<PAGE>
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
-------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to
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Commission file number: 1-13412
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HUDSON TECHNOLOGIES, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-3641530
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
25 Torne Valley Road, Hillburn, New York 10931
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(Address of principal executive offices) (Zip Code)
(914) 368-4990
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(Registrant's telephone number, including area code)
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 short period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
<PAGE>
HUDSON TECHNOLOGIES, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1
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Balance Sheets
March 31, 1996 and December 31, 1995 . . . . . . . . . . . 2
Statements of Income
Three Months Ended March 31, 1996 and 1995 . . . . . . . . 3
Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . . . 5
ITEM 2
------
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . 7
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . .10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . .11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Hudson Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
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<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,760,978 $ 2,459,609
Investments, available for sale 1,100,000 1,100,000
Accounts receivable 3,835,410 2,543,040
Inventories 4,377,324 5,344,157
Prepaid expenses and other current assets 1,269,960 942,990
------------- -------------
Total current assets 12,343,672 12,389,796
Property and equipment, less accumulated depreciation 4,992,264 4,536,266
Excess of cost over assets of business acquired, less accumulated
amortization 5,985,702 6,063,009
Patents, less accumulated amortization 856,671 861,394
Other assets 167,189 168,827
------------- -------------
Total assets $ 24,345,498 $ 24,019,292
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 1,353,691 $ 1,390,694
Current maturities of long-term debt and capital lease obligations 271,402 273,110
------------- -------------
Total current liabilities 1,625,093 1,663,804
Long-term debt and capital lease obligations, less current maturities 1,871,734 1,932,794
Deferred income taxes 100,282 85,324
------------- -------------
Total liabilities 3,597,109 3,681,922
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Commitments
Stockholders' equity:
Common stock, $.01 par value-shares authorized, 20,000,000;
issued and outstanding, 4,308,935 and 4,242,435 43,089 42,424
Additional paid-in capital 18,582,505 18,251,836
Retained earnings 2,122,795 2,043,110
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Total stockholders' equity 20,748,389 20,337,370
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Total liabilities and stockholders' equity $ 24,345,498 $ 24,019,292
============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Hudson Technologies, Inc. and Subsidiaries
Consolidated Statements of Income
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------
(Unaudited)
1996 1995
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<S> <C> <C>
Net sales $ 3,756,811 $ 6,198,966
Cost of Sales 2,036,765 4,059,243
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Gross Profit 1,720,046 2,139,723
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Operating expenses:
Selling 231,156 378,404
Administrative and general 1,154,146 842,818
Depreciation and amortization 231,729 85,161
------------ ------------
Total operating expenses 1,617,031 1,306,383
------------ ------------
Income from operations 103,015 833,340
------------ ------------
Other income (expense):
Other Income 9,591 -
Interest income 27,221 8,300
Interest expense:
Affiliates - (8,908)
Other (51,299) (18,378)
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Total other income (expense) (14,487) (18,986)
------------ ------------
Income before taxes on income 88,528 814,354
Taxes on income 8,843 342,283
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Net income $ 79,685 $ 472,071
============ ============
Net income per common and common stock equivalents $ .02 $ .19
============ ============
Weighted average number of shares outstanding 4,663,100 2,537,332
============ ============
Net income per common stock assuming full dilution $ .02 $ .12
============ ============
Weighted average number of shares outstanding 4,674,042 4,065,712
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Hudson Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------
(Unaudited)
1996 1995
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<S> <C> <C>
Cash flow from operating activities:
Net income $ 79,685 $ 472,071
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Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 231,729 85,161
Deferred income taxes 14,958 -
Changes in assets and liabilities:
Accounts receivable (1,292,370) (2,267,561)
Inventories 966,833 (1,579,960)
Prepaid expenses and other current assets (326,970) 313,567
Other assets 1,638 115,900
Accounts payable and accrued expenses (37,003) 1,754,683
Due to CFC Reclamation - (263,431)
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Total adjustments (441,185) (1,841,641)
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Net cash used in operating activities (361,500) (1,369,570)
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Cash flows used in investing activities:
Capital expenditures (605,697) (1,667,445)
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Net cash used in investing activities (605,697) (1,667,445)
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Cash flows from financing activities:
Short-term notes payments - (10,482)
Long-term debt proceeds - 758,107
Long-term debt and capital lease obligations repaid (62,768) -
Proceeds from redemption of warrants 331,334 -
Proceeds from issuance of warrants - 500,000
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Net cash provided by financing activities 268,566 1,247,625
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Net decrease in cash and cash equivalents (698,631) (1,789,390)
Cash and cash equivalents, beginning of the period 2,459,609 2,215,808
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Cash and cash equivalents, end of the period $ 1,760,978 $ 426,418
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</TABLE>
See accompanying notes to financial statements.
