(

) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The following is a summary of the more significant accounting policies of Cyclo Therapeutics, Inc

(the “Company,” “we,” “our” or “us”) that affect the accompanying consolidated financial statements:

(a) ORGANIZATION AND OPERATIONS––The Company was incorporated in

August 1990

as a Florida corporation, under the name Cyclodextrin Technologies Development, Inc. with operations beginning in

July 1992.

In conjunction with a restructuring in

2000,

we changed our name to CTD Holdings, Inc. We changed our name to Cyclo Therapeutics, Inc. in

September 2019

to better reflect our current business, and on

November 6, 2020,

we reincorporated from the State of Florida to the State of Nevada.

We are a clinical stage biotechnology company that develops cyclodextrin-based products for the treatment of disease. We have filed a Type II Drug Master File with the U.S. Food and Drug Administration (“FDA”) in

2014

for our lead drug candidate, Trappsol® Cyclo™ as a treatment for Niemann-Pick Type C disease (“NPC”). NPC is a rare and fatal cholesterol metabolism disease that impacts the brain, lungs, liver, spleen, and other organs. In

2015,

we launched an International Clinical Program for Trappsol® Cyclo™ as a treatment for NPC. In

2016,

we filed an Investigational New Drug application (“IND”) with the FDA, which described our Phase I clinical plans for a randomized, double blind, parallel group study at a single clinical site in the U.S. The Phase I study evaluated the safety of Trappsol® Cyclo™ along with markers of cholesterol metabolism and markers of NPC during a

-week treatment period of intravenous administration of Trappsol® Cyclo™ every

two

weeks to participants

years of age and older. The IND was approved by the FDA in

September 2016,

and in

January 2017

the FDA granted Fast Track designation to Trappsol® Cyclo™ for the treatment of NPC. Initial patient enrollment in the U.S. Phase I study commenced in

September 2017.

Enrollment in this study was completed in

October 2019,

and in

May 2020

we announced Top Line data showing a favorable safety and tolerability profile for Trappsol® Cyclo™ in this study. In

October 2020

we received a “Study

May

Proceed” notification from the FDA with respect to the proposed Phase III clinical trial.

We have also filed Clinical Trial Applications for a Phase I/II clinical study with several European regulatory bodies, including those in the United Kingdom, Sweden and Italy, and in Israel, all of which have approved our applications. The Phase I/II study is evaluating the safety, tolerability and efficacy of Trappsol® Cyclo™ through a range of clinical outcomes, including neurologic, and respiratory, in addition to measurements of cholesterol metabolism and markers of NPC. The

first

patient was dosed in this study in

July 2017,

and in

February 2020,

we announced completion of enrollment of

patients in this study. In

September 2020,

we released positive data from the

seven

patients who completed the trial, supporting the efficacy of Trappsol® Cyclo™ in treating NPC patients.

January 2018,

the FDA authorized a single patient IND expanded access program using Trappsol® Cyclo™ for the treatment of Alzheimer's disease. We prepared a synopsis for an early stage protocol using Trappsol® Cyclo™ intravenously to treat Alzheimer's disease that was presented to the FDA in

January

2021.

We received feedback from the FDA on this synopsis in

April 2021

and have incorporated the feedback into our development strategy for the filing of an IND for a Phase II program. We intend to submit this IND to the FDA in the

second

half of

2021.

We also continue to operate our legacy fine chemical business, consisting of the sale of cyclodextrins and related products to the pharmaceutical, nutritional, and other industries, primarily for use in diagnostics and specialty drugs. However, our core business has transitioned to a biotechnology company primarily focused on the development of cyclodextrin-based biopharmaceuticals for the treatment of disease from a business that had been primarily reselling basic cyclodextrin products.

(b) BASIS OF PRESENTATION––The consolidated financial statements include the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The interim consolidated financial statements of the Company included in this Quarterly Report on Form

-Q, including these notes, are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The consolidated financial statements, and these notes, have been prepared in accordance with GAAP and do

not

contain certain information included in the Company's Annual Report on Form

-K for the fiscal year ended

December 31, 2020.

