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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended: September 30, 2002
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Period from __________ to __________
Commission File Number: 0-6333
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HYDRON TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
New York 13-1574215
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2201 West Sample Road, Building 9, Suite 7B
Pompano Beach, FL 33073 (954) 861-6400
- ---------------------------------------- -------------------------------
(Address of Principal Executive Offices) (Registrant's telephone number)
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. [X] Yes [ ] No.
Number of shares of common stock outstanding as of September 30, 2002: 5,300,136
HYDRON TECHNOLOGIES, INC.
Index
Part I. Financial Information
- -----------------------------
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets-- September 30, 2002 and December 31, 2001 3
Condensed Statements of Operations -- Three and nine months ended
September 30, 2002 and 2001 4
Condensed Statements of Cash Flows -- Nine months ended
September 30, 2002 and 2001 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 4. Control and Procedures 14
Part II. Other Information
- --------------------------
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Certifications 17
2
HYDRON TECHNOLOGIES, INC.
Condensed Balance Sheets
September 30, December 31,
2002 2001
(Unaudited) (Note)
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 31,996 $ 167,067
Trade accounts receivable 27,880 61,444
Inventories 974,173 1,164,297
Prepaid expenses and other current assets 42,207 43,450
------------ ------------
Total current assets 1,076,256 1,436,258
Property and equipment, less accumulated
depreciation of $543,533 and $534,533 at
2002 and 2001, respectively 18,374 27,374
Deposits 28,390 28,203
Deferred product costs, less accumulated
amortization of $5,698,021 and $5,482,021 at
2002 and 2001, respectively 399,309 544,347
------------ ------------
Total Assets $ 1,522,329 $ 2,036,182
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 192,284 $ 116,559
Deferred revenues 84,751 148,646
Accrued liabilities 403,647 388,033
------------ ------------
Total current liabilities 680,682 653,238
Commitments and contingencies -- --
Shareholders' equity
Common stock - $.01 par value
30,000,000 shares authorized; 5,360,336 and 5,035,336 shares
issued; and 5,300,136 and 4,975,136 shares outstanding at
September 30, 2002 and December 31, 2001 respectively 53,603 50,353
Preferred stock - $.01 par value
5,000,000 shares authorized; no shares issued
or outstanding -- --
Additional paid-in capital 19,553,837 19,501,837
Accumulated deficit (18,326,635) (17,730,088)
Treasury stock, at cost; 60,200 shares (439,158) (439,158)
------------ ------------
Total Shareholders' equity 841,647 1,382,944
------------ ------------
Total liabilities and shareholders equity $ 1,522,329 $ 2,036,182
============ ============
Note: The balance sheet at December 31. 2001 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed financial statements.
3
HYDRON TECHNOLOGIES, INC.
Statement of Operations
(Unaudited)
Three months ended Nine months ended
September 30 September 30
-------------------------- --------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net Sales $ 305,281 $ 507,293 $ 1,187,686 $ 1,354,143
Cost of sales 58,900 214,039 325,135 412,079
----------- ----------- ----------- -----------
Gross profits 246,381 293,254 862,551 942,064
Expenses
Royalty expense 15,015 18,059 59,410 61,118
Research and development 15,990 41,924 48,980 82,067
Selling, general & administration 344,552 374,429 1,126,486 1,099,498
Depreciation & amortization 75,000 99,600 225,000 298,800
----------- ----------- ----------- -----------
Total expenses 450,557 534,012 1,459,876 1,541,483
----------- ----------- ----------- -----------
Operating loss (204,176) (240,758) (597,325) (599,419)
Interest income 127 3,744 778 8,299
----------- ----------- ----------- -----------
Loss before income taxes (204,049) (237,014) (596,547) (591,120)
Income taxes expense -- -- --
----------- ----------- ----------- -----------
Net loss $ (204,049) $ (237,014) $ (596,547) $ (591,120)
=========== =========== =========== ===========
Basic and diluted loss per share
Net loss per common share $ (0.04) $ (0.05) $ (0.12) $ (0.12)
=========== =========== =========== ===========
Weighted average shares outstanding
(basic and dilutive) 5,148,234 4,975,136 5,033,469 4,975,136
=========== =========== =========== ===========
See notes to condensed financial statements.
4
HYDRON TECHNOLOGIES, INC.
