Attached files
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, 2009
( ) 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
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: $623,874
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: $606,167 based on a $.07 EOD, June 30, 2009, closing price.
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: 33,410,295 shares
of Common Stock as of February 28, 2010.
PART I
Item 1. Business.
CTD Holdings, Inc. ("We" "Our" "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 Trappsol(R) CDs and CD derivatives to the R&D
market and to introduce Aquaplex (R) complexes of active pharmaceutical
ingredients with little or no regulatory burden in order to minimize the product
development expenses and create profitable revenue for the Company and its
customers/clients.
We currently sell our products for use in the pharmaceutical, food and
industrial chemical industries, as well as R&D chemical supply.
CD Market
The food additive industry has been experimenting with CDs for many years.
Now that commercial supply of Trappsol(R) and Aquaplex(R) can be assured and in
many cases regulatory approval has been obtained, the Company believes the food
additive industry world-wide 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 10 years, many 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. We
believe that natural CDs have been confirmed to be generally as safe. Moreover,
recent approvals by the Food and Drug Administration (FDA) suggest that
regulatory approval for new products may be easier in the future. In 2001
Janssen Pharmaceutica, now a subsidiary of Johnson & Johnson, received FDA
approval to market Sporanox(R) antifungal which contained hydroxypropyl BCD. In
2008, Trappsol(R) HPB was used in an FDA approved compassionate use clinical
trial. This led to a new product in the Company's Trappsol(R) product line
called Cyclo(TM). As of March 2010, Cyclo(TM) was expecting to receive approval
within 60 days to be designated an orphan drug.
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). The prices of the natural
CDs have decreased enough so that these materials will be used much more widely.
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. 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). The Company is considering registering the mark "cyclo" based
on its availability. These IP properties add to the intangible asset value of
the Company since 2000. Our website 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 Biosolutions - Adrian MI and Mitsubishi - Tokyo, Japan. 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. However, we believe the strategic
decision made in 2009 to vertically integrate by becoming a manufacturer of
spray-dried Aquaplex(R) products could substantially increase the Company's
income.
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, pharmaceutical, and personal products industries, among others, by
manufacturing bulk Aquaplex(R) complexes using a proprietary Pulse Combustion
spray-drying technology.
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; and now the availability in bulk of
Aquaplex(R) APIs (Active Pharmaceutical Ingredients) will provide the Company
with an even greater competitive advantage.
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. Now that we will be able to provide bulk quantities of Aquaplex(R)
products using a proprietary technology, we expect the major pharmaceutical
companies to aggressively incorporate these Aquaplex(R) products into their
existing and new drug formulations, as a result of the reduction in product
development and clinical trial costs provided by the availability of water
soluble APIs in bulk quantities.
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 European and Asian countries where
current regulatory views include CDs as natural products and GRAS (Generally
Recognized as Safe) excipients enhancing the aqueous solubility of APIs. 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. 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 significant advantages in 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 at our research park and thereby further strengthen our competitive
advantage. CTD Holdings will continue to evaluate opportunities to acquire
Cyclolab going forward, notwithstanding our 2006 derailed attempt to purchase
the company. The Cyclolab acquisition failed as the result of misrepresentation
by investors that has resulted in a judgment against those investors. The
Company believes that its current effort to attain c-GMP (current Good
Manufacturing Practice) status for its planned (2010) spray-drying facility at
the Research Park site will provide a significant and long-lasting competitive
advantage. The Company believes that Cyclolab will play an important role in the
future of 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 five persons on a full-time basis in 2009. None of the
Company's employees belong to a union. The Company believes relations with its
employees are good.
Item 1A. Risk Factors.
The loss of the unique skills of the CEO of the Company and the President
of the NSP division would significantly reduce the prospects of a timely
implementation of the above strategic plans. The possibility of competition from
a major manufacturer of CDs must be considered. While the fact that such has not
already happened significantly reduces the concern, it cannot be totally
dismissed.
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, including the current plan to build a spray-drying facility.
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 current limited insurance coverage is
adequate for the Property. As the additional development continues, management
will begin to appropriately increase the coverage.
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, 2009, are 22.7425 mils and $3,319,
respectively.