The consolidated financial statements should be read in conjunction with that Annual Report on Form

-K. Results for the interim periods presented are

not

necessarily indicative of the results that might be expected for the entire fiscal year.

(c) CASH AND CASH EQUIVALENTS––Cash and cash equivalents consist of cash and any highly liquid investments with an original purchased maturity of

three

months or less.

(d) ACCOUNTS RECEIVABLE––Accounts receivable are unsecured and non-interest bearing and stated at the amount we expect to collect from outstanding balances. Customer account balances with invoices dated over

days old are considered past due. The Company does

not

accrue interest on past due accounts. Customer payments are allocated to the specific invoices identified on the customer's remittance advice or, if unspecified, applied to the oldest unpaid invoices.

The carrying amount of accounts receivable are reduced by an allowance for credit losses that reflects management's best estimate of the amounts that will

not

be collected. The Company reviews each customer balance where all or a portion of the balance exceeds

days from the invoice date. Based on the Company's assessment of the customer's current creditworthiness, the Company estimates the portion, if any, of the balance that will

not

be collected, and writes off receivables as a charge to the allowance for credit losses when, in management's estimation, it is probable that the receivable is worthless. Based on management's assessment of the credit history with customers having outstanding balances and current relationships with them, an allowance for doubtful accounts was

not

deemed necessary at

March 31, 2021

and

December

31,

2020.

(e) INVENTORY AND COST OF PRODUCTS SOLD––Inventory consists of our pharmaceutical drug Trappsol® Cyclo™, cyclodextrin products and chemical complexes purchased for resale recorded at the lower of cost (

first

-in,

first

-out) or net realizable value. The Company records a specific reserve for inventory items that are determined to be obsolete. The reserve for obsolete inventory was

$52,922

March 31, 2021

and

December

31,

2020,

respectively. The Company's reserve for obsolete inventory is based on the Company's best estimates of product sales and customer demands. It is reasonably possible that the estimates used by the Company to determine its provisions for inventory write-downs will be materially different from actual write-downs. These differences could result in materially higher than expected inventory provisions and related costs, which could have a materially adverse effect on the Company's results of operations and financial condition in the near term. Cost of products sold includes the acquisition cost of the products sold and does

not

include any allocation of outbound freight charges, indirect overhead expenses, warehouse and distribution expenses, or depreciation and amortization expense.

(f) PREPAID CLINICAL EXPENSES––Prepaid clinical expenses consist of our pharmaceutical drug Trappsol® Cyclo™ expected to be used in our clinical trial program recorded at cost. Prepaid clinical expenses represent valid future economic benefits based on our contracts with our vendors, and will be realized in the ordinary course of business.

(g) MORTGAGE NOTE RECEIVABLE––The mortgage note receivable is stated at amortized value, which is the amount we expect to collect.

(h) FURNITURE AND EQUIPMENT––Furniture and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using primarily the straight-line method over the estimated useful lives of the assets (generally

three

five

years for computers and vehicles and

seven

ten

years for machinery, equipment and office furniture). We periodically review our long-lived assets to determine if the carrying value of assets

may

not

be recoverable. If an impairment is identified, we recognize a loss for the difference between the carrying amount and the estimated fair value of the asset.

(i) REVENUE RECOGNITION––Revenues are recognized when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the

five

step model prescribed under Accounting Standard Update (“ASU”)

No.

2014

09:

(i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

Product revenues

In the U.S. we sell our products to the end user or wholesale distributors. In other countries, we sell our products primarily to wholesale distributors and other

third

-party distribution partners. These customers subsequently resell our products to health care providers and patients.

Revenues from product sales are recognized when the customer obtains control of our product, which occurs at a point in time, typically upon delivery to the customer. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that we would have recognized is

one

year or less or the amount is immaterial. We treat shipping and handling costs performed after a customer obtains control of the product as a fulfillment cost. We have identified

one

performance obligation in our contracts with customers which is the delivery of product to our customers. The transaction price is recognized in full when we deliver the product to our customer, which is the point at which we have satisfied our performance obligation.