Statements of Cash Flow
(Unaudited)
Nine months ended
September 30
--------------------------
2002 2001
----------- -----------
Operating Activities
Net Loss $ (596,547) $ (591,120)
Adjustments to reconcile net loss to
Net Cash used by operating activities
Depreciation and amortization 225,000 298,800
Change in operating assets and liabilities
Trade accounts receivables 33,564 40,561
Inventories 190,124 89,451
Prepaid expenses and other current assets 1,243 10,843
Deposits (187) 21,706
Accounts payable 75,725 (105,110)
Deferred revenues (63,895) 209,618
Accrued liabilities 15,614 17,079
----------- -----------
Net cash provided (used) by operating activities (119,359) (8,172)
Investing activities
Capital Expenditures, net -- 8,711
Deferred product costs (15,713) --
----------- -----------
Net cash provided (used) by investing activities (15,713) 8,711
Financing activities
Net cash provided (used) by financing activities -- --
----------- -----------
Net increase (decrease) in cash and cash equivalents (135,072) (16,883)
Cash and cash equivalents at beginning of period 167,067 190,946
----------- -----------
Cash and cash equivalents at end of period $ 31,995 $ 174,063
=========== ===========
Noncash investing and financing activities
Market value of stock issued for license agreement $ 55,250.00 --
See notes to condensed financial statements.
5
Note A -- Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management of Hydron Technologies, Inc. (the "Company"), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three month and
nine month periods ended September 30, 2002 are not necessarily indicative of
the results that may be expected for the year ending December 31, 2002. For
further information, refer to the financial statements and footnotes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2001.
Note B - Inventories
Inventories consist of the following:
September 30, December 31,
2002 2001
----------- -----------
Finished goods $ 350,172 $ 543,880
Raw material and components 624,001 620,417
----------- -----------
$ 974,173 $ 1,164,297
=========== ===========
Note C - Distribution
The majority of the Company's products are currently sold in the United States
through Hydron direct marketing channels (proprietary Catalog and the World Wide
Web site). The Company also sells its products to private label customers,
television retailers and, to a lesser extent, internationally through salons and
doctors offices.
While in prior years television retail was the primary focus for the marketing
and distribution of the Company's products, Management believes that the
Company's exclusive agreements with television retailers had limited the
marketing opportunities to build its business through additional sales channels.
Under exclusive contracts with television retailers the Company neither
controlled its airtime nor the selling priorities of those television retailers,
effectively handicapping the Company's ability to influence sales trends.
The Company began diversifying away from television retailers in 2001 with
continued focus on developing the Catalog business and the addition of a private
label customer to provide additional cash flow. Further, the Company has been
pursuing new international distribution and new products that would
significantly augment Hydron's direct marketing efforts. This development
includes filing a patent in February 2002 on new acne formulas that provide
marked performance improvements versus other over-the-counter products currently
on the market.
6
Note C - Distribution (continued)
- - Catalog Sales
The Company's full color Catalog offers personal care products for sale directly
to consumers. The Catalog also provides information on new products, educates
consumers on proper skin care and facilitates consumer re-ordering. The Company
sells its products on the World Wide Web and regularly transmits E-mail
broadcasts to its customer base. Catalog sales represents approximately 75% of
Hydron's total annual sales. The Company is continuing to explore new ways to
enhance Catalog sales and operations.
- - Private Label Contracting
Effective March 1, 2001, the Company entered into an agreement with Reliv
International, Inc ("Reliv") to develop and manufacture a line of private label
skin care products under their brand name, ReversAge(R). Five products were
introduced in August 2001 at a national sales meeting to Reliv's multi-tier
marketing distribution network. A sixth new product was introduced in February
2002. The agreement requires minimum product purchases and advance payments to
cover packaging and design costs. Reliv is a public company traded on NASDAQ
(symbol RELV). Private label sales represent approximately 20% of Hydron's total
annual sales.
- - International
The Company sells product to an Australia-based health and beauty products
distributor for retail salon stores and medical offices in Australia and New
Zealand.
The Company also distributes dental products into Spain and, to a lesser extent,
other countries. Although this category is not significant at this time,
Management is committed to the expansion of international sales and believes
that international sales represent one of the foundations for the future growth
of the Company.