<PAGE>
Hudson Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of March 31, 1996 and for the three months
ended March 31, 1996 and 1995 is unaudited)
1. Summary of Significant Accounting Policies
a) Business
Hudson Technologies, Inc. and its subsidiaries (the
"Company") are engaged in the business of recovering
and reclaiming refrigerants and the subsequent resale
of the purified product.
b) Unaudited Interim Financial Statements
In the opinion of management, the unaudited interim
financial statements for the three months ended March
31, 1996 and 1995 are presented on a basis consistent
with the audited annual financial statements and
reflect all adjustments, consisting only of normal
recurring accruals, necessary for fair presentation
of the results of such periods. The results of
operations for the period ended March 31, 1996 are
not necessarily indicative of the results to be
expected for the year.
The financial statements and notes are presented as
permitted by form 10-QSB and do not contain certain
information prescribed by generally accepted
accounting principles. These financial statements
should be read in conjunction with the financial
statements and notes thereto for the year ended
December 31, 1995 included in the Company's filing on
form 10-KSB. The accounting policies used in
preparing these financial statements are the same as
those described in the December 31, 1995 financial
statements.
c) Reclassification
Certain 1995 account balances have been reclassified
for comparative purposes.
d) Consolidation
The consolidated financial statements include the
operations of Hudson Technologies Inc. and its
subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation.
<PAGE>
Hudson Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of March 31, 1996 and for the three months
ended March 31, 1996 and 1995 is unaudited)
2. Capital Transactions
On September 15, 1995, the Company called warrants pursuant to
its initial public offering for redemption. A total of
1,530,139 shares of common stock were issued in connection
with this redemption through December 31, 1995. Net proceeds
of $9,289,138 were used to reduce liabilities and to finance
increased levels of inventory. An additional 66,500 shares
were issued in connection with this redemption in the three
months ended March 31, 1996. Net proceeds of $331,334 were
used for working capital purposes.
3. Acquisition
On August 15, 1995, the Company acquired Refrigerant
Reclamation Corporation of America ("RRCA"). The acquisition
was accounted for as a purchase from the date of acquisition
with the assets acquired and liabilities assumed recorded at
fair values, and the results of RRCA's operations included in
the Company's consolidated financial statements from the date
of acquisition.
The unaudited pro forma results of operations which follow
assume that the acquisition occurred at the beginning of 1995.
The unaudited pro forma calculations include adjustments for
the estimated effect on the Company's historical operations
for depreciation and amortization, interest and income taxes
related to the acquisition.
Three months ended March 31, 1996 1995
-------------------------------------------------------------
Sales $ 3,756,811 $ 7,140,072
Net income $ 79,685 $ 581,186
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Net income per common and
common stock equivalents $ .02 $ .22
Net income per common stock
assuming full dilution $ .02 $ .14
=============================================================
The pro forma information presented is for information
purposes only and does not purport to be indicative of the
results which would actually have been obtained if the
combination had been in effect for the periods indicated.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of operations
Three Months Ended March 31, 1996 and 1995
Net sales decreased by $2,492,155, or 39.3%, from $6,198,966 for the three
months ended March 31, 1995 to $3,756,811 for the three months ended March 31,
1996. The decrease in net sales was attributable to a decrease in the volume of
used refrigerants available to the Company for reclamation. The Company
purchased significant amounts of refrigerants from importers during the three
months ended March 31, 1995. In May 1995, the Company determined to cease
purchasing imported refrigerants and has not yet been able to obtain the same
levels of domestic refrigerants for reclamation. The near term inability to
obtain sufficient levels of domestic refrigerants impacted net sales during the
three months ended March 31, 1996. To the extent the Company is unable to obtain
sufficient quantities of domestic refrigerants in the future, the Company's
financial condition and results of operations could be materially adversely
affected.
