UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2008
( ) 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
27317 N. W. 78th Avenue, High Springs, FL 32643
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (386) 454-0887
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes (_) No (X)
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes (_) No (X)
Note - Checking the box above will not relieve any registrant required to
file reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 (X) No (_)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (_)
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 (Do not check if a smaller reporting company) (_)
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 (_) No (X)
State issuer's revenues for its most recent fiscal year: $751,176
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity,
as of the last business day of the registrant's most recently completed second
fiscal quarter: $640,825 based on the average high $.07 and low $.04 price as of
June 30, 2008, of $.06 per share. (See definition of affiliate in Rule 12b-2 of
the Exchange Act.)
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
Indicate the number of shares outstanding of each of the registrant's
classes of common equity, as of the latest practicable date: 26,542,438 shares
of Common Stock as of February 28, 2009.
PART I
Item 1. Business.
CTD Holdings, Inc. ("Us" or "the Company") was organized as a Florida
corporation on August 9, 1990, with operations beginning in July 1992. We sell
cyclodextrins ("Cyclodextrins" or "CDs") and related products to the food,
pharmaceutical and other industries. We also provide consulting services in the
area of commercialization of CD applications.
CDs
Cyclodextrins are molecules that bring together oil and water and have
potential applications anywhere oil and water must be used together. Successful
applications have been made in the areas of agriculture, analytical chemistry,
biotechnology, cosmetics, diagnostics, electronics, foodstuffs, pharmaceuticals
and toxic waste treatment. Stabilization of food flavors and fragrances is the
largest current worldwide market for CD applications. The Company and others
have developed CD-based applications in stabilization of flavors for food
products; elimination of undesirable tastes and odors; preparation of antifungal
complexes for foods and toiletries; stabilization of fragrances and dyes;
reduction of foaming in foods; cosmetics and toiletries; and the improvement of
quality, stability and storability of foods.
CDs can improve the solubility and stability of a wide range of drugs. Many
promising drug compounds are unusable or have serious side effects because they
are either too unstable or too insoluble in water. Strategies for administering
currently approved compounds involve injection of formulations requiring pH
adjustment and/or the use of organic solvents. The result is frequently painful,
irritating, or damaging. These side effects can be ameliorated by CDs. CDs also
have many potential uses in drug delivery for topical applications to the eyes
and skin.
We believe the application of CDs in both OTC and ethical ophthalmic
products provides the greatest opportunity for the successful and timely
introduction of CD containing preparations for topical drug use.
We provide consulting services for the commercial development of new
products containing CDs. Our revenues are derived from consulting, the
distribution of CDs, the manufacturing of selected CD complexes, and sales of
our own manufactured and licensed products containing CDs.
CD Product Background
CDs are donut shaped circles of glucose (sugar) molecules. CDs are formed
naturally by the action of bacterial enzymes on starch. They were first noticed
and isolated in 1891 by a French scientist, Villiers, as he studied rotting
potatoes. The bacterial enzyme naturally creates a mixture of at least three
different CDs depending on how many glucose units are included in the molecular
circle; six glucose units yield Alpha CD ("ACD"); seven units, beta CD ("BCD");
eight units, gamma CD ("GCD"). The more glucose units in the circle, the bigger
the circle, or donut. The inside of this "donut" provides an excellent resting
place for "oily" molecules while the outside of the donut is significantly
compatible with water enabling clear stable solutions of CDs to exist in aqueous
environments even when an "oily" molecule is carried within the donut hole. The
net result is a molecular carrier that comes in small, medium, and large sizes
with the ability to transport and deliver "oily" materials using water as the
primary vehicle.
CDs are manufactured in large quantities by mixing appropriate enzymes with
starch solutions, thereby reproducing the natural process. ACD, BCD and GCD can
be manufactured by an entirely natural process and therefore are considered to
be natural products. Additional processing is required to isolate and separate
the CDs. The purified ACD, BCD, and GCD are referred to collectively as natural
CDs (NCDs).
The chemical groups on each glucose unit in a CD molecule provide chemists
with ways to modify the properties of the CDs, i.e. to make them more water
soluble or less water soluble, thereby making them better carriers for a
specific chemical. The CDs that result from chemical modifications are no longer
considered "natural" and are referred to as chemically modified CDs ("CMCDs").
Since the property modifications achieved are often so advantageous to a
specific application, the Company does not believe the loss of the "natural"
product categorization will prevent its ultimate commercial use. It does,
however, create a greater regulatory burden.
Our strategy is to sell CDs and to introduce products with little or no
regulatory burden in order to minimize product expenses and create profitable
revenue.
We currently sell our products for use in the pharmaceutical, food and
industrial chemical industries.
CD Market
The food additive industry has been experimenting with CDs for many years.
Now that commercial supply of these materials can be assured and regulatory
approval is in place, the Company believes the food additive industry will
continue to increase its use of CDs.
CDs have been used in a variety of food products in Japan for over 25
years. In 1999 the economic impact of CD's on the Japanese economy was reported
to be $2.6 billion. Within the last five years, more European countries have
approved the use of CDs in food products. In the United States, major starch
companies are renewing their earlier interest in CDs as food additives. Oral
arguments for regulatory approval by the United States Food and Drug
Administration ("FDA") have been accepted. As of November 3, 1997, BCD use as a
food additive in 10 categories of food products was confirmed to be generally
recognized as safe (GRAS).
Applications of CDs in personal products and for industrial uses have
appeared in many patents and patent applications. Procter & Gamble uses CDs in
Bounce(R), a popular fabric softener and Febreze(R). Avon uses CDs in its dermal
preparations using its Age Protective System APS(R). These uses will grow as the
price of the manufactured CDs decrease or are perceived as acceptable in view of
the value added to the products. In 2001 Janssen Pharmaceutica, a subsidiary of
Johnson & Johnson received approval to market Sporanox(r), an oral and
injectable formulation containing hydroxypropyl BCD.
In Japan at least twelve pharmaceutical preparations are now marketed which
contain CDs. The CDs permit the use of all routes of administration. Ease of
delivery and improved bioavailability of such well-known drugs as nitroglycerin,
dexamethasone, PGE(1&2), and cephalosporin permit these "old" drugs to command
new market share and sometimes new patent lives. Because of the value added, the
dollar value of the worldwide market for products containing CDs and for
complexes of CDs can be 100 times that of the CD itself.
CD Products
Our CD products include Trappsol(R), Aquaplex(R), and AP(TM)-Flavor product
lines. The Trappsol product line consists of approximately 200 different
varieties of CDs and the Aquaplex product line includes more than 60 different
complexes of active ingredients with various CDs. In addition to these product
lines, the Company introduced Garlessence(R) in the fourth quarter of 1995.
Garlessence is the first ingestible product containing CDs to be marketed in the
U.S. The Company also provides consulting services, research coordination, and
the use of CD Infobase(TM), a comprehensive database of CD related information.
The Company has protected its service and trade marks by registering them with
the U.S. Patent and Trademark office. The following trademarks have been
approved and are in use: Trappsol(R), and Aquaplex (R). These properties add to
the intangible asset value of the Company. Since 2000, our Web Site at
http://www.cyclodex.com, a major tangible asset has grown to be a leading
Cyclodextrin information site on the Internet.
CTD purchases CD's from commercial manufacturers around the world
including: Wacker Chemie - Munich, Germany; Nihon Shokuhin Kako - Tokyo, Japan;
Roquette Freres - Le Strem, France; Cerestar Inc. - Hammond IN, USA. At the end
of 2002, CTD became the exclusive distributor in North America of the CD
products manufactured by Cyclolab R&D Labs in Budapest, Hungary. The Company
does not manufacture cyclodextrins.
We have introduced many new products into our basic line of CDs and CD
complexes--liquid preparations of CDs; relatively unprocessed, less expensive
mixtures of the natural CDs; naturally modified CDs (glucosyl and maltosyl); and
finally, excess production of custom complexes when those items are not
proprietary or restricted by the customer.
Business Strategy
Our strategy has been and will continue to be to generate profitable
revenue through sales of CD related products.
From inception through the current year, sales of CDs and CD derivatives
have been sufficient to provide the necessary operational profitability to
sustain the Company. Since these materials were simply purchased and resold,
they had the least value-added attributes.