Item 3. Legal Proceedings.
On March 10, 2010, the Company was awarded a judgment in Palm Beach County,
Florida, Circuit Court Case No. 50-2007-CA-00818XXXXMB, Div. AA, for damages in
the amount of $151,547.80 against Steven Dorrough, Jayme Dorrough and Eline
Entertainment Group (not incorporated). The time within which an appeal may be
filed will expire in 30 days.
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
2009 First Quarter $ 0.03 $ 0.03
Second Quarter $ 0.07 $ 0.05
Third Quarter $ 0.07 $ 0.06
Fourth Quarter $ 0.13 $ 0.11
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 paid no dividends in 2009 and will not pay any cash dividends
on its common stock in 2010 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. 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 and unfavorable currency exchange rates for
our current order quantities are making domestic sources more competitively
priced. We make patent information about CDs 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. At the end of 2008, we joined in an effort to treat a set of twins
in the US who were diagnosed with Niemann Pick C (NPC). NPC is also called
Childhood Alzheimer's. It is a fatal disease caused by a genetic defect that
prevents proper handling of cholesterol in the body's cells. Treatment with our
Trappsol(R) HPB proved to provide an ameliorative benefit and was submitted for
orphan drug status in March 2010. The sales of this product in the US and
internationally contributed significantly to our revenues in 2009. We expect
continued growth in the sales of this product, now called Trappsol Cyclo(TM).
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. Shares of
Series A Preferred Stock are entitled to vote one 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. This ensures that the votes
entitled to be cast by the holder of the Series A Preferred Stock are equal to
at least one more than 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 pink sheet 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". In April 2009, the Company reached an agreement with the President
of Eline to release him and Eline from any further litigation in exchange for
the contractual (stock power) return of rights to the one share of Series A
Preferred Stock owned by Mr. Strattan. Litigation against the remaining
defendants, Steven Dorrough, Jayme Dorrough, Yucatan Holding Company and Eline
Holding Group, Inc. was further prosecuted, resulting in a judgment (March 10,
2010) awarding CTD $150,000 for costs.
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 as a protective measure while the Series A stock ownership was in doubt.
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 increased to $339,000 as of December 31, 2009, from $277,000 at
December 31, 2008. This increase was due primarily to cash from operations. We
have not experienced and do not expect to have any valuation issues or access
restrictions to our cash accounts. Our working capital was $537,000 at December
31, 2009 compared to $444,000 at December 31, 2008. Our cash flow from
operations for 2009 was $108,000 compared to $65,000 for 2008. The increased
cash flow from operations is due primarily to increased sales. In February 2008,
we paid off our $140,000 mortgage on our property. This reduced our interest
expense $850 per month.
During 2009 we sold Trappsol(R) products from inventory purchased in 2008
(approximately $100,000) for our two most profitable bulk 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 regular foreign suppliers in bulk quantities. 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 one year of our
historical sales volume of these products.
We acquired 162,780 shares of our common stock at a cost of $9,228 during
2009 as part of a Company stock repurchase program announced in October 2008.
At December 31, 2009, we have $825,000 in net operating loss carryforwards
that can be used to offset our current and future taxable net income and reduce
our income tax liabilities. We recorded a deferred tax asset of $250,000 based
on our expected future profitability and ability to utilize some of the net
operating losses before they expire. However, $420,000 of those net operating
losses expired in 2009 and $195,000 expire in 2010. In 2008, management did not
believe it would be able to fully utilize these net operating losses before they
expire and 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. Management did not increase its valuation allowance in 2009.
During 2009, we hired a consultant to perform certain public relations
activities through April 1, 2010, for 2,200,000 shares of restricted common
stock. We recorded an expense of $66,000 for 2009 and we issued the stock in
2010.
Operating Results
Product sales increased 22% to $603,000 in 2009 from $495,000 in 2008. This
is after a 34% decrease in sales from 2007 to 2008 and 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) increased to $111,000 in 2009 compared
to $99,000 for 2008. For 2009, we had a net loss of $(193,000), compared to net
loss in 2008 of $(413,000), which included a deferred tax provision of $200,000.
