SEC Info - Hydron Technologies Inc - 10-Q/A

SEC Info

Home

My Interests

Help

Please Sign In

Hydron Technologies Inc · 10-Q/A · For 9/30/04

Filed On 11/10/04 5:20pm ET · SEC File 0-06333 · Accession Number 1144204-4-18313

  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

11/10/04  Hydron Technologies Inc           10-Q/A      9/30/04    7:28                                     1144204

Amendment to Quarterly Report · Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q/A      Amendment to Quarterly Report                         19     85K 
 2: EX-31.1     Certification per Sarbanes-Oxley Act (Section 302)     2±    10K 
 3: EX-31.2     Certification per Sarbanes-Oxley Act (Section 302)     2±    10K 
 4: EX-31.3     Certification per Sarbanes-Oxley Act (Section 302)     2±    10K 
 5: EX-32.1     Certification per Sarbanes-Oxley Act (Section 906)     1      6K 
 6: EX-32.2     Certification per Sarbanes-Oxley Act (Section 906)     1      6K 
 7: EX-32.3     Certification per Sarbanes-Oxley Act (Section 906)     1      6K

10-Q/A · Amendment to Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Exhibits and Reports on Form 8-K Financial Statements (Unaudited) Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
1	1st Page
3	Item 1. Financial Statements (Unaudited)
10	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
11	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
18	Item 6. Exhibits and Reports on Form 8-K

10-Q/A 1st Page of 19 TOC Top Previous Next Bottom Just 1st
 Sponsored Ads...







UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 FORM 10-Q/A

(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, 2004
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

 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 November 10, 2004: 9,260,136

10-Q/A 2nd Page of 19 TOC 1st Previous Next Bottom Just 2nd

EXPLANATORY NOTE

        This Form 10-Q/A (Amendment No. 1) amends Part I, Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations of the 
Quarterly Report on Form 10-Q for the quarter ended September 30, 2004,         
originally filed by Hydron Technologies, Inc. on November 10, 2004. The effect  
of the amendment is to include a discussion of start up costs for Hydron Royalty
Partners, LLLP and minority interest in net loss that were inadvertently omitted
in Management's Discussion in the original filing. The financial statements are 
properly reported but Management's Discussion had not been updated.             

10-Q/A 3rd Page of 19 TOC 1st Previous Next Bottom Just 3rd

TABLE OF CONTENTS                                                         PAGE  

Part I.  Financial Information                                                  

Item 1.  Financial Statements (Unaudited)                                       

Condensed Consolidated Balance Sheets                         
            September 30, 2004 and December 31, 2003                     3

Condensed Consolidated Statement of Operations                
Three months and nine months ended                
               September 30, 2004 and 2003                               4

Condensed Consolidated Statements of Cash Flows               
            Nine months ended September 30, 2004 and 2003                5

      Notes to Condensed Consolidated Financial Statements               6

Item 2.  Management's Discussion and Analysis of Financial Condition        9   
and Results of Operations                                     

Item 4.  Control and Procedures                                             16  

Part II. Other Information                                                      

       Exhibits and Reports on Form 8-K.                                  17

       Signatures                                                         18

       Certification of Chief Officers Pursuant to Section                19
302 of the Sarbanes-Oxley Act of 2002 and Item 307    
of Regulation S-K                                     

       Certification Pursuant to 18 U.S.C, Section 1350, as               22
Adopted Pursuant to Section 906 of the Sarbanes-Oxley 
Act of 2002                                           

 2

10-Q/A 4th Page of 19 TOC 1st Previous Next Bottom Just 4th
                                                        · Enlarge/Download Table


                                                     HYDRON TECHNOLOGIES, INC.                                           

                                               CONDENSED CONSOLIDATED BALANCE SHEETS                                     

                                                                         September 30, 2004            December 31, 2003 
                                                                             (Unaudited)                     (Note)      
                                                                         ------------------           -------------------
                                                                                                                         
ASSETS                                                                                                                   

Current Assets                                                                                                           
    Cash and cash equivalents                                            $        559,704             $         964,723  
    Trade accounts receivable                                                         937                        10,191  
    Inventories                                                                   525,855                       520,032  
    Prepaid expenses and other current assets                                      44,447                        34,422  
                                                                         ------------------           -------------------
            Total current assets                                                1,130,943                     1,529,368  

Property and equipment, less accumulated                                                                                 
       depreciation of $207,511 and $204,361 at                                                                          
       2004 and 2003, respectively                                                 14,491                        17,641  
Deposits                                                                           19,588                        19,587  
Deferred product costs, less accumulated                                                                                 
       amortization of $155,686 and $133,186 at                                                                          
       2004 and 2003, respectively                                                158,730                       176,491  

                                                                         ------------------           -------------------
            Total Assets                                                       $1,323,752                   $ 1,743,087  
                                                                         ==================           ===================

LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                     

Current liabilities                                                                                                      
    Accounts payable                                                             $ 72,693                      $ 42,229  
    Loans payable                                                                   1,837                         4,803  
    Royalties payable                                                              26,837                       127,437  
    Deferred revenues                                                              93,813                       165,164  
    Accrued liabilities                                                           261,145                       234,954  
                                                                         ------------------           -------------------
       Total current liabilities                                                  456,325                       574,587  

Commitments and contingencies                                                           -                             -  
Minority interest in consolidated partnership                                     284,552                             -  

Shareholders' equity                                                                                                     
    Preferred stock - $.01 par value; 5,000,000 shares                                                                   
       authorized; no shares issued or outstanding                                      -                             -  
    Common stock - $.01 par value                                                                                        
       30,000,000 shares authorized; 9,320,336 shares                                                                    
       issued; and 9,260,136 shares outstanding                                                                          
       at 2004 and 2003, respectively                                              93,203                        93,203  
    Additional paid-in capital                                                 21,086,237                    21,086,237  
    Accumulated deficit                                                       (20,157,407)                  (19,571,782) 
    Treasury stock, at cost; 60,200 shares                                       (439,158)                     (439,158) 
                                                                         ------------------           -------------------
       Total shareholders' equity                                                 582,875                     1,168,500  
                                                                         ------------------           -------------------
       Total liabilities and shareholders' equity                              $1,323,752                   $ 1,743,087  
                                                                         ==================           ===================

Note: The balance sheet at December 31, 2003 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 ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                    

3 

10-Q/A 5th Page of 19 TOC 1st Previous Next Bottom Just 5th
                                                        · Enlarge/Download Table


                                                   HYDRON TECHNOLOGIES, INC.                                                  

                                         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                      
                                                          (Unaudited)                                                         

                                             Three months ended September 30,                Nine months ended September      
                                                2004                2003                      2004                 2003       
                                           ----------------    ----------------         -----------------    -----------------
                                                                   (Note)                                         (Note)      
                                                                                                                              
Net Sales                                  $       200,975     $       324,705          $        923,204     $        959,922 
Cost of sales                                       75,324             113,597                   378,776              350,550 
                                           ----------------    ----------------         -----------------    -----------------
Gross profits                                      125,651             211,108                   544,428              609,372 

Expenses                                                                                                                      
      Royalty expense                                4,565                   -                    27,384                    - 
      Research and development                      46,946              26,940                   168,389               71,886 
      Selling, general & administration            318,666             297,377                   926,681              917,153 
      Depreciation & amortization                    8,550              49,770                    25,650              149,310 
                                           ----------------    ----------------         -----------------    -----------------
          Total expenses                           378,727             374,087                 1,148,104            1,138,349 

                                           ----------------    ----------------         -----------------    -----------------
Operating loss                                    (253,076)           (162,979)                 (603,676)            (528,977)

Interest income - net of interest expense              942                (593)                    2,604                   18 
                                           ----------------    ----------------         -----------------    -----------------
          Loss before income taxes                                                                                            
           and minority interest                  (252,134)           (163,572)                 (601,072)            (528,959)

Minority interest in net loss                       15,448                   -                    15,448                    - 
Income taxes expense                                     -                   -                         -                    - 
                                           ----------------    ----------------         -----------------    -----------------
          Net loss                         $      (236,686)    $      (163,572)         $       (585,624)    $       (528,959)
                                           ================    ================         =================    =================

Basic and diluted loss per share           $         (0.03)    $         (0.02)         $          (0.06)    $          (0.08)
                                           ================    ================         =================    =================

Weighted average shares                                                                                                       
      outstanding (basic and diluted)            9,260,136           7,050,136                 9,260,136            7,050,136 
                                           ================    ================         =================    =================

Note: Shipping and handling billings and costs have been reclassified from                                                    
      Selling, general, & administrative to Net sales and Cost of sales,                                                      
      respectively. These reclassifications have no effect on reported Net                                                    
      income.                                                                                                                 

                                SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                         


4 

10-Q/A 6th Page of 19 TOC 1st Previous Next Bottom Just 6th

 HYDRON TECHNOLOGIES, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        · Enlarge/Download Table

                                                   Nine months ended   September 30, 
                                                        2004               2003      
                                                   ---------------    ---------------
                                                                                     
Operating Activities                                                                 
   Net Loss                                        $     (585,624)    $     (528,959)
      Adjustments to reconcile net loss to                                           
       net cash used by operating activities                                         
        Depreciation and amortization                      25,650            149,310 

      Change in operating assets and liabilities                                     
        Trade accounts receivables                          9,254              1,690 
        Inventories                                        (5,822)            88,571 
        Prepaid expenses and other current assets         (10,025)             5,215 
        Deposits                                                -              1,228 
        Accounts payable                                   30,464            (45,604)
        Royalties payable                                (100,600)                 - 
        Deferred revenues                                 (71,351)            58,903 
        Accrued liabilities                                26,189             48,892 
                                                   ---------------    ---------------
      Net cash used in operating activities              (681,867)          (220,754)

