UNITED STATES

Securities and Exchange Commission

Washington, D.C. 20549

 

Form 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

 

For the quarterly period ended September 30, 2014

 

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission file number 1-13412

 

 

Hudson Technologies, Inc.

 

 

(Exact name of registrant as specified in its charter)

 

New York

(State or other jurisdiction of

incorporation or organization)

 

13-3641539

(I.R.S. Employer

Identification No.)

     
1 Blue Hill Plaza    

P.O. Box 1541

Pearl River, New York

(Address of principal executive offices)

 

10965

(Zip Code )

 

Registrant’s telephone number, including area code   (845) 735-6000

 

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)

x  Yes     ¨  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer (do not check if a smaller reporting company) ¨ Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes     x  No

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

Common stock, $0.01 par value   32,031,426 shares
Class   Outstanding at October 29, 2014

 

 

 

 
 

 

Hudson Technologies, Inc.

 

Index

 

Part   Item   Page
             
Part I.   Financial Information    
             
    Item 1   - Financial Statements    
        - Consolidated Balance Sheets   3
        - Consolidated Statements of Operations   4
        - Consolidated Statements of Cash Flows   5
        - Notes to the Consolidated Financial Statements   6
    Item 2   - Management’s Discussion and Analysis of Financial Condition and Results of Operations   14
    Item 3   - Quantitative and Qualitative Disclosures About Market Risk   20
    Item 4   - Controls and Procedures   21
             
Part II.   Other Information    
             
    Item 1   - Legal Proceedings   22
    Item 6   - Exhibits   22
             
    Signatures    

 

2
 

 

Part I – FINANCIAL INFORMATION

 

Item 1-Financial Statements

 

Hudson Technologies, Inc. and subsidiaries

Consolidated Balance Sheets

(Amounts in thousands, except for share and par value amounts)

 

    September 30,
2014
    December 31,
2013
 
    (unaudited)        
Assets                
Current assets:                
Cash and cash equivalents   $ 1,173     $ 669  
Trade accounts receivable - net     9,036       3,706  
Income taxes receivable     0       2,709  
Inventories     27,653       33,967  
Deferred tax asset     207       207  
Prepaid expenses and other current assets     4,838       608  
Total current assets     42,907       41,866  
                 
Property, plant and equipment, less accumulated depreciation     4,462       4,536  
Other assets     150       106  
Deferred tax asset     5,171       5,363  
Investments in affiliates     377       440  
Intangible assets, less accumulated amortization     48       57  
Total Assets   $ 53,115     $ 52,368  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
Accounts payable and accrued expenses   $ 7,834     $ 3,955  
Accrued payroll     437       289  
Short-term debt and current maturities of long-term debt     272       15,367  
Total current liabilities     8,543       19,611  
Long-term debt, less current maturities     458       4,671  
Total Liabilities     9,001       24,282  
                 
Commitments and contingencies                
                 
Stockholders' equity:                
Preferred stock, shares authorized 5,000,000:                
Series A convertible preferred stock, $0.01 par value ($100 liquidation preference value); shares authorized 150,000; none  issued or outstanding     0       0  
Common stock, $0.01 par value; shares authorized 50,000,000; issued and outstanding 32,031,426 and 25,070,386     320       251  
Additional paid-in capital     60,543       44,944  
Accumulated deficit     (16,749 )     (17,109 )
Total Stockholders' Equity     44,114       28,086  
                 
Total Liabilities and Stockholders' Equity   $ 53,115     $ 52,368  

 

See Accompanying Notes to the Consolidated Financial Statements.

 

3
 

 

Hudson Technologies, Inc. and subsidiaries

Consolidated Statements of Operations

(unaudited)

(Amounts in thousands, except for share and per share amounts)

 

   

Three month period

ended September 30,

   

Nine month period

ended September 30,

 
    2014     2013     2014     2013  
                         
Revenues   $ 15,296     $ 15,171     $ 47,755     $ 53,816  
Cost of sales, excluding lower of cost or market adjustment     13,801       13,084       42,255       40,019  
Lower of cost or market adjustment     0       14,700       0       14,700  
Gross profit (loss)     1,495       (12,613 )     5,500       (903 )
                                 
Operating expenses:                                
Selling and marketing     630       756       1,894       2,397  
General and administrative     992       1,077       2,609       2,967  
Total operating expenses     1,622       1,833       4,503       5,364  
                                 
Operating income (loss)     (127 )     (14,446 )     997       (6,267 )
                                 
Other income (expense):                                
Interest expense     (99 )     (247 )     (494 )     (687 )
Total other income (expense)     (99 )     (247 )     (494 )     (687 )
                                 
Income (loss) before income taxes     (226 )     (14,693 )     503       (6,954 )
                                 
Income tax (benefit) expense     (118 )     (5,578 )     143       (2,642 )
                                 
Net income (loss)   $ (108 )   $ (9,115 )   $ 360     $ (4,312 )
                                 
Net income (loss) per common share – Basic   $ (0.00 )   $ (0.36 )   $ 0.01     $ (0.17 )
Net income (loss) per common share – Diluted   $ (0.00 )   $ (0.36 )   $ 0.01     $ (0.17 )
Weighted average number of shares outstanding – Basic     32,031,426       25,070,386       28,179,853       24,751,674  
Weighted average number of shares outstanding – Diluted     32,031,426       25,070,386       29,839,975       24,751,674  

 

See Accompanying Notes to the Consolidated Financial Statements.

 

4
 

 

Hudson Technologies, Inc. and subsidiaries

Consolidated Statements of Cash Flows

Increase (Decrease) in Cash and Cash Equivalents

(unaudited)

(Amounts in thousands)

 

   

Nine month period

ended September 30,

 
    2014     2013  
             
Cash flows from operating activities:                
Net income (loss)   $ 360     $ (4,312 )
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:                
Depreciation and amortization     626       600  
Value of share-based payment arrangements     29       53  
Amortization of deferred finance costs     81       61  
Deferred tax asset utilization     193       (1,053 )
Allowance for doubtful accounts     48       49  
Lower of cost or market adjustment     0       6,694  
                 
Changes in assets and liabilities:                
Trade accounts receivable     (5,378 )     (4,959 )
Inventories     6,314       1,095  
Income taxes receivable     2,709       0  
Prepaid and other assets     (4,355 )     (4,253 )
Accounts payable and accrued expenses     4,027       (233 )
Deferred income taxes     0       542  
Cash provided by (used in) operating activities     4,654       (5,716 )
                 
Cash flows from investing activities:                
Additions to patents     (10 )     (7 )
Additions to property, plant, and equipment     (534 )     (556 )
Investment in affiliates     63       (47 )
Cash used by investing activities     (481 )     (610 )
                 
Cash flows from financing activities:                
Proceeds from issuance of common stock     15,639       1,110  
Proceeds from (repayments of) short-term debt – net     (15,080 )     5,337  
Repayment of long-term debt     (4,228 )     (169 )
Cash provided (used) by financing activities     (3,669 )     6,278  
                 
Increase (decrease) in cash and cash equivalents     504       (48 )
Cash and cash equivalents at beginning of period     669       3,991  
Cash and cash equivalents at end of period   $ 1,173     $ 3,943  
                 
Supplemental Disclosure of Cash Flow Information:                
Cash paid during period for interest   $ 413     $ 626  
Cash paid during period for income taxes   $ 0     $ 1,085  

 

See Accompanying Notes to the Consolidated Financial Statements.

 

5
 

 

Hudson Technologies, Inc. and subsidiaries

Notes to the Consolidated Financial Statements

 

Note 1 - Summary of Significant Accounting Policies

 

Business

 

Hudson Technologies, Inc., incorporated under the laws of New York on January 11, 1991, is a refrigerant services company providing innovative solutions to recurring problems within the refrigeration industry. The Company's products and services are primarily used in commercial air conditioning, industrial processing and refrigeration systems, including (i) refrigerant sales, (ii) refrigerant management services consisting primarily of reclamation of refrigerants and (iii) RefrigerantSide® Services performed at a customer's site, consisting of system decontamination to remove moisture, oils and other contaminants. In addition, RefrigerantSide® Services include predictive and diagnostic services for industrial and commercial refrigeration applications, which are designed to predict potential catastrophic problems and identify inefficiencies in an operating system. The Company’s SmartEnergy OPS™ service is a web-based real time continuous monitoring service applicable to a facility’s refrigeration systems and other energy systems. The Company’s Chiller Chemistry®, Chill Smart®, Fluid Chemistry®, and Performance Optimization are predictive and diagnostic service offerings. As a component of the Company’s products and services, the Company also participates in the generation of carbon offset projects. The Company operates principally through its wholly-owned subsidiary, Hudson Technologies Company. Unless the context requires otherwise, references to the “Company”, “Hudson”, “we”, “us”, “our”, or similar pronouns refer to Hudson Technologies, Inc. and its subsidiaries.

 

In preparing the accompanying consolidated financial statements, and in accordance with ASC855-10 “Subsequent Events”, the Company’s management has evaluated subsequent events through the date that the financial statements were filed.

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The financial information included in this quarterly report should be read in conjunction with the Company’s audited financial statements and related notes thereto for the year ended December 31, 2013. Operating results for the nine month period ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

 

In the opinion of management, all estimates and adjustments considered necessary for a fair presentation have been included and all such adjustments were normal and recurring.

 

Consolidation

 

The consolidated financial statements represent all companies of which Hudson directly or indirectly has majority ownership or otherwise controls. Significant intercompany accounts and transactions have been eliminated. The Company's consolidated financial statements include the accounts of wholly-owned subsidiaries Hudson Holdings, Inc. and Hudson Technologies Company.

 

Fair Value of Financial Instruments

 

The carrying values of financial instruments including trade accounts receivable and accounts payable approximate fair value at September 30, 2014 and December 31, 2013, because of the relatively short maturity of these instruments. The carrying value of short and long-term debt approximates fair value, based upon quoted market rates of similar debt issues, as of September 30, 2014 and December 31, 2013.

 

Credit Risk

 

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of temporary cash investments and trade accounts receivable. The Company maintains its temporary cash investments in highly-rated financial institutions and, at times, the balances exceed FDIC insurance coverage. The Company's trade accounts receivable are primarily due from companies throughout the United States. The Company reviews each customer's credit history before extending credit.

 

The Company establishes an allowance for doubtful accounts based on factors associated with the credit risk of specific accounts, historical trends, and other information. The carrying value of the Company’s accounts receivable is reduced by the established allowance for doubtful accounts. The allowance for doubtful accounts includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve for the remaining accounts receivable balances. The Company adjusts its reserves based on factors that affect the collectability of the accounts receivable balances.

 

6
 

 

For the nine month period ended September 30, 2014, two customers each accounted for 10% or more of the Company’s revenues and, in the aggregate these two customers accounted for 26% of the Company’s revenues. At September 30, 2014, there were $2,004,000 in outstanding receivables from these customers.

 

For the nine month period ended September 30, 2013, two customers each accounted for 10% or more of the Company’s revenues and, in the aggregate these two customers accounted for 25% of the Company’s revenues. At September 30, 2013, there were $622,000 in outstanding receivables from these customers.

 

The loss of a principal customer or a decline in the economic prospects of and/or a reduction in purchases of the Company's products or services by any such customer could have a material adverse effect on the Company's operating results and financial position.

 

Cash and Cash Equivalents

 

Temporary investments with original maturities of ninety days or less are included in cash and cash equivalents.

 

Inventories

 

Inventories, consisting primarily of refrigerant products available for sale, are stated at the lower of cost, on a first-in first-out basis, or market. Where the market price of inventory is less than the related cost, the Company may be required to write down its inventory through a lower of cost or market adjustment, the impact of which is reflected in cost of sales on the Consolidated Statements of Operations. Any such adjustment is based on management’s judgment regarding future demand and market conditions and analysis of historical experience.

 

Property, Plant and Equipment

 

Property, plant and equipment are stated at cost, including internally manufactured equipment. The cost to complete equipment that is under construction is not considered to be material to the Company's financial position. Provision for depreciation is recorded (for financial reporting purposes) using the straight-line method over the useful lives of the respective assets. Leasehold improvements are amortized on a straight-line basis over the shorter of economic life or terms of the respective leases. Costs of maintenance and repairs are charged to expense when incurred.