We believe with careful fiscal management our working capital is sufficient
to run our operations at current and expected future operating levels into the
near future. We may require new capital in the next twelve months to implement
our current expansion.
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 have been able to increase revenues to balance
these new expenses, but cannot be sure such effort will be enough in the short
term to sustain the favorable cash flow we have been enjoying.
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. In
the first quarter of 2010, the site plan was modified to include the building of
a spray-drying facility. This modification resulted from our decision to
implement new technology that will result in proprietary technology to produce
CD complexes of APIs in bulk quantities. Completion of this project is expected
to be by year-end 2010, resulting in a c-GMP plant approved to produce
pharmaceutical ingredients suitable for parenteral use.
To implement this new effort, a new wholly-owned subsidiary, NanoSonic
Products, Inc. (NSP) was created in December 2008, and Dr. Jeffrey Tate was
hired to be its President and COO. Responsibility for our two branded products,
Trappsol(R) and Aquaplex(R) will be divided between the two divisions -
Trappsol(R) to CTD and Aquaplex(R) to NSP.
Beginning in 2003, we began improvements and renovations of our corporate
office and have invested $191,000 through December 31, 2009. During the year
ended December 31, 2009, we capitalized $43,000 of improvements including
additional paving of our driveway. We are continuing our efforts to develop a
total site plan for our Research Park facility. These existing structures
previously designated to become a warehouse and an educational auditorium will
be modified to house the $1.5 million spray-drying facility that will be the
centerpiece of the Research Park. We believe this effort will increase our
capitalized improvements significantly in 2010.
We issued 3,161,384 shares and 5,718,147 shares of our common stock to
officers and employees for compensation earned under employment agreements for
2009 and 2008, respectively.
We have no off-balance sheet arrangements as of December 31, 2009.
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. We are currently working
on a site plan for a spray-drying pilot plant as well as renovations and
construction of an auditorium and meeting rooms suitable for the mission of our
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.
Valuation Allowance on Deferred Tax Assets
ASC 820 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 2009, we reported net loss before taxes of $(193,000). In 2009, we
decreased the amount of our valuation allowance of our deferred tax asset by the
amount of the net operating loss that was used or expired in 2009, which
decreased our valuation allowance percentage to 25% from 47% due to our current
and expected future profitability. We recorded an income tax provision, which
was offset by deferred tax assets and utilization of our net operating loss. Our
sales level increased in 2009 and we expect continued volitility in the timing
of sales, but overall sales growth is expected 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 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.
The range of possible judgments relating to the valuation of our deferred
tax asset is very wide. In 2007, we determined the weight of available evidence
supported a decision that a portion of our deferred tax assets will be realized,
resulting a deferred tax asset of $450,000, and a decrease in our valuation
allowance of the same amount. In 2008, we concluded that the weight of available
evidence supported a decision that 47% of our net operating losses would expire
unused, so we increased our valuation allowance by $200,000. 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 freight 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.
2009 Compared to 2008
Total product sales for 2009 were $603,000, a 22% increase over 2008 sales
of $495,000. 2007 was our highest sales ($751,000) level. Sales for 2009 were
the 2nd highest sales reported in our history, and 2008 was our 4th highest
sales total . The increase in sales from 2008 to 2009 is due primarily to recent
publicity regarding use of cyclodextrins in various medically related
applications . 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 2009, our four largest
customers accounted for 57% of our sales; the largest accounted for 21% of
sales. In 2008, our four largest customers accounted for 51% 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 frequently ordered 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) increased to $111,000 for 2009 compared to $99,000
for 2008. 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 2008 to 2009. We have not experienced significant increases in material
costs during 2009.
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. dominated in U.S. dollars. Our main
supplier of fine chemicals and complexes is located in Hungary dominated in
Euros. 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 increased 31% to $486,000 for 2009, from $370,000 for 2008.
This increase is due primarily to the addition of a new employee who was to
provide consulting services to customers, and to whom we issued Company stock
and other equities and recorded an expense of $157,021. We also added an
additional office employee during the third quarter of 2008.
Professional fees decreased to $88,000 for 2009 from $101,000 for 2008.