Cost of sales decreased by $2,022,478, or 49.8%, from $4,059,243 for the
three months ended March 31, 1995 to $2,036,765 for the three months ended March
31, 1996, and decreased as a percentage of sales from 65.5% to 54.2%. The
decrease in absolute dollars was primarily attributable to decreased sales
levels. The decrease in cost of sales as a percentage of sales reflects lower
costs associated with the Company's refrigerant recovery and on-site reclamation
operations on behalf of its customers and an increase in the volume of
refrigerants reclaimed and returned to customers rather than purchased,
reclaimed and resold. The percentage of refrigerants which the Company
purchases, reclaims and resells (rather than reclaims for the customer) at any
particular time depends upon the customer's decision and the availability of
used refrigerants. In future periods, cost of sales may be affected by freight
and other costs, price competition, by the availability of large quantities of
refrigerants available for purchase, and the volume of refrigerant reclaimed and
returned, versus purchased, reclaimed and resold.
Operating expenses increased by $310,648, or 23.8%, from $1,306,383 for the
three months ended March 31, 1995 to $1,617,031 for the three months ended March
31, 1996. The increase was primarily attributable to increased general and
administrative expenses, including travel, salaries and related costs, as well
as depreciation and amortization. Operating expenses as a percentage of sales
increased from 21.1% to 44.8%. The increase in operating expenses as a
percentage of sales is a result of the increased expenditures required to
support the Company's expanded operations without corresponding increases in net
sales during the three months ended March 31, 1996.
Interest expense was $51,299 for the three months ended March 31, 1996,
compared to $27,286 for the three months ended March 31, 1995. The increase in
interest expense is primarily the result of increased interest paid on the
Company's line of credit.
<PAGE>
As a result, net income decreased by $392,386, or 83.1%, from $472,071 for
the three months ended March 31, 1995 to $79,685 for the three months ended
March 31, 1996. Net income as a percentage of sales also decreased from 7.6% to
2.1%.
Liquidity and Capital Resources
The Company's primary cash requirements have been to fund increased levels
of inventories and the costs of continuing expansion. The Company has
historically satisfied its working capital requirements primarily through cash
flow from operations, the issuance of equity securities and borrowings. At March
31, 1996, the Company had working capital of approximately $10,718,579, compared
to approximately $10,725,992 at December 31, 1995.
Net cash used in operating activities was $361,500 for the three months
ended March 31, 1996, compared to $1,369,570 for the three months ended March
31, 1995. The decrease was primarily attributable to the reduced requirement to
fund inventory. Net cash used in investing activities for the three months ended
March 31, 1996 was $605,697, compared to $1,667,445 for the three months ended
March 31, 1995. The decrease reflects a decrease in capital expenditures. Net
cash provided by financing activities was $268,566 for the three months ended
March 31, 1996, as compared to $1,247,625 for the three months ended March 31,
1995. The decrease is primarily attributable to lower borrowings under the
Company's agreement with MTB Bank New York City (the "Bank"). At March 31, 1996,
the Company had cash and cash equivalents of $1,760,978.
The Company's capital expenditures were approximately $1,667,445 and
$605,697, respectively, the three months ended March 31, 1995 and 1996,
respectively. As of the date hereof, the Company does not have any material
commitments for capital expenditures.