 

Due to the specialized nature of the Company's business, it is possible that the Company's estimates of equipment useful life periods may change in the future.

 

Revenues and Cost of Sales

 

Revenues are recorded upon completion of service or product shipment and passage of title to customers in accordance with contractual terms. The Company evaluates each sale to ensure collectability. In addition, each sale is based on an arrangement with the customer and the sales price to the customer is fixed. License fees are recognized over the period of the license based on the respective performance measurements associated with the license. Royalty revenues are recognized when earned. Cost of sales is recorded based on the cost of products shipped or services performed and related direct operating costs of the Company's facilities. To the extent that the Company charges its customers shipping fees, such amounts are included as a component of revenue and the corresponding costs are included as a component of cost of sales.

 

The Company's revenues are derived from refrigerant and reclamation sales and RefrigerantSide® Services, including license and royalty revenues. The revenues for each of these lines are as follows:

 

Nine Month Period Ended September 30,   2014     2013  
(in thousands, unaudited)            
Refrigerant and reclamation sales   $ 44,011     $ 50,564  
RefrigerantSide® Services     3,744       3,252  
Total   $ 47,755     $ 53,816  

 

Income Taxes

 

The Company utilizes the asset and liability method for recording deferred income taxes, which provides for the establishment of deferred tax asset or liability accounts based on the difference between tax and financial reporting bases of certain assets and liabilities. The tax benefit associated with the Company's net operating loss carry forwards (“NOLs”) is recognized to the extent that the Company is expected to recognize future taxable income. The Company assesses the recoverability of its deferred tax assets based on its expectation that it will recognize future taxable income and adjusts its valuation allowance accordingly. As of September 30, 2014 and December 31, 2013, the net deferred tax asset was $5,378,000 and $5,570,000, respectively.

 

7
 

 

Certain states either do not allow or limit NOLs and as such the Company will be liable for certain state taxes. To the extent that the Company utilizes its NOLs, it will not pay tax on such income but may be subject to the federal alternative minimum tax. In addition, to the extent that the Company’s net income, if any, exceeds the annual NOL limitation it will pay income taxes based on existing statutory rates. Moreover, as a result of a “change in control”, as defined by the Internal Revenue Service, the Company’s ability to utilize its existing NOLs is subject to certain annual limitations. Approximately $10,600,000 of the Company’s $16,000,000 of NOLs are subject to annual limitations of $1,300,000.

 

As a result of an Internal Revenue Service audit, the 2011 and prior federal tax years have been closed. The Company operates in many states throughout the United States and, as of September 30, 2014, the various states’ statutes of limitations remain open for tax years subsequent to 2008. The Company recognizes interest and penalties, if any, relating to income taxes as a component of the provision for income taxes.

 

The IRS recently initiated an examination of the Company’s federal income tax returns for the fiscal years 2012 and 2013. The Company does not expect the results of this examination to have a material effect on the Company’s financial statements.

 

The Company evaluates uncertain tax positions, if any, by determining if it is more likely than not to be sustained upon examination by the taxing authorities. As of September 30, 2014 and December 31, 2013, the Company had no uncertain tax positions.

 

Income per Common and Equivalent Shares

 

If dilutive, common equivalent shares (common shares assuming exercise of options and warrants) utilizing the treasury stock method are considered in the presentation of diluted earnings per share. The reconciliation of shares used to determine net income per share is as follows (dollars in thousands, unaudited):

 

   

Three Month Period

ended September 30,

   

Nine Month Period

ended September 30,

 
    2014     2013     2014     2013  
                         
Net income (loss)   $ (108 )   $ (9,115 )   $ 360     $ (4,312 )
                                 
Weighted average number of shares - basic     32,031,426       25,070,386       28,179,853       24,751,674  
Shares underlying warrants     0       0       196,522       0  
Shares underlying options     0       0       1,463,600       0  
Weighted average number of shares outstanding - diluted     32,031,426       25,070,386       29,839,975       24,751,674  

 

During the three month periods ended September 30, 2014 and 2013, certain options and warrants aggregating 3,676,661 and 3,746,807 shares, respectively, have been excluded from the calculation of diluted shares, due to the fact that their effect would be anti-dilutive.

 

During the nine month periods ended September 30, 2014 and 2013, certain options and warrants aggregating 80,843 and 3,746,807 shares, respectively, have been excluded from the calculation of diluted shares, due to the fact that their effect would be anti-dilutive.

 

Estimates and Risks

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect reported amounts of certain assets and liabilities, the disclosure of contingent assets and liabilities, and the results of operations during the reporting period. Actual results could differ from these estimates.

 

The Company utilizes both internal and external sources to evaluate potential current and future liabilities for various commitments and contingencies. In the event that the assumptions or conditions change in the future, the estimates could differ from the original estimates.

 

Several of the Company's accounting policies involve significant judgments, uncertainties and estimations. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. To the extent that actual results differ from management's judgments and estimates, there could be a material adverse effect on the Company. On a continuous basis, the Company evaluates its estimates, including, but not limited to, those estimates related to its allowance for doubtful accounts, inventory reserves, and valuation allowance for the deferred tax assets relating to its NOLs and commitments and contingencies. With respect to accounts receivable, the Company estimates the necessary allowance for doubtful accounts based on both historical and anticipated trends of payment history and the ability of the customer to fulfill its obligations. For inventory, the Company evaluates both current and anticipated sales prices of its products to determine if a write down of inventory to net realizable value is necessary. In determining the Company’s valuation allowance for its deferred tax assets, the Company assesses its ability to generate taxable income in the future.

 

8
 

 

The Company participates in an industry that is highly regulated, and changes in the regulations affecting our business could affect our operating results. Currently the Company purchases virgin hydrochlorofluorocarbon (“HCFC”) and hydrofluorocarbon (“HFC”) refrigerants and reclaimable, primarily HCFC, HFC and chlorofluorocarbon (“CFC”), refrigerants from suppliers and its customers. Effective January 1, 1996, the Clean Air Act (the “Act”) prohibited the production of virgin CFC refrigerants and limited the production of virgin HCFC refrigerants. Effective January 2004, the Act further limited the production of virgin HCFC refrigerants and federal regulations were enacted which established production and consumption allowances for HCFC refrigerants which imposed limitations on the importation of certain virgin HCFC refrigerants. Under the Act, production of certain virgin HCFC refrigerants is scheduled to be phased out during the period 2010 through 2020, and production of all virgin HCFC refrigerants is scheduled to be phased out by 2030. In December 2009, the Environmental Protection Agency (“EPA”) issued a final rule (the “2009 Rule”) which limited the total pounds of virgin HCFC refrigerants that could be produced and imported for the years 2010 through 2014 to levels which, based upon the EPA’s estimates, would require as much as 20% of the service demand for existing equipment to be met by reclaimed or recycled HCFC refrigerants. As a result of litigation, the 2009 Rule was vacated, and in April 2013, the EPA issued a final rule (the “April 2013 Rule”) providing for further reductions in the production and importation of virgin HCFC refrigerants in the years 2013 and 2014 when compared to the reductions originally established in the 2009 Rule. On October 16, 2014, the Administrator of the EPA signed a final rule providing further reductions in the production and consumption allowances for HCFC refrigerants for the years 2015 through 2019 (the “Final Rule”). In the Final Rule, the EPA has established a linear draw down for the production or importation of virgin HCFC-22 that will start at approximately 22 million pounds in 2015 and reduce by approximately 4.5 million pounds each year and end at zero in 2020.

 

To the extent that the Company is unable to source sufficient quantities of refrigerants or is unable to obtain refrigerants on commercially reasonable terms or experiences a decline in demand and/or price for refrigerants sold by the Company, the Company could realize reductions in revenue from refrigerant sales, which could have a material adverse effect on its operating results and its financial position.

 

The Company is subject to various legal proceedings. The Company assesses the merit and potential liability associated with each of these proceedings. In addition, the Company estimates potential liability, if any, related to these matters. To the extent that these estimates are not accurate, or circumstances change in the future, the Company could realize liabilities, which could have a material adverse effect on its operating results and its financial position.

 

Impairment of Long-lived Assets

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the cost to sell.

 

Recent Accounting Pronouncements

 

In March 2013, the FASB issued ASU No. 2013-05, which amends the guidance in ASC 830, “Foreign Currency Matters”. ASU No. 2013-05 addresses the accounting for the cumulative translation adjustment (“CTA”) when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. This amended guidance is to be applied prospectively and is effective for the Company beginning on January 1, 2014. The implementation of the amended accounting guidance did not have a material impact on our consolidated financial position or results of operations.

 

In July 2013, the FASB issued ASU 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." ASU 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this Update are effective for fiscal years (and interim periods within those years) beginning after December 15, 2013. The adoption of ASU 2013-11 did not have a material impact on our results of operations or our financial position.

 

9
 

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. An entity should apply the amendments in ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. We are currently evaluating the effects of ASU 2014-09 and therefore cannot estimate the effects, if any on historical or future revenue recognition at this time.

 

Note 2 - Share-based Compensation

 

Share-based compensation represents the cost related to share-based awards, typically stock options, granted to employees, non-employees, officers and directors. Share-based compensation is measured at grant date, based on the estimated aggregate fair value of the award on the grant date, and such amount is charged to compensation expense on a straight-line basis (net of estimated forfeitures) over the requisite service period. For the nine month periods ended September 30, 2014 and 2013, the share-based compensation expense of $29,000 and $53,000, respectively, is reflected in general and administrative expenses in the consolidated income statements.

 

Share-based awards have historically been stock options issued pursuant to the terms of the Company’s stock option and stock incentive plans, (collectively, the “Plans”), described below. The Plans may be administered by the Board of Directors or the Compensation Committee of the Board or by another committee appointed by the Board from among its members as provided in the Plans. Presently, the Plans are administered by the Company’s Compensation Committee of the Board of Directors. As of September 30, 2014, the Plans authorized the issuance of stock options to purchase 6,000,000 shares of the Company’s common stock and, as of September 30, 2014 there were 2,511,733 shares of the Company’s common stock available for issuance for future stock option grants or other stock based awards.

 

Stock option awards, which allow the recipient to purchase shares of the Company’s common stock at a fixed price, are typically granted at an exercise price equal to the Company’s stock price at the date of grant. Typically, the Company’s stock option awards have vested from immediately to two years from the grant date and have had a contractual term ranging from five to ten years.

 

During the nine month periods ended September 30, 2014 and 2013, the Company issued options to purchase 10,000 shares and 110,000 shares, respectively. As of September 30, 2014, there was $68,000 of unrecognized compensation cost related to non-vested previously granted option awards.

 

Effective July 25, 1997, the Company adopted its 1997 Employee Stock Option Plan, which was amended on August 19, 1999, (“1997 Plan”) pursuant to which 2,000,000 shares of common stock were reserved for issuance upon the exercise of options designated as either (i) incentive stock options (“ISOs”) under the Internal Revenue Code of 1986, as amended (the “Code”), or (ii) nonqualified options. ISOs could be granted under the 1997 Plan to employees and officers of the Company. Non-qualified options could be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights could also be issued in tandem with stock options. Effective June 11, 2007, the Company’s ability to grant options or stock appreciation rights under the 1997 Plan expired.

 

Effective September 10, 2004, the Company adopted its 2004 Stock Incentive Plan (“2004 Plan”) pursuant to which 2,500,000 shares of common stock were reserved for issuance upon the exercise of options, designated as either (i) ISOs under the Code, or (ii) nonqualified options, restricted stock, deferred stock or other stock-based awards. ISOs could be granted under the 2004 Plan to employees and officers of the Company. Non qualified options, restricted stock, deferred stock or other stock-based awards could be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights could also be issued in tandem with stock options. Effective September 10, 2014, the Company’s ability to grant options or other awards under the 2004 Plan expired.

 

ISOs granted under the 2004 Plan could not be granted at a price less than the fair market value of the common stock on the date of grant (or 110% of fair market value in the case of persons holding 10% or more of the voting stock of the Company). Nonqualified options granted under the 2004 Plan could not be granted at a price less than the fair market value of the common stock. Options granted under the 2004 Plan expire not more than ten years from the date of grant (five years in the case of ISOs granted to persons holding 10% or more of the voting stock of the Company).