Legal fees were higher than historical levels for 2008 as the result of our
lawsuit with Eline Entertainment Group, Inc. We will continue to incur legal
expenses in the collection of the judgment awarded.
Office and other expenses are comparable at $31,000 and $34,000 for 2009
and 2008, respectively. Most of our office related expenses do not vary
significantly from quarter to quarter.
Amortization and depreciation is comparable at $21,000 and $23,000 for 2009
and 2008, respectively. We expect similar expenses in future periods as the
result of our office renovations, improvements and additions.
Freight and shipping decreased 17% to $11,000 for 2009, from $14,000 for
2008, due to lower purchases and more competition in shipping costs . Freight
and shipping is dependent on frequency of ordering products for inventory and
frequency of sales.
Investment and other income decreased 17% to $8,000 for 2009, from $28,000
for 2008. This decrease is due primarily to lower earnings on cash balances in
2009. We earned some nonrecurring consulting fees in 2008.
We recognized a net zero income tax expense for 2009 due to the utilization
of net operating loss carryforwards, offset by a decrease in our valuation
allowance of our deferred tax asset. Our valuation allowance of our deferred tax
asset also decreased due to our inability to utilize certain net operating
losses before they expired. 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 of our deferred tax asset 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.
We recognized a net loss of $(193,000) for 2009 compared to net loss for
2008 of $(413,000).
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, PA
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, 2009 and 2008, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 2009 and 2008. 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 audits provide 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, 2009 and 2008, and the results of their
operations and their cash flows for the years ended December 31, 2009 and 2008,
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,
2009 included in the accompanying management's report on internal control and,
accordingly, we do not express an opinion thereon.
\s\ Baumann, Raymondo & Company, PA
Baumann, Raymondo & Company PA
Tampa, Florida
March 18, 2010
PART I. Financial Information
Item 1. Financial Statements.
PART I. Financial Information
Item 1. Financial Statements.
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2009 AND 2008
ASSETS
2009 2008
CURRENT ASSETS
Cash and cash equivalents $ 338,872 $ 276,669
Accounts receivable 40,425 27,794
Inventory 185,262 209,975
Other current assets - 2,000
------------- -------------
Total current assets 564,559 516,438
------------- -------------
PROPERTY AND EQUIPMENT, NET 466,537 442,784
------------- -------------
OTHER
Note Receivable 9,894 -
Shareholder loan 469 17,069
Deferred tax asset 250,000 250,000
Intangibles, net of accumulated amortization
Of $6,000 and $5,000, respectively 4,000 5,000
------------- -------------
Total other assets 264,363 272,069
------------- -------------
TOTAL ASSETS $1,295,459 $ 1,231,291
============= ===============
(Continued)
F-1
CTD HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2009 and 2008
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
2009 2008
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 27,676 $ 72,125
------------ -------------
Total current liabilities 27,676 72,125
------------ -------------
LONG-TERM LIABILITIES
Accrued stock compensation 66,000 -
------------ -------------
STOCKHOLDERS' EQUITY
Common stock, par value $.0001 per share,
100,000,000 shares authorized, 31,103,822 and
26,542,438 shares issued and outstanding,
respectively 3,110 2,654
Preferred stock, par value $.0001 per share,
5,000,000 shares authorized;
Series A, 1 share issued and outstanding - -
Series D, -0- shares issued or outstanding - -
Additional paid-in capital 3,483,427 3,238,911
Accumulated deficit (2,275,526) (2,082,399)
Treasury stock, at cost - 162,780 shares
at December 31, 2009 (9,228) -
------------ ------------
Total stockholders' equity 1,201,783 1,159,166
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,295,459 $ 1,231,291
============ =============
See accompanying Notes to Financial Statements.