Presently, sales of CD complexes represent a majority of the Company's
product sales revenues. Transition to the more value-added complexes continues
and is desirable for increased profitability since higher margins can be
maintained for these products. We have increased our list of major customers
from 3 to 4 thereby continuing to reduce our dependency on sales to a very small
core of repeat purchases.
We intend to increase our business development efforts in the food additive
and personal products industries while continuing to build on our successes in
the pharmaceutical industry.
Business development on behalf of the Company's clients will include the
following: (i) negotiation of rights and/or licenses to CD-related inventions;
(ii) consultation with manufacturers to establish customized manufacturing
specifications; (iii) patentability assessments and strategic planning of patent
activities; (iv) trade secret strategies; (v) regulatory interface; and (vi)
strategic marketing planning.
The Company believes its competitive advantage lies in its experience and
know how in the use and application of CDs, areas in which it believes it has
few equals.
In addition to its licensing efforts, the Company intends to coordinate
research studies in which it will retain a portion of the rights created as a
result of the research work supported.
Assuming the availability of funds, the Company will negotiate licensing
rights to its own selected inventions. Because of its comprehensive technical
and patent database for CD-related inventions, the Company believes it is
uniquely positioned to take advantage of constantly evolving licensing
situations.
Marketing Plan
We believe the failure of businesses to exchange information about CD
molecules has hindered a more rapid commercialization of CDs as safe excipients.
We believe our philosophy of partnering and sharing will act as a catalyst to
create momentum overcoming the inertia created by the previous conservatism and
secrecy.
Our sales have always been direct, volatile and driven by the acceptance of
CD's as beneficial excipients. Arrangements with large laboratory supply
companies and several diagnostic companies have provided a strong sales base,
that continues to diversify.
The Company has taken advantage of the propensity of researchers to use the
Internet to gather information about new products by establishing a website with
the unique and descriptive domain name "cyclodex.com".
We intend to work with clients in countries where current regulatory views
include CDs as natural products acting as excipients to introduce beneficial
pharmaceuticals improved by CDs.
Along with the new products themselves, the Company has created a
licensable mark that may be used by other manufacturers wishing to take
advantage of the improved aqueous delivery afforded by Trappsol CDs.
We intend to generate additional revenue through obtaining rights to
certain patents that we will sublicense to appropriate organizations or that we
will use to develop our own proprietary products. Revenue would then be expected
to result from sub-licensing royalties, sales of CD complexes to be used in the
newly developed pharmaceuticals, and finally from the sales of the products to
end-users.
Assuming an ongoing successful process of development, approval and
adoption of CDs and CMCDs for pharmaceutical applications, the Company's
objective is to initiate dialogue and be well prepared for partnerships with
major food companies. Price is a primary concern in this market, but unlike
pharmaceuticals where FDA permission for clinical testing may be obtained before
actual FDA product approval, food companies cannot feed experimental
formulations to test panels of consumers until the ingredients, i.e., the CDs,
receive approval for human consumption. Therefore, the Company will work with
the food companies and key university food research groups to initially evaluate
non-taste applications. These questions will initially be explored using NCDs
since commercial adoption will depend heavily upon the price of the CD selected
and NCDs will always be the least expensive. The benefits derived from the use
of CDs with expensive ingredients (e.g., flavors, fragrances)have already become
accepted commercial uses for CMCDs (chemically modified CDs) and (naturally
modified CD's) NMCDs.
Competition
The Company is currently a leading consultant in determining manufacturing
standards and costs for CDs and CMCDs. However, there will always exist the
potential for competition in this area since no patent protection can be
comprehensive and forever exclusive. Nevertheless, there is a perceived barrier
to entry into the CD industry because of the lack of general experience with CD
complexation procedures. The Company has established a strong business
relationship with one of the experts in this field -- Cyclolab in Hungary -- and
has utilized the services and expertise of this laboratory. The Company believes
this relationship provides a significant marketing lead time, and combined with
a strong marketing presence, will give the Company a two to three year lead time
advantage over its competitors.
In 2002 we became the exclusive North American distributor of the CD
products manufactured by Cyclolab. We intend to form additional business
relationships with Cyclolab in Hungary by creating a Cyclolab-USA laboratory
facility and thereby strengthen our competitive advantage. CTD Holdings
continues to consider Cyclolab as a potential acquisition, even after the failed
2006 effort due to misrepresentation by potential investors that has led to
continuing litigation. Cyclolab will certainly play a leading role in the future
Josef Szejtli Research Park at the Company's current corporate site.
Government Regulation
Under the Federal Food, Drug and Cosmetic Act ("Food and Drug Act"), the
Food and Drug Administration ("FDA") is given comprehensive authority to
regulate the development, production, distribution, labeling and promotion of
food and drugs. The FDA's authority includes the regulation of the labeling and
purity of the Company's food and drug products. In the event the FDA believes
any company is not in compliance with the law, the FDA can institute proceedings
to detain or seize products, enjoin future violations or assess civil and/or
criminal penalties against that Company.
The FDA and comparable agencies in foreign countries impose substantial
requirements upon the introduction of therapeutic drug products through lengthy
and detailed laboratory and clinical testing procedures, sampling activities and
other costly and time consuming procedures. The extent of potentially adverse
government regulations which might arise from future legislation or
administrative action cannot be predicted.
Under present FDA regulations, FDA defines drugs as "articles intended for
use in the diagnosis, cure, mitigation, treatment or prevention of disease in
man." The Company's product development strategy is to first introduce a product
that will not be regulated by the FDA as a drug because all of its ingredients
are natural products or is generally regarded as safe (GRAS) by the FDA. The
Company is continually updated by counsel as to changes in FDA regulations that
might affect the use of and claims for these products. There is no assurance
that the FDA will not take the position that the Company's food and nutritional
supplement products are subject to requirements relating to drug development and
sale. The effect of such determination could be to limit or prohibit
distribution of such products.
Employees
The Company employed three persons on a full time basis. None of the
Company's employees belong to a union. The Company believes relations with its
employees are good.
Item 1A. Risk Factors.
Item 2. Properties.
In 2000, the Company bought approximately 40 acres in western Alachua
County, Florida, (the "Property") for a purchase price of $210,000 which was
paid for in part by a new first mortgage of $150,000. The Property had been
developed in part as a mushroom growing facility. While the Company has
discontinued mushroom growing operations on the Property, the Company continues
to use the Property as its corporate headquarters. Its present 6,000 sq.ft.
facility is expected to be adequate to house the Company's operations for the
foreseeable future.
In March 2008, the Company paid off the mortgage in the first step to
create the research park. The Property is in a region that is experiencing
moderate population and development growth which has increased the market value
of the Property. Management believes the limits of insurance coverage are
adequate for the Property.
The Property has a 6,000 sq.ft. facility from which the Company operates
its corporate offices. The anticipated remaining useful life of the facility is
undetermined, but in Management's estimate exceeds 25 years. The Property's
federal tax basis, rate, and method are, respectively, $162,000, 40 years, and
straight-line. The realty tax rate and annual realty taxes assessed on the
Property for the year ended December 31, 2007, are 21.1152 mils and $2,890.68,
respectively.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
In October 1994, the Company's securities began trading on the OTC Bulletin
Board and in the over-the-counter market "pink sheets" under the symbol CTDI. In
2000, CTDI did a 2 for 1 split of its common shares from approximately 2.3
million to 4.6 million issued and outstanding. In conjunction with that
restructuring, we changed the name of CTDI to CTD Holdings, Inc; CTDI was then
incorporated as a Florida corporation and became a wholly owned subsidiary of
CTD Holdings, Inc. In 2000 CTD Holdings, Inc. changed its trading symbol to
CTDH.OB and currently trades on the OTC Bulletin Board as CTDH.OB. Since the
commencement of trading of the Company's securities, there has been an extremely
limited market for its securities. The following table sets forth high and low
bid quotations for the quarters indicated as reported by the OTC Bulletin Board.
High Low
2007 First Quarter $ 0.05 $ 0.02
Second Quarter $ 0.05 $ 0.02
Third Quarter $ 0.04 $ 0.02
Fourth Quarter $ 0.05 $ 0.02
2008 First Quarter $ 0.03 $ 0.02
Second Quarter $ 0.08 $ 0.03
Third Quarter $ 0.08 $ 0.02
Fourth Quarter $ 0.06 $ 0.02
Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions.