- - Retail
The Company has established minor levels of retail distribution. Initially,
utilizing excess inventory, the Company has sold product on a limited,
promotional basis to several retailers utilizing current packaging
configurations. It is anticipated that any significant retail effort of core
Hydron products would require investment in repackaging.
Note D - Earnings Per Share
Options and warrants to purchase 206,500 shares of common stock were outstanding
at September 30, 2002, but were not included in the computation of diluted
earnings per share because the effect would be anti-dilutive to the net loss per
share for the period.
The Board of Directors has approved the issuance of an additional 507,500
options; subject to the approval of a stock option plan amendment at the next
shareholders' meeting. These options have not been reflected in the September
30, 2002 calculations since there are insufficient options available without the
shareholders actions.
7
Note E - Subsequent Event
On October 30, 2002, the Board of Directors of the Company approved the issuance
of common stock in the form of a private placement offering to raise between
$250,000 and $400,000 in equity financing. One non-registered share accompanied
with an option to purchase an additional share will be offered at $0.20 per
unit. The option is exercisable anytime during the next three years at an
exercise price of $0.20 per share. If the full $400,000 is raised, the number of
shares outstanding will increase by 2,000,000 shares and the number of options
outstanding will increase an additional 2,000,000 shares.
Note F - Going Concern
The accompanying condensed financial statements were prepared assuming that the
Company will continue as a going concern. This basis of accounting contemplates
the recovery of the Company's assets and the satisfaction of its liabilities in
the normal course of operations. The Company's ultimate ability to attain
profitable operations is dependent upon obtaining additional financing or to
achieve a level of sales adequate to support its cost structure.
Accordingly, there are no assurances that the Company will be successful in
achieving the above plans, or that such plans, if consummated, will enable the
Company to obtain profitable operations or continue as a going concern.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Critical Accounting Policies
- ----------------------------
We have identified the policies outlined below as critical to our business
operations and an understanding of our results of operations. The listing is not
intended to be a comprehensive list of all our accounting policies. In many
cases, the accounting treatment of a particular transaction is specifically
dictated by accounting principles generally accepted in the United States, with
no need for management's judgment in their application. The impact and any
associated risks related to these policies on our business operations is
discussed throughout Management's Discussion and Analysis of Financial Condition
and Results of Operations where such policies affect our reported and expected
financial results. For detailed discussion on the application of these and other
accounting policies, see the Notes to the Financial Statements in the Company's
December 31, 2001 Form 10K. Note that our preparation of the financial
statements requires us to make estimates and assumptions that affect the
reported amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of our financial statements, and the reported amount of
revenue and expenses during the reported period. There can be no assurance that
actual results will not differ from those estimates.
Revenue Recognition and Product Warranty
Revenue from product sales is recognized at the time of shipment. Provision is
made in the period of the sale for estimated product returns from the ultimate
end user.
Research and Development
Research and development costs are charged to operations when incurred and are
included in operating expenses.
Advertising
Advertising costs are expensed as incurred and are included in "selling, general
and administrative expenses."
Business
- --------
Hydron Technologies, Inc. markets a broad range of consumer and oral health care
products using a moisture-attracting ingredient (the "Hydron(R) polymer"), and
owns a non-prescription drug delivery system for topically applied
pharmaceuticals, which uses such polymer. The Company holds U.S. and
international patents on, what Management believes is, the only known
cosmetically acceptable method to suspend the Hydron polymer in a stable
emulsion for use in personal care/cosmetic products. The Company is developing
other personal care/cosmetic products for consumers using its patented
technology and would, when appropriate, either seek licensing arrangements with
third parties, or develop and market proprietary products through its own
efforts. Management believes that because of their unique properties, products
that utilize the Hydron polymer have the potential for wide acceptance in
consumer and professional health care markets.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Business (continued)
- --------------------
The Company has been engaged in the development of various consumer products
using Hydron polymers since 1986. The Company's products are designed to address
concerns about aging, and include Hydron skincare, hair care, bath and body and
sun care. The Company currently has thirty-nine individual products available in
the following product lines: skin care (22 products), hair care (7 products),
bath and body (8 products) and sun care (2 products). These products are also
packaged into collections and sold at a more favorable value than the individual
products sold separately. All of the products are available through the Hydron
Catalog and Web site www.hydron.com ("Catalog").
