U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934: For the Quarterly Period Ended June 30, 1996
Commission File Number 1-13012
H.E.R.C. PRODUCTS INCORPORATED
State of Incorporation: Delaware IRS Employer Identification Number: 86-0570800
3622 North 34th Avenue
Phoenix, Arizona 85017
(602) 233-2212
Indicate by check mark whether the registrant (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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
--------------
Class August 7, 1996
----- --------------
Common stock, $.01 par value 6,253,277
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
Index To Consolidated Financial Statements
PART I. FINANCIAL INFORMATION Page No.
Consolidated Financial Statements:
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations
Six Months Ended June 30, 1996 and 1995 4
Consolidated Statement of Stockholders' Equity
Six Months Ended June 30, 1996 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION 13
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 1,405,920 $ 331,601
Trade accounts receivable, net of an allowance for
doubtful accounts of $7,637 and $0, respectively 385,284 251,201
Inventories 743,297 577,836
Other receivables 14,613 22,422
Prepaid expenses 73,183 16,351
------------ ------------
Total Current Assets 2,622,297 1,199,411
------------ ------------
Property and Equipment
Property and equipment 377,863 352,638
Less accumulated depreciation 108,754 109,863
------------ ------------
Net Property and Equipment 269,109 242,775
------------ ------------
Other Assets
Patents, net of accumulated amortization of $51,707
and $39,801 respectively 201,330 205,757
Patents pending 108,724 78,083
Certificates of deposit, pledged 75,628
Refundable deposits 17,689 5,817
Other 9,637 14,304
Goodwill, net of accumulated amortization of $57,154
and $14,255, respectively 1,614,594 1,649,377
------------ ------------
Total Other Assets 1,951,974 2,028,966
------------ ------------
$ 4,843,380 $ 3,471,152
============ ============
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable, including current portion of long-term debt $ 282,099 $ 245,131
Accounts payable 89,496 203,739
Accrued wages 16,797 18,198
Other accrued expenses 14,442 44,630
------------ ------------
Total Current Liabilities 402,834 511,698
------------ ------------
Long-Term Liabilities
Long-term debt, net of current portion 515,679 537,599
Deferred rent 5,126 5,126
------------ ------------
Total Long-Term Liabilities 520,805 542,725
------------ ------------
Total Liabilities 923,639 1,054,423
------------ ------------
Stockholders Equity
Preferred stock, $0.01 par value;
authorized 1,000,000 shares, none issued -- --
Common stock, $0.01 par value; authorized 10,000,000 shares;
issued and outstanding 6,162,968 and 2,928,441 respectively 61,630 29,284
Additional paid-in capital 10,086,943 7,812,619
Accumulated deficit (6,228,832) (5,425,174)
------------ ------------
Total Stockholders' Equity 3,919,741 2,416,729
------------ ------------
$ 4,843,380 $ 3,471,152
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 509,085 $ 279,288 $ 971,114 $ 494,350
Cost of Sales 248,449 286,533 547,126 542,933
----------- ----------- ----------- -----------
Gross Profit (Loss) 260,636 (7,245) 423,988 (48,583)
----------- ----------- ----------- -----------
Selling, General and Administrative Expenses 652,043 654,457 1,254,197 1,102,481
----------- ----------- ----------- -----------
Operating loss (391,407) (661,702) (830,209) (1,151,064)
----------- ----------- ----------- -----------
Other Income (Expenses)
Other income (expense) 18,949 72,228 40,726 91,539
Interest expense (6,678) (5,924) (14,175) (6,914)
----------- ----------- ----------- -----------
Total other income (expenses) 12,271 66,304 26,551 84,625
----------- ----------- ----------- -----------
Loss before (benefit) taxes on income (379,136) (595,398) (803,658) (1,066,439)
(Benefit) Taxes on Income -- -- -- --
----------- ----------- ----------- -----------
Net Loss (379,136) $ (595,398) $ (803,658) $(1,066,439)
=========== =========== =========== ===========
Loss Per Share $ (0.23) $ (0.06) $ (0.18) $ (0.44)
=========== =========== =========== ===========
Weighted Average Common Shares
and Share Equivalents Outstanding 6,107,130 2,618,035 4,517,786 2,435,034
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
HERC PRODUCTS INCORPORATED AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance,
January 1, 1996 2,928,441 $ 29,284 $ 7,812,619 $(5,425,174) $ 2,416,729
Net Loss (803,658) (803,658)
Issuance of shares
of common stock 3,234,527 32,346 2,274,324 -- 2,306,670
--------- ----------- ----------- ----------- -----------
Balance,
June 30, 1996 6,162,968 $ 61,630 $10,086,943 $(6,228,832) $ 3,919,741
========= =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (803,658) $(1,066,439)