 

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Effective August 27, 2008, the Company adopted its 2008 Stock Incentive Plan (“2008 Plan”) pursuant to which 3,000,000 shares of common stock were reserved for issuance upon the exercise of options, designated as either (i) ISOs under the Code, or (ii) nonqualified options, restricted stock, deferred stock or other stock-based awards. ISOs may be granted under the 2008 Plan to employees and officers of the Company. Non qualified options, restricted stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2008 Plan is sooner terminated, the ability to grant options or other awards under the 2008 Plan will expire on August 27, 2018.

 

ISOs granted under the 2008 Plan may not be granted at a price less than the fair market value of the common stock on the date of grant (or 110% of fair market value in the case of persons holding 10% or more of the voting stock of the Company). Nonqualified options granted under the 2008 Plan may not be granted at a price less than the fair market value of the common stock. Options granted under the 2008 Plan expire not more than ten years from the date of grant (five years in the case of ISOs granted to persons holding 10% or more of the voting stock of the Company).

 

Effective September 17, 2014, the Company adopted its 2014 Stock Incentive Plan (“2014 Plan”) pursuant to which 3,000,000 shares of common stock were reserved for issuance upon the exercise of options, designated as either (i) ISOs under the Code, or (ii) nonqualified options, restricted stock, deferred stock or other stock-based awards. ISOs may be granted under the 2014 Plan to employees and officers of the Company. Non qualified options, restricted stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2014 Plan is sooner terminated, the ability to grant options or other awards under the 2014 Plan will expire on September 17, 2024.

 

ISOs granted under the 2014 Plan may not be granted at a price less than the fair market value of the common stock on the date of grant (or 110% of fair market value in the case of persons holding 10% or more of the voting stock of the Company). Nonqualified options granted under the 2014 Plan may not be granted at a price less than the fair market value of the common stock. Options granted under the 2014 Plan expire not more than ten years from the date of grant (five years in the case of ISOs granted to persons holding 10% or more of the voting stock of the Company).

 

All stock options have been granted to employees and non-employees at exercise prices equal to or in excess of the market value on the date of the grant.

 

The Company determines the fair value of share based awards at the grant date by using the Black-Scholes option-pricing model, and is incorporating the simplified method to compute expected lives of share based awards with the following weighted-average assumptions:

 

Nine Month Period

ended September 30,

  2014     2013  
Assumptions                
Dividend yield     0 %     0 %
Risk free interest rate     1.69 %     .85% - 1.64 %
Expected volatility     59 %     62% - 76 %
Expected lives     5 years       5 years  

 

A summary of the activity for the Company's Plans for the indicated periods is presented below:

 

Stock Option Plan Totals   Shares     Weighted
Average
Exercise Price
 
Outstanding at December 31, 2012     3,348,935     $ 1.23  
·    Cancelled     (58,617 )   $ 1.87  
·    Exercised     (945,761 )   $ 1.20  
·    Granted     173,354     $ 2.59  
Outstanding at December 31, 2013     2,517,911     $ 1.33  
·    Exercised     (20,000 )   $ 1.18  
·    Granted     10,000     $ 2.73  
Outstanding at September 30, 2014     2,507,911     $ 1.33  

 

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The following is the weighted average contractual life in years and the weighted average exercise price at September 30, 2014 of:

 

          Weighted Average        
    Number of     Remaining     Weighted Average  
    Options     Contractual Life     Exercise Price  
Options outstanding     2,507,911       3.8 years     $ 1.33  
Options vested     2,466,244       3.7 years     $ 1.30  

 

The following is the intrinsic value at September 30, 2014 of :

 

Options outstanding   $ 5,027,955  
Options vested in 2014   $ 0  
Options exercised in 2014   $ 52,000  

 

The intrinsic value of options exercised during the year ended December 31, 2013 was $2,816,000.

 

Note 3 - Debt

 

Bank Credit Line

 

On June 22, 2012, a subsidiary of Hudson entered into a Revolving Credit, Term Loan and Security Agreement (the “PNC Facility”) with PNC Bank, National Association, as agent (“Agent” or “PNC”), and such other lenders as may thereafter become a party to the PNC Facility. Under the terms of the PNC Facility, as amended, Hudson may borrow up to a maximum of $40,000,000 consisting of a term loan in the principal amount of $4,000,000 and revolving loans in a maximum amount up to $36,000,000. Amounts borrowed under the PNC Facility may be used by Hudson for working capital needs and to reimburse drawings under letters of credit. Fees and expenses relating to the creation of the PNC Facility of approximately $144,000 are being amortized over the life of the loan. At September 30, 2014, total borrowings under the PNC Facility were none, and there was $25,000,000 available to borrow under the revolving line of credit. The effective interest rate under the PNC Facility was 3.0% at September 30, 2014.

 

Interest on loans under the PNC Facility is payable in arrears on the first day of each month with respect to loans bearing interest at the domestic rate (as set forth in the PNC Facility) and at the end of each interest period with respect to loans bearing interest at the Eurodollar Rate (as defined in the PNC Facility) or, for Eurodollar Rate Loans (as defined in the PNC Facility) with an interest period in excess of three months, at the earlier of (a) each three months from the commencement of such Eurodollar Rate Loan or (b) the end of the interest period. Interest charges with respect to loans are computed on the actual principal amount of loans outstanding during the month at a rate per annum equal to (A) with respect to Domestic Rate Loans (as defined in the PNC Facility), the sum of (i) a rate per annum equal to the higher of (1) the base commercial lending rate of PNC, (2) the federal funds open rate plus .5% and (3) the daily LIBOR plus 1%, plus (ii) .5% and (B) with respect to Eurodollar Rate Loans, the sum of the Eurodollar Rate plus 2.75%.

 

Hudson granted to PNC, for itself, and as agent for such other lenders as may thereafter become a lender under the PNC Facility, a security interest in Hudson’s receivables, intellectual property, general intangibles, inventory and certain other assets.

 

The PNC Facility contains certain financial and non-financial covenants relating to Hudson, including limitations on Hudson’s ability to pay dividends on common stock or preferred stock, and also includes certain events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, impairments to guarantees and a change of control. The PNC Facility contains a financial covenant to maintain at all times a Fixed Charge Coverage Ratio of not less than 1.10 to 1.00, tested quarterly on a rolling twelve month basis. Fixed Charge Coverage Ratio is defined in the PNC Facility, with respect to any fiscal period, as the ratio of (a) EBITDA of Hudson for such period, minus unfinanced capital expenditures (as defined in the PNC Facility) made by Hudson during such period, minus the aggregate amount of cash taxes paid by Hudson during such period, minus the aggregate amount of dividends and distributions made by Hudson during such period, minus the aggregate amount of payments made with cash by Hudson to satisfy soil sampling and reclamation related to environmental cleanup at the Company’s former Hillburn, NY facility during such period (to the extent not already included in the calculation of EBITDA as determined by the Agent) to (b) the aggregate amount of all principal payments due and/or made, except principal payments related to outstanding revolving advances with regard to all funded debt (as defined in the PNC Facility) of Hudson during such period, plus the aggregate interest expense of Hudson during such period. EBITDA as defined in the PNC Facility shall mean for any period the sum of (i) earnings before interest and taxes for such period plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period, plus (iv) non-cash charges.

 

On October 25, 2013, we entered into the Second Amendment to the PNC Facility (the “Second PNC Amendment”) which, among other things, waived our requirement to comply with the minimum fixed charge coverage ratio covenant of 1.10 to 1.00 for the fiscal quarter ended September 30, 2013 under the PNC Facility and suspended the minimum fixed charge ratio covenant until the quarterly period ending March 31, 2015.

 

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The Second PNC Amendment also redefined the “Revolving Interest Rate” as well as the “Term Loan Rate” (as defined in the PNC Facility) as follows:

 

“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the sum of the Alternate Base Rate (as defined in the PNC Facility) plus one percent (1.00%) with respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus two and three quarters of one percent (2.75%) with respect to the Eurodollar Rate Loans.

 

“Term Loan Rate” shall mean an interest rate per annum equal to (a) the sum of the Alternate Base Rate plus one percent (1.00%) with respect to the Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus two and three quarters of one percent (2.75%) with respect to Eurodollar Rate Loans.

 

On July 2, 2014, we entered into the Third Amendment to the PNC Facility (the “Third PNC Amendment”) which, among other things, extended the term of PNC Facility. Pursuant to the Third PNC Amendment, which was effective June 30, 2014, the Termination Date of the PNC Facility (as defined in the PNC Facility) has been extended to June 30, 2018. The Third PNC Amendment also amended the Minimum EBITDA covenant in the PNC Facility to require that the Company maintain, on a trailing 12 month basis, tested quarterly, minimum EBITDA for the quarters ending June 30, 2014 through December 31, 2014, as follows:

 

Period   Amount  
Six month period ending June 30, 2014   $ 1,123,000  
Nine month period ending September 30, 2014   $ 1,330,000  
Twelve month period ending December 31, 2014   $ 802,000  

 

EBITDA for the nine month period ended September 30, 2014 was $1,623,000, which was in compliance with the EBITDA covenant, as amended by the Third PNC Amendment, for the period. The EBITDA was calculated as follows:

 

    For the nine months
ended September 30, 2014
 
Net income   $ 360,000  
add: income tax provision     143,000  
Income before income taxes     503,000  
add: interest expense     494,000  
add: depreciation and amortization     626,000  
         
Earnings before interest, taxes, depreciation, and amortization   $ 1,623,000  

 

EBITDA, which represents a non-GAAP measurement of certain financial results, does not represent and should not be considered as an alternative to net income or cash provided by operating activities as determined by GAAP. We make no representation or assertion that EBITDA is indicative of our cash provided by operating activities or results of operations. We have provided a reconciliation of the net loss to EBITDA solely for the purpose of complying with SEC disclosure requirements and not as an indication that EBITDA is a substitute measure for income from operations.

 

The Company was in compliance with all covenants, as amended under the PNC Facility as of September 30, 2014. The Company’s ability to comply with these covenants in future quarters may be affected by events beyond the Company’s control, including general economic conditions, weather conditions, regulations and refrigerant pricing. Although we expect to remain in compliance with all covenants in the PNC Facility, as amended, depending on our future operating performance and general economic conditions, we cannot make any assurance that we will continue to be in compliance.

 

The commitments under the PNC Facility will expire and the full outstanding principal amount of the loans, together with accrued and unpaid interest, are due and payable in full on June 30, 2018, unless the commitments are terminated for any reason or the outstanding principal amount of the loans are accelerated sooner following an event of default.

 

Note 4 – Capital Stock

 

On June 6, 2014 the Company entered into an Underwriting Agreement with an investment banking firm for itself and as representative for two other investment banking firms (collectively, the “Underwriters”), in connection with an underwritten offering (the “Offering”) of 6,000,000 shares of the Company’s common stock, par value $0.01 per share (the “Firm Shares”). Pursuant to the Underwriting Agreement, the Company agreed to sell to the Underwriters, and the Underwriters agreed to purchase from the Company, an aggregate of 6,000,000 shares of common stock at a price of $2.3375 per share, and the price to the public was $2.50 per share. Pursuant to the Underwriting Agreement, the Company also granted the Underwriters a 30 day option to purchase up to 900,000 additional shares of its common stock to cover over-allotments, if any. The Company also agreed to reimburse certain expenses incurred by the Underwriters in the Offering.

 

The closing of the Offering was held on June 11, 2014, at which time, the Company sold 6,900,000 shares of its common stock to the Underwriters (including 900,000 shares to cover over-allotments) at a price of $2.3375 per share, and received gross proceeds of $16,128,750. The Underwriters received reimbursement of expenses of $150,000, and the Company also incurred approximately $400,000 of additional expenses in connection with the Offering.