Holders
As of February 27, 2009, the number of holders of record of shares of
common stock, excluding the number of beneficial owners whose securities are
held in street name was approximately 70.
Dividend Policy
The Company will not pay any cash dividends on its common stock in 2006
because it intends to retain its earnings to finance the expansion of its
business. Thereafter, declaration of dividends will be determined by the Board
of Directors in light of conditions then existing, including without limitation
the Company's financial condition, capital requirements and business condition.
Recent Sales of Unregistered Securities
None.
Item 7. Management's Discussion and Analysis or Plan of Operation.
Introduction
CTD Holdings, Inc. (referred to as the "Company," "CTD," or "we," "us," and
"our") began operations in 1990. Our revenues are principally derived from the
resale of cyclodextrins and cyclodextrin complexes. Our sales are primarily to
major chemical supply houses around the world, pharmaceutical companies, food
companies for research and development and to diagnostics companies. We acquire
our products principally from outside the United States, largely from Japan and
Hungary, but are gradually finding satisfactory supply sources in the United
States. While we enjoy lower supply prices from outside the United States,
shipping costs for our current order quantities are making domestic sources more
competitively priced. To add value to our products, we maintain a database of
patented and patent pending uses of cyclodextrins as recorded by the United
States Patent & Trademark Office. We also maintain a database that includes
patents issued in many other countries of the World. This information is
available to our customers. We also offer our customers our knowledge of the
properties and potential new uses of cyclodextrins and complexes.
As most of our customers use our cyclodextrin products in their research
and development activities, the timing, product mix, and volume of their orders
from us are unpredictable. We also have four major customers who 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 potentially significant revenue volatility from quarter to quarter and
year to year.
In 2004, we authorized a series of "blank check" preferred stock consisting
of 5,000,000 shares and creating a series of Series A Preferred Stock. The more
significant right is Series A Preferred shareholders vote with the holders of
common stock on all matters submitted to a vote of our shareholders. Share of
Series A Preferred Stock are 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 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". Currently, the Company has received a verbal offer from a
representative of Eline whereby each party would waive its rights and claims in
regard to the other. The Company's Board of Directors is considering its
response.
The Company's Board of Directors had previously decided to create an
additional class of preferred shares to be referred to as the Series B Preferred
Share. The Series B Preferred Share would entitle the holder to vote, in
addition to other shares owned by the holder, the number of votes equal to the
number of the authorized, but unissued common shares of the Company. Action to
approve the proposed amendment would not occur until an Information Statement is
filed and approved by the Securities and Exchange Commission. Currently, the
Company's Board of Directors has put the filing of this information statement on
hold.
Liquidity and Capital Resources
Our cash, short-term investments and certificates of deposit decreased to
$277,000 as of December 31, 2008, from $310,000 at December 31, 2007. This
decrease was due primarily to significantly unusual uses of cash in 2008 such as
increasing inventory by $102,000, retiring the mortgage on our property of
$140,000, $59,000 for patent database development and $25,000 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.
Our working capital was $444,000 at December 31, 2008 compared to $504,000
at December 31, 2007. Our cash flow from operations for 2008 was $65,000
compared to $370,000 for 2007. The decreased cash flow from operations is due
primarily to decreased sales and an increase in inventory.
We had accumulated almost $500,000 in cash through 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 significantly increased our inventory for our
two most profitable bulk products. In April 2008, we ordered $46,000 of the
product HPB from a Japanese supplier, and in July 2008 we ordered $80,000 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 have $1,275,000 in net operating loss carryforwards that can be used to
offset our current and future taxable net income and reduce our income tax
liabilities. However, $640,000 of those net operating losses expire in 2009 and
2010 and management does not believe it will be able to fully utilize these net
operating losses before they expire. In 2008, we increased our valuation
allowance for our deferred tax asset by $180,000 in anticipation that this
portion of our deferred tax asset will not be utilized. In 2007, we recognized
$450,000 in deferred tax assets as the result of reducing our deferred tax asset
valuation allowance to 0% from 100%.
Operating Results
Sales decreased 34% to $495,000 in 2008 from $751,000 in 2007. This is
after a 39% increase in sales from 2006 to 2007. Our cost of products sold
(excluding any allocation of direct and indirect overhead and handling costs)
was consistent at $99,000 in 2008 compared to $101,000 for 2007. For 2008, we
had a net loss of $(413,000), which included a deferred tax provision of
$200,000, compared to net income of $654,000, which included a deferred tax
benefit of $45,000, in 2007.
We believe our working capital is sufficient to run our operations at
current and 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 while we feel it is
appropriate during the current growth stage to engage consultants that can help
the Company in financial areas outside its expertise, these consulting fees will
act to reduce profitability. We are working hard to increase revenues to balance
these new expenses, but cannot be sure 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 $148,000 through December 31, 2008. During the year
ended December 31, 2008, we capitalized $25,000 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 raise additional capital by
offering shares to finance the building construction of the research park.
During 2007, we began a major upgrade and update of our searchable
cyclodextrin patent database. We capitalized $33,000 for this project in 2006
and capitalized an additional $59,000 through October 2008. In October 2008, we
determined that the database was functionally impaired and we expensed the
entire development cost of $92,000.
We issued 5,718,147 shares and 5,118,750 shares of our common stock to
officers and employees for compensation earned under employment agreements for
2008 and 2007, respectively.
We have no off-balance sheet arrangements as of December 31, 2008.
Results of Operations and Critical Accounting Policies and Estimates
The results of operations are based on the preparation of consolidated
financial statements in conformity with accounting principles generally accepted
in the United States. The preparation of consolidated financial statements
requires management to select accounting policies for critical accounting areas
as well as estimates and assumptions that affect the amounts reported in the
consolidated financial statements. The Company's accounting policies are more
fully described in Note 1 of Notes to Consolidated Financial Statements.
Significant changes in assumptions and/or conditions in our critical accounting
policies could materially impact the operating results. We have identified the
following accounting policies and related judgments as critical to understanding
the results of our operations.
Long-Lived Assets
The recoverability of long-lived assets is evaluated annually or more
frequently if impairment indicators exist. Indicators of impairment include
historical financial performance, operating trends and our future operating
plans. If impairment indicators exist, we evaluate the recoverability of
long-lived assets on an operating unit basis based on undiscounted expected
future cash flows before interest for the expected remaining useful life of the
operating unit. Recorded values for long-lived assets that are not expected to
be recovered through undiscounted future cash flows are written down to current
fair value, which is generally determined from estimated discounted future net
cash flows for assets held for use or net realizable value for assets held for
sale.
At the end of 2007, we began to renovate three buildings in our corporate
office park that were idle from our former mushroom farming operation. The
carrying value of these long-lived assets is $75,000. During 2006, the Company
recorded a $12,500 impairment allowance for an autoclave not currently used in
the Company's operation. In 2007, we removed the autoclave from the building and
sold it in 2008. We are currently renovating one building to be used as an
inventory warehouse and the other two are being combined and renovated to make
an auditorium.
Valuation Allowance on Deferred Tax Assets
SFAS 109, "Accounting for Income Taxes" requires that deferred tax assets
be evaluated for future realization and reduced by a valuation allowance to the
extent we believe a portion will not be realized. We consider many factors when
assessing the likelihood of future realization of our deferred tax assets
including our recent cumulative earnings experience, expectations of future
taxable income, the carry-forward periods available to us for tax reporting
purposes, and other relevant factors. Our net deferred tax assets are $250,000
($430,000 less a $180,000 valuation allowance), comprised principally of
$1,275,000 of net operating loss carryforwards (NOL's), with the remaining
portion related to temporary timing differences between tax and financial
reporting. Classification of deferred tax assets between current and long-term
categories is based on the expected timing of realization, and the valuation
allowance is allocated on a prorata basis.
For 2008, we reported net loss before taxes of $(213,000). In 2008, we
increased our valuation allowance of our deferred tax asset to 47% from 0% due
to the expiration of $640,000 in net operating losses in 2009 and 2010 and our
current and expected future profitability, and recorded a $200,000 income tax
expense and reduction in our deferred tax asset. Our sales level decreased in
2008 and we expect sales growth to be slow in the near term consistent with the
overall U.S. economy and then we expect our sales to return to a modest growth
starting in 2010.