----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 84,268 39,552
Cost of equipment sold in the ordinary course of business -- 160,971
Loss on sale of equipment
1,522 --
(Increase) decrease in assets
Trade accounts receivable (136,137) 147,700
Inventories (165,461) (47,925)
Other receivables (55,016) (59,220)
Prepaid expenses 238 8,042
Other assets 66,496 (53,481)
Increase (decrease) in liabilities
Accounts payable (114,243) 62,678
Accrued wages (1,401) (30,232)
Other accrued expenses (30,189) (36,273)
----------- -----------
Total adjustments (349,923) 191,812
----------- -----------
Net cash used in operating activities (1,153,581) (874,627)
----------- -----------
Cash Flows From Investing Activities
Capital expenditures (76,701) (75,183)
Cash received from the sale of equipment 21,000 --
Expenditures related to patents and product labels (38,117) (35,613)
Cash paid in acquisition of subsidiary, net of cash acquired -- (48,063)
----------- -----------
Net cash used in investing activities (93,818) (158,859)
----------- -----------
Cash Flows From Financing Activities
Proceeds from issuance of common stock 1,981,670 200,000
Proceeds from issuance of notes payable
and long term debt 361,968 --
Principal payments under long-term debt obligations (21,920) (15,914)
Principal payments to Good-Miles Partnership -- (94,532)
----------- -----------
Net cash provided by financing activities 2,321,718 89,554
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 1,074,319 (943,932)
Cash and Cash Equivalents, at beginning of period 331,601 2,016,241
----------- -----------
Cash and Cash Equivalents, at end of period $ 1,405,920 $ 1,072,309
=========== ===========
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest $8,676 $7,370
====== ======
During 1996 notes payable to shareholder of $325,000 were repaid
through the issuance of common stock
During 1996, pledged certificates of deposit of $75,628 were applied in partial
satisfaction of certain long term debt obligations
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Basis of Presentation
The unaudited consolidated financial statements are presented in accordance with
the requirements of Form 10-QSB and consequently do not include all of the
disclosures normally made in an annual Form 10-KSB filing. Accordingly, these
consolidated financial statements included herein should be reviewed in
conjunction with the consolidated financial statements and the footnotes therein
included within the Company's Form 10-KSB for the year ended December 31, 1995.
The consolidated financial statements have been prepared in accordance with the
Company's customary accounting practices and have not been audited. In the
opinion of management, the consolidated financial statements reflect all
adjustments necessary to report fairly the Company's financial position and
results of operations for the interim period. All such adjustments are normal
and recurring in nature. The interim consolidated results of operations are not
necessarily indicative of results to be expected for the year ending December
31, 1996.
NOTE 2 - Inventories
Inventories are summarized as follows:
June 30, 1996 December 31, 1995
------------- -----------------
Raw Materials $ 42,186 $ 40,064
Work in Progress 65,880 46,889
Finished Goods 635,231 490,883
-------- --------
Total $743,297 $577,836
======== ========
NOTE 3 - Agreement of Merger
On May 1, 1995, the Company acquired all of the outstanding capital stock of CCT
Corporation ("CCT") in a merger transaction by which CCT has become a
wholly-owned subsidiary of the Company. CCT, based in Carlsbad, California,
manufactures and distributes environmentally friendly proprietary agriculture
products. Shelby A. Carl, Chairman Emeritus of the Board of the Company, was
(through the Shelby A. Carl trust) the majority stockholder of CCT, and his son,
S. Steven Carl, was the minority stockholder. The merger transaction has been
accounted for as a purchase with the results of operations of CCT included in
the Company's consolidated financial statements from the date of the
acquisition. As a result of this transaction, goodwill of $1,706,531 was
recorded. The selling shareholders are eligible to receive additional
compensation under certain circumstances.
NOTE 4 - Investment in Joint Venture
In November 1993 and January 1994, the Company entered into an operating
agreement and supply/service agreement with Conair Corporation ("Conair") to
form a limited liability company (the "LLC"), H.E.R.C. Consumer Products
Company, under the Illinois Limited Liability Company Act effective January 1,
1994. The Company and Conair are the members of the LLC. The LLC is licensed by
the Company to utilize certain of its trade names and trademarks in the
production and marketing of the consumer products business of the Company.
