UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
__X__ Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934 for the quarterly period ended: September 30, 2008.
____ Transition Report Under Section 13 or 15(d) of the Exchange Act 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)
Registrant'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 registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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.
(x)Yes (_) No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of 'large accelerated filer,'
'accelerated filer,' and 'smaller reporting company' in Rule 12b-2 of the
Exchange Act.
Large accelerated filer (_) Accelerated filer (_)
Non-accelerated filer (_) Smaller reporting company (X)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) (_)Yes (x)No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 3, 2008, the Company had outstanding 20,930,764 shares of its
common stock.
PART I. Financial Information
Item 1. Financial Statements.
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
September 30, 2008 December 31, 2007
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 243,121 $ 209,981
Certificate of deposit - 100,000
Accounts receivable 47,059 85,434
Inventory 224,292 107,624
Deferred tax asset 75,000 75,000
Investment due from related party - 853
Other current assets 2,000 2,442
------------- -------------
Total current assets 591,472 581,334
------------- -------------
PROPERTY AND EQUIPMENT, NET 446,415 437,435
------------- -------------
OTHER ASSETS
Certificate of deposit - 163,985
Shareholder loan 4,344 -
Intangibles, net 89,816 40,967
Deferred tax asset 391,000 375,000
------------- -------------
Total other assets 485,160 579,952
------------- -------------
TOTAL ASSETS $ 1,523,047 $ 1,598,721
============= =============
(Continued)
F-1
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, 2008 December 31, 2007
(Unaudited)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 74,444 $ 73,664
Current portion of long-term debt - 3,942
------------- -------------
Total current liabilities 74,444 77,606
------------- -------------
LONG-TERM LIABILTIES
Long-term debt, less current portion - 136,132
Loan from officer - 21,330
------------- -------------
Total long-term liabilities - 157,462
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, par value $.0001 per share,
100,000,000 shares authorized, 24,612,263 and
20,824,291 shares issued and outstanding,
respectively 2,461 2,083
Preferred stock, par value $.0001 per share,
5,000,000 shares authorized; Series A, 1 share
issued and outstanding - -
Additional paid-in capital 3,189,915 3,030,737
Accumulated deficit (1,743,773) (1,669,167)
------------- -------------
Total stockholders' equity 1,448,603 1,363,653
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,523,047 $ 1,598,721
============= =============
See Accompanying Notes to Financial Statements.
F-2
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
PRODUCT SALES $ 142,105 $ 226,710 $ 371,230 $ 557,633
----------- ----------- ----------- -----------
EXPENSES
Personnel 114,301 74,606 276,120 200,920
Cost of products sold
(exclusive of
depreciation and
amortization,shown
seperately below) 3,111 47,711 81,268 64,495
Professional fees 13,154 15,254 71,383 92,884
Office and other 7,799 11,396 25,325 24,962
Amortization and
depreciation 5,373 5,900 18,323 16,559
Freight and shipping 6,671 7,721 12,473 13,248
----------- ----------- ----------- -----------
150,409 162,588 484,892 413,068
----------- ----------- ----------- -----------
Operating income (loss) (8,304) 64,122 (113,662) 144,565
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Investment and other
income 10,997 8,547 24,872 21,869
Interest expense (100) (2,636) (1,816) (7,979)
----------- ----------- ----------- -----------
Total other income 10,897 5,911 23,056 13,890
----------- ----------- ----------- -----------
NET INCOME (LOSS) BEFORE
INCOME TAXES 2,593 70,033 (90,606) 158,455
Income Taxes (1,000) - 16,000 -
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 1,593 $ 70,033 $ (74,606) $ 158,455
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON
SHARE $ .00 $ .00 $ (.00) $ .01
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 26,626,745 17,533,666 26,626,745 18,383,406
=========== =========== =========== ===========
See Accompanying Notes to Financial Statements
F-3
CTD HOLDINGS,INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Nine Months Ended
September 30,
--------------------------
2008 2007
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (74,606) $ 158,455
------------ ------------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 18,323 16,559
Stock awarded to employees 159,556 104,120
Income tax benefit of deferred tax asset (16,000) -
Increase or decrease in:
Accounts receivable 38,375 (18,573)
Inventory (116,668) (25,548)
Prepaid expenses 442 22,113
Accounts payable and accrued expenses 780 (30,751)
------------ ------------
Total adjustments 84,808 67,920
------------ ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 10,202 226,375
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment and building improvements (24,499) (19,974)
Patent database costs (51,653) (13,233)
Redemption of certificate of deposit 263,985 -
Investment with related party 853 (201,777)
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 188,686 (234,984)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (140,074) (5,187)
Payments on stockholder loan (21,330) -
Loan to stockholder (4,344) -
Received from stockholder - 14,984
------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (165,748) 9,797
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 33,140 1,188
F-4
CTD HOLDING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase in Cash and Cash Equivalents
(Unaudited)
(Concluded)
Nine Months Ended
September 30,
--------------------------
2008 2007
------------ ------------
CASH AND CASH EQUIVALENTS, beginning of period 209,981 23,629
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 243,121 $ 24,817
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
Cash paid for interest $ 1,816 $ 7,979
============ ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Common stock awarded to officers $ 159,556 $ 104,120
============ ===========
See Accompanying Notes to Financial Statements
F-5
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)
The information presented herein as of September 30, 2008, and for the three and
nine month periods ended September 30, 2008, and 2007, is unaudited.
