Shares of GeoBargain on the radar just eclipsed the $1.00 mark, up 400% from our first mention!

On 2/26/2014:

We alerted Geo premium members of CTDH on when the stock was trading at $0.20, our note:

Reasons for tracking. We are extremely excited to follow the developments to this possible unfolding growth story. In some respects it reminds us of GeoBargain POLXF. CTDH sells cyclodextrins (“cyclodextrins” or “CDs”) and related products to the food, pharmaceutical, nutritional, and other industries, primarily for use in diagnostics and specialty drugs with continuing growth in research and new product development.

  • Cyclodextrins, in either bulk form or as a finished product can:
    • be used to make foods taste and look better
    • increase the effective/safety of drugs
    • improve the smell of fragrances
  • Between 2002 and 2008 annual sales had generally come in at about $500,000. However, from 2008 to 2012 revenues have steadily increased, reaching 1 million for the first time in 2011. It appears that the company will report 2013 revenues north of  $1.5 million.

Revenue in millions

Fiscal Quarter 2013 Fiscal year 2012 Fiscal year 2011 Fiscal year 2010 Fiscal year
March REV $0.58 $0.44 $0.25 $0.17
June REV $0.71 $0.15 $0.37 $0.16
September REV $0.17 $0.16 $0.23 $0.20
December REV $0.30 $0.18 $0.27
Total REV $1.04 $1.03 $0.80
  • Since 2008 the company has been doing a few things to increase its growth trajectory and improve its risk profile:
    • Expanding to new markets where the acceptance of Cyclodextrins is increasing
    • Producing more products in house as opposed to reselling Cyclodextrins or Cyclodextrins products.
    • Selling higher margin products
    • Diversifying customer base
    • Increasing length of customer contracts
  • In the United States, major starch companies are renewing their earlier interest in CDs as food and nutraceutical additives
  • A potential boost to future business may come from the fact that it looks like the FDA is recognizing how safe Cyclodextrins are.  For example, one of the company’s products, Trappsol® Cycloâ„¢,  gained Orphan Drug status from the FDA in 2010.


Caveats:

 

 

  • no independent members of our Board of Directors or an independent audit committee.
  • Volatility in revenue stream since demand for product can be dependent on drug pipeline of its customers and larger orders.  This is a key issue. For example , notice above how  volatile  quarterly revenues have been.
  • Adoption of CD has to accelerate to take sales to next level
  • Customer concentration
  • Unable to report consistent profitability

On 3/21/2014:

We coded CTDH as a high risk GeoBargain on the radar at $0.27, our note:

In our 2/26/2014 email, when the stock was trading at $0.20, we listed our reasons for tracking.  We mentioned that we were extremely excited to follow the developments of this possibly unfolding growth story.   We stated that in some respects it reminds us of GeoBargain POLXF.   On 3/12/2014 CTDH reported record revenues for 2013:

  • CTDH reported record product sales of $1,693,335 for the fiscal year ended 12/31/2013, a 71% increase over 2012 product sales.
  • The Company reported net income of $205,000 for 2013, a 176% increase over 2012.

Bullish commentary from management:

“In 2013 we achieved traction for sales of our branded products, took advantage of historically low interest rates to refinance debt, and invested in our market channels to increase sales,” said Dr. Jeffrey Tate, President of CTD Holdings. “With the addition of two key international investors to our Board in February, we are poised for accelerated growth.”

We are coding CTDH as a GeoBargain on the Radar at $0.27 and will look to initiate a position.

On 4/15/2014:

CTDH announced a financing and Collaboration Agreement with a major Pharma manufacturer and distributor. Our note:

The company  announced that it has closed on a Securities Purchase and Collaboration Agreement with Novit LP an affiliated entity of the USP Group, a major manufacturer and distributor of over-the-counter pharmaceutical products in Poland.

The transaction involved the signing of a Securities Purchase and Collaboration Agreement under which CTD Holdings issued 4 million shares of Common Stock to Novit LP at $0.25 per share, resulting in a $1,000,000 capital infusion to the Company.

Quotes from management:

“This transaction opens the door to collaboration with a leading company in a growing market”

“Access to the impressive manufacturing and distribution capabilities of the USP Group will accelerate our product development and enhance our ability to move finished products to customers. It opens virgin sales territory for the Company.”

Lastly on 4/21/2014:

When stock was trading at $0.49 we alerted premium members that our due diligence on CTDH reveals a good long-term growth opportunity, tempered by short -term lumpiness in quarterly financials.  We stated:

We interviewed  management and are very excited about long term prospects of the company.  Unfortunately,from a growth perspective,  we think it’s a 3 to 5 year story and near term  financial results may not be able to break out of historic quarterly range.  However, the company is in the process of:

  • Setting up a broader application for its product
  • Increasing distribution
  • Taking steps to produce more product in-house and taking lower quality  raw material to produce high quality products resulting in higher margins for the company
  • With the designation of Trappsol as an orphan drug treatment, the company is positioning itself to be valued more as a biotech company rather than a specialty chemical company  which  may allow investors to deal with near term  volatility  in  quarterly results.

We are still long.