Investing activities                                                                 
   Capital Expenditures, net                                    -            (13,480)
   Deferred product costs                                  (4,739)           (36,507)
                                                   ---------------    ---------------
      Net cash used in investing activities                (4,739)           (49,987)

Financing activities                                                                 
   Net cash used for repayment of loans payable            (2,966)           205,702 
   Change in amount due minority interest                 284,552                  - 
   Additional Paid in capital                                   -                  - 
                                                   ---------------    ---------------
      Net cash provided from financing activities         281,586            205,702 

                                                   ---------------    ---------------
      Net decrease in cash and cash equivalents          (405,019)           (65,039)

Cash and cash equivalents at beginning of period          964,723            291,136 

                                                   ---------------    ---------------
Cash and cash equivalents at end of period         $      559,704     $      226,097 
                                                   ===============    ===============

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

5 

10-Q/A 7th Page of 19 TOC 1st Previous Next Bottom Just 7th

 HYDRON TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

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 adjustments)        
considered necessary for a fair presentation have been included. Operating      
results for the three and nine month periods ended September 30, 2004 are not   
necessarily indicative of the results that may be expected for the year ending  
December 31, 2004. 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, 2003.                                                        

      The consolidated financial statements include the accounts of Hydron
Technologies, Inc. and a majority owned limited liability limited partnership,  
Hydron Royalty Partners, LLLP. Hydron Royalty Partners, LLLP (the "Partners")   
was established in August 2004 by Hydron, the general partner, and ten limited  
partners for the purpose of paying outstanding and up to $30,000 annually of    
future royalties and licensing obligations in return for royalty and licensing  
payments due from Valera Pharmaceuticals, Inc. The establishment of Partners    
allowed Hydron to meet its current and future royalty obligations and retain the
possibility of a significant royalty income stream opportunity. All appropriate 
inter-company transactions have been eliminated.                                

Use of Estimates                                                                

      The preparation of financial statements in conformity with generally
accepted accounting principles requires Management to make estimates and        
assumptions that affect the amounts reported in the financial statements and    
accompanying notes. Actual results could differ from those estimates.           

NOTE B - INVENTORIES                                                            

Inventories consist of the following:                         

                                      September 30,     December 31,
                                      2004              2003
                                      -------------     ------------

Finished goods                              $     106,435     $     90,443      
Raw materials and components                      419,420          429,589      
                                      -------------     ------------

                                      $     525,855     $    520,032
                                      =============     ============

 6

10-Q/A 8th Page of 19 TOC 1st Previous Next Bottom Just 8th

 HYDRON TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

NOTE C - DISTRIBUTION                                                           

         The majority of the Company's products are currently sold in the United
States through Hydron's direct marketing channels (proprietary Catalog and the  
World Wide Web site). The Company also sells its products to private label      
customers and, to a lesser extent, television retailers and internationally     
through salons and doctors' offices.                                            

NOTE D - EARNINGS PER SHARE                                                     

    Effective January 1, 2004, the Company granted options to purchase
100,000 shares of common stock for $.659 to consultants. These options vest over
12 months.                                                                      

        Options and warrants to purchase 5,577,500 shares of common stock were
outstanding at September 30, 2004, but were not included in the computation of  
diluted earnings per share because the effect would be anti-dilutive. The       
outstanding options and warrants include 1,015,000 options the Board of         
Directors has approved, subject to the approval of a stock option plan amendment
at the next shareholders' meeting on November 15, 2004.                         

    There were no options granted to employees during the three months
ended September 30, 2004 that would require adjustments to the pro forma        
information regarding net income and earnings per share required by FASB        
Statement No. 123, and it is unchanged from that reflected in the Company's     
Annual Report on Form 10-K for the year ended December 31, 2003.                

NOTE E - ACCRUED LIABILITIES                                                    

Accrued liabilities represent expenses that apply to the reported period and    
have not been billed by the provider or paid by the Company. Accrued liabilities
consisted of the following:                                                     

                             SEPTEMBER 30,    DECEMBER 31,
                             2004             2003
                             -------------    ------------
Dividends payable                       $    83,163      $    83,163            
Director fees payable                        76,015           65,012            
Professional fees                            35,356           24,712            
Other                                        66,611           62,067            
                             -------------    ------------
                            $   261,145      $   234,954
                             =============    ============

 7

10-Q/A 9th Page of 19 TOC 1st Previous Next Bottom Just 9th

 HYDRON TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

NOTE F - GOING CONCERN                                                          

   The accompanying condensed consolidated 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 achieving 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

10-Q/A 10th Page of 19 TOC 1st Previous Next Bottom Just 10th


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS                                                   

BUSINESS                                                                        

   Hydron Technologies, Inc. continues to shift its primary focus to
conducting research and development into products and medical applications      
utilizing its patented tissue oxygenation technology. In November 2003, Hydron  
received a US patent for its method of oxygenating skin and tissue topically,   
using microbubbles of pure oxygen averaging one micron in diameter, suspended in
fluid. The super-oxygenation technology delivers pure oxygen through the skin to
tissue depths considered therapeutic for wound healing and the maintenance of   
tissue viability. A topically applied oxygenated skin treatment could have      
numerous applications in wound healing and anti-aging skincare treatments.      