F-2
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Unaudited)
2009 2008
---------- ----------
REVENUES
Product sales $ 603,041 $ 494,937
Consulting income 20,833 -
---------- ----------
623,874 494,937
---------- ----------
EXPENSES
Personnel 486,087 370,449
Cost of products sold
(exclusive of depreciation and
amortization, shown separately below) 110,830 99,319
Consulting stock expense 76,417 -
Professional fees 88,142 101,164
Office and other 31,217 34,012
Amortization and depreciation 20,577 22,869
Freight and shipping 11,463 14,432
Loss on disposal of equipment 76 -
Abandoned patent database costs - 92,166
----------- ----------
824,809 734,411
----------- -----------
Operating loss (200,935) (239,474)
----------- -----------
OTHER INCOME (EXPENSE)
Investment and other income 7,808 28,058
Interest expense - (1,816)
----------- -----------
Total other income (expense) 7,808 26,242
----------- -----------
NET LOSS BEFORE
INCOME TAXES (193,127) (213,232)
INCOME TAX EXPENSE - (200,000)
----------- ----------
NET LOSS $ (193,127) $(413,232)
=========== ===========
NET LOSS PER COMMON SHARE $ (.01) $ (.02)
=========== ===========
Weighted average number of
Common shares outstanding 28,750,597 23,533,349
=========== ===========
See Accompanying Notes to Financial Statements.
F-3
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
COMMON STOCK PREFERRED STOCK ADDITIONAL TREASURY ACCUMULATED TOTAL
PAID-IN STOCK DEFICIT STOCKHOLDERS'
CAPITAL EQUITY
SHARES PAR VALUE SHARES PAR VALUE
-------- ---------- ------- --------- --------- ---------- ------------ -------------
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
Shares issued under
employment agreements 3,161,384 316 - - 155,056 - - 155,372
Shares issued to
acquire investment 1,400,000 140 - - 89,460 - - 89,600
Purchase of treasury stock - - - - - (9,228) - (9,228)
Net loss - - - - - - (193,127) (193,127)
Balance, -------- ---------- ----- -------- ---------- ------ ----------- -------------
December 31, 2009 31,103,822 $ 3,110 1 $ - $ 3,483,427 $(9,228) $ (2,275,526) $ 1,201,783
======== ========== ===== ======= ========== ====== =========== =============
See Accompanying Notes to Financial Statements.
F-4
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 2009 AND 2008
2009 2008
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net LOSS $ (193,127) $ (413,232)
----------- -----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 20,577 22,869
Stock received for services (20,833) -
Stock compensation to consultants 10,417 -
Loss on disposal of equipment 76 -
Stock compensation to employees 255,388 208,745
Abandoned patent database costs - 92,166
Deferred income tax assets - 200,000
Increase or decrease in:
Accounts receivable (12,631) 57,640
Inventory 24,713 (102,351)
Other current assets 2,000 442
Accounts payable and accrued expenses (44,449) (1,539)
Accrued stock compensation 66,000 -
----------- -----------
Total adjustments 301,258 477,972
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 108,131 64,740
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment and equipment (43,406) (25,164)
Redemption of certificate of deposit - 263,985
Patent database developed - (59,253)
Redemption with related party - 853
Loan to shareholder - (17,069)
Payment received from loan to shareholder 16,600 -
Cash loaned under note receivable (9,894) -
----------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING (36,700) 163,352
ACTIVITIES ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock (9,228) -
Payments on long-term debt - (140,074)
Payments on loan payable to stockholder - (21,330)
----------- ----------
NET CASH USED IN FINANCING ACTIVITIES (9,228) (161,404)
----------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 62,203 66,668
CASH AND CASH EQUIVALENTS, beginning of period 276,669 209,981
----------- ----------
CASH AND CASH EQUIVALENTS, end of period $338,872 $ 276,669
=========== ==========
CTD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 2009 and 2008
(Continued)
2009 2008
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ - $ 1,816
=========== ============
Cash paid for income taxes $ - $ -
=========== ============
See Accompanying Notes to Financial Statements
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
(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 subsidiaries. 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). 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 assets 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 2009 or 2008.
(k) START-UP COSTS - Start-up costs are expensed as incurred.
(l) 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. The
Company files income tax returns in the U.S. federal jurisdiction, and in
various state jurisdictions. The Company is no longer subject to U.S. Federal or
state income tax examinations by tax authorities for years before 2006, except
for net operating loss carryforwards from periods prior to 2006. The Company has
reviewed and evaluated the relevant technical merits of each of its tax
positions in accordance with accounting principles generally accepted in the
United States of America for accounting for uncertainty in income taxes, and
determined that there are no uncertain tax positions that would have a material
impact on the financial statements of the Company.
