As filed with the Securities and Exchange Commission on: July 16, 2004
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Registration No. 333-112824
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
HYDRON TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
New York
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(State or jurisdiction of incorporation or organization)
13-1574215
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(I.R.S. Employer identification Number)
2201 West Sample Road
Building 9, Suite 7B
Pompano Beach, Florida 33073
(954) 861-6400
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(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
William A. Lauby
Chief Financial Officer
Hydron Technologies, Inc.
2201 West Sample Road
Building 9, Suite 7B
Pompano Beach, Florida 33073
(954) 861-6400
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(Name, address, including zip code, and telephone number
including area code, of agent for service)
With a copy to:
Robert C. Brighton, Jr., Esq.
Ruden McClosky Smith Schuster & Russell, P.A.
200 East Broward Boulevard
Suite 1500
Fort Lauderdale, Florida 33301
(954) 527-2473
Approximate date of commencement of sale to the public: From time to
time after the effective date of this Registration Statement as determined by
the selling shareholders.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under he Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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PROSPECTUS
HYDRON TECHNOLOGIES, INC.
8,766,500 Shares of Common Stock
2,210,000 Warrants
This prospectus relates to the offering from time to time of up to 8,766,500
shares of Common Stock and 2,210,000 warrants to purchase shares of Common Stock
("Securities") of Hydron Technologies, Inc. by the shareholders named in this
prospectus or their transferees, pledgees, donees or successors ("Selling
Shareholders"). The Selling Shareholders' include the Company's Chairman of the
Board and current Chief Executive Officer, Richard Banakus and the other three
members of the Board of Directors (see "Selling Shareholders" below). Hydron
will receive an aggregate $2,837,173 upon the exercise of the warrants and
options, assuming the exercise of all warrants and options for cash. Hydron will
not receive any proceeds from sales of the outstanding shares of Common Stock or
sales of the underlying shares relating to the warrants and options.
Hydron is registering these Securities for resale, but the registration of these
Securities does not necessarily mean that the Selling Shareholders' will sell
any of these Securities.
Our Common Stock is quoted on the OTC Bulletin Board, a regulated quotation
service for over-the-counter securities not listed or traded on NASDAQ, under
the symbol HTEC.OB. On January 30, 2004, the closing price of the Company's
Common Stock was $ 0.58. The warrants are not quoted or traded in any securities
market.
INVESTING IN OUR SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
6 FOR DISCUSSION OF THESE RISKS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SALE OF THE COMMON STOCK OR
DETERMINED THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE AND COMPLETE. IT
IS ILLEGAL FOR ANY PERSON TO TELL YOU OTHERWISE.
The date of this prospectus is July 16, 2004.
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THE COMPANY
Hydron Technologies, Inc. markets a broad range of personal 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 markets its skin care products through
Hydron's direct-to-consumer catalog and on the Internet at www.hydron.com.
Hydron has received a patent on its method for delivery of oxygen into the skin
and tissue without the use of the bloodstream and is committed to the
development of products and medical applications associated with its proprietary
tissue oxygenation technology.
Our principal offices are located at 2201 West Sample Road, Building 9, Suite
7B, Pompano Beach, Florida 33073 and our telephone number is (954) 861-6400. Our
website address is www.hydron.com. Information on our website does not
constitute part of this prospectus.
RISK FACTORS
You should carefully consider the following risks before making an investment
decision. We urge you to consult with your own legal and tax advisers prior to
making an investment decision.
Hydron Has Received a "Going Concern" Report from Our Auditors
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The Company has received a "going concern" report from its independent certified
public accountants. The Company has experienced losses from operations in every
fiscal year since 1996. These matters raise substantial doubt about the
Company's ability to continue as a going concern.
We have incurred significant losses over the past five years and anticipate that
we will continue to incur substantial losses, both on a net and operating basis,
in the current year. The Company is dependant on the proceeds of private
offerings to finance its current operations. The ability of the Company to
continue as a going concern is dependent upon, among other things, development
of Hydron's oxygenation technology, enhanced sales levels, the careful
management of costs, and receipt of additional equity financing.