 

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Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Certain statements contained in this section and elsewhere in this Form 10-Q constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, changes in the laws and regulations affecting the industry, changes in the demand and price for refrigerants (including unfavorable market conditions adversely affecting the demand for, and the price of refrigerants), the Company's ability to source refrigerants, regulatory and economic factors, seasonality, competition, litigation, the nature of supplier or customer arrangements that become available to the Company in the future, adverse weather conditions, possible technological obsolescence of existing products and services, possible reduction in the carrying value of long-lived assets, estimates of the useful life of its assets, potential environmental liability, customer concentration, the ability to obtain financing, any delays or interruptions in bringing products and services to market, the timely availability of any requisite permits and authorizations from governmental entities and third parties as well as factors relating to doing business outside the United States, including changes in the laws, regulations, policies, and political, financial and economic conditions, including inflation, interest and currency exchange rates, of countries in which the Company may seek to conduct business, the Company’s ability to successfully integrate any assets it acquires from third parties into its operations, and other risks detailed in the Company’s 10-K for the year ended December 31, 2013 and other subsequent filings with the Securities and Exchange Commission (“SEC”). The words “believe”, “expect”, “anticipate”, “may”, “plan”, “should” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

 

Critical Accounting Policies

 

The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Several of the Company's accounting policies involve significant judgments, uncertainties and estimations. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. To the extent that actual results differ from management's judgments and estimates, there could be a material adverse effect on the Company. On a continuous basis, the Company evaluates its estimates, including, but not limited to, those estimates related to its allowance for doubtful accounts, inventory reserves, and valuation allowance for the deferred tax assets relating to its net operating loss carry forwards (“NOLs”) and commitments and contingencies. With respect to accounts receivable, the Company estimates the necessary allowance for doubtful accounts based on both historical and anticipated trends of payment history and the ability of the customer to fulfill its obligations. For inventory, the Company evaluates both current and anticipated sales prices of its products to determine if a write down of inventory to net realizable value is necessary. In determining the Company’s valuation allowance for its deferred tax assets, the Company assesses its ability to generate taxable income in the future. The Company utilizes both internal and external sources to evaluate potential current and future liabilities for various commitments and contingencies. In the event that the assumptions or conditions change in the future, the estimates could differ from the original estimates.

 

Overview

 

Sales of refrigerants continue to represent a significant portion of the Company’s revenues. The Company’s refrigerant sales are primarily HCFC and HFC based refrigerants and to a lesser extent CFC based refrigerants that are no longer manufactured. Currently the Company purchases virgin HCFC and HFC refrigerants and reclaimable HCFC, HFC and CFC refrigerants from suppliers and its customers. Effective January 1, 1996, the Clean Air Act (the “Act”) prohibited the production of virgin CFC refrigerants and limited the production of virgin HCFC refrigerants. Effective January 2004, the Act further limited the production of virgin HCFC refrigerants and federal regulations were enacted which established production and consumption allowances for HCFC refrigerants and imposed limitations on the importation of certain virgin HCFC refrigerants. Under the Act, production of certain virgin HCFC refrigerants is scheduled to be phased out during the period 2010 through 2020, and production of all virgin HCFC refrigerants is scheduled to be phased out by 2030. In December 2009, the EPA issued the 2009 Rule which limited the total pounds of virgin HCFC refrigerants that could be produced and imported for the years 2010 through 2014 to levels which, based upon the EPA’s estimates, would require as much as 20% of the service demand for existing equipment to be met by reclaimed or recycled HCFC refrigerants. In 2011, as a result of litigation, the 2009 Rule was vacated, and in April 2013, the EPA issued a final rule providing for further reductions in the production and importation of virgin HCFC refrigerants in the years 2013 and 2014 when compared to the reductions originally established in the 2009 Rule. The final rule issued in April 2013 allows for the production or importation of 63 million and 51 million pounds of virgin HCFC-22 in 2013 and 2014, respectively. On October 16, 2014, the Administrator of the EPA signed a final rule providing further reductions in the production and consumption allowances for virgin HCFC refrigerants for the years 2015 through 2019 (the “Final Rule”). In the Final Rule, the EPA has established a linear draw down for the production or importation of virgin HCFC-22 that will start at approximately 22 million pounds in 2015 and reduce by approximately 4.5 million pounds each year and end at zero in 2020.

 

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The Company has created and developed a service offering known as RefrigerantSide® Services. RefrigerantSide® Services are sold to contractors and end-users whose refrigeration systems are used in commercial air conditioning and industrial processing. These services are offered in addition to refrigerant sales and the Company's traditional refrigerant management services, which consist primarily of reclamation of refrigerants. The Company has created a network of service depots that provide a full range of the Company's RefrigerantSide® Services to facilitate the growth and development of its service offerings.

 

The Company focuses its sales and marketing efforts for its RefrigerantSide® Services on customers who the Company believes most readily appreciate and understand the value that is provided by its RefrigerantSide® Services offering. In pursuing its sales and marketing strategy, the Company offers its RefrigerantSide® Services to customers in the following industries: petrochemical, pharmaceutical, industrial power, manufacturing, commercial facility and property management and maritime. The Company may incur additional expenses as it develops its RefrigerantSide® Services offering.

 

Results of Operations

 

Three month period ended September 30, 2014 as compared to the three month period ended September 30, 2013

 

Revenues for the three month period ended September 30, 2014 were $15,296,000, an increase of $125,000 or 1% from the $15,171,000 reported during the comparable 2013 period. The increase in revenues was attributable to an increase in refrigerant revenues of $49,000 and an increase in RefrigerantSide® Services revenues of $76,000. The increase in refrigerant revenue is primarily related to an increase in the number of pounds of certain refrigerants sold, which accounted for an increase in revenues of $3,899,000, offset in part by a decrease in the selling price per pound of certain refrigerants sold, which accounted for a decrease in revenues of $3,850,000. The increase in RefrigerantSide® Services was primarily attributable to an increase in the average revenue per job completed compared to the same period in 2013.

 

Cost of sales for the three month period ended September 30, 2014 was $13,801,000 or 90% of sales. The cost of sales for the three month period ended September 30, 2013, before the lower of cost or market adjustment of $14,700,000, was $13,084,000 or 86% of sales. The increase in the cost of sales percentage from 86% for the three month period ended September 30, 2013 to 90% for the three month period ended September 30, 2014 is primarily due to the cost of certain refrigerants yielding a lower gross margin on those sales for the three month period ended September 30, 2014 compared to the same period in 2013.

 

Operating expenses for the three month period ended September 30, 2014 were $1,622,000, a decrease of $211,000 from the $1,833,000 reported during the comparable 2013 period. The decrease in operating expenses is due to a decrease in selling expenses of $126,000, primarily due to decreased selling payroll costs, as well as a decrease in general and administrative expenses of $85,000 primarily due to a decrease in professional fees.

 

Other income (expense) for the three month period ended September 30, 2014 was ($99,000), compared to the ($247,000) reported during the comparable 2013 period. Other income (expense) consists of interest expense of $99,000 and $247,000 for the comparable 2014 and 2013 periods, respectively. The decrease in interest expense is due to decreased borrowing on the PNC credit facility.

 

Income tax benefit for the three month period ended September 30, 2014 was $118,000 compared to income tax benefit for the three month period ended September 30, 2013 of $5,578,000. For 2014 and 2013 the income tax benefits were for federal and state income tax at statutory rates applied to the pre-tax loss.

 

Net loss for the three month period ended September 30, 2014 was $108,000, a decrease of $9,007,000 from the $9,115,000 net loss reported during the comparable 2013 period, primarily due to the 2013 lower of cost or market adjustment of $14,700,000 offset by the income tax benefit of approximately $5,600,000.

 

Nine month period ended September 30, 2014 as compared to the nine month period ended September 30, 2013

 

Revenues for the nine month period ended September 30, 2014 were $47,755,000, a decrease of $6,061,000 or 11% from the $53,816,000 reported during the comparable 2013 period. The decrease in revenues was primarily attributable to a decrease in refrigerant revenues of $6,553,000 partially offset by an increase in RefrigerantSide® Services revenues of $492,000. The decrease in refrigerant revenue is primarily related to a decrease in the selling price per pound of certain refrigerants sold, which accounted for a decrease in revenues of $24,219,000, offset in part by an increase in the number of pounds of certain refrigerants sold, which accounted for an increase in revenues of $17,666,000. The increase in RefrigerantSide® Services was attributable to an increase in the price of jobs completed offset by a decrease in the number of jobs completed when compared to the same period in 2013.

 

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Cost of sales for the nine month period ended September 30, 2014 was $42,255,000 or 88% of sales. The cost of sales for the nine month period ended September 30, 2013, before the lower of cost or market adjustment of $14,700,000, was $40,019,000 or 74% of sales. The increase in the cost of sales percentage from 74% for the nine month period ended September 30, 2013 to 88% for the nine month period ended September 30, 2014 is primarily due to the cost of certain refrigerants yielding a lower gross margin on those sales for the nine month period ended September 30, 2014 compared to the same period in 2013.

 

Operating expenses for the nine month period ended September 30, 2014 were $4,503,000, a decrease of $861,000 from the $5,364,000 reported during the comparable 2013 period. The decrease in operating expenses are due to a decrease in selling expenses of $503,000 primarily due to decreased selling payroll costs, advertising and professional fees, and a decrease in general and administrative expenses of $358,000 primarily due to a decrease in administrative payroll, investor relations costs and professional fees and a collection of a previously written off bad debt.

 

Other income (expense) for the nine month period ended September 30, 2014 was ($494,000), compared to the ($687,000) reported during the comparable 2013 period. Other income (expense) consists of interest expense of $494,000 and $687,000 for the comparable 2014 and 2013 periods, respectively. The decrease in interest expense is due to decreased borrowing on the PNC credit facility.

 

Income tax expense (benefit) for the nine month period ended September 30, 2014 and 2013 was $143,000 and ($2,642,000), respectively. For 2014 and 2013 the respective income tax expense (benefits) were for federal and state income tax at statutory rates applied to the pre-tax income or (loss).

 

Net income (loss) for the nine month period ended September 30, 2014 was $360,000, an increase of $4,672,000 from the ($4,312,000) net loss reported during the comparable 2013 period, primarily due to the lower of cost or market adjustment in 2013 of $14,700,000, offset by decreased revenues and gross profit margins in 2014.

 

Liquidity and Capital Resources

 

At September 30, 2014, the Company had working capital, which represents current assets less current liabilities of $34,364,000, an increase of $12,109,000 from the working capital of $22,255,000 at December 31, 2013. The increase in working capital is primarily attributable to approximately $16,000,000 of proceeds from the issuance of common stock, offset by the repayment of long term debt of approximately $4,000,000.

 

Inventory and trade receivables are principal components of current assets. At September 30, 2014, the Company had inventories of $27,653,000, a decrease of $6,314,000 from $33,967,000 at December 31, 2013. The decrease in the inventory balance is due to the timing and availability of inventory purchases and the sale of refrigerants. The Company's ability to sell and replace its inventory on a timely basis and the prices at which it can be sold are subject, among other things, to current market conditions and the nature of supplier or customer arrangements and the Company's ability to source CFC based refrigerants (which are no longer being produced), HCFC refrigerants (which are currently being phased down leading to a full phase out of virgin production), or non-CFC based refrigerants. At September 30, 2014, the Company had trade receivables, net of allowance for doubtful accounts, of $9,036,000, an increase of $5,330,000 from $3,706,000 at December 31, 2013. The Company's trade receivables are concentrated with various wholesalers, brokers, contractors and end-users within the refrigeration industry that are primarily located in the continental United States.

 

The Company has historically financed its working capital requirements through cash flows from operations, the issuance of debt and equity securities, and bank borrowings.

 

Net cash provided by operating activities for the nine month period ended September 30, 2014, was $4,654,000 compared with net cash used by operating activities of $5,716,000 for the comparable 2013 period. Net cash provided from operating activities for the 2014 period was primarily attributable to a decrease in inventory and income taxes receivable as well as an increase in accounts payable and accrued expenses offset by an increase in trade accounts receivable and prepaid and other assets.

 

Net cash used by investing activities for the nine month period ended September 30, 2014, was $481,000 compared with net cash used by investing activities of $610,000 for the comparable 2013 period. The net cash used by investing activities for the 2014 period was primarily related to investment in general purpose equipment for the Company’s Champaign, Illinois facility.

 

Net cash used by financing activities for the nine month period ended September 30, 2014, was $3,669,000 compared with net cash provided by financing activities of $6,278,000 for the comparable 2013 period. The net cash used by financing activities for the 2014 period was primarily due to repayment of short term debt and long term debt, offset by proceeds from the issuance of common stock.