(m) NET INCOME (LOSS) PER COMMON SHARE - Net income (loss) per common share
is 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 periodically awards stock to
employees under employment agreements. 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. The Company periodically issues stock to
consultants under consulting agreements. 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, less a 20% discount if the stock is restricted for at least six months.
(o) RECLASSIFICATIONS - Certain amounts in the 2008 financial statements
have been reclassified for comparative purposes to conform with the 2009
presentation.
(p) THE FASB ACCOUNTING STANDARDS CODIFICATION (ASC) AND THE HIERARCHY OF
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CODIFICATION) The Codification is
the source of authoritative U.S. generally accepted accounting principles (GAAP)
recognized by the FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants including the Company. On
the effective date of this Statement, the Codification superseded all
then-existing non-SEC accounting and reporting standards. All other
non-grandfathered non-SEC accounting literature not included in the Codification
is non-authoritative. Since the Codification was effective for financial
statements issued for interim and annual periods ending after September 15,
2009, the Company revised its references to Statement of Financial Accounting
Standards to refer to the Codification as its source for GAAP.
(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
Beginning July 1, 2009, the Company has employment agreements with two
officers, Mr. Strattan and Mr. Fails, for total monthly cash salaries of $12,500
and $3,500, respectively. From January 1, 2009 to June 30, 2009, Mr. Strattan's
monthly salary was $7,000 in cash and $12,500 in restricted shares based on the
formula below, and Mr. Fail's monthly salary was $3,000 in cash and $1,000 in
restricted shares based on the formula below. Through June 30, 2009, the
officers were awarded shares of common stock each month. The number of shares
due is equal to $13,500 divided by eighty percent of the closing price of the
Company's common stock on that last day of each month. No shares of restricted
stock were earned by Mr. Strattan or Mr. Fails subsequent to July 1, 2009. 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 the
number of shares awarded for that month. The stock is subject to trading
restrictions under Rule 144. For 2009, the Company awarded 2,561,384 shares and
recognized an expense of $101,372 for stock awarded under these agreements.
Effective July 1, 2009, the Company entered into an employment agreement
with an officer of its wholly owned subsidiary for 600,000 shares of Company
stock through December 31, 2009. The Company recognized an expense equal to the
fair value of the stock determined using the average stock closing trading price
for each month of the agreement, which resulted in an expense of $54,000 in
2009. The agreement also provided for a bonus of 50% of the subsidiary's future
profits. The Company issued 50% of the stock earned by the subsidiary as
consulting fee revenue to the employee and expensed $5,208 in 2009. In addition,
the Company did not renew the employment agreement for 2010 and transferred 81%
of the outstanding stock of its wholly owned subsidiary, Vistra Growth
Properties, Inc. to the employee as a termination settlement. The Company
recognized an expense of $97,813, which is equal to the value of 1,400,000
shares of Company stock previously issued to the subsidiary.
For 2008, the Company had employment agreements with two officers for total
monthly salaries of $10,000. In addition, the officers were 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.
During 2009, we hired a consultant to perform certain public relations
activities through April 1, 2010, for 2,200,000 shares of restricted common
stock. We recorded an expense of $66,000 for 2009 and issued the stock in 2010.
(3) NOTES RECEIVABLE
The Company loaned $9,700 to an unrelated investment company. The note is
unsecured, principal and interest at 24% is due on demand.
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31:
2009 2008
---------- -----------
Land $ 80,000 $ 80,000
Buildings and improvements 432,082 418,978
Machinery and equipment 23,046 23,046
Office furniture and equipment 51,381 51,705
----------- ------------
586,509 573,729
Less: accumulated depreciation 167,353 149,419
----------- ------------
419,156 424,310
Construction in progress 47,381 18,474
----------- ------------
Property and equipment, net $ 466,537 $ 442,784
=========== ============
(5) 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 $342,315 and $279,832 at December 31, 2009 and 2008,
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 chemical supply and pharmaceutical companies located
primarily in the United States and the Hungary. Three customers accounted for
83% of the accounts receivable balance at December 31, 2009. Three customers
accounted for 77% of the accounts receivable balance at December 31, 2008. The
Company has no policy requiring collateral or other security to support its
accounts receivable.