 Research and development efforts to date have included clinical
testing, in-vitro bacteriological testing, micro-bubble size analysis, packaging
prototypes, and stability testing. Following its successful pre-clinical test at
the University of Massachusetts Medical School, Department of Thoracic Surgery, 
the Company commissioned a clinical test on healthy human subjects. This        
clinical test produced an average increase in subcutaneous tissue oxygenation of
54%. Management believes that these tests provided the first-ever evidence that 
subcutaneous tissue could be oxygenated from the outside in.                    

         On November 14, 2003, Hydron completed a non-brokered private placement
to accredited investors, raising $1.1 million, to accelerate its research and   
development program surrounding this oxygenation technology. The Company has    
also added expert clinical and regulatory consultants and is pursuing approval  
from the FDA to allow the use of its oxygenation technology for a number of     
medical applications.                                                           

         In October 2004, the Company received notice from the FDA that Hydron's
MicrO2 Oxygenation Apparatus is a device that will be reviewed and regulated by 
the Center for Devices and Radiological Health under the medical device         
provisions of the Federal Food, Drug, and Cosmetic Act. Hydron's MicrO2         
Oxygenation Apparatus is a device intended to produce oxygenated water infused  
with micro-bubbles to use in topical oxygen therapy. The device would be used at
the patient bedside or doctor's office to enhance wound healing. Further, the   
device is intended for adjunctive therapy (rather than sole treatment) for      
wounds such as skin ulcerations due to diabetes, venous stumps, post surgical   
infections and gangrenous lesions, decubitus ulcers, infected amputation stumps,
skin grafts, burns, and frostbite.                                              

         The Company also markets a broad range of consumer and oral health care
products using a moisture-attracting ingredient (the "Hydron(R) polymer"), and a
topical delivery system for active ingredients including pharmaceuticals. 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. Additional patents  
have been applied for relating to a self-adjusting pH formulation for skincare  
and acne. The Company is developing other personal care/cosmetic products for   
consumers using its patented technology and would, when appropriate, seek       
licensing arrangements with third parties, or develop and market proprietary    
products through its own efforts.                                               

         In August 2004, Hydron Technologies, Inc. (Hydron), as general partner,
formed Hydron Royalty Partners, LLLP (Partners) a Limited Liability Limited     
Partnership for the purpose of funding                                          

 9

10-Q/A 11th Page of 19 TOC 1st Previous Next Bottom Just 11th


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS (CONTINUED)                                       

existing royalty obligations and a portion of future royalty obligations in     
consideration of sharing future royalty income that may arise from Hydron's     
agreement with Valera Pharmaceuticals, Inc. (Valera). Partners has completed a  
non-brokered private placement of Limited Partnership Interest to ten accredited
investors including Hydron's Chairman, Richard Banakus and a Hydron Director,   
Ronald J. Saul. Each limited partner invested $30,000 or an aggregate of        
$300,000 for a 49.999% interest of Partners. The establishment of the Partners  
allowed Hydron to meet its current and future royalty obligations and retain the
possibility of a significant royalty income stream opportunity.                 

RESULTS OF OPERATIONS                                                           

    Total net sales for the three months ended September 30, 2004 were
$200,975, a decrease of $123,730 or 38.1% from net sales of $324,705 for the    
three months ended September 30, 2003. Skin care products net sales for the     
three months ended September 30, 2004 were $172,954, a decrease of $116,885 or  
40.3% from sales of $289,839 for the three months ended September 30, 2003.     
Professional products net sales for the three months ended September 30, 2004   
were $3,194, a decrease of $186 or 5.5% from sales of $3,380 for the three      
months ended September 30, 2003. Shipping and handling revenues for the three   
months ended September 30, 2004 were $24,826, a decrease of $4,456 or 15.2% from
shipping and handling revenues of $29,282 in the three months ended September   
30, 2003.                                                                       

    For the nine months ended September 30, 2004, total net sales were
$923,204, a decrease of $36,718 or 3.8% from net sales of $959,922 for the nine 
months ended September 30, 2003. Skin care products net sales for the nine      
months ended September 30, 2004 were $828,169, a decrease of $18,178 or 2.1%    
from sales of $846,347 for the nine months ended September 30 2003. Professional
products net sales for the nine months ended September 30, 2004 were $5,368, a  
decrease of $2,500 or 31.8% from sales of $7,868 for the nine months ended      
September 30, 2003. Shipping and handling revenues for the nine months ended    
September 30, 2004 were $87,842, a decrease of $11,439 or 11.5% from shipping   
and handling revenues of $99,281 in the nine months ended September 30, 2003.   