For 2007, we reported net income before taxes of $204,000. In 2007, we
reduced our valuation allowance of our deferred tax asset to 0% from 100% due to
our current and expected future profitability, and recorded a $450,000 income
tax benefit and deferred tax asset. Our sales level has increased to an amount
that supports expected profitability on a continuing basis for at least the next
three to five years. During 2006, we maintained our historical deferred tax
asset valuation allowance at 100% based on the Company's history of prior
losses, and our sales volatility that collectively reduces the chance of
realization of our deferred tax assets.
The range of possible judgments relating to the valuation of our deferred
tax asset is very wide. For example, in 2005 and 2006, we have determined the
weight of available evidence did not support a decision that a portion of our
deferred tax assets will be realized, resulting in a valuation allowance of
100%. Alternatively, if we had concluded that the weight of available evidence
supported a decision that substantially all of our deferred tax assets may be
realized, we would have a substantial income tax benefit in our statement of
operations prior to 2007.
Significant judgment is required in making this assessment, and it is very
difficult to predict when, if ever, our assessment may conclude our deferred tax
assets are realizable.
Comparability of Cost of Products Sold and Gross Margin
Our gross margins may not be comparable to those of other entities, since
some entities include all the costs related to their distribution network in
cost of goods sold. Our cost of goods sold includes only the cost of products
sold and does not include any allocation of inbound or outbound fright charges,
indirect overhead expenses, warehouse and distribution expenses, or depreciation
and amortization expense. We have two employees who provide receiving,
inspection, warehousing and shipping operations for us. The cost of these
employees, and our other employees, are included in personnel expense. Our other
costs of warehousing and shipping functions are included in office and other
expense.
2008 Compared to 2007
Total product sales for 2008 were $495,000, a 34% decrease over 2007 sales
of $751,000. 2007 was a record sales year for the Company. Sales for 2008 were
the 3rd highest sales reported in the company's history. The decrease in sales
from 2008 to 2007 was more of a return to normal historical sales levels. The
large sales volume in 2007 was due to an increase in sales volume primarily of
one product, Trappsol HPB. We did not expect sales to decrease as much as they
did from 2007 to 2008, this decrease followed the decline in the general U.S.
economy. Our major customers continue to follow historical product ordering
trends to place periodic large orders that represent a significant share of our
annual sales volume. In 2008, our four largest customers accounted for 51% of
our sales; the largest accounted for 20% of sales. In 2007, our four largest
customers accounted for 59% of our sales; the largest accounted for 20% 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. We have not experienced significant price resistance for our products
and we remain positive that our customer's market segments are not significantly
affected by the general downturn in the U.S. economy and that our sales will
remain at historical levels due to continued customer demand for our products.
In addition, we added additional inventory of our most common products to better
take advantage of sales opportunities as they arise, which also hedges our
product costs against short-term price increases.
Our cost of products sold (excluding any allocation of direct and indirect
overhead and handling costs) remained consistent at $99,000 for 2008 compared to
$101,000 for 2007. Historically, changes in both sales volume and product mix
has a significant effect on our cost of sales and our margins, which we
experienced from 2007 to 2008. We have not experienced significant increases in
material costs during 2008.
As we buy some of our inventory from foreign suppliers, the change in the
value of the U.S. dollar in relation to the Euro and other foreign currencies
does have an affect on 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 is located in Hungary. 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. When we experience short-term increases in
currency fluctuation or supplier price increases, we are often not able to raise
our prices sufficiently to maintain our historical margins and therefore, our
margins on these sales may decline.
Personnel costs have increased 35% to $370,000 for 2008, from $274,000 for
same period in 2007. This increase is due primarily to an increase in the annual
salary and monthly stock compensation paid to our president. We also added an
additional office employee during the third quarter of 2008.
Professional fees are comparable at $101,000 for 2008, from $104,000 for
2007. Legal fees were higher than historical levels 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 $34,000 and $37,000 for 2008
and 2007, respectively. Most of our office related expenses do not vary
significantly from quarter to quarter.
Amortization and depreciation is comparable at $23,000 and $24,000 for 2008
and 2007, respectively. We expect similar expenses in future periods as the
result of our office renovations, improvements and additions.
Freight and shipping decreased 17% to $14,000 for 2008, from $17,000 for
2007, due to decreased sales volume. Freight and shipping is dependent on
frequency of ordering products for inventory and frequency of sales. However,
shipping costs, in general, have increased from 2007.
Investment and other income increased 17% to $28,000 for 2008, from $24,000
for 2007. This increase is due primarily to interest income on increased average
cash balances in 2008, although we have experienced lower interest rates on our
investments during 2008.
We recognized a $200,000 income tax expense for 2008 due to an increase in
the valuation allowance of our deferred tax asset. We increased our valuation
allowance as the result reducing our estimates of expected net taxable income in
the next three years and for the resulting expected inability to utilize certain
net operating losses before they expired. In 2007, we reduced the valuation
allowance of our deferred tax asset from 100% to 0% due to our current and
expected future profitability, and recorded a $450,000 income tax benefit and
deferred tax asset. Prior to December 31, 2007, we recorded a 100% valuation
allowance on our net deferred tax asset.
We recognized a net loss of $(413,000) for 2008 compared to net income for
2007 of $654,000.
We will continue to introduce new products that will increase sales revenue
and implement a strategy of creating or acquiring operational affiliates and/or
subsidiaries that will use CD's in herbal medicines, waste-water remediation,
pharmaceuticals, and foods. We also intend to pursue exclusive relationships
with major CD manufacturer(s) and specialty CD labs to distribute their
products. We continue to be the exclusive distributor in North America of the CD
products manufactured by Cyclolab Research Laboratories in Budapest, Hungary.
In keeping with its commitment to use the internet as a major advertising
and public relations outlet, we continue to maintain our web site. This asset
has been instrumental in creating and maintaining a worldwide leadership role
for us in the implementation of research and commercialization of CD
applications. We believe the maintenance and growth of our web site will return
that investment many times.
Forward-looking Statement
All statements other than statements of historical fact in this report are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995, and are based on management's current expectations of the
Company's near term results, based on current information available and
pertaining to the Company. The Company assumes no obligation to update publicly
any forward-looking statements. Actual results may differ materially from those
projected in the forward-looking statements. These forward-looking statements
involve risks and uncertainties, including, but not limited to, the following:
demand for Cyclodextrins; changes in governmental laws and regulations
surrounding various matters, such as labeling disclosures; production and
pricing levels of important raw materials; difficulties of delays in the
development, production, testing and marketing of products; and product margins
and customer product acceptance.
Item 8. Financial Statements and Supplementary Data.
BAUMANN, RAYMONDO & COMPANY, P.A.
405 NORTH REO STREET, SUITE 200
TAMPA, FL 33609
Report of Independent Registered Public Accounting Firm
To the Board of Directors
CTD Holdings, Inc.
High Springs, Florida
We have audited the consolidated balance sheets of CTD Holdings, Inc. and
subsidiary as of December 31, 2008 and 2007, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 2008 and 2007. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provided a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CTD Holdings, Inc.
and subsidiary as of December 31, 2008 and 2007, and the results of their
operations and their cash flows for the years ended December 31, 2008 and 2007,
in conformity with accounting principles generally accepted in the United States
of America.
We were not engaged to examine management's assertion about the effectiveness of
CTD Holdings, Inc. internal control over financial reporting as of December 31,
2008 included in the accompanying management's report on internal control and,
accordingly, we do not express an opinion thereon.
\s\ Baumann, Raymondo & Company, P.A.
Baumann, Raymondo & Company PA
Tampa, Florida
March 20, 2009
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,2008 and 2007
ASSETS
2008 2007
CURRENT ASSETS ----------- -----------
Cash and cash equivalents $ 276,669 $ 209,981
Certificate of deposit - 100,000
Accounts receivable 27,794 85,434
Inventory 209,975 107,624
Deferred tax asset - 75,000
Investment due from related party - 853
Other current assets 2,000 2,442
----------- -----------
Total current assets 516,438 581,334
------------ -----------
PROPERTY AND EQUIPMENT, NET 442,784 437,435
------------ -----------
OTHER
Certificates of deposit - 163,985
Loan to shareholder/officer 17,069 -
Deferred tax asset 250,000 375,000
Intangibles, net of accumulated amortization
of $5,000 and $5,910 at December 31, 2008
and 2007, respectively 5,000 40,967
------------ -----------
Total other assets 272,069 579,952
------------ -----------
TOTAL ASSETS $ 1,231,291 $ 1,598,721
============ ===========
The accompanying notes to consolidated financial statements are an integral part
of this statement.