F-8
CTD HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
(6) MAJOR CUSTOMERS AND SUPPLIERS:
In 2009, three major customers accounted for 51% of total sales. In 2008,
two major customers accounted for 37% of total sales.
Substantially all 2009 and 2008 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.
(7) LONG-TERM DEBT:
The Company paid its mortgage payable in full during 2008.
(8) PREFERRED STOCK
In 2009, we authorized a Series D preferred stock, setting forth its
designations, rights and preferences. Only shareholders who own in excess of 10%
of the combined total number of outstanding Common Shares and outstanding Class
D preferred shares may be entitled to hold Series D preferred stock. The more
significant right is in the event the combined total number of outstanding
common shares and outstanding Series D preferred shares increases, such that any
Class D preferred shareholder owns less than 10% of the combined total number of
outstanding common shares and outstanding Class D preferred shares, the Series D
preferred shares automatically convert to common shares, unless the affected
shareholder acquires sufficient additional common shares to increase the total
stockholdings to more than 10% of the combined total number of combined total
number of outstanding common shares and outstanding Class D preferred shares. No
Series D shares have been issued.
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 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.
(9) TREASURY STOCK
Treasury stock is recorded at acquisition cost. The Company reacquired 162,780
shares of its previously outstanding common stock for $9,228. The shares were
not cancelled as of December 31, 2009.
(10) 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. The President
repaid $16,600 during 2009 and $469 was due at December 31, 2009.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS:
ASC 820 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.
(12) 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, 2009, unused operating loss
carryforwards totaling approximately $ 825,000 that may be applied against
future taxable income. If not used, the carryforwards will expire as follows:
Year Ending
December 31, Amount
------------ -----------
2010 $ 195,000
2017 206,000
2020 280,000
2021 71,000
2024 66,000
2028 7,000
-----------
Total $ 825,000
===========
If all of the operating loss carryforwards and temporary deductible
differences were used, the Company would realize a deferred tax asset of
approximately $332,000 based upon expected income tax rates. Under ASC 740, 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 2009, management reduced the valuation allowance percentage of our
deferred tax asset to 25% from 47% equal to effect of the amount used and
expired of $325,000 of net operating losses in 2009, which resulted in no net
income tax expense or benefit based on our assessment of our current and
expected future profitability.
For 2008, management increased the valuation allowance of our deferred tax
asset to 47% from 0% due to the future 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.
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:
2009 2008
---------- ----------
Current income tax benefit $ 21,000 $ 25,000
Tax expense of temporary (45,000) (45,000)
differences
Tax benefit of operating loss carryforwards 18,000 -
Expiration of net operating loss carryforward (92,000)
Decrease (increase) in valuation allowance 98,000 (180,000)
---------- ----------
Total net tax benefit (expense) $ - $(200,000)
========== ==========
Significant components of the Company's deferred Federal income taxes were as
follows:
2009 2008
---------- ----------
Deferred tax assets
Net operating loss carryforwards $ 230,000 $ 380,000
Stock-based compensation expense 100,000 47,000
Depreciation and amortization expense 2,000 3,000
---------- ----------
Total deferred tax assets 332,000 430,000
Less valuation allowance (82,000) (180,000)
---------- ----------
Deferred tax assets, net of valuation 250,000 250,000
---------- ----------
Deferred tax liabilities - -
---------- ----------
Net tax assets $ 250,000 $ 250,000
========== ==========
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:
2009 2008
---------- ----------
Tax benefit at Federal statutory rate $ 21,000 $ 25,000
Effect of State taxes 4,000 5,000
Use of net operating loss 21,000 -
Expiration of net operating loss (92,000) -
Valuation allowance - net operating loss 98,000 (180,000)
Change in expected income tax rate (8,000) (3,000)
Stock-based compensation (44,000) (47,000)
---------- ----------
Total tax benefit (provision) $ - $ (200,000)
========== ==========
(13) EMPLOYEE BENEFIT PLAN The Company adopted a 401(k) plan in 2009. The
Plan is available to all employees who have satisfied certain eligibility
requirements. Employee contributions are discretionary. The Company may match
employee contributions and may also make discretionary contributions for all
eligible employees based upon their total compensation. For 2009, the Company
elected to match the employee's contribution, not to exceed 4% of compensation.