Hydron Has Not Paid Dividends Since 1996 and Its Ability to Pay Dividends
Depends Upon Improvements in Our Financial Results
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We cannot assure you that the Company will operate at a profit in the future or
whether or when we will generate cash flow from legally available sources
sufficient to pay dividends. The Company has no current plans or intentions of
paying dividends in the foreseeable future and may never pay any dividends.
Management of the Company will pay costs incurred in operating the Company and
conducting and completing the Company's business plan before dividends are paid.
We may also enter into agreements relating to loans to us that would prohibit
the payment of dividends. In addition, the Board of Directors may determine to
establish and maintain reserves for working capital, taxes, insurance and other
costs and expenses relating to the Company's business. Any of the foregoing
events may delay or prevent your receipt of dividends.
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We May be Unable to Successfully Develop and Market Products Using the
Super-Oxygenation Technology
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We have had some initial research success utilizing a new technology that
super-oxygenates certain liquids and have focused our business strategy around
the development and marketing of products derived from this technology. However,
as we conduct additional research, our initial results may be offset by
currently unknown negative attributes.
Technical Difficulties
Among other things, the ability to super-oxygenate liquids may be limited to
only a few specific substances, restricting the number and type of products that
may be developed using the new technology. Additional research will be required
to determine whether fluids with varying degrees of viscosities will retain
super-oxygenation. Other desirable ingredients such as sterilizing additives may
react with the high level of oxygen and change the expected results thus
limiting the number or types of additives that could be used.
Reaction by Users
The combination of additives with the high level of oxygen in the products may
cause users of such products to experience negative reactions that would
outweigh the potential benefits of the products. The normal reaction from
additives may vary when combined with extra oxygen and the expected result may
not be achieved.
FDA Approvals
Our marketing of commercial products based on the new technology is dependent on
achieving various milestones in the research and development by certain dates.
There can be no assurance that these progress goals will be met or that we will
be able to introduce commercial products using the new technology on the
timetable contemplated by our business strategy or at all. Moreover, some
products will require approval by the Food and Drug Administration. This
approval process can be lengthy and costly (several hundred thousand dollars).
Delays in or the failure to obtain necessary FDA approvals would limit our
ability to offer products using the new technology.
Attracting Strategic Alliances
We will seek to develop alliances with leaders in other industries to develop,
market and distribute products using the new technology. However, these
companies may choose to develop their own alternative technologies, or we may be
unable to negotiate an alliance on satisfactory terms. Without such alliances,
our ability to successfully conduct product development, and market and
distribute new products will be adversely affected by our limited resources,
including our marketing ability and access to distribution channels. Failure to
develop alliances would significantly reduce the commercial potential of the new
technology.
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Raising Additional Financing
We expect that significant additional financing will be required to develop the
broad-ranging infrastructure we believe will be necessary to fully realize the
commercial potential of our new technology in several areas, including, health
care, industrial and cosmetic uses. We will be required to raise additional
financing to fund several years of research, develop manufacturing techniques,
and create products and packaging necessary for product distribution. Equity
financing will dilute current shareholders' holdings and the price received for
our stock in such financings may be very dilutive to existing shareholders
depending on R & D results, market conditions, and other factors affecting the
price of securities.
Qualified Employees
If we are unable to attract and retain qualified personnel, and obtain adequate
accounting and management resources, along with computer hardware and software
capabilities that we do not currently possess, our ability to commercially
exploit this new technology will be impeded and result in a delay in achieving
alliance agreements, product introductions and brand development.
We Are Dependent Upon Key Personnel
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Our success depends substantially upon our ability to attract, integrate,
motivate and retain qualified senior management and key research and sales
personnel. Our Company is currently managed by Richard Banakus, who serves on an
interim basis as President and Chief Executive Officer, by Terrence S. McGrath,
our Chief Operating Officer, and by William A. Lauby, our Chief Financial
Officer. The loss of Mr. Banakus, Mr. McGrath, or Mr. Lauby would have a
material adverse effect on our business.