         Skin care products sales consist primarily of catalog sales and private
label sales. During the three months ended September 30, 2004, direct marketing 
catalog sales decreased by $70,176 or 29.1% from $241,255 for the three months  
ended September 30, 2003 to $171,079. Private label sales for the three months  
ended September 30, 2004 were $1,875, a decrease of $19,493 or 91.2% from       
private label sales of $21,368 for the same period last year. These sales tend  
to fluctuate from quarter to quarter as purchase orders for individual items    
cover more than one year's supply. Purchase orders are received only            
approximately four to six times a year for the seven items in the line.         

        For the nine months ended September 30, 2004, direct marketing catalog
sales decreased by $164,876 or 21.1% from $781,638 last year to $616,762 this   
year. Private label sales for the nine months were $211,407, an increase of     
$173,914 or 463.9% from private label sales of $37,493 for the same period last 
year. As stated above, these private label sales tend to fluctuate significantly
from quarter to quarter.                                                        

         Historically, over 98% of the Company's products are sold in the United
States. The Company sells skin care products in Australia and dental products in
Spain and Canada. These sales are not material at this time and represented 0.6%
and 1.1% of total net sales for the three months ended September 30, 2004 and   
2003, respectively. For the nine months ended September 30, sales outside the   
United States represented 0.5% and 0.6% of total sales for 2004 and 2003,       
respectively.                                                                   

10

10-Q/A 12th Page of 19 TOC 1st Previous Next Bottom Just 12th


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS (CONTINUED)                                       

    Cost of sales was $75,324 for the three months ended September 30,
2004, a decrease of $38,273 or 33.7% from cost of sales of $113,597 for the     
three months ended September 30, 2003. Cost of sales was 37.5% of total sales   
the three months ended September 30, 2004 compared to 35.0% for the three months
ended September 30, 2003. The cost of sales percentage increased as the         
quarterly non-variable costs had to be absorbed by the lower sales level.       
Shipping and handling costs for the third quarter of 2004 were $29,806, a       
decrease of $6,419 or 17.7% from shipping and handling costs of $36,225 for the 
same period in 2003. This decrease reflects the decline in catalog sales.       

 For the nine months ended September 30, 2004, cost of sales was
$378,776, an increase of $28,226 or 8.1% from cost of sales of $350,550 for the 
nine months ended September 30, 2003. Cost of sales was 41.0% of total sales for
the nine months ended September 30, 2004 compared to 36.5% for the nine months  
ended September 30, 2003. The increase in cost of sales percentage reflects the 
impact of this period's significantly higher private label sales that include   
higher product cost (68.4% of sales) versus the product cost of catalog sales   
(18.1% of sales). Shipping and handling costs for the nine months were $97,744, 
a decrease of $28,200 or 22.4% from shipping and handling costs of $125,944 for 
the same period in 2003. This decrease reflects the 21.1% decline in catalog    
sales plus savings realized by performing more of the shipping and handling     
tasks in house.                                                                 

     The Company's overall gross profit margin decreased to 62.5% of net
sales for the three months ended September 30, 2004 versus 65.0% for the three  
months ended September 30, 2003. This is due primarily to the impact of fixed   
costs on lower sales levels. For the nine months ended September 30, 2004 the   
overall gross profit margin decreased to 59.0% of net sales versus 63.5% for the
same period in 2003. The decrease for the nine months reflects the impact of    
significant private label sales that have a lower margin than catalog sales.    

     Royalty expenses for the three months ended September 30, 2004 were
$4,565. There were no royalty expenses for the first quarter of 2003. For the   
nine months ended September 30, 2004, royalty expenses were $27,384. No accrued 
royalty expenses were required in 2003 as the definition of applicable products 
was changed, creating a surplus accrual during 2003. That surplus has now been  
exhausted and the expense reflects the royalties due on sales for the period.   

         Research and development ("R&D") expenses reflect the Company's efforts
to identify new product opportunities, obtain regulatory approval, develop and  
package the products for commercial sale, perform appropriate efficacy and      
safety tests, and conduct consumer panel studies and focus groups. R&D expenses 
for the three months ended September 30, 2004 were $46,946, an increase of      
$20,006 or 74.3% over R&D expenses of $26,940 for the three months ended        
September 30, 2003. This increase is due principally to the Company's R&D work  
on its new oxygenation technology. For the nine months ended September 30, 2004,
R&D expenses were $168,389, an increase of $96,503 or 134.2% over R&D expenses  
of $71,886 for the same period last year. The amount of R&D expenses per year   
will continue to increase as the oxygenation technology moves through the FDA   
approval process and the Company expands its research behind this technology.   