(1) BASIS OF PRESENTATION:
The accompanying financial statements include CTD Holdings, 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 recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 2008,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2008. 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, 2007.
(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.
(3) INCOME TAXES
For the three month period ended September 30, 2008, the Company reported net
income and reported income tax expense of $1,000 and reduced its deferred tax
asset. For the nine month period ended September 30, 2008, the Company
reported a net loss and also realized a net operating tax loss and
recorded the future benefit by increasing its deferred tax asset and
recognizing an income tax benefit of $16,000. This was based on management's
expectation that it is more likely than not the Company will report net
income and net taxable income for 2008 and future years sufficient to utilize
its net operating loss carry forwards.
For 2007, the Company reported net income and no income tax expense was reported
for the three and nine month periods ended september 30, 2007, due to the
Company utilizing the benefit of its net operating loss carry forward. In the
fourth quarter of 2007, the Company reduced the valuation allowance on the
deferred tax asset by $450,000.
(4) CONCENTRATIONS
Sales to three major customers were 42% of total sales for the nine months ended
September 30, 2008. Sales to four major customers were 67% of total sales for
the nine months ended September 30, 2007.
Substantially all 2007 and 2006 inventory purchases were from three vendors.
The Company has only one source for certain manufactured inventory, which is
located in Hungary. However, the Company has manufactured these products in the
past and could do so again, if necessary. There are multiple sources for its
other inventory products.
(5) COMMITMENTS AND CONTINGENCIES
For 2008, the Company has employment agreements with two officers for total
monthly salaries of $10,000. In addition, the officers are awarded shares of
common stock each month. The number of shares due is equal to $13,500 divided by
eighty percent of the closing price of the Company's common stock on that last
day of each month. The Company recognizes an expense equal to the fair value of
the stock determined using the average stock closing trading price for the month
multiplied by the number of shares awarded for that month. The stock is subject
to trading restrictions under Rule 144. Also, the Company issued shares to one
of its employees through July 31, 2008. The number of shares due is equal to
$500 divided by eighty percent of the closing price of the Company's common
stock on the last day of each month. For the three and nine months ended
September 30, 2008, the Company awarded 1,246,307 and 3,787,972 shares and
recognized an expense of $71,343 and $159,527, respectively, for stock awarded
under these agreements.
For 2007, the Company had employment agreements with two officers for total
monthly salaries of $5,000. In addition, the Company's president is awarded
shares of common stock each month. The number of shares due is equal to $11,500
divided by eighty percent of the closing price of the Company's common stock
price on the last day of each month. The $11,500 amount is a combination of
$6,500 under the employment agreement and $5,000 awarded as a monthly bonus
effective July 1, 2007. The Company recognizes an expense equal to the fair
value of the stock determined using the average stock closing trading price for
the month multiplied by number of shares awarded for that month. The stock is
subject to trading restrictions under Rule 144. For the three and nine months
ended September 30, 2007, the Company awarded 1,677,083 and 3,505,208 shares and
recognized an expense of $50,031 and $103,520, respectively, for stock awarded
under the agreements. Effective July 1, 2007, the Company also issued 29,166
shares of stock to an employee and expensed $870 for the three and nine months
ended September 30, 2007.