Reserves for Discounts and Allowances

Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, health care providers or payors, including those associated with the implementation of pricing actions in certain of the international markets in which we operate. Our process for estimating reserves established for these variable consideration components do

not

differ materially from our historical practices.

Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts, contractual adjustments and returns. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to our customer) or a liability (if the amount is payable to a party other than our customer). Our estimates of reserves established for variable consideration typically utilize the most likely method and reflect our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances,

may

be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will

not

occur in a future period. Actual amounts

may

ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

For additional information on our revenues, please read Note

Revenues, to these consolidated financial statements.

(j) 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.

(k) ADVERTISING––Advertising costs are charged to operations when incurred. We incur minimal advertising expenses.

(l) RESEARCH AND DEVELOPMENT COSTS––Research and development costs are expensed as incurred.

(m) 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. In addition, tax benefits related to positions considered uncertain are recognized only when it is more likely than

not

the position will be sustained upon examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that has a greater than

50%

likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

(n) NET LOSS PER COMMON SHARE––Basic and fully diluted net loss per common share is computed using a simple weighted average of common shares outstanding during the periods presented, as outstanding warrants to purchase

2,130,268

common shares were antidilutive for the

three

months ended

March 31, 2021

and the year ended

December

31,

2020.

(o) STOCK BASED COMPENSATION––The Company periodically awards stock to employees, directors, and consultants. In the case of employees and consultants, an expense is recognized equal to the fair value of the stock determined using the closing trading price of the stock on the award date. With respect to directors, the Company accrues stock compensation expense on a quarterly basis based on the Company's historical director compensation policies, and each quarter recognizes such expense based on the trading price of the common stock during such quarter. This expense is then trued up at the time the shares are issued to directors based on the trading price at the time of issuance.

(p) FAIR VALUE MEASUREMENTS AND DISCLOSURES––The Fair Value Measurements and Disclosures topic of the Accounting Standards Codification (“ASC”) requires companies to determine fair value based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. The Fair Value Measurements and Disclosures topic emphasizes that fair value is a market-based measurement,

not

an entity-specific measurement.

The guidance requires that assets and liabilities carried at fair value be classified and disclosed in

one

of the following categories:

●	Level 1: Quoted market prices in active markets for identical assets or liabilities.

●	Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

●	Level 3: Unobservable inputs that are not corroborated by market data.

We have

assets or liabilities that are required to have their fair value measured on a recurring basis at

March 31, 2021

and

December

31,

2020.

Long-lived assets are measured at fair value on a non-recurring basis and are subject to fair value adjustments when there is evidence of impairment.

For short-term classes of our financial instruments, which include cash, accounts receivable and accounts payable, and which are

not

reported at fair value, the carrying amounts approximate fair value due to their short-term nature. The fair value of the mortgage note receivable is estimated based on the present value of the underlying cash flows discounted at current rates. At

March 31, 2021

and

December

31,

2020,

the carrying value of the mortgage note receivable approximates fair value.

(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, including regarding contingencies, that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company's most significant estimate relates to inventory obsolescence. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could significantly differ from these estimates.

(r) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS––Management does

not

believe any recently issued, but

not

yet effective, accounting standards, if currently adopted, would have a material effect on the Company's financial statements.

(s) UNCERTAINTY––The recent outbreak of the COVID-

coronavirus is impacting worldwide economic activity. COVID-

poses the risk that we or our employees, CROs, suppliers, manufacturers and other partners

may

be prevented from conducting business activities for an indefinite period of time, including due to the spread of the disease or shutdowns that

may

be requested or mandated by governmental authorities. While it is

not

possible at this time to estimate the full impact that COVID-

could have on our business, the continued spread of COVID-

could disrupt our clinical trials, supply chain and the manufacture or shipment of our cyclodextrin products, and other related activities, which could have a material adverse effect on our business, financial condition and results of operations. While we have

not

yet experienced any disruptions in our business or other negative consequences relating to COVID-

19,

the extent to which the COVID-

pandemic impacts our results will depend on future developments that are highly uncertain and cannot be predicted.