F-2
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2008 and 2007
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
2008 2007
CURRENT LIABILITIES ----------- ------------
Accounts payable and accrued expenses $ 72,125 $ 73,664
Current portion of long-term debt - 3,942
----------- ------------
Total current liabilities 72,125 77,606
----------- ------------
LONG-TERM LIABILITIES
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,26,542,438 and
20,824,291 shares issued and outstanding as of
December 31, 2008 and 2007, respectively 2,654 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 3,238,911 3,030,737
Accumulated deficit (2,082,399) (1,669,167)
----------- -----------
Total stockholders' equity 1,159,166 1,363,653
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,231,291 $ 1,598,721
============ ==========
The accompanying notes to consolidated financial statements are an integral part
of this statement.
F-3
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
2008 2007
------------- ------------
PRODUCT SALES $ 494,937 $ 751,176
------------- ------------
EXPENSES
Personnel 370,449 273,605
Cost of products sold (exclusive
of depreciation and amortization,
shown separately below) 99,319 100,956
Professional fees 101,164 103,816
Office and other 34,012 37,315
Amortization and depreciation 22,869 24,368
Freight and shipping 14,432 17,447
Loss on disposal of equipment - 3,341
Abandoned patent database costs 92,166 -
------------- ------------
734,411 560,848
------------- ------------
Operating income (loss) (239,474) 190,328
------------- -----------
OTHER INCOME (EXPENSE)
Investment and other income 28,058 23,974
Interest expense (1,816) (10,748)
------------- -----------
Total other income (expense) 26,242 13,226
------------- -----------
NET INCOME (LOSS) BEFORE INCOME TAXES (213,232) 203,554
INCOME TAX BENEFIT (EXPENSE) (200,000) 450,000
------------- -----------
NET INCOME (LOSS) $ (413,232) $ 653,554
============= ===========
NET INCOME (LOSS) PER COMMON SHARE: $ (.02) $ .04
============= ===========
Weighted average number of
common shares outstanding 23,533,349 17,919,985
============= ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
COMMON STOCK PREFERRED STOCK ADDITIONAL TOTAL
PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES PAR VALUE SHARES PAR VALUE CAPITAL DEFICIT EQUITY
----------- ----------- -------- ---------- ----------- -------------- ------------
Balance,
December 31, 2006 15,705,541 $ 1,571 1 $ - $ 2,881,262 $ (2,322,721) $ 560,112
Shares issued under
employment agreements 5,062,501 506 - - 148,097 - 148,603
Shares issued for services 56,249 6 - - 1,378 - 1,384
Net income - - - - - 653,554 653,554
Balance, ----------- ----------- -------- ---------- ----------- -------------- ------------
December 31, 2007 20,824,291 2,083 1 - 3,030,737 (1,669,167) 1,363,653
Shares issued under
employment agreements 5,616,958 561 - - 204,446 - 205,007
Shares issued for services 101,189 10 - - 3,728 - 3,738
Net loss - - - - - (413,232) (413,232)
Balance, ----------- ----------- -------- ---------- ----------- ------------ -----------
December 31, 2008 26,542,438 $ 2,654 1 $ - $ 3,238,911 $ (2,082,399) $ 1,159,166
=========== =========== ======== ========== =========== ============ ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
DECEMBER 31, 2008 AND 2007
2008 2007
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (413,232) $ 653,554
----------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 22,869 24,368
Loss on disposal of equipment - 3,341
Stock compensation to employees 208,745 149,987
Abandoned patent database costs 92,166 -
Deferred income tax assets 200,000 (450,000)
Increase or decrease in:
Accounts receivable 57,640 (26,325)
Inventory (102,351) (27,877)
Other current assets 442 21,671
Accounts payable and accrued expenses (1,539) 21,498
----------- -----------
Total adjustments 477,972 (283,337)
----------- -----------
Net cash provided by operating
activities 64,740 370,217
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (25,164) (51,388)
Purchase of certificate of deposit - (263,985)
Redemption of certificate of deposit 263,985 -
Patent database developed (59,253) (32,913)
Redemption (Investment) with related party 853 134,687
Loan to shareholder (17,069) -
Payment received from loan to shareholder - 16,514
----------- -----------
Net cash provided by (used in) investing 163,352 (197,085)
activities ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (140,074) (8,110)
Payments on loan payable to stockholder (21,330) -
Receipt of loan from shareholder - 21,330
----------- -----------
Net cash provided by (used in) financing
activities (161,404) 13,220
----------- -----------
Net increase in cash and cash equivalents 66,688 186,352
CASH AND CASH EQUIVALENTS, beginning of period 209,981 23,629
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 276,669 $ 209,981
=========== ===========
F-6
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
DECEMBER 31, 2008 AND 2007
(Continued)
2008 2007
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 1,816 $ 10,748
=========== ============
Cash paid for income taxes $ - $ -
=========== ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITY
Common stock issued to employees for services $ 208,745 $ 149,987
=========== ============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the more significant accounting policies of
CTD Holdings, Inc. and Subsidiary (the Company) that affect the accompanying
consolidated financial statements:
(a) ORGANIZATION AND OPERATIONS - The Company was incorporated in August
1990, as a Florida corporation with operations beginning in July 1992. The
Company is engaged in the marketing and sale of cyclodextrins and related
products to food, pharmaceutical and other industries. The Company also provides
consulting services related to cyclodextrin technology.
(b) BASIS OF PRESENTATION - The consolidated financial statements include
the Company and its wholly owned subsidiary. All intercompany accounts and
transactions have been eliminated.
(c) CASH AND CASH EQUIVALENTS - For the purposes of reporting cash flows,
the Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
(d) ACCOUNTS RECEIVABLE - Accounts receivable are stated at the amount
management expects to collect from outstanding balances. Based on management's
assessment of the credit history with customers having outstanding balances and
current relationships with them, management has concluded that losses on
balances outstanding at year-end will be immaterial.
(e) PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation on property and equipment is computed using primarily the
straight-line method over the estimated useful lives of the assets (generally
three to five years for computers, software and vehicles, seven to ten years for
furniture and equipment, fifteen years for certain land improvements, and forty
years for buildings and building improvements). In accordance with Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Company
periodically reviews its long-lived assets to determine if the carrying value of
assets may not be recoverable. If an impairment is identified, the Company
recognizes a loss for the difference between the carrying amount and the
estimated value of the asset.
(f) INVENTORY AND COST OF PRODUCTS SOLD - Inventory consists of
cyclodextrin products and chemical complexes purchased for resale recorded at
the lower of cost (first-in, first-out) or market. Cost of products sold
includes the acquisition cost of the products sold and does not include any
allocation of inbound or outbound freight charges, indirect overhead expenses,
warehouse and distribution expenses, or depreciation and amortization expense.
(g) INTANGIBLES - Intangible assets consist of loan costs and other
intangibles recorded at cost. Intangible are amortized using the straight-line
method over their respective estimated useful lives. Prior to 2008, intangible
assets also includes the cost of developing a database of patents applied for
and issued involving the use of cyclodextrins. This project was abandoned in
2008 and these costs were expensed. Management periodically reviews its
intangibles to determine if the carrying value of assets may not be recoverable.
If an impairment is identified, a loss is recognized for the difference between
the carrying amount and the estimated value of the asset.
(h) REVENUE RECOGNITION - We recognize revenue from product sales or
services rendered when the following four revenue recognition criteria are met:
persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the selling price is fixed or determinable, and
collectibility is reasonably assured. Product sales and shipping revenues, net
of any discounts or return allowances, are recorded when the products are
shipped and title passes to customers. Sales to customers are made pursuant to a
sales contract that provides for transfer of both title and risk of loss upon
our delivery to the carrier. Return allowances, which reduce product revenue,
have been historically infrequent, and are recorded when they become known.
Amounts received in advance are deferred and recognized as revenue when all four
revenue recognition criteria have been met.
(i) SHIPPING AND HANDLING FEES - Shipping and handling fees, if billed to
customers, are included in product sales. Shipping and handling costs associated
with inbound and outbound freight are expensed as incurred and included in
freight and shipping expense.