On February 7, 2007, Registrant and C.E. Rick Strattan filed suit in Circuit
Court in Palm Beach County, Florida, (Case Number 2007CA001818XXXXMB) seeking
the return of the Class A Preferred Share and damages from defendants Eline
Entertainment Group, Inc., Eline Holding Group, Inc., Yucatan Holding Company,
Steven T. Dorrough, Jayme Dorrough, and Barry Rothman, based on representations
made in connection with the Share Exchange Agreement dated August 11, 2005, as
amended and the enforcement of the agreement.
(6) CHANGE IN ACCOUNTING ESTIMATE
In January 2007, the Company received a favorable price adjustment for inventory
acquired and resold in 2006, resulting in reduction in cost of goods sold for
2007 of $7,700 for nine months ended September 30, 2007.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Introduction
CTD Holdings, Inc. (referred to as the "Company," "CTD" or in the first person
notations of "we," "us," and "our") began operations in 1990. Our revenues are
principally derived from retail sales of cyclodextrins and cyclodextrin
complexes. Our sales are primarily to major chemical supply houses around the
world, pharmaceutical companies, and food companies for research and development
and to diagnostics companies. We acquire our products principally from outside
the United States, largely from Japan, Germany and Hungary, but are gradually
finding satisfactory supply sources in the United States and China. While we
enjoy better supply prices from outside the United States, rising shipping costs
are making domestic sources more competitively priced. To add value to our
products, we maintain a comprehensive database of patented and patent pending
uses of cyclodextrins from the United States. We also maintain a less
comprehensive database that includes patents issued in many other countries
including Japan, Germany and others. This information is available to our
customers. We also offer our customers our knowledge of the properties and
potential new uses of cyclodextrins and cyclodextrin complexes.
As most of our customers use our cyclodextrin products in their research and
development activities, their ordering from us is unpredictable with regard to
timing, product mix and volume. We also have four major customers that have a
significant effect on our revenues when they increase or decrease their research
and development activities that use cyclodextrins. We keep in constant contact
with these customers as to their cyclodextrin needs so we can maintain the
proper inventory composition and quantity in anticipation of their needs. The
sales to major customers and the product mix and volume of products sold has a
significant effect on our revenues and product margins. These factors contribute
to our significant revenue volatility from quarter to quarter and year to year.
In 2004, we amended the Company's Articles of Incorporation authorizing a series
of "blank check" preferred stock consisting of 5,000,000 shares; we created and
issued one share of Series A Preferred Stock, setting forth its designations,
rights and preferences. The more significant right is that the owner of the one
Series A Preferred share votes with the holders of common stock on all matters
submitted to a vote of our shareholders. The owner of the one share of Series A
Preferred Stock is entitled to one vote more than one-half of all votes entitled
to be cast by all holders of voting capital stock of the Company on any matter
submitted to holders of common shares so as to ensure that the votes entitled to
be cast by the holder of the Series A Preferred Stock are equal to at least a
majority of the total of all votes entitled to be cast by the holders of common
shares. In 2004, we issued one share of Series A Preferred Stock to C.E.
Strattan, our majority shareholder in exchange for 1,029,412 shares of common
stock held by him, which he voluntarily surrendered to the Company and were
cancelled. Effective August 11, 2005, C.E. Strattan contractually transferred
the right to the one outstanding share of Series A Preferred Stock to Eline
Entertainment Group, Inc. (Eline). The agreement with Eline provides for
advances to the Company of up to an aggregate of $1,500,000 to acquire CycloLab,
at Eline's sole discretion. Eline is an SEC reporting company currently not in
reporting compliance. In September 2006, the company's President, Mr. Strattan,
demanded, in accordance with the expired contract, the return of the Series A
Preferred Stock in the form of a stock power authorization since the physical
share never left the possession of its original owner, Mr. Strattan. The demand
letter was sent to the address given in the contract and was never acknowledged
nor responded to by Eline. The Company has filed a legal action with regard to
its agreement with Eline. See "Legal Proceedings".
Liquidity and Capital Resources
Our cash, short-term investments and certificates of deposits decreased to
$243,000 as of September 30, 2008, compared to $474,000 as of December 31, 2007.
The decrease for the nine months ended September 30, 2008, was due primarily to
increasing inventory by $117,000, retiring the mortgage on our property of
$140,000, $52,000 to develop our patent database and $24,000 to purchase
equipment and improve our physical facilities. We have not experienced and do
not expect to have any valuation issues or access restrictions to our cash
accounts and short-term investments.