The Company's 401(k) contribution was $2,634 for 2009.
(14) 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 47% 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.
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.
Three (3) 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 Positions and Offices Year First Became
With Registrant Director
C.E. Rick Strattan 64 Director, CEO, Chairman 1990
George L. Fails 65 Director, President 2001
Louis S. Weltman 52 Director 2009
C.E. Rick Strattan, 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, President since 2009 and 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.
Louis S. Weltman, Director since 2009. Mr. Weltman brings more than 30
years of real estate development, operational, corporate development and
financing experience to the Company. Mr. Weltman is currently Managing Partner
of ViStra Growth Partners, Inc., which is a corporate strategy consulting and
merchant banking firm assisting emerging companies in developing entrance,
growth and exit strategies. In addition, Mr. Weltman oversees strategy and
investment management for a closely-held REIT, SL Realty Partners, Ltd., which
provides treatment and housing for individuals recovering from diseases of
addiction. Mr. Weltman obtained a Bachelor of Science in Economics from of The
University of Pennsylvania's Wharton School of Finance and Commerce in 1979 and
his MBA from New York University's Stern School of Business Administration in
1981.
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 2009 $117,000 -0- -0- $ 75,000.00 (1) -0- -0- -0-
President, CEO 2008 $ 84,000 -0- -0- $189,822.00 (4) -0- -0- -0-
Chairman 2007 $ 36,000 $ 25,000 -0- $148,603.00 (3) -0- -0- -0-
George L. Fails 2009 $ 39,000 -0- -0- $ 7,232.00 (2) -0- -0- -0-
Operations Manager 2008 $ 36,000 -0- -0- $ 15,186.00 (5) -0- -0- -0-
2007 $ 30,000 -0- -0- -0- -0- -0- -0-
Louis S. Weltman 2009 -0- -0- -0- $ 18,000 (6) -0- -0- -0-
Director
(1) Reflects grant of 2,371,651 shares
(2) Reflects grant of 189,732 shares
(3) Reflects grant of 5,062,501 shares
(4) Reflects grant of 5,201,033 shares
(5) Reflects grant of 415,925 shares
(6) Reflects grant of 600,000 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. This contract
was extended through December 31, 2009, at a base annual salary of $84,000 and a
number of shares computed using $12,500 per month, through June 30, 2009.
Effective July 1, 2009, the base annual salary was increased to $12,500 per
month with no stock compensation. This contract was extended through December
31, 2010, at a base annual salary of $150,000 and a number of shares computed
using $5,500 for 11 months.
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
through June 30, 2009. Effective July 1, 2009, the base annual salary was
increased to $3,500 per month with no stock compensation. This contract was
extended through December 31, 2010, at a base annual salary of $42,000 and a
number of shares computed using $0 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 28, 2010, 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 ....................... 17,728,413 53.06%
4123 N.W. 46th Avenue
Gainesville, FL 32606
George L. Fails............................. 1,346,749 4.03%
2420 N.W. 142nd Avenue
Gainesville, FL 32609
Louis S. Weltman 2,000,000 (1) 5.99%
3205 N.W. 62nd Street
Boca Raton, FL 33496
All Officers and Directors as a group ...... 21,075,162 63.08%
(1) Held by Jill K. Weltman
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. In 2009, a total
of 2,371,651 shares and 189,733 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 Stockholder owes the Company $469 at December 31,
2009. The advance is unsecured and was repaid in January 2010.
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 $58,500.
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 31, 2010
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 31, 2010
By: /s/ George L. Fails
---------------------------------
GEORGE L. FAILS
Director
Date: March 31, 2010
By: /s/ Louis S. Weltman
---------------------------------
LOUIS S. WELTMAN
Director
Date: March 31, 2010