Conair is solely responsible for funding the operations of the LLC. The Company
sold all of its consumer products inventory on hand at its cost at the effective
date of the agreement to Conair. The Company accounts for its investment in the
LLC by use of the equity method of accounting. Accordingly, sales of the LLC are
not reported as sales of the Company.
7
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - Investment in Joint Venture (continued)
A summary of the results of the operations of the LLC for the quarters and six
months ended June 30, 1996, and 1995 are as follows: (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 361,000 $ 306,000 $ 761,000 $ 710,000
Cost of Sales 202,000 180,000 436,000 409,000
Gross Profit 159,000 126,000 325,000 301,000
Selling Expenses 30,000 71,000 143,000 167,000
General & Administrative Expenses 53,000 92,000 164,000 92,000
--------- --------- --------- ---------
Net Income (Loss) $ 76,000 $ (37,000) $ 90,000 $ (30,000)
========= ========= ========= =========
</TABLE>
On July 1, 1996, H.E.R.C. Consumer Products, Inc., an Arizona corporation
("HCP"), and a wholly-owned subsidiary of H.E.R.C. Products Incorporated
("Company"), acquired all of the right, title and ownership interest in the LLC
owned by Conair. The LLC, prior to July 1, 1996, was owned jointly by the
Company and Conair to conduct the production and marketing of the Company's
consumer products.
Under the terms of the agreement, for the acquisition of Conair's interest in
the LLC, HCP paid Conair $276,000 on July 1, 1996 and all the parties agreed to
terminate their respective obligations under certain existing agreements,
including, but not limited to, the partnership agreement, operating agreement
and supply agreement related to the LLC which resulted in, among other things,
the settlement of the Company's obligation to pay Conair approximately $230,000
and the LLC's obligation to pay the Company approximately $165,000. The
agreement further provides for payment of certain other amounts as follows: (I)
within 14 days after receipt by HCP of the financial statements of the LLC for
the period June 1, 1996 through June 30, 1996, HCP will pay additional purchase
consideration to Conair in an amount equal to 50% of the net profit of the LLC
for such period plus 5% of the net sales of the LLC for such period, and (ii)
the LLC will pay Conair for certain inventory products manufactured by Conair
for the LLC before June 28, 1996 ("Conair Inventory"), plus shipping and
handling expenses, such payments to be in six equal monthly installments
commencing July 31, 1996. The LLC has pledged as security for the payments due
under the agreement all of the Conair Inventory being purchased and all the
other assets of the LLC. The Company has agreed to guarantee the amounts payable
by the LLC for the Conair Inventory. .
NOTE 5 - Non Cash Investing Activities
For purposes of the Statements of Cash Flows, for the six months ended June 30,
1995, equipment with a cost of $292,324 was reclassified as inventory held for
sale. Of that total, $160,971 was sold during the six months ended June 30,
1995.
NOTE 6 - Private Placement of Units
In April 1996, the Company completed the private placement of 3,214,902 units.
Each unit consisted of one common share and one warrant. The Company received
proceeds of approximately $2,306,670, net of $425,998 in expenses directly
related to the offering. Each warrant entitles the holder to purchase, within
three years from the closing date, one share of common stock at a price of $2.00
per share, subject to adjustment. The shares sold and the shares underlying the
warrants sold in this private placement have registration rights and are subject
to a one-year lock up provision. The placement agent in this offering received a
unit purchase option entitling it to purchase 321,490 units, within five years
from the closing date, at a price of $.935 per unit.
8
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - Private Placement of Units (continued)
During 1996, the Company's Chief Executive Officer and Chairman Emeritus
advanced an aggregate of $325,000 to the Company. Concurrent with the
aforementioned private placement, the Company satisfied its repayment obligation
through the issuance of 382,353 units. The units issued to these individuals are
included in the amounts noted above.
Fees, costs and expenses incurred prior to the private offering are capitalized
and will be charged against the proceeds therefrom.
NOTE 7- Pro Forma Adjustments
The pro forma condensed consolidated balance sheet as of June 30, 1996 and the
condensed consolidated income statement data for the six months ended June 30,
1996 and 1995 give effect to the acquisitions described in notes 3 and 4 of this
report.
The pro forma information is based on the historical financial statements of the
Company, CCT and the LLC, giving effect to the transactions under the purchase
method of accounting.
