Cyclo Therapeutics, Inc. (CTD Holdings, Inc.) Q3 2019 Financial Report Analysis

Key Insights:

• Recommendation: Hold. While Cyclo Therapeutics has successfully raised capital and increased cash reserves, ongoing net losses and reliance on a small customer base pose risks that warrant caution in investment decisions.

Snapshot of Financial Performance:

• Net Loss: $(1,625,000) for Q3 2019, up from $(787,000) in Q3 2018.
• Total Revenue: $286,000 for Q3 2019, a 27% increase year-over-year.
• Cash Reserves: Increased to $4,994,000 from $2,217,000 as of the end of 2018.
• Total Assets: $5,862,239 as of September 30, 2019, showing significant growth from $2,917,856 at the end of 2018.
• Equity Position: Total stockholders' equity improved to $3,483,247, up from $992,524 at the end of 2018.

Detailed Financial Analysis:

1. Revenue Growth:

Cyclo Therapeutics reported a total revenue of $286,000 for Q3 2019, a notable increase of 27% compared to $224,000 in Q3 2018. This growth, however, is juxtaposed against a year-to-date revenue increase of only 1%, indicating possible stagnation in core product sales over a longer period.

• Product Sales Breakdown:
• Trappsol® Cyclo™: Q3 2019 generated $74,000 (none in Q3 2018), but YTD sales decreased by 38% to $104,000.
• Trappsol® HPB: Sales rose to $153,000 (21% increase) in Q3 2019, and YTD growth was 18%, reflecting a positive trend.
• Aquaplex®: No sales in Q3 2019 compared to $37,000 in Q3 2018, although YTD sales increased to $150,000.

The customer concentration is concerning; 75% of sales came from five major customers, putting the company at risk if any of these relationships falter.

2. Expense Analysis:

Operating expenses ballooned to $1,914,539 in Q3 2019, driven largely by significant increases in personnel and research and development (R&D) costs.

• Personnel Costs: Increased by 77% to $521,000 due to new hires and stock awards.
• R&D Expenses: Rose by 94% to $942,000, indicating aggressive investment in clinical trials.

These rising costs contributed to a net loss of $(1,625,000) in Q3, a sharp increase from $(787,000) in the same quarter last year.

3. Balance Sheet Strength:

The balance sheet reflects a robust increase in total assets to $5,862,239, primarily due to successful capital raises. Total stockholders' equity has improved significantly, signaling a stronger financial foundation.

• Total Assets: Jumped from $2,917,856 in 2018 to $5,862,239 in 2019.
• Cash Position: Increased to $4,994,215, providing a buffer for ongoing operations.

4. Cash Flow Dynamics:

Cash flow from operating activities showed a significant outflow of $(4,369,478), an increase from $(2,133,780) in the previous year. This raises liquidity concerns and highlights the necessity for the company to manage costs effectively while seeking new revenue streams.

• Cash Flow from Financing Activities: Increased significantly, suggesting successful capital raises, which is crucial for funding ongoing operations and R&D.

Macro and Competitive Landscape:

The biopharmaceutical industry is under pressure from regulatory changes, technological advancements, and competition for funding and market share. Cyclo Therapeutics operates in a niche market focused on rare diseases, which offers potential but comes with its own set of challenges, including high R&D costs and a lengthy approval process.

The competitive landscape also includes emerging biotech firms that may offer similar products or therapies, necessitating continuous innovation and marketing efforts from Cyclo Therapeutics to maintain and grow its market position.

Future Outlook:

With improved cash reserves and a focus on the development of Trappsol® Cyclo™ and other products, Cyclo Therapeutics is poised for potential growth in the coming months. However, the company must address its operational inefficiencies and dependency on a limited customer base to ensure long-term sustainability.

Investors should monitor the company's efforts to diversify its customer base and improve revenue generation as they navigate the challenges of the biopharmaceutical landscape.

Conclusion:

In summary, Cyclo Therapeutics, Inc. has made strides in raising capital and improving its financial standing. However, persistent net losses and high operating expenses present significant challenges. For now, a Hold recommendation is warranted as the company works to turn its strategic initiatives into profitable outcomes, while investors remain vigilant regarding the potential risks of customer concentration and operational efficiency.

This analysis aims to provide a comprehensive overview of Cyclo Therapeutics' financial health and operational challenges as reflected in the Q3 2019 report. Investors should consider these insights carefully when making investment decisions.