Selling, general, and administrative ("SG&A") expenses for the three
months ended September 30, 2004 were $318,666, representing an increase of      
$21,289 or 7.2% from SG&A expenses of $297,377 for the three months ended       
September 30, 2003. Set up costs for Hydron Royalty Partners, LLLP was $19,834, 
and printing costs increased $10,226 for the production of annual reports and   
proxy statements for the shareholders' meeting in November. These were offset by
lower credit card processing fees and postage. For the nine months ended        
September 30, 2004, selling, general, and administrative expenses were $926,681,
an increase of $9,528 or 1.0% from $917,153 for the same period last year.      

11

10-Q/A 13th Page of 19 TOC 1st Previous Next Bottom Just 13th


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS (CONTINUED)                                       

       Depreciation and amortization expense was $8,550 for the three months
ended September 30, 2004, a decrease of $41,220 or 82.8% from $49,770 for the   
three months ended September 30, 2003. For the nine months ended September 30,  
2004 depreciation and amortization was $25,650, a decrease of $123,660 or 82.8% 
from $149,310 for the same period last year. The decrease was due primarily to  
intangible assets becoming fully amortized by mid-2003. Fully amortized         
intangible assets of $5,370,000 were written off in 2003.                       

       Net interest income was $942 for the three months ended September 30,
2004 compared to net interest expense of $593 for the three months ended        
September 30, 2003. The Company maintains a conservative investment strategy    
with respect to its cash balances, deriving investment income primarily from    
U.S. Treasury securities.                                                       

         Minority interest in net loss was $15,448 for the three and nine months
ended September 30, 2004 and represents the minority partners' share of the     
operating loss of Hydron Royalty Partners, LLLP, which has been consolidated    
with Hydron Technologies, Inc. The partnership was established in August 2004,  
so there is no similar item included in last year's results.                    

     The Company had a net loss of $236,686, representing an increase of
$73,114 or 45.7% for the three months ended September 30, 2004 from the net loss
of $163,572 for the three months ended September 30, 2003, a result primarily of
the factors discussed above.                                                    

     For the nine months ended September 30, 2004, the Company had a net
loss of $585,624, an increase of $56,665 or 10.7% from net loss of $528,959 for 
the nine months ended September 30, 2003. The increase in the net loss is a     
result primarily of the factors discussed above.                                

LIQUIDITY AND FINANCIAL RESOURCES                                               

   The Company anticipates that present working capital balances and
internally generated funds will not be sufficient to meet its working capital   
needs for the next twelve months. The development of the Company's oxygenation  
technology will depend on its ability to raise capital on commercially          
reasonable terms. The Company's working capital was approximately $674,618 as of
September 30, 2004, including cash and cash equivalents of approximately        
$559,704. Cash used by operating activities for the nine months ended September 
30, 2004 was $677,479. Net funds used for investing activities were $24,574 and 
financing activities provided $297,034 for the nine months ended September 30,  
2004.                                                                           

        The Company does not have any material debt, long-term capital leases,
or long-term operating leases. The lease on the current office facility expires 
August 31, 2005. There are no long-term capital expenditures under construction 
and no long-term commitments other than royalty payments under an agreement with
GP Strategies Corporation (See note 5 to the Financial Statements included in   
the Company's Form 10-K dated December 31, 2003). The Company does not have any 
lines of credit. There are no purchase order commitments that exceed 90 days.   

     The Company completed a non-brokered private placement of 1,750,000
Units at $.20 per Unit ($350,000), on December 10, 2002 to several accredited   
investors. Each Unit is comprised of one share of common stock and one          
three-year option to buy one additional common share at $.20. As of December 31,
2003 all 1,750,000 options are outstanding.                                     

12

10-Q/A 14th Page of 19 TOC 1st Previous Next Bottom Just 14th


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS (CONTINUED)                                       

    On November 14, 2003, the Company completed a non-brokered private
placement of 2,210,000 Units at $.50 per Unit ($1,105,000) to accredited        
investors. Each Unit is comprised of one share of Common Stock and one five-year
warrant to buy one additional common share at $1.00. As of December 31, 2003,   
all 2,210,000 warrants are outstanding.                                         

       The Company has registered these outstanding shares and the 4,581,500
underlying shares of outstanding warrants and options with the Securities and   
Exchange Commission as required by the November 14, 2003 private placement      
agreement. The warrants/options are a future source of capital for the Company  
and could generate up to $2,560,000 if they are exercised.                      

   Hydron Royalty Partners, LLLP (the "Partners") was established in
August, 2004 by Hydron, the general partner, and ten limited partners for the   
purpose of paying outstanding and up to $30,000 annually of future royalty and  
licensing obligations in return for royalty and licensing payments revenues     
possibly due from Valera Pharmaceuticals, Inc. The establishment of Partners    
allowed Hydron to meet its current and future royalty obligations and retain the
possibility of a significant royalty income stream opportunity.                 