Management believes that the Company's product lines are unique and offer the
following competitive benefits: the moisturizers self-adjust to match the skin's
optimal pH balance soon after they are applied to the skin; they become
water-insoluble on the skin's surface, and unlike all other water-based cremes
and lotions, are not removed by the skin's perspiration or plain water; they are
oxygen-permeable, allowing the skin to breathe; they do not emulsify the skin's
natural moisturizing agents, as do conventional cremes and lotions; and they
attract and hold water, creating a cushion of moisture on the skin's surface
that promotes penetration of other beneficial product ingredients, all while
leaving no greasy after-feel.
The Company's products are dermatologist tested and approved for all skin types.
Products for use around the eye area are also ophthalmologist tested and safe
for contact lens wearers. Most of the Company's moisturizing products are based
on the Company's patented emulsion system, which permits the product ingredients
to deliver their intended benefits over an extended period of time and in a more
efficient manner.
Management believes that the Hydron emulsion system can enhance the
effectiveness of topical over-the-counter medications. The emulsion system is
designed to deposit a uniform polymer film on the skin's surface which has a
number of advantages over traditional lotions: promotes hydration of the outer
layer of skin, improves penetration into the skin's pores, and has good
tactility and flexibility. The Company expects to continue to focus research and
development resources on proprietary technology-based products as determined by
Management's assessment of consumer demand.
In 2000, the Company discovered that the Hydron emulsion system also adjusts pH
on the skin to match the pH of the stratum corneum, the skin's surface layer. It
is evident in recent skin research (Kligman 2002) that the pH range of the
emulsion system is ideal for contributing to the skin's natural healing process
and enzyme production responsible for rebuilding the skin's lipid barrier.
Hydron filed for patent protection in February 2002 for a unique delivery system
for over-the-counter (OTC) acne drug ingredients. The new system is believed to
significantly reduce the harshness and irritation caused by most acne products
currently in the marketplace. The Brand will be developed under the registered
Aclime(R) trademark. The Company is currently finalizing packaging and
evaluating alternative distribution channels for the line, including: direct
marketing, limited retail and infomercials.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Business (continued)
- --------------------
Since August 2000, the Company has been researching and developing a new
technology that provides a method for the delivery of oxygen into the skin and
tissue at depths considered medically therapeutic without the use of the
bloodstream. The Company filed for patent protection as of February 2001. The
patent application is pending. Management anticipates that as a result of its
continuing research into tissue oxygenation, the Company's primary focus will
begin to shift from personal care/cosmetic products to developing/licensing
applications or products based upon this new technology.
The approach to tissue oxygenation developed by Hydron is unique. It utilizes an
existing technology that infuses liquid with oxygen at 20+ times normal levels
to create a super-oxygenated liquid filled with micro-bubbles of highly
pressurized oxygen. When placed in contact with the skin, the highly saturated
fluid and micro-bubbles are transferred directly to the skin through osmosis and
kinetic diffusion.
Research and development efforts to date have included clinical testing,
in-vitro bacteriological testing, micro-bubble size analysis, packaging
prototypes, and stability testing. Clinical testing on healthy subjects was
conducted at the University of Massachusetts Medical School; Department of
Thoracic Surgery producing an average increase in subcutaneous tissue
oxygenation of 54% in healthy individuals. Management believes that these tests
provided the first-ever evidence that subcutaneous tissue could be oxygenated
for the outside in.
The skin treatment is expected to have numerous applications in wound healing
and anti-aging skincare treatments. Current medical research shows that each
year, in the United States alone, medical problems associated with oxygen
deprivation to the skin and tissues can affect over 16 million diabetics, two
million burn patients, 600,000 individuals with impaired circulatory systems and
countless others suffering from chronic wounds to fluid for transporting organs
for transplant. Likewise, medical problems associated with anaerobic bacteria
(i.e. organisms that thrive in the absence of oxygen) such as acne, diaper rash,
post-operative infections and periodontal disease may be reduced or eliminated
by application of his technology.
On November 1, 2002, the Company attended by invitation, a conference held by
the Diabetes Technology Society in Atlanta, Georgia where it presented an
abstract of its clinical findings.
