicinals venture
at the newly acquired 40-acre farm in High Springs, FL. Through its subsidiary,
Natural Spirit Mushroom Enterprises, Inc. (NSME), the company has successfully
established a growing sales base for its edible exotic mushrooms. In the second
quarter of 2000, NSME sold more than $7,000 of certified organic Shiitake
mushrooms and produce, matching its first quarter sales. At the end of July,
NSME had one of two new grow houses on line for a total of three; the fourth
grow house will become operational in early August. The added capacity will
allow the Company to produce 2,000 lbs. per month of mushrooms by the end of
2000. Based on the great demand for edible mushrooms that NSME is experiencing,
management believes quickly increasing growing capacity will be rewarded with
increased sales.
Total product sales decreased $126,270 ($181,549 vs. $55,279) from the first
quarter of 2000. Sales for the six months ended June 30, 2000 were $36,422 less
than sales for the six months ended June 30, 1999 ($236,828 vs. $273,250). The
primary cause of this decrease is the historical volatility seen with the CTD's
sales. This decrease does not exceed the levels of volatility seen before for
CTD. Currently, the NSME subsidiary's quarterly sales are small ( $7,000) and
were essentially the same in the first and second quarter of 2000. As NSME's
contribution to sales increases, the Company expects to see less volatility in
quarter to quarter sales volume.
Product sales of CTD are primarily to large pharmaceutical and food companies
for research and development purposes. Sales of both products and services
continue to be concentrated among a few large customers.
Sales of NSME products are currently to local restaurants and produce
distributors. The demand by these users will exceed NSME's ability to supply
them for the immediate future. Even so, NSME is beginning to introduce its
products to national distributors and larger supermarkets. NSME is also selling
its exotic mushrooms through an Internet portal at www.mushroomshoppe.com to
high-end customers such as 5-star restaurants.
The company's gross profit margin (GPM) decreased to 67% for the six months
ending June 30, 2000,from 90% for the six months ending June 30, 1999.. This
decrease is due to a combination of a change in the Company's product mix from
1999 to 2000, and as a result of lower margins on the NSME products. The Company
does not expect its GPM to decrease below 50% for the remainder of 2000 as a
result of these changes.. SG&A expenses did not significantly change ($ 142,399
vs. $ 143,183) from the first quarter 2000 to the second quarter 2000. SG&A for
2000 is up significantly compared to 1999 due to the addition of the NSME
operations at the end of 1999. The company expects this level of expenses to
decrease as the NSME subsidiary moves out of the start-up phase into a more
efficient manufacturing phase; but, these expenses are expected to again
increase to support the expected growth in production and sales at NSME by the
fourth quarter. Management intends to use the existing levels of expenses as a
not-to-exceed target for future growth of subsidiaries and addition of new
subsidiaries.
2
<PAGE>
The Company's operating loss for the three months ended June 30, 2000 was
$115,726 compared to the loss of $19,851 for the three months ending March 31,
2000. The increase in the loss is due to the significant drop in sales for the
quarter experienced by the CTD subsidiary. The Company had a loss of ($135,578)
for the six months ended June 30, 2000 compared to net income of $51,864 for the
six months ended June 30, 1999. The primary reason for the decrease in
profitability is due to the start-up of the NSME operations beginning at the end
of 1999. Management has moved NSME out of the start-up phase into the operating
phase and will begin reducing expenses to a level necessary to support efficient
operations; combined with increased revenues from greater production of
mushrooms, management intends to reduce NSME's losses substantially during the
remainder of 2000 to a level that will permit CTDH to be profitable. By the end
of 2000 management expects NSME to add to the company's profitability at the
rate of about $ 5,000 per month.
The Company will continue to introduce new products through its subsidiaries
that will enhance profitability; and it will continue to implement its strategy
of creating or acquiring operational affiliates and/or subsidiaries that will
use CD's in herbal medicines, waste-water remediation, pharmaceuticals, and
foods.
Forward-looking Statements
--------------------------
All statements other than statements of historical fact in this report are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995, and are based on management's current expectations of the
Company's near term results, based on current information available and
pertaining to the Company. The Company assumes no obligation to update publicly
any forward-looking statement. Actual results may differ materially from those
projected in the forward-looking statements. These forward-looking statements
involve risks and uncertainties, including, but not limited to, the following:
demand for cyclodextrin and mushrooms; changes in governmental laws and
regulations surrounding various matters, such as labeling disclosures;
production and pricing levels of important raw materials; and difficulties or
delays in the development, production, testing and marketing of products;
product margins and customer product acceptance.
3
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
All common shares of the Company were doubled pursuant to a two for one stock
split effective May 1, 2000. From March 31, 2000, to June 30, 2000, President
C.E. Rick Strattan was issued 75,566 shares valued at more than $10,000 as
compensation. Twenty thousand common shares were sold to Chris Kent, and 40,000
common shares were sold to George Fails for $.50 per share. On April 24, 2000,
the Company issued 200,000 common shares to Randy McAtee in consideration of his
services provided pursuant to the Public Relations Service Agreement entered
into with the Company on March 1, 2000. All share certificates contained
restricted legends. All shares were issued pursuant to exceptions from
registration under Section 4(2) of the Securities Act of 1933.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
None.
15
