SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended March 31, 1997
Commission File Number 0-10683
HYDROMER, INC.
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(Exact name of registrant as specified in its charter)
New Jersey 22-2303576
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(State of incorporation) (IRS Employer
Identification No.)
35 Columbia Road, Branchburg, New Jersey 08876-3518
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 526-2828
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Without Par Value
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(Title of class)
Check whether the issuer (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 report(s,) and (2) has been subject to such filing requirements for the
past 90 days. Yes (X) No( )
Indicate the number of shares outstanding or each of the issuer's classes of
Common Stock as of the close of the period covered by this report.
Class Outstanding at March 31, 1997
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Common Stock 4,378,904
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HYDROMER, INC.
INDEX TO FORM 10-QSB
March 31, 1997
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I - Financial Information
Condensed Financial Statements
Balance Sheets - March 31, 1997 & June 30, 1996.......................................... 2
Statements of Operations for the three & nine month period March 31, 1997 and 1996....... 3
Statements of Cash Flows for the nine months ended March 31, 1997 and 1996............... 4
Notes to Financial Statements............................................................ 5
Management's Discussion and Analysis of the Financial Condition and
Results of Operation...................................................................6-7
Part II - Other Information........................................................................ 8
</TABLE>
1
<PAGE>
<TABLE>
HYDROMER, INC.
BALANCE SHEETS
<CAPTION>
March 31, June 30,
(UNAUDITED) (AUDITED)
1997 1996
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................................ $ 386,586 $ 167,900
Trade receivables less allowance for doubtful accounts of $8,831 and
$8,831, respectively............................................................... 223,957 316,271
Marketable investment securities..................................................... - -
Inventory............................................................................ 157,670 171,360
Prepaid expenses..................................................................... 77,002 45,262
Deferred tax asset................................................................... 61,248 61,248
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Total Current Assets................................................................... 906,463 762,041
Property and Equipment, net............................................................ 213,129 222,514
Deferred Tax Asset..................................................................... 61,247 61,247
Other Assets........................................................................... 9,838 9,875
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$1,190,677 $1,055,677
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................................................... $ 31,091 $ 22,356
Accrued expenses..................................................................... 39,755 70,261
Income tax payable................................................................... 59 59
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Total Current Liabilities 70,905 92,676
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Stockholders' Equity
Common stock - no par value, authorized 6,000,000 shares, issued
and outstanding, 4,378,904 shares.................................................. 2,922,708 2,922,708
Contributed capital.................................................................. 577,750 577,750
Accumulated deficit.................................................................. (2,373,545) (2,531,317)
Unrealized gain on marketable investment securities.................................. - -
Treasury stock, 10,917 common shares at cost......................................... (6,140) (6,140)
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Total Stockholders' Equity 1,120,772 963,001
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$1,190,677 $1,055,677
=============================================================================================================================
</TABLE>
2
<PAGE>
<TABLE>
HYDROMER, INC.
STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
UNAUDITED UNAUDITED UNAUDITED UNAUDITED
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<S> <C> <C> <C> <C>
REVENUES:
Product sales and services............................. $ 194,523 $ 148,545 $ 535,399 $ 421,981
Royalties, options and licenses Fees................ 219,338 270,480 744,081 645,096
Research Contracts.................................. - 15,000 - 45,000
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413,861 434,025 1,279,479 1,112,077
Cost of Product Sales.................................. 58,517 52,976 177,627 155,985
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Gross profit..................................... 355,344 381,049 1,101,853 956,092
Selling, General and Administrative.................... 221,322 243,114 671,622 625,060
Research and Development............................... 83,750 129,226 279,702 371,444
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Operating Income (Loss).......................... 50,272 8,709 150,528 (40,412)
Interest Income........................................ 2,949 3,792 7,403 10,394
Interest Expense....................................... - - - -
Gain on Sale of Securities............................. - - - -
Other Income (Expense)................................. (46) 560 (35) 85,860
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Income before provision for income taxes......... 53,175 13,061 157,897 55,842
Provision for Income Taxes Expense (Benefit)........... - - 125 857
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Net Income....................................... $ 53,175 $ 13,061 $ 157,772 $ 54,984
==============================================================================================================================
Income Per Common Share.......................... $ 0.012 $ 0.003 $ 0.036 $ 0.013
==============================================================================================================================
Dividends per share.............................. $ 0.000 $ 0.000 $ 0.000 $ 0.000
==============================================================================================================================
Weighted Average Common Shares Outstanding............. 4,367,987 4,367,987 4,367,987 4,367,987
==============================================================================================================================
</TABLE>
3
<PAGE>
<TABLE>
HYDROMER, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended
March 31,
1997 1996
UNAUDITED UNAUDITED
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)...................................................................... $ 157,772 $ 54,984
Adjustments to reconcile net income (loss) to net cash (used in) operating activities
Depreciation and amortization......................................................... 29,304 24,530
Gain on sale of securities............................................................ - -
Changes in Assets and Liabilities
Trade receivables.................................................................... 92,314 (32,874)
Inventory............................................................................ 13,690 (61,045)
Prepaid expenses..................................................................... (31,739) (35,951)
Deferred tax asset................................................................... - -
Other assets......................................................................... 37 (3,378)
Accounts payable and accrued liabilities............................................. (22,774) (17,968)
Income taxes payable................................................................. - (38,504)
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Net Cash (Used in) Operating Activities 238,604 (110,206)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Cash purchases of property and equipment............................................... (19,918) (61,095)
Cash proceeds received from sale of marketable investment securities (1,925,000) (190,000)
Cash purchases of marketable investment securities..................................... 1,925,000 457,679
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Net Cash Provided by (Used in) Investing Activities................................ (19,918) 206,584
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Net Increase (Decrease) in Cash and Cash Equivalents.................................... 218,686 96,378
Cash and Cash Equivalents at Beginning of Year.......................................... 167,900 41,030
- -----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Quarter............................................. $ 386,586 $ 137,408
=======================================================================================================================
</TABLE>
4
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HYDROMER, INC.