        The Company's independent accountants issued a "going concern" opinion
since the Company has incurred significant losses over the past five years and  
generates a negative cash flow on a monthly basis. The ability of the Company to
continue as a going concern is dependent upon increasing sales, managing        
operating expenses, and obtaining additional equity financing.                  

Management's plan includes the following elements:                              

o   Obtaining FDA approval of the Company's oxygenation technology in 
marketing segments which are attractive to today's investor;  

  o   Expanding the product line of existing private label customers, thus
         leveraging the Hydron polymer technology across multiple product lines;

o   Effectively applying the Company's existing resources to achieve  
objectives that will attract the interest of new investors and
strategic partners;                                           

  o   Advancing the oxygenation technology in the medical segment so as to
stimulate the interest of investors and strategic partners;   

   o   Entering into joint ventures with strategic partners that can provide
       complimentary products, distribution, and manufacturing capabilities;

o   Developing new skin care products for new private label customers 
      utilizing Hydron's proprietary expertise to expand our product base;

   o   Licensing proprietary and possibly patentable technologies, including
        skin and tissue oxygenation, and the self-adjusting pH system for skin
     care and acne ingredient delivery, where appropriate to third party
companies;                                                    

13

10-Q/A 15th Page of 19 TOC 1st Previous Next Bottom Just 15th


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS (CONTINUED)                                       

 o   Continuing emphasis on catalog sales, including sales made over the
internet, since these sales have higher profit margins;       

    o   Increasing use of direct marketing techniques to reach new and current
       consumers, such as print promotions mailed to targeted consumers, Web
   site specials, promotions to other Web site customers, and direct
E-mail promotions to new customers;                           

    o   Adding new international distribution revenue streams through expanded
use of distribution agreements with foreign and international 
distributors;                                                 

o   Developing, acquiring, and marketing new product lines based on   
       proprietary technologies that appeal to aging baby boomers as well as
to a younger generation;                                      

    o   Continuing to develop proprietary technology that the Company believes
       will improve its long-term success in the skin care business, such as
     the acne ingredient delivery system. The Company's super-oxygenated
         fluid and composition technology should facilitate significant advances
        in skin care products and open application and licensing opportunities
beyond the skin care category;                                

  o   Entering into marketing, licensing, and distribution agreements with
        third parties, which have greater financial and distribution resources
      than those of the Company and that can enhance the Company's product
     introductions with appropriate national marketing support programs.

      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.                                  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS                       

   The statements contained in this Report on Form 10-Q that are not
purely historical 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, including, without     
limitation, its plans regarding distribution and marketing of its products and  
the development, acquisition, and marketing of new products. 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."      

       Each forward-looking statement reflects the Company's current view of
future events and is subject to risks, uncertainties, and other factors that    
could cause actual results to differ materially from any results expressed or   
implied by its forward-looking statements. Important factors that could cause   
actual results to differ materially from the results expressed or implied by any
forward-looking statements include:                                             

o   The volatility of the price of the Company's common stock;        

o   The Company's ability to fund future growth;                      

o   The Company's ability to be profitable;                           

14

10-Q/A 16th Page of 19 TOC 1st Previous Next Bottom Just 16th


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS (CONTINUED)                                       

o   The Company's ability to attract and retain qualified personnel;  

o   General economic conditions in the medical and cosmetic markets;  

o   Market demand for and acceptance of the Company's products;       

    o   Legal claims against the Company, including, but not limited to claims
of patent infringement;                                       

o   The Company's ability to protect its intellectual property;       

o   Defects in the Company's products;                                

o   The Company's obligation to indemnify certain customers;          

o   The Company's dependence on contract manufacturers and suppliers; 

 o   The Company's dependence on a small number of customers for private
label revenue;                                                

  o   The Company's ability to develop and maintain relationships with key
vendors;                                                      

o   New regulations and legislation;                                  

o   General economic and business conditions;                         

    o   Other risks and uncertainties disclosed in the Company's Annual Report
        on Form 10-K for the year ended December 31, 2003 and in the Company's
other filings with the SEC.                                   

   All subsequent forward-looking statements relating to the matters
described in this document and attributable to the Company or to persons acting 
on its behalf are expressly qualified in their entirety by such factors. The    
Company has no obligation to publicly update or revise these forward-looking    
statements to reflect new information, future events, or otherwise, except as   
required by applicable federal securities laws, and the Company cautions you not
to place undue reliance on these forward-looking statements.                    

15

10-Q/A 17th Page of 19 TOC 1st Previous Next Bottom Just 17th


ITEM 4. CONTROLS AND PROCEDURES                                                 

      As of the end of this period, the Company 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 its 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 the Company's disclosure     
controls and procedures are effective to timely alert them to material          
information required to be included in the Company's Securities Exchange Act of 
1934 filings.                                                                   

  There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls  
subsequent to the date that the Company carried out its evaluation.             