(j) ADVERTISING - Advertising costs are charged to operations when
incurred. The Company incurred no advertising expenses in 2008 or 2007.
(k) START-UP COSTS - Start-up costs are expensed as incurred.
(l) DEFERRED INCOME TAXES -- Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective income tax bases. Deferred tax assets and
liabilities are measured using enacted rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered
or settled.
(m) 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. For stock awarded under
employment agreements (see Note 2), the monthly stock awarded is treated as
issued on the 15th day of each month earned for purposes of computing the
weighted average outstanding shares.
(n) STOCK BASED COMPENSATION - The Company follows the requirements of
Statement of Financial Accounting Standard No. 123(R) "Share-Based Payment." The
Company has employment agreements which call for stock to be awarded to
employees 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 number of shares awarded for that month. The Company also
issues periodic stock bonuses to employees. The Company records an expense equal
to the fair value of the stock on the closing trading price of the stock on the
day awarded.
(o) RECLASSIFICATIONS - Certain amounts in the 2007 financial statements
have been reclassified for comparative purposes to conform with the 2008
presentation.
(p) NEW ACCOUNTING PRONOUNCEMENTS - The Financial Accounting Standards
Board ("FASB") has issued several new standards, which have implementation dates
subsequent to the Company's year end. Management does not believe that any of
these new standards will have a material impact on the Company's consolidated
financial position, results of operations or cash flows. The FASB issued
Interpretation No. 48 ("FIN 48"), which clarifies generally acceptable
accounting principles for recognition, measurement, presentation and disclosure
relating to uncertain tax positions. As permitted by FIN 48 (as amended), the
Company has elected to defer the application of FIN 48 until issuance of its
December 31, 2009 consolidated financial statements. For consolidated financial
statements covering periods prior to calendar 2009, the Company evaluates
uncertain tax positions in accordance with existing generally accepted
accounting principles and makes such accruals and disclosures as might be
required thereunder.
(q) USE OF ESTIMATES - The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
(2) COMMITMENTS AND CONTINGENCIES
For 2009, 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 the 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 number of shares awarded for that month.
For 2008, the Company had 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 the 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 number of shares awarded for that month. Also, for 2008, the
Company issued shares to one of its employees. The number of shares awarded 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. The stock is subject to trading
restrictions under Rule 144. For 2008, the Company awarded 5,718,147 shares and
recognized an expense of approximately $208,000 for stock awarded under these
arrangements.
For 2007, the Company had employment agreements with two officers for total
monthly salaries of $5,500. In addition, each month the President was awarded
shares of common stock. The number of shares awarded was equal to a specified
dollar amount divided by eighty percent of the closing price of the Company's
common stock on the last day of each month. For the period January 1, 2007,
through June 30, 2007, the amount was $6,500. For the period July 1, 2007,
through December 31, 2007, the amount was $11,500. The Company recognized 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.
Beginning July 2007, the Company also issued shares to one of its employees. The
number of shares due was equal to $200 divided by eighty percent of the closing
price of the Company's common stock on the last day of each month. For 2007, the
Company awarded 5,118,750 shares and recognized an expense of approximately
$150,000 for stock awarded under these arrangements.
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.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31:
2008 2007
---------- -----------
Land $ 80,000 $ 80,000
Buildings and improvements 418,978 413,565
Machinery and equipment 23,046 22,218
Office furniture and equipment 51,705 51,256
----------- ------------
573,729 567,039
Less: accumulated depreciation 149,419 129,604
----------- ------------
424,310 437,435
Construction in progress 18,474 -
----------- ------------
Property and equipment, net $ 442,784 $ 437,435
=========== ============
(4) CONCENTRATIONS OF CREDIT RISK:
Significant concentrations of credit risk for all financial instruments
owned by the Company, are as follows:
(a) DEMAND AND CERTIFICATE OF DEPOSITS - The Company has demand and
certificate of deposits in financial institutions that are insured up to the
Federal Deposit Insurance Corporation limits. The demand and certificate deposit
bank balances were $279,832 and $472,763 at December 31, 2008 and 2007,
respectively. The Company has no policy of requiring collateral or other
security to support its deposits.
(b) ACCOUNTS RECEIVABLE - The Company's accounts receivable consist of
amounts due primarily from food and pharmaceutical companies located primarily
in the United States and the United Kingdom. Three customers accounted for 77%
of the accounts receivable balance at December 31, 2008. Two customers accounted
for 82% of the accounts receivable balance at December 31, 2007. The Company has
no policy requiring collateral or other security to support its accounts
receivable.
(c) INVESTMENT WITH RELATED PARTY - The Company has an oral agreement for
investment services with a nonprofit organization. The Company's president is
also the president of the nonprofit organization. The funds are invested by the
nonprofit in a money market account. The Company earns a proportional share of
the interest earned in the account. The Company has no policy of requiring
collateral or other security to support this amount.
F-8
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
(5) MAJOR CUSTOMERS AND SUPPLIERS:
In 2008, two major customers accounted for 37% of total sales.
In 2007, three major customers accounted for 49% of total sales.
Substantially all 2008 and 2007 inventory purchases were from three
vendors.
The Company has only one source for certain manufacturing inventory.
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.
(6) LONG-TERM DEBT:
The Company paid its mortgage payable in full during 2008. Long-term debt
as of December 31, 2007 consisted of a $140,074 mortgage note payable to bank,
with payments of $1,163 due monthly including principal and interest at 7.25%,
which was collateralized by land and buildings with a cost of $210,000.
(7) RELATED PARTY TRANSACTIONS:
During 2008, the Company repaid the $21,330 borrowed from the President
(who is also the majority common stockholder), plus interest of $512. The
President then borrowed $17,069 from the Company during 2008 and this amount is
outstanding at December 31, 2008. Payments of $2,000 are due monthly in 2009
under a verbal arrangement. The loan is unsecured and interest accrues at 4%
beginning January 1, 2009.
During 2007, the President (who is also the majority common stockholder)
loaned the Company $29,000 plus accrued interest of $131. The loan is unsecured
and interest accrues at 5%. The loan was reduced by $7,801 due to the Company by
the President.
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107 "Disclosures about Fair
Value of Financial Instruments" requires disclosure of fair value to the extent
practicable for financial instruments, which are recognized or unrecognized in
the consolidated balance sheet. The fair value of all financial instruments
approximates carrying value due to the short-term maturity of the instruments.
The fair value of the financial instruments is not necessarily representative of
the amount that could be realized or settled, nor does the fair value amount
consider the tax consequences of realization or settlement.
(9) INCOME TAXES:
The Company follows the provisions of Statement of Financial Accounting
Standard No. 109 "Accounting for Income Taxes." Differences between accounting
rules and tax laws cause differences between the basis of certain assets and
liabilities for financial reporting purposes and tax purposes. The tax effect of
these differences, to the extent they are temporary, is recorded as deferred tax
assets and liabilities. Income tax expense is the tax payable or refundable for
the period plus or minus the change during the period in deferred assets and
liabilities. Temporary differences which give rise to deferred tax assets and
liabilities consist of net operating loss carryforwards, accelerated
depreciation methods for income tax purposes and interest accrued to related
parties but not for tax purposes until paid.
The Company has available at December 31, 2008, unused operating loss
carryforwards totaling approximately $ 1,275,000 that may be applied against
future taxable income. If not used, the carryforwards will expire as follows:
Year Ending
December 31, Amount
------------ -----------
2009 $ 420,000
2010 195,000
2017 206,000
2020 280,000
2021 71,000
2024 66,000
2025 37,000
-----------
Total $ 1,275,000
===========
If all of the operating loss carryforwards and temporary deductible
differences were used, the Company would realize a deferred tax asset of
approximately $430,000 based upon expected income tax rates. Under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", the
deferred tax asset should be reduced by a valuation allowance if it is likely
that all or a portion of it will not be realized. Realization depends on
generating sufficient taxable income before the expiration of the loss
carryforwards.
For 2008, management increased the valuation allowance of our deferred tax
asset to 47% from 0% due to the expiration of $640,000 of net operating losses
in 2009 and 2010 in excess of our current and expected future profitability, and
recorded a $180,000 income tax expense.
For 2007, management reduced the valuation allowance of our deferred tax
asset to 0% from 100% due to our current and expected future profitability, and
recorded a $450,000 income tax benefit and deferred tax asset.