 

16
 

 

At September 30, 2014, the Company had cash and cash equivalents of $1,173,000. The Company continues to assess its capital expenditure needs. The Company may, to the extent necessary, continue to utilize its cash balances to purchase equipment primarily for its operations. The Company estimates that the total capital expenditures for 2014 will be approximately $1,000,000.

 

The following is a summary of the Company's significant contractual cash obligations for the periods indicated that existed as of September 30, 2014 (in 000’s) :

 

    Twelve Month Period Ended September 30,  
                               
Long and short term debt and capital lease obligations:   2015     2016     2017     2018     Total  
Principal   $ 272     $ 280     $ 178     $ 0     $ 730  
Estimated interest (1)     21       13       3       0       37  
Operating leases     796       635       516       193       2,140  
                                         
Total contractual cash obligations   $ 1,089     $ 928     $ 697     $ 193     $ 2,907  

 

 

(1) The estimated future interest payments on all debt other than revolving debt are based on the respective interest rates applied to the declining principal balances on each of the notes.

 

On June 22, 2012, a subsidiary of Hudson entered into a Revolving Credit, Term Loan and Security Agreement (the “PNC Facility”) with PNC Bank, National Association, as agent (“Agent” or “PNC”), and such other lenders as may thereafter become a party to the PNC Facility. Under the terms of the PNC Facility, as amended, Hudson may borrow up to a maximum of $40,000,000 consisting of a term loan in the principal amount of $4,000,000 and revolving loans in a maximum amount up to $36,000,000. Amounts borrowed under the PNC Facility may be used by Hudson for working capital needs and to reimburse drawings under letters of credit. Fees and expenses relating to the creation of the PNC Facility of approximately $144,000 are being amortized over the life of the loan. At September 30, 2014, total borrowings under the PNC Facility were none, and there was $25,000,000 available to borrow under the revolving line of credit. The effective interest rate under the PNC Facility was 3.0% at September 30, 2014.

 

Interest on loans under the PNC Facility is payable in arrears on the first day of each month with respect to loans bearing interest at the domestic rate (as set forth in the PNC Facility) and at the end of each interest period with respect to loans bearing interest at the Eurodollar Rate (as set forth in the PNC Facility) or, for Eurodollar Rate Loans (as defined in the PNC Facility) with an interest period in excess of three months, at the earlier of (a) each three months from the commencement of such Eurodollar Rate Loan or (b) the end of the interest period. Interest charges with respect to loans are computed on the actual principal amount of loans outstanding during the month at a rate per annum equal to (A) with respect to Domestic Rate Loans (as defined in the PNC Facility), the sum of (i) a rate per annum equal to the higher of (1) the base commercial lending rate of PNC, (2) the federal funds open rate plus .5% and (3) the daily LIBOR plus 1%, plus (ii) .5% and (B) with respect to Eurodollar Rate Loans, the sum of the Eurodollar rate plus 2.75%.

 

Hudson granted to PNC, for itself, and as agent for such other lenders as thereafter may become a lender under the PNC Facility, a security interest in Hudson’s receivables, intellectual property, general intangibles, inventory and certain other assets.

 

The PNC Facility contains certain financial and non-financial covenants relating to Hudson, including limitations on Hudson’s ability to pay dividends on common stock or preferred stock, and also includes certain events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, impairments to guarantees and a change of control.

 

The PNC Facility contains a financial covenant to maintain at all times a Fixed Charge Coverage Ratio of not less than 1.10 to 1.00, tested quarterly on a rolling twelve month basis. Fixed Charge Coverage Ratio is defined in the PNC Facility, with respect to any fiscal period, as the ratio of (a) EBITDA of Hudson for such period, minus unfinanced capital expenditures (as defined in the PNC Facility) made by Hudson during such period, minus the aggregate amount of cash taxes paid by Hudson during such period, minus the aggregate amount of dividends and distributions made by Hudson during such period, minus the aggregate amount of payments made with cash by Hudson to satisfy soil sampling and reclamation related to environmental cleanup at the Company’s former Hillburn, NY facility during such period (to the extent not already included in the calculation of EBITDA as determined by the Agent) to (b) the aggregate amount of all principal payments due and/or made, except principal payments related to outstanding revolving advances with regard to all funded debt (as defined in the PNC Facility) of Hudson during such period, plus the aggregate interest expense of Hudson during such period. EBITDA as defined in the PNC Facility shall mean for any period the sum of (i) earnings before interest and taxes for such period plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period, plus (iv) non-cash charges.

 

17
 

 

On October 25, 2013, we entered into the Second PNC Amendment which, among other things, waived our requirement to comply with the minimum fixed charge coverage ratio covenant of 1.10 to 1.00 for the fiscal quarter ended September 30, 2013, under the PNC Facility, and suspended the minimum fixed charge ratio covenant until the quarterly period ending March 31, 2015. .

 

The Second PNC Amendment also redefined the “Revolving Interest Rate” as well as the “Term Loan Rate” (as defined in the PNC Facility) as follows:

 

“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the sum of the Alternate Base Rate (as defined in the PNC Facility) plus one percent (1.00%) with respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus two and three quarters of one percent (2.75%) with respect to the Eurodollar Rate Loans.

 

“Term Loan Rate” shall mean an interest rate per annum equal to (a) the sum of the Alternate Base Rate plus one percent (1.00%) with respect to the Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus two and three quarters of one percent (2.75%) with respect to Eurodollar Rate Loans.

 

On July 2, 2014, we entered into the Third Amendment to the PNC Facility (the “Third PNC Amendment”) which, among other things, extended the term of PNC Facility. Pursuant to the Third PNC Amendment, which was effective June 30, 2014, the Termination Date of the PNC Facility (as defined in the PNC Facility) has been extended to June 30, 2018. The Third PNC Amendment also amended the Minimum EBITDA covenant in the PNC Facility to require that the Company maintain, on a trailing 12 month basis, tested quarterly, minimum EBITDA for the quarters ending June 30, 2014 through December 31, 2014, as follows:

 

Period   Amount  
Six month period ending June 30, 2014   $ 1,123,000  
Nine month period ending September 30, 2014   $ 1,330,000  
Twelve month period ending December 31, 2014   $ 802,000  

 

EBITDA for the nine month period ended September 30, 2014 was $1,623,000, which was in compliance with the EBITDA covenant, as amended by the Third PNC Amendment, for the period. The EBITDA was calculated as follows:

 

   

For the nine months

ended September 30, 2014

 
Net income   $ 360,000  
add: income tax provision     143,000  
Income before income taxes     503,000  
add: interest expense     494,000  
add: depreciation and amortization     626,000  
         
Earnings before interest, taxes, depreciation, and amortization   $ 1,623,000  

 

EBITDA, which represents a non-GAAP measurement of certain financial results, does not represent and should not be considered as an alternative to net income or cash provided by operating activities as determined by GAAP. We make no representation or assertion that EBITDA is indicative of our cash provided by operating activities or results of operations. We have provided a reconciliation of the net loss to EBITDA solely for the purpose of complying with SEC disclosure requirements and not as an indication that EBITDA is a substitute measure for income from operations.

 

The Company was in compliance with all covenants, as amended under the PNC Facility as of September 30, 2014. The Company’s ability to comply with these covenants in future quarters may be affected by events beyond the Company’s control, including general economic conditions, weather conditions, regulations and refrigerant pricing. Although we expect to remain in compliance with all covenants in the PNC Facility, as amended, depending on our future operating performance and general economic conditions, we cannot make any assurance that we will continue to be in compliance.

 

The commitments under the PNC Facility will expire and the full outstanding principal amount of the loans, together with accrued and unpaid interest, are due and payable in full on June 30, 2018, unless the commitments are terminated for any reason or the outstanding principal amount of the loans are accelerated sooner following an event of default.

 

On June 6, 2014 the Company entered into an Underwriting Agreement with an investment banking firm for itself and as representative for two other investment banking firms (collectively, the “Underwriters”), in connection with an underwritten offering (the “Offering”) of 6,000,000 shares of the Company’s common stock, par value $0.01 per share (the “Firm Shares”). Pursuant to the Underwriting Agreement, the Company agreed to sell to the Underwriters, and the Underwriters agreed to purchase from the Company, an aggregate of 6,000,000 shares of common stock at a price of $2.3375 per share, and the price to the public was $2.50 per share. Pursuant to the Underwriting Agreement, the Company also granted the Underwriters a 30 day option to purchase up to 900,000 additional shares of its common stock to cover over-allotments, if any. The Company also agreed to reimburse certain expenses incurred by the Underwriters in the Offering.

 

18
 

 

The closing of the Offering was held on June 11, 2014, at which time the Company sold 6,900,000 shares of its common stock to the Underwriters (including 900,000 shares to cover over-allotments) at a price of $2.3375 per share, and received gross proceeds of $16,128,750. The Underwriters received reimbursement of expenses of $150,000, and the Company also incurred approximately $400,000 of additional expenses in connection with the Offering.

 

The Company believes that it will be able to satisfy its working capital requirements for the foreseeable future from anticipated cash flows from operations and available funds under the PNC Facility. In addition, the proceeds from the Offering may be used for working capital and general corporate purposes which may include, among other things, funding acquisitions, although we have no present commitments or agreements with respect to any such transactions. Any unanticipated expenses, including, but not limited to, an increase in the cost of refrigerants purchased by the Company, an increase in operating expenses or failure to achieve expected revenues from the Company's RefrigerantSide® Services and/or refrigerant sales or additional expansion or acquisition costs that may arise in the future would adversely affect the Company's future capital needs. There can be no assurance that the Company's proposed or future plans will be successful, and as such, the Company may require additional capital sooner than anticipated, which capital may not be available on acceptable terms, or at all.

 

Inflation

 

Inflation has not historically had a material impact on the Company's operations.

 

Reliance on Suppliers and Customers

 

The Company participates in an industry that is highly regulated, and changes in the regulations affecting our business could affect our operating results. Currently the Company purchases virgin HCFC and HFC refrigerants and reclaimable, primarily HCFC and CFC, refrigerants from suppliers and its customers. Under the Act the phase-down of future production of certain virgin HCFC refrigerants commenced in 2010 and is scheduled to be phased out by the year 2020, and production of all virgin HCFC refrigerants is scheduled to be phased out by the year 2030. To the extent that the Company is unable to source sufficient quantities of refrigerants or is unable to obtain refrigerants on commercially reasonable terms or experiences a decline in demand and/or price for refrigerants sold by it, the Company could realize reductions in revenue from refrigerant sales, which could have a material adverse effect on the Company’s operating results and financial position.

 

For the nine month period ended September 30, 2014, two customers each accounted for 10% or more of the Company’s revenues and, in the aggregate these two customers accounted for 26% of the Company’s revenues. At September 30, 2014, there were $2,004,000 in outstanding receivables from these customers.

 

For the nine month period ended September 30, 2013, two customers each accounted for 10% or more of the Company’s revenues and, in the aggregate these two customers accounted for 25% of the Company’s revenues. At September 30, 2013, there were $622,000 in outstanding receivables from these customers.

 

The loss of a principal customer or a decline in the economic prospects of and/or a reduction in purchases of the Company's products or services by any such customer could have a material adverse effect on the Company's operating results and financial position.

 

Seasonality and Weather Conditions and Fluctuations in Operating Results

 

The Company's operating results vary from period to period as a result of weather conditions, requirements of potential customers, non-recurring refrigerant and service sales, availability and price of refrigerant products (virgin or reclaimable), changes in reclamation technology and regulations, timing in introduction and/or retrofit or replacement of refrigeration equipment, the rate of expansion of the Company's operations, and by other factors. The Company's business is seasonal in nature with peak sales of refrigerants occurring in the first half of each year. During past years, the seasonal decrease in sales of refrigerants has resulted in losses particularly in the fourth quarter of the year. In addition, to the extent that there is unseasonably cool weather throughout the spring and summer months, which would adversely affect the demand for refrigerants, there would be a corresponding negative impact on the Company. Delays or inability in securing adequate supplies of refrigerants at peak demand periods, lack of refrigerant demand, increased expenses, declining refrigerant prices and a loss of a principal customer could result in significant losses. There can be no assurance that the foregoing factors will not occur and result in a material adverse effect on the Company's financial position and significant losses. The Company believes that to a lesser extent there is a similar seasonal element to RefrigerantSide® Service revenues as refrigerant sales. The Company is continuing to assess its RefrigerantSide® Service revenues seasonal trend.