16

10-Q/A 18th Page of 19 TOC 1st Previous Next Bottom Just 18th

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                        

(a) Exhibits:                                                                   

31.1     Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 and Item 307 of Regulation S-K     
(filed herewith).                                             

31.2     Certification of Chief Operating Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 and Item 307 of Regulation S-K     
(filed herewith).                                             

31.3     Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 and Item 307 of Regulation S-K     
(filed herewith).                                             

32.1     Certification of Chief Executive Officer Pursuant to 18 U.S.C., Section
       1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (filed herewith).                                        

32.2     Certification of Chief Operating Officer Pursuant to 18 U.S.C., Section
       1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (filed herewith).                                        

32.3     Certification of Chief Financial Officer Pursuant to 18 U.S.C., Section
       1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (filed herewith).                                        

(b) Reports on Form 8-K:                                                        

         On October 1, 2004 the Company filed a report on Form 8-K in connection
    with the establishment of Hydron Royalty Partners, LLLP, a limited
    liability limited partnership, for the purpose of funding existing
royalty obligations.                                          

17

10-Q/A Last Page of 19 TOC 1st Previous Next Bottom Just 19th

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.                                          

                                     HYDRON TECHNOLOGIES, INC.

                                 /s/: William A. Lauby
                                 ---------------------
                            William A. Lauby
                                       Chief Financial Officer and
                                        Principal Accounting Officer

Dated: November 10, 2004                                                        

18

10-Q/A	1st Page of 19	TOC	Top	Previous	Next	Bottom	Just 1st

10-Q/A	2nd Page of 19	TOC	1st	Previous	Next	Bottom	Just 2nd

10-Q/A	3rd Page of 19	TOC	1st	Previous	Next	Bottom	Just 3rd

10-Q/A	4th Page of 19	TOC	1st	Previous	Next	Bottom	Just 4th

10-Q/A	5th Page of 19	TOC	1st	Previous	Next	Bottom	Just 5th

10-Q/A	6th Page of 19	TOC	1st	Previous	Next	Bottom	Just 6th

10-Q/A	7th Page of 19	TOC	1st	Previous	Next	Bottom	Just 7th

10-Q/A	8th Page of 19	TOC	1st	Previous	Next	Bottom	Just 8th

10-Q/A	9th Page of 19	TOC	1st	Previous	Next	Bottom	Just 9th

10-Q/A	10th Page of 19	TOC	1st	Previous	Next	Bottom	Just 10th

10-Q/A	11th Page of 19	TOC	1st	Previous	Next	Bottom	Just 11th

10-Q/A	12th Page of 19	TOC	1st	Previous	Next	Bottom	Just 12th

10-Q/A	13th Page of 19	TOC	1st	Previous	Next	Bottom	Just 13th

10-Q/A	14th Page of 19	TOC	1st	Previous	Next	Bottom	Just 14th

10-Q/A	15th Page of 19	TOC	1st	Previous	Next	Bottom	Just 15th

10-Q/A	16th Page of 19	TOC	1st	Previous	Next	Bottom	Just 16th

10-Q/A	17th Page of 19	TOC	1st	Previous	Next	Bottom	Just 17th

10-Q/A	18th Page of 19	TOC	1st	Previous	Next	Bottom	Just 18th

10-Q/A	Last Page of 19	TOC	1st	Previous	Next	Bottom	Just 19th

Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 10-Q/A Filing	Date	First	Last	Other Filings

	12/10/02	13
	9/30/03	3	13	10-Q
	11/14/03	10	14
	12/31/03	4	16	NT 10-K, 10-K, 10-K/A
	1/1/04	8
For The Period Ended	9/30/04	1	13	8-K, 10-Q
	10/1/04	18
Filed On / Filed As Of	11/10/04	1	19	10-Q
	11/15/04	8		DEF 14A
	12/31/04	7		10-K
	8/31/05	13

Top				List All Filings

Filing Submission - Alternative Formats (Word / Rich Text, HTML, Plain Text, SGML, XML, et al.)

			in		Show		and
Help...	Wildcards: ? (any letter), * (many). *Logic:* for Docs: & (and), \| (or); for Text: \| (anywhere), "(&)" (near).

Hydron Technologies Inc · 10-Q/A · For 9/30/04

Filed On 11/10/04 5:20pm ET · SEC File 0-06333 · Accession Number 1144204-4-18313

Amendment to Quarterly Report · Form 10-QFiling Table of Contents

10-Q/A · Amendment to Quarterly ReportDocument Table of Contents

Dates Referenced Herein and Documents Incorporated By Reference

Amendment to Quarterly Report · Form 10-Q
Filing Table of Contents

10-Q/A · Amendment to Quarterly Report
Document Table of Contents