Notes to Financial Statements
In the opinion of management, the accompanying unaudited financial statements
include all adjustments (consisting of only normal adjustments) necessary for a
fair presentation of the results for the interim periods. No provision has been
made for federal income taxes because of the availability of loss carryforwards
from prior fiscal years.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company's revenues of $413,861 for its third fiscal quarter ended March
31, 1997, were $20,164, or 5% less than the $434,025 of revenues recorded in the
same quarter of the previous fiscal year. The decrease for the quarter is due to
a combination of lower revenues from royalties and license fees and higher
revenues from product sales. The Company's sales of patented coating solutions
and related services increased from $148,545 in the third quarter of fiscal 1996
to $194,523 in the third quarter of fiscal year 1997. For the nine month period
ended March 31,1997, the company's total revenues of $1,279,479 were $167,402 or
15% greater than the $1,112,077 of revenues recorded in the same period of the
previous fiscal year. The increase for the nine month period is due primarily to
higher revenues recorded from royalties and product sales. The Company's sales
of patented coating solutions and related sales and services in the nine month
period ending December 31 increased from $421,981 in fiscal year 1996 to
$535,399 in fiscal year 1997.
The net income of $53,175, or $0.012 per share for the current quarter was
$40,114 greater than the net profit of $13,061, or $0.003 per share, reported
for the same quarter of the prior fiscal year. This increase in net income for
the quarter was due to higher revenues on product sales and services and a
decrease in expenses for both Selling, General and Administration and Research
and Development. The company also recorded net income for the nine month period
ending March 31, 1997 of $157,772 or $0.036 per share as compared with net
income of $54,984 or $0.013 per share recorded during the same period of the
previous fiscal year. The increase in net income for the current nine month
period was due to higher revenues from royalties, product sales and services and
a decrease in expenses for both Selling, General and Administration and Research
and Development.
Cost of sales of $58,517, represented 30% of the sales of patented coating
solutions and related services for the third quarter, were $5,541 greater than
the $52,976, which represented 36% of the sales of patented coating solutions
recorded in the same quarter in the prior fiscal year. Overall dollar increases
relate to the increase level of sales of patented coating solutions and related
services, while the percentage of cost of sales to sales of coating solutions
and related services decreased due to a change in product mix. For the nine
month period ended March 31, 1997, cost of sales was $177,627, or 33% of sales
of patented coating solutions and related services as compared to $155,985, or
37% of the sales of patented coating solutions and related services for the
prior fiscal period. Overall dollar increases relate to the increased level of
sales of patented coating solutions and related services. While the percentage
decrease in the cost of sales is due to a change in the product mix.
Operating expenses during the quarter of $305,072, or 74% of revenues, were
$67,628 less than the $372,340, or 86% of revenues recorded in the prior fiscal
year. For the nine month period ended March 31, 1997 operating expenses were
$951,324 as compared to $996,504 for the same period of the previous fiscal
year. The decrease in expenses are primarily associated with an decrease in
Research and Development expenses, which is the result of Hydromer eliminating a
position within the department.
6
<PAGE>
Financial Condition
Working capital increased by $166,193 to $835,558 at March 31, 1997 from
$669,365 at June 30, 1996, as result of the profit the Company reported for the
period. Cash and cash equivalents increased during the period from $167,900 to
$386,586. The Company believes that future revenues will provide a sufficient
cash flow to maintain operations at current levels.
7
<PAGE>
PART II - Other Information
Item 6. Exhibits and Reports on form 8-K:
a) Exhibits - none
b) Reports on Form 8-K - There were no reports on Form 8-K filed for the quarter
ending March 31, 1997
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on his behalf by the
undersigned thereunto duly authorized.
HYDROMER, INC.
/s/ MARK KLYPKA
------------------------
Mark Klypka
Vice President
Finance & Administration
Chief Financial Officer
DATE: April 30, 1997
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 386,586
<SECURITIES> 0
<RECEIVABLES> 223,957
<ALLOWANCES> 0
<INVENTORY> 157,670
<CURRENT-ASSETS> 906,463
<PP&E> 702,639
<DEPRECIATION> (489,510)
<TOTAL-ASSETS> 1,196,677
<CURRENT-LIABILITIES> 70,905
<BONDS> 0
0
0
<COMMON> 2,922,708
<OTHER-SE> (1,801,935)
<TOTAL-LIABILITY-AND-EQUITY> 1,120,772
<SALES> 194,523
<TOTAL-REVENUES> 413,861
<CGS> 58,517
<TOTAL-COSTS> 221,322
<OTHER-EXPENSES> 83,750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 53,175
<INCOME-TAX> 0
<INCOME-CONTINUING> 53,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,175
<EPS-PRIMARY> 0.012
<EPS-DILUTED> 0
</TABLE>