As of September 30, 2008, our working capital was $517,000 compared to $504,000
at December 31, 2007. Our cash flows from operations for the first nine months
of 2008 were $10,000 compared to $226,000 for the same period in 2007. This
decrease was primarily due to a $187,000 decrease in sales and a $117,000
increase in inventory in 2008.
We accumulated almost $500,000 in cash in January 2008, which is in excess of
our requirements for normal operations and capital projects. We determined the
best use of our additional cash was to pay off the $140,000 mortgage on our
property, which we did in February 2008. This reduces interest expense $850 per
month. We also signficantly increased our inventory for our two most popular
products. In April 2008, we ordered $80,000 of the product HPB from a Japanese
supplier, and in July 2008 we ordered $46,000 of the product Methyl-Beta from a
German supplier. We increased our inventory of these two products based on our
estimate of future industry purchase trends and recent product inquiries from
our larger customers. These products have a three month or more lead time to
acquire from our suppliers in the quantity purchased. Because we now have these
products in stock, we have an increased opportunity to fill any large orders we
may receive. Due to increased shipping costs, it is also less costly to buy and
ship larger quantities from our suppliers. If these large orders do not
materialize, we can sell this product in the normal course of business. Our
current inventory of these two product represents approximately two years of our
historical sales volume of these products.
In October 2008, we announced a plan to repurchase up to $150,000 of currently
outstanding common stock. We have not determined the exact timing of these share
repurchases.
We believe our working capital is sufficient to run our operations at current
expected future operating levels into the near future. We do not require capital
in the next twelve months for normal operations.
Controlling cash expenses continues to be management's primary fiscal tool.
However, growth requires increased expenditures and we feel that it is
appropriate during the current growth stage to engage consultants that can help
the Company in financial areas outside its expertise, accepting that these fees
will act to reduce profitability. We are working hard to increase revenues to
balance these new expenses, but cannot be sure that such effort will be enough
in the short term to sustain profitable financial performance.
Beginning in 2003, we began improvements and renovations of our corporate office
and have invested $123,000 through December 31, 2007, including paving our
limerock driveway and completing part of our office renovation. During the nine
months ended September 30, 2008, we capitalized $24,000 of improvements
including paving the first 300 feet of our driveway. Currently we are conducting
an extensive survey of our 40 acres of property and existing facilities in
preparation for developing a total site plan for our Research Park facility. In
2009, we plan to renovate three existing structures to be an inventory warehouse
and an educational auditorium at a estimated cost of $60,000. These buildings
have been previously idle. Over the next five years, we plan to renovate or
construct at least six buildings for an estimated cost of $150,000.
Currently, we are developing a site plan for the research park including survey,
engineering and design. The progress of the site plan is contingent on the
Company's ability to fund our building plan from operating profits and cash
flow. At the conclusion of the site plan, we plan to sell additional stock to
finance the building construction of the research park.
During 2007, we began a major upgrade and update of our searchable cyclodextrin
patent database. This database will be the only database dedicated to issued and
applied for US patents regarding cyclodextrins capable of supporting the
anticipated deluge of litigation created by the sheer volume of cyclodextrin
patenting activities that have occurred over the last five (5) years. We have
capitalized $85,000 for this database through September 30, 2008. We expect the
initial project to cost $125,000 and to be completed by June 30, 2009. We plan
to begin selling subscriptions to customers by the end of 2009. During the first
quarter of 2008, we expanded the project to include significant data
verification and customized software to update the database directly from the
U.S. Patent and Trademark Office and increased the budget by $30,000. We plan to
implement phase II after revenue has been generated from Phase I. Phase II will
include entering U.S. patent applications into the database. On an ongoing
basis, we will continue to enhance the database for ease of use and
completeness. We have not budgeted Phase II at this time. We expect annual
database enhancement and maintenance costs to be at least $20,000 for the
foreseeable future. We have not completed the database or placed it in service
at September 30, 2008. We anticipate the patent database will have an indefinite
life and will not be amortized. However, we will amortize the internally
developed software component of database project over its expected useful life
and all future maintenance costs of updating the database will be expensed as
incurred.
We have no off-balance sheet arrangements at September 30, 2008.