Because of the inherent uncertainties in estimating the valuation allowance
on the deferred tax asset, it is at least reasonably possible that the company's
estimate deferred tax asset will change in the near term and be material to the
financial statements.
The components of the provision for income taxes are as follows for the
years ended December 31:
2008 2007
---------- ----------
Current income tax benefit (expense) $ 25,000 $ (45,000)
Tax benefit (expense) of temporary (45,000) (21,000)
differences
Tax benefit of operating loss carryforwards - 66,000
Decrease (increase) in valuation allowance (180,000) 450,000
---------- ----------
Total net tax benefit (expense) $(200,000) $ 450,000
========== ==========
Significant components of the Company's deferred Federal income taxes were as
follows:
2008 2007
---------- ----------
Deferred tax assets
Net operating loss carryforwards $ 380,000 $ 405,000
Stock-based compensation expense 47,000 42,000
Depreciation and amortization expense 3,000 3,000
---------- ----------
Total deferred tax assets 430,000 450,000
Less valuation allowance (180,000) -
---------- ----------
Deferred tax assets, net of valuation 250,000 450,000
---------- ----------
Deferred tax liabilities - -
---------- ----------
Net tax assets $ 250,000 $ 450,000
========== ==========
The differences between the effective income tax rate reflected in the
benefit (provision) for income taxes and the amounts, which would be determined
by applying statutory income tax rate of 28% for 2008 and 2007, is summarized as
follows:
2008 2007
---------- ----------
Tax provision at Federal statutory rate $ 25,000 $ (101,000)
Effect of State taxes 5,000 (15,000)
Valuation allowance - net operating loss (180,000) 400,000
Change in expected income tax rate (3,000) 173,000
Stock-based compensation (47,000) (7,000)
---------- ----------
Total tax benefit (provision) $ (200,000) $ 450,000
========== ==========
(10) PREFERRED STOCK
In 2004, the Company amended its Articles of Incorporation authorizing a
class of "blank check" preferred stock consisting of 5,000,000 shares thus
creating a series of Series A Preferred Stock and set forth its designations,
rights and preferences. The more significant right is the Series A share votes
together with the holders of the common stock on all matters submitted to a vote
of Company holders of common stock, with the share of Series A Preferred Stock
being 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
common shareholders 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 common shareholders. Each share of
Series A Preferred Stock has a liquidation preference of $.0001. In 2004,the
Company issued one share of the Series A Preferred Stock to its majority common
shareholder in exchange for 1,029,412 shares of common stock held by the
majority common shareholder, which were surrendered to the Company and
cancelled. Effective August 11, 2005, the outstanding share of the Company's
Series A Preferred Stock was acquired by Eline Entertainment Group, Inc. In
September 2006, the Company's majority common shareholder demanded the transfer
to him of the one share of Series A preferred stock in exchange for 100,000
shares of Eline Entertainment Group, Inc. alleging breach of contract. The share
certificate of Series A Preferred Stock is in the possession of the Registrant.
The Company's Board of Directors has decided to create an additional class
of preferred share to be referred to as the Series B Preferred Share. The Series
B Preferred Share would entitle the holder to vote, in addition to other shares
owned by the holder, the number of votes equal to the number of the authorized,
but unissued common shares of the Company. Action to approve the proposed
amendment would not occur until an Information Statement is filed and approved
by the Securities and Exchange Commission.
(11) SIGNIFICANT FOURTH QUARTER ADJUSTMENTS
For 2008, management determined the patent database development project was
not economically feasible and expensed 100% of the previously capitalized cost
of $92,000 in the fourth quarter of 2008.
Also in 2008, management increased its valuation allowance to 44% from 0%
due to our current and expected future profitability, and recorded a $180,000
income tax expense and reduced our deferred tax asset in the fourth quarter of
2008.
For 2007, management reduced its valuation allowance to 0% from 100% due to
our current and expected future profitability, and recorded a $450,000 income
tax benefit and deferred tax asset in the fourth quarter of 2007.
F-12
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
Item 9A(T). Controls and Procedures.
a. Management's annual 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 Principal Accounting 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(e) and 15d-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 disclosure controls and procedures as of December 31,
2008 were effective.
4. This annual 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 annual report.
b. Changes in internal controls.
The Company made no changes in its internal control over financial
reporting that occurred during the Company's fourth fiscal quarter
that has materially affected, or which is reasonably likely to
materially affect the Company's internal control over financial
reporting.
Item 9B. Other Information.
The Company's Board of Directors has decided to create an additional class
of preferred share to be referred to as the Series B Preferred Share. The Series
B Preferred Share would entitle the holder to vote, in addition to other shares
owned by the holder, the number of votes equal to the number of the authorized,
but unissued common shares of the Company. Action to approve the proposed
amendment would not occur until an Information Statement is filed and approved
by the Securities and Exchange Commission.
PART III.
Item 10. Directors, Executive Officers, Promoters, Control Persons and Corporate
Governance; Compliance With Section 16(a) of the Exchange Act.
Two (2) directors, constituting the entire Board of Directors, serve until
the next Annual Meeting of shareholders, or until a successor shall be elected
and shall qualify:
Name Age Principal Occupation Year First Became
Director
C.E. Rick Strattan 62 President, CEO and Chairman 1990
George L. Fails 63 Operations Manager 2001
C.E. Rick Strattan, President, CEO and Director since its 1990. Mr.
Strattan served as treasurer of the Company from August, 1990, to May, 1995.
From November 1987 through July 1992, Mr. Strattan was with Pharmatec, Inc.,
where he served as Director of Marketing and Business Development for CDs. Mr.
Strattan was responsible for CD sales and related business development efforts.
From November, 1985 through May, 1987, Mr. Strattan served as Chief Technical
Officer for Boots-Celltech Diagnostics, Inc. He also served as Product Sales
Manager for American Bio-Science Laboratories, a Division of American Hospital
Supply Corporation. Mr. Strattan is a graduate of the University of Florida
receiving a B.S. degree in chemistry and mathematics, and has also received an
MS degree in Pharmacology, and an MBA degree in Marketing/Computer Information
Sciences, from the same institution. Mr. Strattan has written and published
numerous articles and a book chapter on the subject of Cyclodextrins.
George L. Fails, Operations Manager CTD, Inc. since 2000. Mr. Fails
currently serves as Operations Manager for CTD, Inc. Prior to joining the
Company, Mr. Fails served as a Detective Sergeant with the Veterans
Administration Hospital in Gainesville, Florida, with special duties as a
Predator Officer with the US Marshall's Service. From 1965 until his retirement
in 1986, Mr. Fails served with the US Army Special Forces, including several
tours in Vietnam, Salvador, and Angola. Mr. Fails also served two years with a
United States intelligence arm. Mr. Fails received his BA from the University of
the Philippines, and has also received degrees from 43 Military schools, as well
as the Federal police Academy in Little Rock, Arkansas.
Directors, including directors also serving the Company in another capacity
and receiving separate compensation therefor shall be entitled to receive from
the Company as compensation for their services as directors such reasonable
compensation as the board may from time to time determine, and shall also be
entitled to reimbursements for any reasonable expenses incurred in attending
meetings of directors. To date, the Board of Directors has received no
compensation, and no attendance fees have been paid.
Audit Committee Financial Expert
No one on our Board of Directors can be deemed to be an audit committee
financial expert. Our business model is not complex and our accounting issues
are straightforward. Responsibility for our operations is centralized within our
executive management, which is comprised of two persons. We recognize that
having a person who possesses all of the attributes of an audit committee
financial expert would be a valuable addition to our Board of Directors,
however, we are not, at this time, able to compensate such a person therefore,
we may find it difficult to attract such a candidate.
Code of Ethics
We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. Our code of ethics will be
provided to any person without charge, upon request. Requests should be
addressed to Investor Relations Department, c/o CTD Holdings, Inc., 27317 N.W.
78th Avenue, High Springs, Florida 32643.
Item 11. Executive Compensation.
SUMMARY COMPENSATION TABLE
Long-term compensation
........................................................