On April 23, 1996, the Company entered into a Contract of Sale with
Environmental Support Solutions, Inc. ("ESS"), Stephen Spain and Robert Johnson
(collectively, the "Sellers") pursuant to which the Company agreed to purchase,
and the Sellers agreed to sell, all of the issued and outstanding shares of the
capital stock of ESS.
The capital stock of ESS was purchased in consideration for $2,375,000,
which was paid by delivery, at the closing, of a check in the amount of $700,000
and promissory notes, payable to each of the Sellers, in the aggregate principal
amount of $1,675,000 (the "ESS Notes"). The ESS Notes become due and payable on
or before October 23, 1996 and bear interest at the annual rate of seven percent
commencing August 23, 1996. The parties have entered into a Stock Pledge
Agreement for the purpose of securing the Company's obligations under the ESS
Notes.
The Company recently completed the implementation of a new management
information system designed to enable the Company to adapt to new service
developments and to enhance corporate productivity. The Company has budgeted
approximately $50,000 to date for this project and had expended approximately
$45,000 to purchase and develop software for the system. Such system is designed
<PAGE>
to integrate inventory control and purchasing, financial and credit control and
internal communications. The Company anticipates that the system will allow the
Company to provide more value to its customers through greater efficiency,
easier order entry and enhanced inventory and pricing information. The system is
expected to provide management and other key employees with detailed account
information, including inventory levels at each of its facilities as well as
pricing and service availability information. The Company believes that the new
management information system will support its expanded operations.
The Company believes that projected cash flow from operations, together
with available cash resources, including available borrowings under its
agreement with the Bank, will be sufficient to satisfy the Company's working
capital requirements and fund proposed capital expenditures for the foreseeable
future, including the payments due under the ESS Notes. However, to the extent
available cash is insufficient to make the payments under the ESS Notes, the
Company will require additional debt or equity financing. There can be no
assurance that any such financing will be available to the Company.
Seasonality and Fluctuations in Operating Results
The Company's operating results vary from period to period as a result of
the seasonal nature of the Company's business, as well as from the requirements
of potential customers, non-recurring refrigerant sales and services, the
availability of large amounts of used refrigerants and the costs associated with
expansion activities which may be undertaken by the Company. The Company's
business is seasonal in nature with peak sales generally occurring in the first
and second quarters. Unforeseen events, including delays in securing adequate
supplies of refrigerants at a time of peak sales or decreases in sales during
such periods, could result in significant fluctuations in operating results or
losses which would not easily be reversed. In May 1995, the Company determined
to cease purchasing imported refrigerants and the inability to obtain the same
levels of used domestic refrigerants could adversely affect the Company's
financial condition and results of operations. There can be no assurance that
the foregoing factors will not result in significant fluctuations in operating
results in the future.
Inflation
Inflation has not historically had a material impact on the Company's
operations.
<PAGE>
PART II. OTHER INFORMATION
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Hudson Technologies, Inc.
Date: May 14, 1996 By: /s/ Kevin J. Zugibe
------------------------------
Kevin J. Zugibe
President
Date: May 14, 1996 By: /s/ Stephen J. Cole-Hatchard
------------------------------
Stephen J. Cole-Hatchard
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
AT MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,760,978
<SECURITIES> 1,100,000
<RECEIVABLES> 3,835,410
<ALLOWANCES> 0
<INVENTORY> 4,377,324
<CURRENT-ASSETS> 12,343,672
<PP&E> 4,992,264
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,345,498
<CURRENT-LIABILITIES> 1,625,093
<BONDS> 0
0
0
<COMMON> 43,089
<OTHER-SE> 20,705,300
<TOTAL-LIABILITY-AND-EQUITY> 24,345,498
<SALES> 3,756,811
<TOTAL-REVENUES> 3,756,811
<CGS> 2,036,765
<TOTAL-COSTS> 2,036,765
<OTHER-EXPENSES> 231,739
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,299
<INCOME-PRETAX> 88,528
<INCOME-TAX> 8,843
<INCOME-CONTINUING> 79,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,685
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