 

19
 

 

Recent Accounting Pronouncements

 

In March 2013, the FASB issued ASU No. 2013-05, which amends the guidance in ASC 830, “Foreign Currency Matters”. ASU No. 2013-05 addresses the accounting for the cumulative translation adjustment (“CTA”) when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. This amended guidance is to be applied prospectively and is effective for the Company beginning on January 1, 2014. The implementation of the amended accounting guidance did not have a material impact on our consolidated financial position or results of operations.

 

In July 2013, the FASB issued ASU 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." ASU 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this Update are effective for fiscal years (and interim periods within those years) beginning after December 15, 2013. The adoption of ASU 2013-11 did not have a material impact on our results of operations or our financial position.

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. An entity should apply the amendments in ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. We are currently evaluating the effects of ASU 2014-09 and therefore cannot estimate the effects, if any on historical or future revenue recognition at this time.

 

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

 

Interest Rate Sensitivity

 

We are exposed to market risk from fluctuations in interest rates on the PNC Facility. The PNC Facility is a $40,000,000 secured facility. Interest on loans under the PNC Facility is payable in arrears on the first day of each month with respect to loans bearing interest at the domestic rate (as set forth in the PNC Facility) and at the end of each interest period with respect to loans bearing interest at the Eurodollar rate (as set forth in the PNC Facility) or, for Eurodollar rate loans with an interest period in excess of three months, at the earlier of (a) each three months from the commencement of such Eurodollar rate loan or (b) the end if he interest period. As of September 30, 2014 interest charges with respect to loans are computed on the actual principal amount of loans outstanding during the month at a rate per annum equal to (A) with respect to domestic rate loans, the sum of (i) a rate per annum equal to the higher of (1) the base commercial lending rate of PNC, (2) the federal funds open rate plus .5% and (3) the daily LIBOR plus 1%, plus (ii) .5% and (B) with respect to Eurodollar rate loans, the sum of the Eurodollar rate plus 2.75%. The outstanding balance on the PNC Facility as of September 30, 2014 was $0. Future interest rate changes on our borrowing under the PNC Facility may have an impact on our consolidated results of operations.

 

Refrigerant Market

 

We are also exposed to market risk from fluctuations in the demand, price and availability of refrigerants. To the extent that the Company is unable to source sufficient quantities of refrigerants or is unable to obtain refrigerants on commercially reasonable terms, or experiences a decline in demand and/or price for refrigerants sold by the Company, the Company could realize reductions in revenue from refrigerant sales, which could have a material adverse effect on our consolidated results of operations.

 

20
 

 

Item 4 - Controls and Procedures

 

Disclosure Controls and Procedures

 

The Company, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective and provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Because of the inherent limitations in all control systems, any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Furthermore, the Company’s controls and procedures can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control and misstatements due to error or fraud may occur and not be detected on a timely basis.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended September 30, 2014 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

21
 

 

PART II – OTHER INFORMATION

 

Item 1 - Legal Proceedings

 

For information regarding pending legal matters, refer to the Legal Proceedings Section in Part I, Item 3 of the Company’s Form 10-K for the year ended December 31, 2013.

 

Item 6 - Exhibits

 

Exhibit
Number
  Description
10.1   2014 Stock Incentive Plan (1)
10.2   Form of Incentive Stock Option Agreement under the 2014 Stock Incentive Plan with full vesting upon issuance. (2)
10.3   Form of Incentive Stock Option Agreement under the 2014 Stock Incentive Plan with options vesting in equal installments over two year period.
10.4   Form of Non-Incentive Stock Option Agreement under the 2014 Stock Incentive Plan with full vesting upon issuance. (2)
10.5   Form of Non-Incentive Stock Option Agreement under the 2014 Stock Incentive Plan with options vesting in equal installments over two year period. (2)
10.6   Form of Incentive Barrier Stock Option Agreement under the 2014 Stock Incentive Plan with full vesting upon issuance. (2)
10.7   Form of Non-Incentive Barrier Stock Option Agreement under the 2008 Stock Incentive Plan with full vesting upon issuance. (2)
10.8   Form of Incentive Barrier Stock Option Agreement under the 2008 Stock Incentive Plan with full vesting upon issuance. (2)
10.9   Form of Non-Incentive Barrier Stock Option Agreement under the 2008 Stock Incentive Plan with full vesting upon issuance. (2)
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2)
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2)
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 (2)

32.2  

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 (2)

101   Interactive Data Files Pursuant to Rule 405 of Regulation S-T (2)

 

 

(1) Incorporated by reference to Appendix B to the Company’s Definitive Proxy Statement on Schedule 14A filed August 12, 2014.
(2) Filed herewith.

 

22
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  HUDSON TECHNOLOGIES, INC.
         
  By: /s/ Kevin J. Zugibe   October 29, 2014
    Kevin J. Zugibe   Date
    Chairman and    
    Chief Executive Officer    

 

  By: /s/ James R. Buscemi   October 29, 2014
    James R. Buscemi   Date
    Chief Financial Officer    

 

23
 

 

Index to Exhibits

 

Exhibit
Number
  Description
10.1   2014 Stock Incentive Plan (1)
10.2   Form of Incentive Stock Option Agreement under the 2014 Stock Incentive Plan with full vesting upon issuance. (2)
10.3   Form of Incentive Stock Option Agreement under the 2014 Stock Incentive Plan with options vesting in equal installments over two year period.
10.4   Form of Non-Incentive Stock Option Agreement under the 2014 Stock Incentive Plan with full vesting upon issuance. (2)
10.5   Form of Non-Incentive Stock Option Agreement under the 2014 Stock Incentive Plan with options vesting in equal installments over two year period. (2)
10.6   Form of Incentive Barrier Stock Option Agreement under the 2014 Stock Incentive Plan with full vesting upon issuance. (2)
10.7   Form of Non-Incentive Barrier Stock Option Agreement under the 2008 Stock Incentive Plan with full vesting upon issuance. (2)
10.8   Form of Incentive Barrier Stock Option Agreement under the 2008 Stock Incentive Plan with full vesting upon issuance. (2)
10.9   Form of Non-Incentive Barrier Stock Option Agreement under the 2008 Stock Incentive Plan with full vesting upon issuance. (2)
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2)
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2)
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 (2)

32.2  

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 (2)

101   Interactive Data Files Pursuant to Rule 405 of Regulation S-T (2)

 

 

(1) Incorporated by reference to Appendix B to the Company’s Definitive Proxy Statement on Schedule 14A filed August 12, 2014.
(2) Filed herewith.

 

24

 

Exhibit 10.2

 

INCENTIVE STOCK OPTION AGREEMENT

HUDSON TECHNOLOGIES, INC.

 

AGREEMENT made as of the (insert date) (the "Grant Date") between Hudson Technologies, Inc. (the "Company"), a New York corporation, having a principal place of business at PO Box 1541, One Blue Hill Plaza, 14 th Floor, Pearl River, New York 10965, and (insert name of Grantee) (the "Grantee").

 

WHEREAS, the Company desires to grant to the Grantee an Incentive Stock Option to purchase shares of its common stock, par value $.01 per share (the "Shares"), under and for the purposes of the 2014 Stock Incentive Plan of the Company (the "Plan") pursuant to the terms thereof;

 

WHEREAS, the Company and the Grantee understand and agree that unless otherwise defined herein any terms used herein have the same meanings as in the Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

 

1.            Grant of Option . The Company hereby grants to the Grantee the right and option to purchase all or any part of an aggregate of (insert number of shares) shares of Common Stock, $.01 par value, on the terms and conditions and subject to all the limitations set forth herein and in the Plan, which is incorporated herein by reference (the "Option"). The Grantee acknowledges receipt of a copy of the Plan.

 

2.            Purchase Price . The purchase price of the Shares covered by the Option shall be $ (insert price per share) per share.

 

3.            Exercise of Option . The Option granted hereby shall vest and be exercisable in full as of the Grant Date.

 

4.            Term of Option . The option shall terminate (insert term) years from the date of this Agreement, but shall be subject to earlier termination as provided herein or in the Plan.

 

In the event that the Grantee’s employment is terminated for Cause or the Grantee voluntarily terminates employment without the consent of the Company, the Options granted under this Agreement, to the extent not theretofore exercised, shall automatically terminate as of the date of termination of the Grantee’s employment.

 

If the Grantee ceases to be employed by the Company for any reason other than death, disability, termination for Cause, or voluntary termination by the Grantee without the consent of the Company, the Option may be exercised at any time within three (3) months after the date the Grantee ceases to be an employee, but in any event not later than the date on which the Option terminates under this Agreement. In such event, the Option shall be exercisable only to the extent that the right to purchase Shares under this Agreement and the Plan has vested and is in effect at the date of such cessation of employment.

 

In the event of termination of employment due to disability of the Grantee (as determined by the Board of Directors of the Company or the Compensation and Stock Option Committee of the Company, as the case may be, and as to the fact and date of which the Grantee is notified by the Board or that Committee, as the case may be, in writing), the Option shall be exercisable within one (1) year after the date of such termination of employment, but in any event not later than the date on which the Option terminates under this Agreement. In such event, the Option shall be exercisable to the extent that the right to purchase the Shares hereunder has vested on the date of such cessation of employment.

 

1
 

 

In the event of the death of the Grantee while an employee of the Company or within three (3) months after the termination of employment (other than termination for Cause, disability or voluntary termination by the Grantee without consent of the Company), the Option shall be exercisable to the extent exercisable but not exercised as of the date of death and in such event, the Option must be exercised, if at all, within one (1) year after the date of death of the Grantee, but in any event not later than the date on which the Option terminates under this Agreement.

 

For purposes hereof, “Business Day” shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close.

 

5.            Non-Assignability . The Option shall not be transferable by the Grantee otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the Grantee's lifetime, only by the Grantee. The Option shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 5, or the levy of any attachment or similar process upon the Option or such right, shall be null and void.

 

6.            Exercise of Option and Issue of Shares . The Option may be exercised in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice to the Company, together with the tender of the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised, shall contain any warranty required by Section 7 below and shall otherwise comply with the terms and conditions of this Agreement and the Plan. The Company shall pay all original issue taxes with respect to the issue of the Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection herewith. Except as specifically set forth herein, the Grantee acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the responsibility of the Grantee. The Grantee of this Option shall have rights as a shareholder only with respect to any Shares covered by the Option after due exercise of the Option and tender of the full exercise price for the Shares being purchased pursuant to such exercise.

 

7.            Purchase for Investment . Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, or any successor legislation (the "Act"), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

(a)          The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for his or her own account, for investment and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing their option Shares issued pursuant to such exercise:

 

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). Such shares may not be sold, transferred or otherwise disposed of unless they have first been registered under the Act or, unless, in the opinion of counsel satisfactory to the Company's counsel, such registration is not required."

 

(b)       The Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws).

 

2
 

 

8.          Notices . Any notices required or permitted by the terms of this Agreement or the Plan shall be given by hand delivery, overnight courier service, or registered or certified mail, return receipt requested, and sent, if to the Company, at its principal executive offices, and if to the Grantee, at the Grantee’s most current residence address as reflected in the records of the Company or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given when received in accordance with the foregoing provisions. Either party hereto may change the address of which notices shall be given by providing the other party hereto with written notice of such change.

 

9.            Governing Law . This Agreement shall be construed and enforced in accordance with the law of the State of New York.

 

10.          Benefit of Agreement . This Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Grantee has hereunto set his or her hand, all as of the day and year first above written.

 

  HUDSON TECHNOLOGIES, INC.  
     
     
  (insert name and title of Company officer)  
     
     
  (insert Grantee’s name) , Grantee  

 

3

 

Exhibit 10.3

 

INCENTIVE STOCK OPTION AGREEMENT

HUDSON TECHNOLOGIES, INC.

 

AGREEMENT made as of the (insert date) (the "Grant Date") between Hudson Technologies, Inc. (the "Company"), a New York corporation, having a principal place of business at PO Box 1541, One Blue Hill Plaza, 14 th Floor, Pearl River, New York 10965, and (insert name of Grantee) (the "Grantee").