Oxygen is also is an essential factor in aging as the facial skin loses about
40% of oxygen carrying capacity by age 65 (a factor in diminished collagen
formulation and wrinkling). As a result, anti-aging/wrinkling applications of
this technology may ultimately lead to a new line of skincare applications and
products.
In July 2002, the Company reached an agreement for licensing existing machine
technology from Life International Products, Inc. that included issuance of
325,000 shares of new Hydron stock and future royalty payments. This may allow
Hydron to be able to manufacture future products under Hydron's tissue
oxygenation pending patent. The company plans additional efficacy testing to
further evaluate the technology and future potential products. It is anticipated
that efficacy testing will require an additional 12 to 24 months.
Currently, the Company's cash flow is insufficient to exploit these new
opportunities and therefore the Company is exploring alternative methods to
finance their continued development.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
Net sales for the three months ended September 30, 2002 were $305,281; a
decrease of $202,012, or 40%, from net sales of $507,293 for the three months
ended September 30, 2001. Net sales for the nine months ended September 30, 2002
were $1,187,686; a decrease of $166,457 or 12% from net sales of $1,354,143 for
the nine months ended September 30, 2001.
Catalog net sales for the three months ended September 30, 2002 were $288,720;
an increase of $21,773, or 8%, from catalog net sales of $266,947 for the three
months ended September 30, 2001. Catalog net sales for the nine months ended
September 30, 2002 were $919,791, an increase of $14,571 or 2% from catalog net
sales of $905,220 for the nine months ended September 30, 2001. The increase in
catalog sales for the three months ended September 30, 2002 and nine months
ended September 30, 2002 was the result of improved third quarter catalog
promotional activities.
Non-catalog net sales, including television, contract, and international sales,
for the three months ended September 30, 2002 were $16,561; a decrease of
$223,785, or 93%, from non-catalog net sales of $240,346 for the three months
ended September 30, 2001. The quarterly non-catalog sales decrease reflects
initial private label shipments in 2001 that were not replaced with turn sales
in 2002. The Company sold $11,500 to television retailers for the three months
ended September 30, 2002, as compared to $21,877 for the three months ended
September 30, 2001. Television retailer contracts have been terminated as of
March 2002, since the exclusivity was too restrictive.
The Company's overall gross profit margin for the three months ended September
30, 2002 was 81%, as compared to 58% for the three months ended September 30,
2001. The increase in gross profit margins for the period reflects a shift in
product mix; with higher margin catalog sales representing 95% of sales for the
three months ended September 30, 2002 as compared to catalog sales representing
53% of sales for the three months ended September 30, 2001.
R&D expenses for the three months ended September 30, 2002 were $15,990; a
decrease of $25,934, or 62%, from R&D expenses of $41,924 for the three months
ended September 30, 2001. The R&D expenses a year ago reflect clinical testing
associated with the oxygenation project. The amount of R&D expenses per year
varies, depending on the nature of the development work during each year, as
well as the number and type of products under development at such time.
Selling, general and administrative ("SG&A") expenses for the three months ended
September 30, 2002 were $344,552; a decrease of $29,877, or 8%, from SG&A
expenses of $374,429 for the three months ended September 30, 2001. The decrease
was principally due to reduced operating expenses after the office relocation.
Interest and investment income for the three months ended September 30, 2002 was
$127, a decrease of $3,617, or 97%, from interest and investment income of
$3,744 for the three months ended September 30, 2001. This decrease is due to
lower cash balances in the 2002 period compared to the 2001 period. The Company
maintains a conservative investment strategy, deriving investment income
primarily from U.S. Treasury securities.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations (continued)
- ---------------------------------
The net loss for the three months ended September 30, 2002 was $204,049, a
decrease of $32,965, or 14%, as compared to a net loss of $237,014 for the three
months ended September 30, 2001. The decrease in the net loss resulted primarily
from the factors discussed above.
Liquidity and Financial Resources
- ---------------------------------
The Company's working capital was approximately $395,574 at September 30, 2002,
including cash and cash equivalents of approximately $31,996. There were no
investing or financing activities for the three months ended September 30, 2002.
The Company has incurred significant losses over the past four years. The
ability of the Company to continue as a going concern is dependent on increasing
sales and reducing operating expenses.