Results of Operations
Total product sales to date declined 34% in 2008 to $371,000, compared to
$558,000 for the same period in 2007. Sales for the quarter ending September 30,
2008 and 2007 were $142,000 and $227,000, respectively. Our decrease in 2008
sales from 2007 was due primarily do a decrease in sales volume, primarily of
one product, Trappsol HPB, of which we had higher than historical volume sales
in 2007. Our major customers continue to follow historical product ordering
trends and have continued to place periodic large orders that represent a
significant share of our annual sales volume. For 2008 to date, our four largest
customers accounted for 49% of our sales; the largest accounted for 17% of
sales. In 2007, our four largest customers accounted for 67% of our sales; the
largest accounted for 27% of sales. The timing of when we receive and are able
to complete these large periodic orders has a significant effect on our
quarterly sales and operating results.
Our cost of products sold (excluding any allocation of direct and indirect
overhead and handling costs) for 2008 to date increased 26% to $81,000 from
$64,000 for the same period in 2007. This increase is the net result of changes
in the product mix sold (increase in cost) offset by a lower volume of sales
(decrease in cost). For 2007, our product sales of Trappsol HPB increased, which
has a high margin, so 2006 cost of sales did not increase at the same percentage
as sales. Also during 2007, we received a favorable price adjustment for some
inventory we acquired and resold in 2006, resulting in reduction in our 2007
cost of goods sold of $7,700. Historically, changes in both sale volume and
product mix has a significant effect on our cost of sales and our margins. Our
margins vary significantly among our products. Our margins for the same product
vary based on quantity sold.
The decrease in the value of the U.S. dollar during 2008 in relation to the Euro
and other foreign currencies has affected our cost of inventory, and will
continue to do so. We buy most of our products from outside the U.S. Our main
supplier of fine chemicals and complexes has raised its prices 10-15% in Euros.
This increase combined with the decline in the U.S dollar, has seen our costs
for these products increase 55-65%. The cost of our bulk inventory has also
increased due to the decline of the U.S. dollar. These products represent a
significant portion of our revenues. We are not able to raise our prices
sufficient to maintain our historical margins and therefore, our product sales
margins have declined.
Personnel costs have increased 37% to $276,000 for the nine months ended
September 30, 2008, from $201,000 for same period in 2007. Personnel costs
increased 53% for the three months ended September 30, 2008 compared the three
months ended September 30, 2007. This increase is due primarily to an increase
in the annual salary and monthly stock bonus awarded to our president. We also
added an additional office employee during the three months ended September
2008.
Professional fees decreased 23% to $71,000 for the nine months ended September
30, 2008, from $93,000 for same period in 2007. Professional fees decreased 14%
for the three months ended September 30, 2008 compared to the three months ended
September 30, 2007. This decrease is primarily due to a reduction in legal
expenses from 2007 to 2008 as the result of our lawsuit with Eline Entertainment
Group, Inc. We continue to incur legal expenses and we may incur significant
future legal fees related to this lawsuit.
Office and other expenses are comparable at $25,000 for 2008 and 2007. Most of
our office related expenses do not vary significantly from quarter to quarter.
Amortization and depreciation increased 11% to $18,000 for the nine months ended
September 30, 2008, from $17,000 for the same period in 2007. Amortization and
depreciation were comparable for the three months ended September 30, 2008
compared to the three months ended September 30, 2007. We expect similar
increases in future periods as the result of our office renovations,
improvements and additions, as well as the addition of internally developed
software related to our patent database when completed.
Freight and shipping decreased 6% to $12,000 for the nine months ended September
30, 2008, from $13,000 for the same period in 2007. Freight and shipping
decreased 14% for the three months ended September 30, 2008 compared to the
three months ended September 30, 2007. Freight and shipping is dependent on
frequency of ordering products for inventory and frequency of sales. We have
also experienced an increase in overall shipping costs due to increases in
energy costs during 2008.
Investment and other income increased 14% to $25,000 for the nine months ended
September 30, 2008, from $22,000 for the same period in 2007. Investment and
other income increased 29% for the three months ended September 30, 2008
compared the three months ended September 30, 2007. This increase is due
primarily to interest income on increased cash balances in 2008, although we
have experienced lower interest rates on our investments during 2008.
We recognized a $16,000 income tax benefit on our additional net operating loss
for the nine months ended September 30, 2008. We recorded no income tax expense
for the nine months ended September 30, 2007, due to the availability of net
operating loss carryforwards that offset our income tax liability. Prior to
December 31, 2007, we recorded a 100% valuation allowance on our net deferred
tax asset.
We recognized a net loss of $(75,000) and net income of $2,000 for the nine and
three month periods ending September 30, 2008, compared to net income of
$158,000 and $70,000 for the nine and three months ended September 30, 2007.