Competition for qualified managerial, technical and sales personnel is intense,
and we may not be able to retain existing or attract additional qualified
personnel in the future. If we were to lose key personnel or fail to attract
additional personnel with appropriate qualifications, we would have difficulty
implementing our business strategy, and our operating results and financial
condition could be materially adversely affected.
We Will Require Significant Working Capital in the Future
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We anticipate that present working capital balances and internally-generated
funds will be sufficient to meet our working capital needs for the next twelve
months. The development of our oxygenation technology will depend on our ability
to raise capital on commercially reasonable terms. There is no assurance that we
will be able to obtain additional financing for such purposes or on acceptable
terms. Any additional equity financing may dilute existing holders of our
equity. Debt and bank financing, if and when incurred, will affect our operating
results and may require us to agree to restrictive covenants that may impact the
way we implement new initiatives and operate our business.
Competition in the Cosmetics and Skin Care Products Business is Significant
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The cosmetics and skin care products business is highly competitive. Our
competitors generally have greater financial and other resources than we
possess, including increased brand recognition.
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Our industry frequently experiences rapid changes due to fluctuations in
consumer preferences and industry trends. We compete on the basis of numerous
factors. Brand recognition, product quality, performance and price, and the
extent to which consumers are educated about product benefits have a marked
influence on consumers' choices. Advertising, promotion, merchandising and
packaging, along with the timing of new product introductions and line
extensions also have a significant impact on buying decisions, while the
structure and quality of the marketing channels affect product reception. Our
competitors' products are often supported by substantial promotional campaigns.
These factors, as well as demographic trends, economic conditions, competitors'
discount pricing strategies, and potential direct sales by manufacturers to our
customers could have a material adverse effect on our business, financial
condition and results of operations.
We Rely Upon Our Licensing Agreement With National Patent Development
Corporation for the Supply of the Hydron (TM) Polymer
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National Patent Development Corporation ("NPDC") has granted us an exclusive
worldwide license to market products using Hydron(TM) polymers in the oral
health, personal care/cosmetic and other consumer product fields, and to utilize
the Hydron(TM) polymer as a drug release mechanism in topically applied,
nonprescription pharmaceutical products. The Hydron(TM) polymer is the
underlying technology in substantially all of the Company's existing products,
but is not integral to our new super-oxygenation technology. However, the loss
or substantial dilution of our rights to use the Hydron(TM) polymer would have a
material, adverse affect on our business.
Hydron is currently in negotiations with the assignee and successor in interest
of NPDC to eliminate or reduce the royalties payable on the sales of products
that utilize the Hydron(TM) polymer. If these negotiations are not concluded
successfully, the existing agreement would continue and Hydron would be required
to pay any royalties that are in arrears (approximately $120,000) as of December
31, 2003. This would reduce the funds available for the development of our
oxygenation technology
We Are Reliant Upon Independent Third Parties for the Manufacture of Our Hydron
(TM) Polymer-Based Products
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Hydron(TM) polymer-based products are manufactured exclusively for us by
independent third parties. To date, the outsourcing of the production has
allowed us to meet shipment demands in a timely manner. If we experience delays
in the delivery of the finished products or the raw materials or components used
to make such products, our business could be adversely affected.
We Have a Limited Ability to Protect Our Intellectual Property
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We regard our patents, copyrights, trademarks, service marks, and other
intellectual property as important to our success.
We hold several patents relating to our products and have licensed the rights to
the Hydron polymer for the uses described above. However, not all of our
technology is protected by patents or registration, and even if protected in
some jurisdictions, may not be protected in every jurisdiction where our
products are or may be sold.
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The steps taken by us, and by those with whom we hold licenses, to protect our
intellectual property may not be adequate. Third parties may infringe or
misappropriate our patents, copyrights, trademarks, service marks and similar
propriety rights. We will rely on patent, trademark, and copyright law, trade
secret protection and confidentiality, as well as, license and other agreements
with employees, customers, strategic partners and others to protect our
intellectual property. Effective patent, copyright, trademark, service mark and
trade secret protection may not be available in all markets where our products
are or may be sold.