 

WHEREAS, the Company desires to grant to the Grantee an Incentive Stock Option to purchase shares of its common stock, par value $.01 per share (the "Shares"), under and for the purposes of the 2014 Stock Incentive Plan of the Company (the "Plan") pursuant to the terms thereof;

 

WHEREAS, the Company and the Grantee understand and agree that unless otherwise defined herein any terms used herein have the same meanings as in the Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

 

1.            Grant of Option . The Company hereby grants to the Grantee the right and option to purchase all or any part of an aggregate of (insert number of shares) shares of Common Stock, $.01 par value, on the terms and conditions and subject to all the limitations set forth herein and in the Plan, which is incorporated herein by reference (the "Option"). The Grantee acknowledges receipt of a copy of the Plan.

 

2.            Purchase Price . The purchase price of the Shares covered by the Option shall be $ (insert price per share) per share.

 

3.            Exercise of Option . The Options granted hereby shall vest and be exercisable as follows:

 

Amount   Date Vested *   Date Exercisable*
         
insert   1/1/15   1/1/15
    4/1/15   4/1/15
    7/1/15   7/1/15
    10/1/15   10/1/15
    1/1/16   1/1/16
    4/1/16   4/1/16
    7/1/16   7/1/16

 

* illustrative of typical vesting schedule, where options vest quarterly over two years.

 

4.            Term of Option . The option shall terminate (insert term) years from the date of this Agreement, but shall be subject to earlier termination as provided herein or in the Plan.

 

In the event that the Grantee’s employment is terminated for Cause or the Grantee voluntarily terminates employment without the consent of the Company, the Options granted under this Agreement, to the extent not theretofore exercised, shall automatically terminate as of the date of termination of the Grantee’s employment.

 

If the Grantee ceases to be employed by the Company for any reason other than death, disability, termination for Cause, or voluntary termination by the Grantee without the consent of the Company, the Option may be exercised at any time within three (3) months after the date the Grantee ceases to be an employee, but in any event not later than the date on which the Option terminates under this Agreement. In such event, the Option shall be exercisable only to the extent that the right to purchase Shares under this Agreement and the Plan has vested and is in effect at the date of such cessation of employment.

 

1
 

 

In the event of termination of employment due to disability of the Grantee (as determined by the Board of Directors of the Company or the Compensation and Stock Option Committee of the Company, as the case may be, and as to the fact and date of which the Grantee is notified by the Board or that Committee, as the case may be, in writing), the Option shall be exercisable within one (1) year after the date of such termination of employment, but in any event not later than the date on which the Option terminates under this Agreement. In such event, the Option shall be exercisable to the extent that the right to purchase the Shares hereunder has vested on the date of such cessation of employment.

 

In the event of the death of the Grantee while an employee of the Company or within three (3) months after the termination of employment (other than termination for Cause, disability or voluntary termination by the Grantee without consent of the Company), the Option shall be exercisable to the extent exercisable but not exercised as of the date of death and in such event, the Option must be exercised, if at all, within one (1) year after the date of death of the Grantee, but in any event not later than the date on which the Option terminates under this Agreement.

 

For purposes hereof, “Business Day” shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close.

 

5.            Non-Assignability . The Option shall not be transferable by the Grantee otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the Grantee's lifetime, only by the Grantee. The Option shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 5, or the levy of any attachment or similar process upon the Option or such right, shall be null and void.

 

6.            Exercise of Option and Issue of Shares . The Option may be exercised in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice to the Company, together with the tender of the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised, shall contain any warranty required by Section 7 below and shall otherwise comply with the terms and conditions of this Agreement and the Plan. The Company shall pay all original issue taxes with respect to the issue of the Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection herewith. Except as specifically set forth herein, the Grantee acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the responsibility of the Grantee. The Grantee of this Option shall have rights as a shareholder only with respect to any Shares covered by the Option after due exercise of the Option and tender of the full exercise price for the Shares being purchased pursuant to such exercise.

 

7.            Purchase for Investment . Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, or any successor legislation (the "Act"), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

2
 

 

(a)           The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for his or her own account, for investment and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing their option Shares issued pursuant to such exercise:

 

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). Such shares may not be sold, transferred or otherwise disposed of unless they have first been registered under the Act or, unless, in the opinion of counsel satisfactory to the Company's counsel, such registration is not required."

 

(b)        The Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws).

 

8.           Notices . Any notices required or permitted by the terms of this Agreement or the Plan shall be given by hand delivery, overnight courier service, or registered or certified mail, return receipt requested, and sent, if to the Company, at its principal executive offices, and if to the Grantee, at the Grantee’s most current residence address as reflected in the records of the Company or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given when received in accordance with the foregoing provisions. Either party hereto may change the address of which notices shall be given by providing the other party hereto with written notice of such change.

 

9.            Governing Law . This Agreement shall be construed and enforced in accordance with the law of the State of New York.

 

10.          Benefit of Agreement . This Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Grantee has hereunto set his or her hand, all as of the day and year first above written.

 

  HUDSON TECHNOLOGIES, INC.  
     
     
  (insert name and title of Company officer)  
     
     
  (insert Grantee’s name) , Grantee  

 

3

 

Exhibit 10.4

 

NON-QUALIFIED STOCK OPTION AGREEMENT

HUDSON TECHNOLOGIES, INC.

 

AGREEMENT made as of (insert date) (the "Grant Date") between Hudson Technologies, Inc. (the "Company"), a New York corporation, having a principal place of business at PO Box 1541, One Blue Hill Plaza, 14th Floor, Pearl River, New York 10965, and (insert name of Grantee) (the "Grantee").

 

WHEREAS, the Company desires to grant to the Grantee a Non-Qualified Option to purchase shares of its common stock, par value $.01 per share (the "Shares"), under and pursuant to the Company’s 2014 Stock Incentive Plan (the “Plan”);

 

WHEREAS, the Company and the Grantee understand and agree that unless otherwise defined herein any terms used herein have the same meanings as in the Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

 

1.            Grant of Option . The Company hereby grants to the Grantee the right and option to purchase all or any part of an aggregate of (Insert number of shares) shares of its Common Stock, $.01 par value, on the terms and conditions and subject to all the limitations set forth herein and in the Plan, which is incorporated herein by reference (the "Option"). The Grantee acknowledges receipt of a copy of the Plan.

 

2.            Purchase Price . The purchase price of the Shares covered by the Option shall be $ (insert option price) per share.

 

3.            Exercise of Option . The Options granted hereby shall vest and be exercisable in full as of the Grant Date.

 

4.            Term of Option . The option shall terminate ( insert term) years from the date of this Agreement. In the event of the death of the Grantee, the Option shall be exercisable to the extent exercisable but not exercised as of the date of death and, in such event, the Option must be exercised, if at all, within one (1) year after the date of death of the Grantee or, if earlier, within the originally prescribed term of the Option.

 

For purposes hereof, “Business Day” shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close.

 

5.            Non-Assignability . The Option shall not be transferable by the Grantee otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the Grantee's lifetime, only by the Grantee. The Option shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 5, or the levy of any attachment or similar process upon the Option or such right, shall be null and void.

 

6.            Exercise of Option and Issue of Shares . The Option may be exercised in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice to the Company, together with the tender of the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised, shall contain any warranty required by Section 7 below and shall otherwise comply with the terms and conditions of this Agreement and the Plan. The Company shall pay all original issue taxes with respect to the issue of the Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection herewith. Except as specifically set forth herein, the Grantee acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the responsibility of the Grantee. The Grantee of this Option shall have rights as a shareholder only with respect to any Shares covered by the Option after due exercise of the Option and tender of the full exercise price for the Shares being purchased pursuant to such exercise.

 

1
 

 

7.           Purchase for Investment . Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, or any successor legislation (the "Act"), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

(a)        The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for his or her own account, for investment and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing their option Shares issued pursuant to such exercise:

 

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). Such shares may not be sold, transferred or otherwise disposed of unless they have first been registered under the Act or, unless, in the opinion of counsel satisfactory to the Company's counsel, such registration is not required."

 

(b)          The Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws).

 

8.         Notices . Any notices required or permitted by the terms of this Agreement or the Plan shall be given by hand delivery, overnight courier service, or registered or certified mail, return receipt requested, and sent, if to the Company, at its principal executive offices, and if to the Grantee, at the Grantee’s most current residence address as reflected in the records of the Company or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given when received in accordance with the foregoing provisions. Either party hereto may change the address of which notices shall be given by providing the other party hereto with written notice of such change.

 

9.           Governing Law . This Agreement shall be construed and enforced in accordance with the law of the State of New York.

 

10.         Benefit of Agreement . This Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

 

2
 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Grantee has hereunto set his or her hand, all as of the day and year first above written.

 

  HUDSON TECHNOLOGIES, INC.  
     
     
  (Insert name & title of Company Officer)  
     
     
  (Insert name) Grantee  

 

3

 

Exhibit 10.5

 

NON-QUALIFIED STOCK OPTION AGREEMENT

HUDSON TECHNOLOGIES, INC.

 

AGREEMENT made as of (insert date) (the "Grant Date") between Hudson Technologies, Inc. (the "Company"), a New York corporation, having a principal place of business at PO Box 1541, One Blue Hill Plaza, 14th Floor, Pearl River, New York 10965, and (insert name of Grantee) (the "Grantee").

 

WHEREAS, the Company desires to grant to the Grantee a Non-Qualified Option to purchase shares of its common stock, par value $.01 per share (the "Shares"), under and pursuant to the Company’s 2014 Stock Incentive Plan (the “Plan”);

 

WHEREAS, the Company and the Grantee understand and agree that unless otherwise defined herein any terms used herein have the same meanings as in the Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

 

1.            Grant of Option . The Company hereby grants to the Grantee the right and option to purchase all or any part of an aggregate of (Insert number of shares) shares of its Common Stock, $.01 par value, on the terms and conditions and subject to all the limitations set forth herein and in the Plan, which is incorporated herein by reference (the "Option"). The Grantee acknowledges receipt of a copy of the Plan.

 

2.            Purchase Price . The purchase price of the Shares covered by the Option shall be $ (insert option price) per share.

 

3.           The Options granted hereby shall vest and be exercisable as follows:

 

Amount   Date Vested *   Date Exercisable*
         
insert   1/1/15   1/1/15
    4/1/15   4/1/15
    7/1/15   7/1/15
    10/1/15   10/1/15
    1/1/16   1/1/16
    4/1/16   4/1/16
    7/1/16   7/1/16

 

* illustrative of typical vesting schedule, where options vest quarterly over two years.

 

4.            Term of Option . The option shall terminate ( insert term) years from the date of this Agreement. In the event of the death of the Grantee, the Option shall be exercisable to the extent exercisable but not exercised as of the date of death and, in such event, the Option must be exercised, if at all, within one (1) year after the date of death of the Grantee or, if earlier, within the originally prescribed term of the Option.

 

For purposes hereof, “Business Day” shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close.

 

5.            Non-Assignability . The Option shall not be transferable by the Grantee otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the Grantee's lifetime, only by the Grantee. The Option shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 5, or the levy of any attachment or similar process upon the Option or such right, shall be null and void.

 

1
 

 

6.            Exercise of Option and Issue of Shares . The Option may be exercised in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice to the Company, together with the tender of the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised, shall contain any warranty required by Section 7 below and shall otherwise comply with the terms and conditions of this Agreement and the Plan. The Company shall pay all original issue taxes with respect to the issue of the Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection herewith. Except as specifically set forth herein, the Grantee acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the responsibility of the Grantee. The Grantee of this Option shall have rights as a shareholder only with respect to any Shares covered by the Option after due exercise of the Option and tender of the full exercise price for the Shares being purchased pursuant to such exercise.

 

7.           Purchase for Investment . Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, or any successor legislation (the "Act"), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

(a)        The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for his or her own account, for investment and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing their option Shares issued pursuant to such exercise:

 

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). Such shares may not be sold, transferred or otherwise disposed of unless they have first been registered under the Act or, unless, in the opinion of counsel satisfactory to the Company's counsel, such registration is not required."

 

(b)       The Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws).

 

8.          Notices . Any notices required or permitted by the terms of this Agreement or the Plan shall be given by hand delivery, overnight courier service, or registered or certified mail, return receipt requested, and sent, if to the Company, at its principal executive offices, and if to the Grantee, at the Grantee’s most current residence address as reflected in the records of the Company or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given when received in accordance with the foregoing provisions. Either party hereto may change the address of which notices shall be given by providing the other party hereto with written notice of such change.

