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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
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FORM 10-QSB
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended December 31, 1996
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
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 DECEMBER 31, 1996
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Common Stock 4,378,904
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HYDROMER, INC.
INDEX TO FORM 10-QSB
December 31, 1996
Page No.
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Part I -- Financial Information
Condensed Financial Statements
Balance Sheets -- December 31, 1996 & June 30, 1996........... 2
Statements of Operations for the three & six month period
December 31, 1996 and 1995.................................. 3
Statements of Cash Flows for the three months ended
December 31, 1996 and 1995.................................. 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
1
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HYDROMER, INC.
BALANCE SHEETS
December 31, June 30,
(UNAUDITED) (AUDITED)
1996 1996
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ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 298,335 $ 167,900
Trade receivables less allowance for doubtful
accounts of $8,831 and $8,831, respectively...... 279,368 316,271
Marketable investment securities................... -- --
Inventory.......................................... 158,587 171,360
Prepaid expenses................................... 48,938 45,262
Deferred tax asset................................. 61,248 61,248
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Total Current Assets................................. 846,476 762,041
Property and Equipment, net.......................... 215,268 222,514
Deferred Tax Asset................................... 61,247 61,247
Other Assets......................................... 10,129 9,875
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$1,133,120 $1,055,677
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable .................................. $ 20,319 $ 22,356
Accrued expenses .................................. 45,144 70,261
Income tax payable ................................ 59 59
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Total Current Liabilities ........................... 65,522 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 ............................... (2,426,720) (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 .......................... 1,067,598 963,001
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$1,133,120 $1,055,677
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2
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<TABLE>
HYDROMER, INC.
STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------------- ---------------------------
1996 1995 1996 1995
UNAUDITED UNAUDITED UNAUDITED UNAUDITED
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Product sales and services ........................ $ 142,023 $ 167,798 $ 340,876 $ 273,436
Royalties, options and licenses Fees .............. 265,000 170,740 524,743 374,616
Research Contracts ................................ -- -- -- 30,000
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407,023 338,538 865,619 678,052
Cost of Product sales ............................... 47,908 59,066 119,110 103,009
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Gross profit .................................... 359,115 279,472 746,509 575,043
Selling, General and Administrative ................. 258,276 217,918 450,300 381,946
Research and Development ............................ 89,620 124,714 195,952 242,218
---------- ---------- ---------- ----------
Operating Income (Loss) ......................... 11,219 (63,160) 100,257 (49,121)
Interest Income ..................................... 2,556 3,117 4,454 6,602
Interest Expense .................................... -- -- -- --
Gain on Sale of Securities .......................... -- -- -- --
Other Income ........................................ 11 -- 11 85,300
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Income before provision for income taxes ........ 13,786 (60,043) 104,722 42,781
Provision for Income Taxes Expense (Benefit). ....... -- -- 125 --
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Net Income ...................................... $ 13,786 $ (60,043) $ 104,597 $ 42,781
========== ========== ========== ==========
Income Per Common Share ......................... $ 0.003 $ (0.010) $ 0.020 $ 0.010
========== ========== ========== ==========
Dividends per share ............................. $ 0.000 $ 0.000 $ 0.000 $ 0.00
========== ========== ========== ==========
Weighted Average Common Shares Outstanding .......... 4,367,987 4,367,987 4,367,987 4,367,987
========== ========== ========== ==========
</TABLE>
3
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<TABLE>
HYDROMER, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
December 31,
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1996 1995
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UNAUDITED UNAUDITED
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ...................................................... $ 104,597 $ 42,781
Adjustments to reconcile net income (loss) to net cash (used in)
operating activities
Depreciation and amortization ........................................ 19,280 15,473
Gain on sale of securities ........................................... -- --
Changes in Assets and Liabilities