The pro forma condensed consolidated income statement data for the six months
ended June 30, 1996 and 1995 give effect to these transactions as if they
occurred at the beginning of the calendar year presented. The historical
statement of operations of the Company will reflect the effect of these
transactions from the dates of acquisitions onward. The pro forma condensed
consolidated balance sheet as of June 30, 1996 gives effect to the acquisition
of the LLC as if the acquisition had occurred on that date.
The pro forma condensed consolidated financial statements have been prepared by
the Company's management based upon the historical financial statements of the
Company, CCT and the LLC. These pro forma condensed consolidated financial
statements may not be indicative of what would have occurred if the combination
had been in effect on the date indicated.
The following table illustrates the pro forma effects on sales, net loss, and
net loss per share for the six months ended June 30, 1996 and 1995:
Six Months Ended
June 30
1996 1995
---- ----
Sales $ 1,732,360 $ 2,416,019
=========== ===========
Net Loss $ (715,120) $ (818,108)
----------- -----------
Net Loss per share ($0.16) ($0.30)
====== ======
9
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 - Pro Forma Adjustments (continued)
The pro forma balance sheet gives effect to the transactions as if they occurred
on the balance sheet date:
Cash and cash equivalents $1,420,334
Accounts receivable 383,963
Inventory 1,019,470
Other current assets 91,651
----------
Total Current Assets 2,915,418
Property & Equipment, net 269,109
Other assets 2,026,656
----------
$5,211,183
==========
Liabilities and Stockholders Equity
Current liabilities $ 770,637
Long term liabilities 520,805
----------
Total Liabilities 1,291,442
Stockholders Equity 3,919,741
----------
$5,211,183
==========
10
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
-----------------------------------------------------------------------------
Sales during the second quarter of 1996 totaled $509,085, reflecting an increase
of $229,797 or 82% from second quarter sales in 1995 of $279,288. The net loss
for the three months ended June 30, 1996 was $379,136 compared to a net loss of
$595,398 for the same period in 1995. The $216,262 or 36% improvement in the net
loss is due mainly to sales of agricultural chemicals by CCT Corporation.
The gross profit margin as a percentage of sales increased to 51% for the second
quarter of 1996 compared to a negative gross margin of 3% for the second quarter
of 1995. The increase is due to the sale of agricultural chemicals. The negative
gross margin for the three months ended June 30, 1995 can be attributed to the
Company's marketing efforts for its PIPE KLEAN product. Fixed operating costs of
maintaining the physical production plant, such as rent, utilities, repairs and
maintenance, insurance and indirect labor have increased, while the sales volume
of industrial products was not sufficient to absorb them. Management expects,
but can give no assurance that the gross margin will continue to fluctuate based
on the seasonality of it's agricultural product sales, nonetheless, management
believes margins will continue to increase in the foreseeable future.
The Company incurred $652,043 of selling, general and administrative expenses in
the second quarter of 1996 compared to $654,457 in the second quarter of 1995,
representing an decrease of $2,414 or less than 1%.. The Company believes it
will be necessary to further expand the selling infrastructure in order to
successfully focus on marketing its various products. The Company anticipates
that it will have increased administrative expenses in connection with the
addition of consumer products to its industrial and agricultural products. These
expenses will be incurred in the marketing of the Company's products, through
attendance at trade shows and industry conferences, advertising, on site
demonstrations of the Company's technology and the use of consultants outside
the Company.
The Company's other income (expense) decreased from $72,228 for the quarter
ended June 30, 1995 to $18,949 for the quarter ended June 30, 1996. This
decrease in other income (expense) was largely attributable to a decrease in
interest income as well as an increase in certain taxes paid by the Company.
The Company incurred interest expense of $6,678 and $5,924 for the quarters
ending June 30, 1996 and 1995 respectively.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
-------------------------------------------------------------------------
Sales during the six months ended June 30, 1996 totaled $971,114 compared with
$494,350 for the six months ended June 30, 1995. The $476,764 or 96% increase is
due to sales of CCT Corporation which contributed $901,191 in revenue for the
six months ended June 30, 1996.
The gross profit margin as a percentage of sales was 44% for the six months
ended June 30, 1996. Cost of sales for the six months ended June 30, 1995
exceeded sales by $48,583, resulting in a negative gross margin which can be
attributed to the Company's marketing efforts for its PIPE KLEAN product. The
Company sold two MRUs at or below cost in order to solidify its agreements with
contractors to distribute and sell the Company's PIPE KLEAN technology. An MRU
is a mobile unit with pumping machinery used to deliver the chemical products of
the Company into the water system being treated.