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 cyclodextrins in herbal medicines, waste-water
remediation, pharmaceuticals, and foods. We also intend to pursue exclusive
relationships with major cyclodextrin manufacturer(s) and specialty cyclodextrin
labs to distribute their products. We continue to be the exclusive distributor
in North America of the cyclodextrin products manufactured by CycloLab Research
Laboratories in Budapest, Hungary.
In keeping with its commitment to use the internet as a major promotional,
educational and public relations outlet, the Company intends to apply greater
human resources to the updating and maintaining of its web site. This valuable
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 the maintenance and growth of our web site will return
that investment many times.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Items 4 and 4T. Controls and Procedures.
a. Management's quarterly report on internal control over financial reporting.
1. Our management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934. Our internal control over
financial reporting is a process designed to provide reasonable assurance that
assets are safeguarded against loss from unauthorized use or disposition,
transactions are executed in accordance with appropriate management
authorization and accounting records are reliable for the preparation of
financial statements in accordance with generally accepted accounting
principles.
2. Internal control over financial reporting is a process tailored to the
Company's unique circumstances, designed under the supervision of the Company's
Chief Executive and Chief Operating Officer, and effected by the Company's Board
of Directors, its consultants and other personnel, taking into account the small
size of the Company, small number of employees and others involved in the
Company's finances. The process uses a system of checks and balances to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:
- pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the Company's assets and the
review of those transactions and dispositions by the Company's compliance
officer;
- provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that the Company's receipts and expenditures are
being made only in accordance with authorizations of management or the Company's
Board of Directors; and
- provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets that could
have a material adverse effect on the Company's financial statements.
3. As required by Rule 13a-15(b) and 15(d)-15(e) under the Exchange Act, our
Chief Executive Officer who is also our Principal Accounting Officer carried out
an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report. The
Company's Chief Executive Officer has concluded that the Company's internal
control over financial reporting, as of September 30, 2008 was effective.
4. This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this quarterly report.
b. Changes in internal controls.
The Company made no changes in its internal control over financial reporting
that occurred during the Company's third fiscal quarter that has materially
affected, or which is reasonably likely to materially affect the Company's
internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
NONE
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
NONE
Item 3. Defaults Upon Senior Securities.
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
Item 5. Other Information.
NONE
Item 6. Exhibits.
(2) Plan of purchase, sale, reorganization, arrangement,
liquidation or succession None
(3) Articles of Incorporation and By-Laws
(i) Articles of Incorporation filed August 9, 1990 *
(ii) By-Laws *
(iii) Certificates of Amendment to the Articles of
Incorporation filed November 18, 1993 and
September 24, 1993 *
(4) Instruments defining the rights of security holders,
including indentures
(a) Specimen Share Certificate for Common Stock. *
(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. *
(10.2) Lease Agreement dated July 7, 1994. **
(10.3) Consulting Agreement dated July 29, 1994 between
the Company and Yellen Associates. *
(10.4) License Agreement dated December 20, 1994 between
the Company and Herbe Wirkstoffe GmbH. *
(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. **
(10.6) Extension of Agreement between the Company and
Herbe Wirkstoffe GmbH. ***
(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 ****
(10.13) Addendum to Share Exchange Agreement with Eline
Entertainment Group ++++
(10.14) Share Exchange Agreement with Eline Entertainment
Groups +++++
(11) Statement re: computation of per share earnings Note 2 to
Financial
Statements
(15) Letter on unaudited interim financial information ****
(18) Letter on change in accounting principles None
(19) Reports furnished to security holders None
(20) Other documents or statements to security holders or any
document incorporated by reference None
(22) Published report regarding matters submitted to vote of
security holders None
(23) Consents of experts and counsel None
(24) Power of Attorney None
(31) Rule 13a-14(a)/15d-14a(a) Certifications ****
(32) Section 1350 Certifications ****
(99) Additional exhibits None
(100)XBRL-Related Documents 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.
++++ Incorporated by reference to the Company's Form 8-K filed with the
Securities and Exchange Commission on September 21, 2005.
+++++Incorporated by reference to the Company's Form 8-K filed with the
Securities and Exchange Commission on August 15, 2005.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CTD HOLDINGS, INC.
Date: November 14, 2008 /s/ C.E. Rick Strattan
-----------------------------
C.E. Rick Strattan
Chief Executive Officer
Chief Financial Officer