Management's plan to increase sales and reduce operating expenses includes
several specific actions. Catalog sales will continue to be emphasized since
they have higher profit margins and represent markets that are growing more
rapidly than the Company's traditional television market. Direct marketing
techniques will be used to reach new and current consumers such as promotions
mailed to targeted consumers, Web site specials, promotions to other Web site
customers, and direct e-mail promotions to new customers.
In addition, the Company added a significant Private Label customer of Hydron
based formulas, with a proprietary nutritional complex of additives, that began
ordering in the second quarter, 2001. This customer competes in the multi-Level
Marketing category and has been successful for 13 years.
The Company is also pursuing international distribution agreements that will
expand the company's distribution around the world. Finally, the Company will
continue to develop tissue oxygenation and other technology that it believes
will improve its long-term success in this category.
As noted in the year-end Report of Independent Certified Public Accountants,
dated March 18, 2002, the Company experienced losses from operations in 2001,
2000, and 1999. These matters raise substantial doubt about the Company's
ability to continue as a going concern. There can be no assurances that
Management's Plan will be successful and the Company's actual results could
differ materially. No estimate has been made should Management's plan be
unsuccessful. The effect of inflation has not been significant upon either the
operations or financial condition of the Company.
13
Cautionary Statement Regarding Forward Looking Statements
- ---------------------------------------------------------
Certain statements contained in this Report on Form 10-Q are forward looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including statements
regarding the Company's expectations, hopes, intentions, beliefs or strategies
regarding the future. Forward looking statements include the Company's
liquidity, anticipated cash needs and availability, and the anticipated expense
levels under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations." All forward looking statements included in
this document are based on information available to the Company on the date of
this Report, and the Company assumes no obligation to update any such forward
looking statement. It is important to note the Company's actual results could
differ materially from those expressed or implied in such forward looking
statements. You should also consult the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 as well as those factors listed from time to
time in the Company's other reports filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 and the Securities
Act of 1933.
Item 4 - Controls and Procedures
- --------------------------------
Within the 90-day period prior to the date of this report, Hydron Technologies,
Inc. carried out an evaluation, under the supervision and with the participation
of management, including its Chief Operating Officer and Chief Financial
Officer, of the effectiveness of the design and operation of Hydron
Technologies, Inc.'s disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14. Based upon that evaluation, the Chief Operating Officer and Chief
Financial Officer concluded that Hydron Technologies, Inc.'s disclosure controls
and procedures are effective to timely alert them to material information
required to be included in Hydron Technologies, Inc.'s Exchange Act filing.
There have been no significant changes in Hydron Technologies, Inc.'s internal
controls or in other factors that could significantly affect internal controls
subsequent to the date that Hydron Technologies, Inc. carried out its
evaluation.
14
Part II - Other Information
Item 5. Other Information
Effective August 12, 2002, Charles Johnston resigned from the Board of
Directors for personal reasons. It has not been determined as to
whether this position will be filled or remains vacant.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
--------
99(i) Principal Executive Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99(ii) Principal Operating Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99(iii) Principal Financial Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Current report on Form 8-K
--------------------------
On November 14, 2002, the Company filed Items 7 and 9 to Form 8-K
related to Statements Under Oath of Principal Executive Officer,
Principal Operating Officer and Principal Financial Officer and
Circumstances Relating to Exchange Act Filings.
15
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.
HYDRON TECHNOLOGIES, INC.
/s/ WILLIAM A. FAGOT
-------------------------------------
William A. Fagot
Chief Financial Officer
Dated: November 14, 2002
16
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and
Item 307 of Regulation S-K
I, Richard Banakus, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Hydron Technologies,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepare;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (November 14, 2002); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls;
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls.
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ RICHARD BANAKUS
- --------------------------
Richard Banakus
Chief Executive Officer
November 14, 2002
17
Certification of Chief Operating Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and Item 307 of Regulation S-K
I, Terrence S. McGrath, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Hydron Technologies,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepare;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (November 14, 2002); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls;
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls.
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ TERRENCE S. MCGRATH
- --------------------------
Terrence S. McGrath
Chief Operating Officer
November 14, 2002
18
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and Item 307 of Regulation S-K
I, William A. Fagot, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Hydron Technologies,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepare;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (November 14, 2002); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls;
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls.
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ WILLIAM A. FAGOT
- --------------------------
William A. Fagot
Chief Financial Officer
November 14, 2002
19