Hydron's stock has a market value below $1.00, which restricts trading the
stock.
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Our common stock is subject to the penny stock rules, which means our market
liquidity could be adversely affected. The SEC's regulations define a "penny
stock" to be an equity security that has a market price less than $5.00 per
share, subject to certain exceptions. These rules impose additional sales
practice requirements on broker dealers that sell low-priced securities to
persons other than established customers and institutional accredited investors;
and require the delivery of a disclosure schedule explaining the nature and
risks of the penny stock market. As a result, the ability or willingness of
broker-dealers to sell of make a market in our common stock might decline.
Our Common Stock Price May Be Volatile
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Although our Common Stock trades on the over-the-counter market and is quoted on
the OTC Bulletin Board, we cannot assure you that there will be an active
trading market or adequate liquidity for our Common Stock. In addition, the
trading price of our common stock has been and may continue to be subject to
wide fluctuations over short and long periods of time. Our stock price may
fluctuate in response to a number of events and factors, including:
o quarterly or cyclical variations in financial results;
o future announcements concerning our business;
o changes in financial estimates and recommendations by securities
analysts;
o news reports relating to trends in relevant industries;
o actions of competitors or the entrance of new competitors;
o market and industry perceptions of our success, or lack thereof, in
pursuing our business plan;
o prevailing interest rates;
o governmental regulations;
o changes and developments affecting relevant industries; and
o general market conditions.
No Market Exists for the Sale of Our Warrants
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Although our Common Stock trades on the over-the-counter market and is quoted on
the OTC Bulletin Board, there is no established market or price quotation for
warrants to purchase our Company's Common Stock. Accordingly, it is unlikely
that you will be able to sell the warrants except in private sales. This lack of
a trading market and price substantially limit your ability to sell such
warrants and, should you be able to, would likely depress the price you would
receive in any such sale.
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Moreover, the value of the warrants will be affected by the same factors
affecting the value of our shares of Common Stock.
Issuance of Additional Stock Could Dilute, Impede Tender Offers or Adversely
Affect the Rights of Common Stock Holders
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Our authorized, unissued and unreserved shares of capital stock as of January
30, 2004 includes (i) a total of approximately 16,200,000 shares of Common Stock
and (ii) a total of 5,000,000 shares of preferred stock. Our Board of Directors,
without any action by our shareholders, is authorized to issue additional shares
of Common Stock and to designate and issue shares of preferred stock in such
series as it deems appropriate, and to establish the rights, preferences, and
privileges of such preferred stock, including dividend, voting and liquidation
rights. The ability of the Board to issue additional shares of Common Stock and
to designate and issue Preferred Stock having preferential rights to those of
the shares of Common Stock could dilute the value of the shares of Common Stock.
In addition, the issuance of shares of preferred stock with special rights or
disproportionate voting power could impede or deter an unsolicited tender offer
or other takeover proposal for us, and could adversely affect the voting power
and other rights of holders of our Common Stock.
Future Sales of Our Common Stock Could Depress Our Stock Price
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We cannot predict the effect that future sales of our Common Stock will have on
its market price. As of January 30, 2004, there were 9,260,136 shares of Common
Stock outstanding and an additional 4,481,500 warrants or options to purchase
shares of our Common Stock outstanding. Shares that were sold to Selling
Shareholders or other shares of our Common Stock that we issue in the future may
become available for resale in the public market from time to time. Sales of
substantial amounts of our Common Stock, or the perception that such sales may
occur, could adversely affect the market price of our Common Stock or our
ability to raise capital by offering equity securities.
We May Experience Volatility in Our Stock Price That Could Affect Your
Investment
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The price of our Common Stock has been, and may continue to be, highly volatile
in response to various factors, many of which we cannot control, including:
o developments in the industries in which we operate;
o actual or anticipated variations in quarterly or annual operating
results;
o speculation in the press or investment community; and
o announcements of technological innovations or new products by us or
our competitors.