The Company incurred $1,254,197 of selling, general and administrative expenses
in the six months ended June 30, 1996 compared to $1,102,481 in the six months
ended June 30, 1995. The $151,716 or 14% increase is partially due to the
addition of sales personnel needed to implement the Company's sales and
marketing plan for its products.
11
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30,
- --------------------------------------------------------------------
1995 (Continued)
- ----------------
The Company incurred interest expense of $14,175 and $6,914, respectively for
the six months ended June 30, 1996 and 1995.
Liquidity and Capital Resources
- -------------------------------
The Company's net cash used in operating activities for the six months ended
June 30, 1996 was $1,153,581 compared to net cash used in operating activities
for the six months ended June 30, 1995 of $874,627. The increase in net cash
used in operating activities is due primarily to increases in accounts
receivable related to agricultural chemical sales and increased inventory of raw
material for agricultural products. At June 30, 1996, the Company had cash and
cash equivalents of $1,405,920 and working capital of $2,219,463 compared with
cash and cash equivalents of $1,072,309 and working capital of $1,172,143 at
June 30, 1995.
On April 3, 1996, the Company sold 3,214,902 units in a private placement,
raising gross proceeds of $2,732,668 and net proceeds of approximately
$2,306,670. Each unit consisted of one share of the Common Stock of the Company
par value $.01 per share ("Common Stock"), and one Common Stock Purchase Warrant
("Warrant"). Each Warrant entitles the holder thereof to purchase one share of
Common Stock for $2.00 until April 3, 1999. The Company may call the Warrants
for redemption at a price of $.01 per Warrant, on not less than 30 days prior
written notice, if the last sales price of the Common Stock has been at least
$5.00 per share on all 20 of the trading days ending on the third day prior to
the date on which notice of redemption is given, if the Company has an effective
registration statement under the Securities Act of 1933 covering the resale of
the shares issuable upon exercise of the Warrants. The Company has registered
the Common Stock issued in the offering and underlying the Warrants for resale
by the holders.
The Company has used and plans to continue to use the proceeds from the Private
Placement and cash flow in the marketing of its consumer products and water
system treatment products, developing, licensing and purchasing of the rights of
new biorational agricultural products and for working capital for general
corporate purposes. The Company's capital requirements have been and will
continue to be significant. The Company is not currently generating sufficient
cash flow to fund its operations, and there can be no assurance that the Company
will be able to generate cash flows in the future which will be sufficient to
fund its operations. Assuming no change in the level of the business of the
Company, it is anticipated that the proceeds from the private placement
consummated April 3, 1996, together with existing cash resources, will be
sufficient to meet its anticipated working capital requirements for
approximately 12 months. If additional financing is needed, the Company will be
required to borrow, sell additional securities or seek other new sources of
financing or may be required to curtail or reduce its activities. The Company
has no current arrangements with any sources with respect to additional
financing. There can be no assurance that any sources of additional financing
will be available to the Company on acceptable terms, or at all. To the extent
that any future financing involves the sale of the Company's equity securities,
the interest of the Company's then-stockholders could be substantially diluted.
12
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED AND SUBSIDIARY
PART II: OTHER INFORMATION
Reports on Form 8-K
On June 16, 1996 the company filed a report on Form 8-K to report the
acquisition of assets which was consummated July 1, 1996..
Exhibits
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Quarterly Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
H.E.R.C. PRODUCTS INCORPORATED
(Registrant)
Date: August 13, 1996 By /s/ S. Steven Carl
--------------------------
S. Steven Carl
Chief Executive Officer
By /s/ Gary S. Glatter
---------------------------
Gary S. Glatter
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,405,920
<SECURITIES> 0
<RECEIVABLES> 385,284
<ALLOWANCES> 7,637
<INVENTORY> 743,297
<CURRENT-ASSETS> 2,622,297
<PP&E> 377,863
<DEPRECIATION> 108,754
<TOTAL-ASSETS> 4,843,380
<CURRENT-LIABILITIES> 402,834
<BONDS> 0
0
0
<COMMON> 61,630
<OTHER-SE> 3,858,111
<TOTAL-LIABILITY-AND-EQUITY> 4,843,380
<SALES> 971,114
<TOTAL-REVENUES> 971,114
<CGS> 547,126
<TOTAL-COSTS> 1,254,197
<OTHER-EXPENSES> (40,726)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,175
<INCOME-PRETAX> (803,658)
<INCOME-TAX> 0
<INCOME-CONTINUING> (803,658)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (803,658)
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