Trade receivables .................................................. 36,903 30,566
Inventory .......................................................... 12,773 (12,500)
Prepaid expenses ................................................... (3,676) (14,189)
Deferred tax asset ................................................. -- --
Other assets ....................................................... (254) (3,963)
Accounts payable and accrued liabilities ........................... (27,154) 3,754
Income taxes payables .............................................. -- --
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Net Cash (Used in) Operating Activities ........................ 142,469 61,922
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CASH FLOWS FROM INVESTING ACTIVITIES:
Cash purchases of property and equipment ............................... (12,034) (48,621)
Cash proceeds received from sale of marketable investment securities ... (1,000,000) (100,000)
Cash purchases of marketable investment securities ..................... 1,000,000 253,989
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Net Cash Provided by (Used in) Investing Activities ............ (12,034) 105,368
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Net Increase (Decrease) in Cash and Cash Equivalents ..................... 130,435 167,290
Cash and Cash Equivalents at Beginning of Year ........................... 167,900 41,030
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Cash and Cash Equivalents at End of Quarter .............................. $ 298,335 $ 208,320
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</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
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's revenues of $407,023 for its second fiscal quarter ended December
31, 1996, were $68,485, or 20% greater than the $338,538 of revenues recorded in
the same quarter of the previous fiscal year. The increase for the quarter is
due to higher revenues from royalties and license fees. The Company's sales of
patented coating solutions and related services decreased from $167,798 in the
second quarter of fiscal 1996 to $142,023 in the second quarter of fiscal year
1997. For the six month period ended December 31, 1996, the company's total
revenues of $865,619 were $187,567 or 28% greater than the $678,052 of revenues
recorded in the same period of the previous fiscal year. The increase for the
six 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 six month period ending December 31, increased from
$273,436 in fiscal year 1996 to $340,876 in fiscal year 1997.
The net income of $13,786, or $0.003 per share for the current quarter was
$73,829 greater than the net loss of $(60,043), or $(0.01) 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 royalties and licenses fees. The
company also recorded net income for the six month period ending December 31,
1996 of $104,597 or $0.02 per share as compared with net income of $42,781 or
$0.01 per share recorded during the same period of the previous fiscal year. The
increase in net income for the current six month period was due to higher
revenues from royalties and product sales and services.
Cost of sales of $47,908, represented 34% of the sales of patented coating
solutions and related services for the second quarter, were $11,158 less than
the $59,066, which represented 35% of the sales of patented coating solutions
recorded in the same quarter in the prior fiscal year. Overall dollar decreases
relate to the decrease 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 remained stable. For the six month period ended December
31, 1996, cost of sales was $119,110, or 35% of sales of patented coating
solutions and related services as compared to $103,009, or 38% 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 $347,896, or 85% of revenues, were
$5,264 greater than the $342,632, or 101% of revenues recorded in the prior
fiscal year. For the six month period ended December 31, 1996 operating expenses
were $646,252 as compared to $624,124 for the same period of the previous fiscal
year. The increase in expenses are primarily associated with an increase in
Selling, General and Administrative expenses, which is the result of Hydromer
hiring another Director of Sales and Marketing.
6
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FINANCIAL CONDITION
Working capital increased by $111,589 to $780,954 at December 31, 1996 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
$298,335. The Company believes that future revenues will provide a sufficient
cash flow to maintain operations at current levels.
7
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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 December 31, 1996
8
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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
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Mark Klypka
Vice President
Finance & Administration
Chief Financial Officer
DATE: January 14, 1997
9
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 298,335
<SECURITIES> 0
<RECEIVABLES> 279,368
<ALLOWANCES> 0
<INVENTORY> 158,587
<CURRENT-ASSETS> 846,476
<PP&E> 694,755
<DEPRECIATION> (479,487)
<TOTAL-ASSETS> 1,133,120
<CURRENT-LIABILITIES> 65,522
<BONDS> 0
0
0
<COMMON> 2,922,708
<OTHER-SE> (1,855,110)
<TOTAL-LIABILITY-AND-EQUITY> 1,067,598
<SALES> 142,023
<TOTAL-REVENUES> 407,023
<CGS> 47,908
<TOTAL-COSTS> 258,276
<OTHER-EXPENSES> 89,620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,786
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,786
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,786
<EPS-PRIMARY> .003
<EPS-DILUTED> 0
</TABLE>