Our Common Stock's market price may also be affected by our inability to meet
analyst and investor expectations or our failure to achieve projected financial
results, including those set forth in this prospectus. Any failure to meet such
expectations or projected financial results, even if minor, could cause the
market price of our Common Stock to decline. Volatility in our stock price may
result in an inability to sell shares at or above the price at which they were
purchased in this offering.
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In addition, stock markets have generally experienced a high level of price and
volume volatility, and the market prices of equity securities of many companies
have experienced wide price fluctuations not necessarily related to the
operating performance of such companies. These broad market fluctuations may
adversely affect our Common Stock's market price. In the past, securities class
action lawsuits frequently have been instituted against such companies following
periods of volatility in the market price of such companies' securities. If any
such litigation is instigated against us, it could result in substantial costs
and a diversion of management's attention and resources, which could have a
material adverse effect on our business, results of operations, and financial
condition.
Our Executive Officers and Directors Control a Significant Percentage of Our
Common Stock and These Shareholders May Take Actions That Are Adverse to Your
Interests
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Our executive officers and directors and entities affiliated with them, in the
aggregate, beneficially own approximately 42.5% of the outstanding shares of our
Common Stock. As a result, these shareholders, acting together, can
significantly influence all matters requiring shareholder approval, including
the election and removal of directors and approval of significant corporate
transactions such as mergers, consolidations, and sales of assets. They also
could dictate the management of our business. This concentration of ownership
could have the effect of delaying, deferring, or preventing a change in control
or impeding a merger or consolidation, takeover, or other business combination,
which could cause the market price of our Common Stock to fall or prevent you
from receiving a premium in such a transaction.
The conditions described above could delay or impede transactions involving a
change in control of the Company or its management.
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, as amended. All statements,
other than statements of historical fact, about our plans, beliefs, goals,
intentions, objectives, projections, expectations, assumptions, strategies, and
future events are forward-looking statements.
Words such as "may," "will," "believe," "plan," "should," "could," "seek,"
"expect," "anticipate," "intend," "estimate," "goal," "objective" and similar
words, or discussions of our strategy or other intentions identify
forward-looking statements. Forward-looking statements are subject to a number
of known and unknown risks, uncertainties, and other factors that could cause
actual results to differ materially from those contemplated by such
forward-looking statements. Consequently, you should not place undue reliance on
these forward-looking statements.
o Important factors that could cause a material difference in the actual
results from those contemplated in such forward-looking statements
include, but are not limited to, those listed under "Risk Factors" and
elsewhere in this prospectus.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this pre-effective Amendment No. 2 to Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Pompano
Beach, and State of Florida, on this 15th day of July 2004.
HYDRON TECHNOLOGIES, INC.
By: /s/ RICHARD BANAKUS
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Richard Banakus
Chairman of the Board of
Directors, President, Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this pre-effective
Amendment No. 1 to this Registration Statement on Form S-3 has been signed by
the following persons in the capacities and on the dates indicated. Each person
whose signature appears below constitutes and appoints Richard Banakus, Terrence
S. McGrath, and William A. Lauby, and each of them individually, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
re-substitution, for him in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and any Rule 462(b) Registration Statement and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
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Signature Title Date
-------------------------- ------------------------------------- -------------
/s/ RICHARD BANAKUS* Chairman of the Board of Directors, July 16, 2004
-------------------------- President, Chief Executive Officer
Richard Banakus
/s/ TERRENCE S. MCGRATH* Chief Operating Officer July 16, 2004
--------------------------
Terrence S. McGrath
/s/ WILLIAM A. LAUBY Chief Financial Officer and Principal July 16, 2004
-------------------------- Accounting Officer
William A. Lauby
/s/ KAREN GRAY* Director July 16, 2004
--------------------------
Karen Gray
/s/ JOSHUA ROCHLIN* Director July 16, 2004
--------------------------
Joshua Rochlin
/s/ RONALD J. SAUL* Director July 16, 2004
--------------------------
Ronald J. Saul
* By: /s/ WILLIAM A. LAUBY
--------------------
William A. Lauby
Attorney-in-Fact
Dated: July 16, 2004
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