Annual compensation Awards Payouts
--------------------------------------------- ------------------------------- -------
Securities
Other annual Restricted underlying LTIP All other
Name & principal Year Salary Bonus compensation stock awards options/SARs payouts compensation
($) ($) ($) ($) (#) ($) ($)
=================== ======== ======== =========== ============ ============== ============ ======= ============
C.E. Rick Strattan 2008 $ 84,000 -0- -0- $189,822.00 (4) -0- -0- -0-
President, CEO 2007 $ 36,000 $ 25,000 -0- $148,603.00 (3) -0- -0- -0-
Chairman 2006 $ 36,000 -0- -0- $ 69,654.00 (1) -0- -0- -0-
George L. Fails 2008 $ 36,000 -0- -0- $ 15,186.00 (5) -0- -0- -0-
Operations Manager 2007 $ 30,000 -0- -0- -0- -0- -0- -0-
2006 $ 22,800 -0- -0- $ 13,931.00 (2) -0- -0- -0-
(1) Reflects grant of 1,493,229 shares
(2) Reflects grant of 298,644 shares
(3) Reflects grant of 5,062,501 shares
(4) Reflects grant of 5,201,033 shares
(5) Reflects grant of 415,925 shares
On October 14, 2003, the Company entered into a one-year Employment
Agreement with C.E. Rick Strattan, the Company's president, with an annual
salary of $36,000 and an award of monthly restricted common shares of the
Company. The number of shares awarded monthly is variable based on a fixed
amount divided by eighty percent of the closing value of the Company's shares on
the last day of the month in which the shares are awarded. For the period
January 1, 2007 though June 30, 2007, the number of shares was computed using
$6,500 per month. For the period July 1, 2007, though December 31, 2007, the
number of shares was computed using $11,500 per month. The Company has agreed to
register Mr. Strattan's shares awarded pursuant to his employment contract. This
contract was extended through December 31, 2008, at a base annual salary of
$84,000 and a number of shares computed using $12,500 per month.
Effective January 1, 2004, the Company entered into a one-year Employment
Agreement with George L. Fails to serve as Operations Manager. Mr. Fails is
compensated $1,900 monthly and an award of monthly restricted common shares of
the Company. The number of shares awarded monthly is variable based on a fixed
amount divided by eighty percent of the closing value of the Company's shares on
the last day of the month in which the shares are awarded. No shares were
awarded in 2006. This contract was extended through December 31, 2008, at a base
annual salary of $36,000 and a number of shares computed using $1,000 per month.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The following table shows the ownership of the Common Stock of the Company
on February 27, 2009, by each person who, to the knowledge of the Company, owned
beneficially more than five percent (5%) of such stock, the ownership of each
director, and the ownership of all directors and officers as a group. Unless
otherwise noted, shares are subject to the sole voting and investment power of
the indicated person.
Names and Address of Individual Amount and Nature of Approximate %
or Identity of Group Beneficial Ownership of Class
C.E. Rick Strattan ....................... 14,704,999 55.40%
4123 N.W. 46th Avenue
Gainesville, FL 32606
George L. Fails............................. 1,157,016 4.36%
2420 N.W. 142nd Avenue
Gainesville, FL 32609
All Officers and Directors as a group ...... 15,862,015 59.76%
Equity Compensation Plan Information
Number of Number of
securities to be securities remaining
issued upon exer- available for future
cise of outstand- Weighted-average issuance under equity
ing options, exercise price of compensation plans
warrants, and outstanding options, (excluding securities
Plan category and rights warrants and rights reflected in column (a))
(a) (b) (c)
-------------------- ------------------- -------------------- ------------------------
Equity compensation
plans approved by None Not Applicable Not Applicable
security holders
Equity compensation
plans not approved * * * * * * * * * * * See Note 1 to Table (below) * * * * * * * * * * *
by security holders
------------------- -------------------- ------------------------
Total
=================== ==================== ========================
Notes to Equity Compensation Plan Table:
Note 1 -- The Company has employment agreements with Mr. Strattan and Mr.
Fails. These agreements require the Company to compensate both employees with a
variable number of restricted shares of the Company per month based on a fixed
amount divided by eighty percent of the closing value of the Company's shares on
the last day of the month in which the shares are awarded. For 2008, the number
of shares was computed using $13,500 per month. For the period from July 1, 2007
to December 31, 2007, the number of shares was computed using $11,500 per month.
For period from January 1, 2007 to June 30, 2007, the number of shares was
computed using $6,500 per month. In 2007 a total of 5,062,501 shares and 0
shares were issued to Mr. Strattan and Mr. Fails, respectively. In 2008 a total
of 5,201,033 shares and 415,925 shares were issued to Mr. Strattan and Mr.
Fails, respectively, pursuant to their employment agreements.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
Mr. Strattan periodically advances the Company short-term loans and defers
receipt of salary. The Company owes the stockholder $21,330 at December 31,
2007. The loan is unsecured and interest accrues at 5%. Interest expense related
to the loan totaled $131 for the year ended December 31, 2007.
Item 14. Principal Accountant Fees and Services.
Audit Fees
The aggregate fees billed for the last fiscal year for professional
services rendered by the principal accountant, Baumann, Raymondo & Company, P.A.
for the audit of the Company's annual financial statements and review of
financial statements included in the Company's Form 10-QSB or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements for those fiscal years was $33,250.00.
Audit-Related Fees
No fees were billed during the last fiscal year for any assurance and
related services by Baumann, Raymondo & Company, P.A. that are not reported
under the caption "Audit Fees".
Tax Fees
No fees were billed during the last fiscal year for professional services
rendered by Baumann, Raymondo & Company, P.A. for tax compliance, tax advice, or
tax planning.
All Other Fees
No other fees were billed during the last fiscal year for professional
services provided by Baumann, Raymondo & Company, P.A.
PART IV.
Item 15. Exhibits, Financial Statement Schedules.
Exhibits Page
(2) Plan of purchase, sale, reorganization, arrangement,
liquidation, or succession
(3) Articles of incorporation and by-laws
(i) Articles of Incorporation filed August 9, 1990 * None
(ii) By-Laws. * None
(iii) Certificates of Amendment to the Articles of
Incorporation filed November 18, 1993 and
September 24, 1993. * None
(4) Instruments defining the rights of security
holders, including indentures
(a) Specimen Share Certificate for Common Stock. * None
(6) No exhibit required N/A
(9) Voting Trust Agreement and amendments None
(10) Material Contracts
(10.1) Agreement of Shareholders dated November 11, 1993
by and among C.E. Rick Strattan, Garrison Enterprises,
Inc. and the Company. * None
(10.2) Lease Agreement dated July 7, 1994**. None
(10.3) Consulting Agreement dated July 29, 1994 between
the Company and Yellen Associates. * None
(10.4) License Agreement dated December 20, 1994 between
the Company and Herbe Wirkstoffe GmbH. * None
(10.5) Joint Venture Agreement between the Company and
Ocumed, Inc. dated May 1, 1995, incorporated by
reference to the Company's Form 10-QSB for the
quarter ended June 30, 1995.** None
(10.6) Extension of Agreement between the Company and Herbe
Wirkstoffe GmbH.*** None
(10.7) Lease Extension+
(10.8) Loan Agreement with John Lindsay+
(10.9) Small Potatoes Contract+
(10.10) Employment Agreement with C.E. Rick Strattan dated
May 30, 2001++
(10.11) Employment Agreement of C.E. Rick Strattan dated
October 14, 2003+++
(10.12) Employment Agreement of George L. Fails dated
October 14, 2003****
(11) Statement re: computation of per share earnings Note 1(k)
to Financial
Statements
(12) No exhibit required N/A
(13) Annual report to security holders for the last
fiscal year, Form 10-Q or 10-QSB or quarterly report
to security holders
(14) Code of Ethics
(16) Letter on changes in certifying accountant*** None
(18) Letter on change in accounting principles None
(21) Subsidiaries of the small business issuer None
(22) Published Report regarding matters submitted to vote of
security holders None
(23) Consent 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
(100) XBRL-Related Documents
* 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.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CTD HOLDINGS, INC.
By: /s/ C.E. Rick Strattan
---------------------------------
C.E. RICK STRATTAN,
Chief Executive Officer
Chief Operating Officer
Principal Accounting Officer
Date: March 27, 2009
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ C.E. Rick Strattan
---------------------------------
C.E. RICK STRATTAN
Chief Executive Officer
Chief Operating Officer
Principal Accounting Officer
Director
Date: March 27, 2009
By: /s/ George L. Fails
---------------------------------
GEORGE L. FAILS
Director
Date: March 27, 2009