 

9.           Governing Law . This Agreement shall be construed and enforced in accordance with the law of the State of New York.

 

2
 

 

10.        Benefit of Agreement . This Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Grantee has hereunto set his or her hand, all as of the day and year first above written.

 

  HUDSON TECHNOLOGIES, INC.  
     
     
  (Insert name & title of Company Officer)  
     
     
  (Insert name) Grantee  

 

3

 

Exhibit 10.6

 

INCENTIVE STOCK OPTION AGREEMENT (BARRIER OPTION)

HUDSON TECHNOLOGIES, INC.

 

AGREEMENT made as of the (insert date) (the "Grant Date") between Hudson Technologies, Inc. (the "Company"), a New York corporation, having a principal place of business at PO Box 1541, One Blue Hill Plaza, 14 th Floor, Pearl River, New York 10965, and (insert name of Grantee) (the "Grantee").

 

WHEREAS, the Company desires to grant to the Grantee an Incentive Stock Option to purchase shares of its common stock, par value $.01 per share (the "Shares"), under and for the purposes of the 2014 Stock Incentive Plan of the Company (the "Plan") pursuant to the terms thereof;

 

WHEREAS, the Company and the Grantee understand and agree that unless otherwise defined herein any terms used herein have the same meanings as in the Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

 

1.            Grant of Option . The Company hereby grants to the Grantee the right and option to purchase all or any part of an aggregate of (insert number of shares) shares of Common Stock, $.01 par value, on the terms and conditions and subject to all the limitations set forth herein and in the Plan, which is incorporated herein by reference (the "Option"). The Grantee acknowledges receipt of a copy of the Plan.

 

2.            Purchase Price . The purchase price of the Shares covered by the Option shall be $ (insert price per share) per share.

 

3.            Exercise of Option . The Option granted hereby shall vest and be exercisable in full as of the Grant Date.

 

4.            Term of Option . The Option shall terminate (insert term) years from the date of this Agreement, but shall be subject to earlier termination immediately and without further notice (i) if the Fair Market Value of a share of Common Stock for five (5) consecutive Business Days is below $( insert barrier price ) or (ii) as provided herein or in the Plan.

 

In the event that the Grantee’s employment is terminated for Cause or the Grantee voluntarily terminates employment without the consent of the Company, the Options granted under this Agreement, to the extent not theretofore exercised, shall automatically terminate as of the date of termination of the Grantee’s employment.

 

If the Grantee ceases to be employed by the Company for any reason other than death, disability, termination for Cause, or voluntary termination by the Grantee without the consent of the Company, the Option may be exercised at any time within three (3) months after the date the Grantee ceases to be an employee, but in any event not later than the date on which the Option terminates under this Agreement. In such event, the Option shall be exercisable only to the extent that the right to purchase Shares under this Agreement and the Plan has vested and is in effect at the date of such cessation of employment.

 

In the event of termination of employment due to disability of the Grantee (as determined by the Board of Directors of the Company or the Compensation and Stock Option Committee of the Company, as the case may be, and as to the fact and date of which the Grantee is notified by the Board or that Committee, as the case may be, in writing), the Option shall be exercisable within one (1) year after the date of such termination of employment, but in any event not later than the date on which the Option terminates under this Agreement. In such event, the Option shall be exercisable to the extent that the right to purchase the Shares hereunder has vested on the date of such cessation of employment.

 

1
 

 

In the event of the death of the Grantee while an employee of the Company or within three (3) months after the termination of employment (other than termination for Cause, disability or voluntary termination by the Grantee without consent of the Company), the Option shall be exercisable to the extent exercisable but not exercised as of the date of death and in such event, the Option must be exercised, if at all, within one (1) year after the date of death of the Grantee, but in any event not later than the date on which the Option terminates under this Agreement.

 

For purposes hereof, “Business Day” shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close.

 

5.            Non-Assignability . The Option shall not be transferable by the Grantee otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the Grantee's lifetime, only by the Grantee. The Option shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 5, or the levy of any attachment or similar process upon the Option or such right, shall be null and void.

 

6.            Exercise of Option and Issue of Shares . The Option may be exercised in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice to the Company, together with the tender of the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised, shall contain any warranty required by Section 7 below and shall otherwise comply with the terms and conditions of this Agreement and the Plan. The Company shall pay all original issue taxes with respect to the issue of the Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection herewith. Except as specifically set forth herein, the Grantee acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the responsibility of the Grantee. The Grantee of this Option shall have rights as a shareholder only with respect to any Shares covered by the Option after due exercise of the Option and tender of the full exercise price for the Shares being purchased pursuant to such exercise.

 

7.            Purchase for Investment . Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, or any successor legislation (the "Act"), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

(a)        The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for his or her own account, for investment and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing their option Shares issued pursuant to such exercise:

 

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). Such shares may not be sold, transferred or otherwise disposed of unless they have first been registered under the Act or, unless, in the opinion of counsel satisfactory to the Company's counsel, such registration is not required."

 

2
 

 

(b)        The Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws).

 

8.          Notices . Any notices required or permitted by the terms of this Agreement or the Plan shall be given by hand delivery, overnight courier service, or registered or certified mail, return receipt requested, and sent, if to the Company, at its principal executive offices, and if to the Grantee, at the Grantee’s most current residence address as reflected in the records of the Company or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given when received in accordance with the foregoing provisions. Either party hereto may change the address of which notices shall be given by providing the other party hereto with written notice of such change.

 

9.            Governing Law . This Agreement shall be construed and enforced in accordance with the law of the State of New York.

 

10.          Benefit of Agreement . This Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Grantee has hereunto set his or her hand, all as of the day and year first above written.

 

  HUDSON TECHNOLOGIES, INC.  
     
     
  (insert name and title of Company officer)  
     
     
  (insert Grantee’s name) , Grantee  

 

3

 

Exhibit 10.7

 

NON-QUALIFIED STOCK OPTION AGREEMENT (BARRIER OPTION)

HUDSON TECHNOLOGIES, INC.

 

AGREEMENT made as of (insert date) (the "Grant Date") between Hudson Technologies, Inc. (the "Company"), a New York corporation, having a principal place of business at PO Box 1541, One Blue Hill Plaza, 14th Floor, Pearl River, New York 10965, and (insert name of Grantee) (the "Grantee").

 

WHEREAS, the Company desires to grant to the Grantee a Non-Qualified Option to purchase shares of its common stock, par value $.01 per share (the "Shares"), under and pursuant to the Company’s 2014 Stock Incentive Plan (the “Plan”);

 

WHEREAS, the Company and the Grantee understand and agree that unless otherwise defined herein any terms used herein have the same meanings as in the Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

 

1.            Grant of Option . The Company hereby grants to the Grantee the right and option to purchase all or any part of an aggregate of (Insert number of shares) shares of its Common Stock, $.01 par value, on the terms and conditions and subject to all the limitations set forth herein and in the Plan, which is incorporated herein by reference (the "Option"). The Grantee acknowledges receipt of a copy of the Plan.

 

2.            Purchase Price . The purchase price of the Shares covered by the Option shall be $ (insert option price) per share.

 

3.            Exercise of Option . The Options granted hereby shall vest and be exercisable in full as of the Grant Date.

 

4.            Term of Option . The Option shall terminate ( insert term ) years from the date of this Agreement, but shall be subject to earlier termination immediately and without further notice (i) if the Fair Market Value of a share of Common Stock for five (5) consecutive Business Days is below $( insert barrier price ) or (ii) as provided in the Plan.

 

For purposes hereof, “Business Day” shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close.

 

5.            Non-Assignability . The Option shall not be transferable by the Grantee otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the Grantee's lifetime, only by the Grantee. The Option shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 5, or the levy of any attachment or similar process upon the Option or such right, shall be null and void.

 

6.            Exercise of Option and Issue of Shares . The Option may be exercised in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice to the Company, together with the tender of the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised, shall contain any warranty required by Section 7 below and shall otherwise comply with the terms and conditions of this Agreement and the Plan. The Company shall pay all original issue taxes with respect to the issue of the Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection herewith. Except as specifically set forth herein, the Grantee acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the responsibility of the Grantee. The Grantee of this Option shall have rights as a shareholder only with respect to any Shares covered by the Option after due exercise of the Option and tender of the full exercise price for the Shares being purchased pursuant to such exercise.

 

1
 

 

7.           Purchase for Investment . Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, or any successor legislation (the "Act"), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

(a)        The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for his or her own account, for investment and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing their option Shares issued pursuant to such exercise:

 

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). Such shares may not be sold, transferred or otherwise disposed of unless they have first been registered under the Act or, unless, in the opinion of counsel satisfactory to the Company's counsel, such registration is not required."

 

(b)        The Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws).

 

8.         Notices . Any notices required or permitted by the terms of this Agreement or the Plan shall be given by hand delivery, overnight courier service, or registered or certified mail, return receipt requested, and sent, if to the Company, at its principal executive offices, and if to the Grantee, at the Grantee’s most current residence address as reflected in the records of the Company or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given when received in accordance with the foregoing provisions. Either party hereto may change the address of which notices shall be given by providing the other party hereto with written notice of such change.

 

9.           Governing Law . This Agreement shall be construed and enforced in accordance with the law of the State of New York.

 

10.         Benefit of Agreement . This Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

 

2
 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Grantee has hereunto set his or her hand, all as of the day and year first above written.

 

  HUDSON TECHNOLOGIES, INC.  
     
     
  (Insert name & title of Company Officer)  
     
     
  (Insert name) Grantee  

 

3

 

Exhibit 10.8

 

INCENTIVE STOCK OPTION AGREEMENT (BARRIER OPTION)

HUDSON TECHNOLOGIES, INC.

 

AGREEMENT made as of the (insert date) (the "Grant Date") between Hudson Technologies, Inc. (the "Company"), a New York corporation, having a principal place of business at PO Box 1541, One Blue Hill Plaza, 14 th Floor, Pearl River, New York 10965, and (insert name of Grantee) (the "Grantee").

 

WHEREAS, the Company desires to grant to the Grantee an Incentive Stock Option to purchase shares of its common stock, par value $.01 per share (the "Shares"), under and for the purposes of the 2008 Stock Incentive Plan of the Company (the "Plan") pursuant to the terms thereof;

 

WHEREAS, the Company and the Grantee understand and agree that unless otherwise defined herein any terms used herein have the same meanings as in the Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

 

1.            Grant of Option . The Company hereby grants to the Grantee the right and option to purchase all or any part of an aggregate of (insert number of shares) shares of Common Stock, $.01 par value, on the terms and conditions and subject to all the limitations set forth herein and in the Plan, which is incorporated herein by reference (the "Option"). The Grantee acknowledges receipt of a copy of the Plan.

 

2.            Purchase Price . The purchase price of the Shares covered by the Option shall be $ (insert price per share) per share.

 

3.            Exercise of Option . The Option granted hereby shall vest and be exercisable in full as of the Grant Date.

 

4.            Term of Option . The Option shall terminate (insert term) years from the date of this Agreement, but shall be subject to earlier termination immediately and without further notice (i) if the Fair Market Value of a share of Common Stock for five (5) consecutive Business Days is below $( insert barrier price ) or (ii) as provided herein or in the Plan.

 

In the event that the Grantee’s employment is terminated for Cause or the Grantee voluntarily terminates employment without the consent of the Company, the Options granted under this Agreement, to the extent not theretofore exercised, shall automatically terminate as of the date of termination of the Grantee’s employment.

 

If the Grantee ceases to be employed by the Company for any reason other than death, disability, termination for Cause, or voluntary termination by the Grantee without the consent of the Company, the Option may be exercised at any time within three (3) months after the date the Grantee ceases to be an employee, but in any event not later than the date on which the Option terminates under this Agreement. In such event, the Option shall be exercisable only to the extent that the right to purchase Shares under this Agreement and the Plan has vested and is in effect at the date of such cessation of employment.

 

In the event of termination of employment due to disability of the Grantee (as determined by the Board of Directors of the Company or the Compensation and Stock Option Committee of the Company, as the case may be, and as to the fact and date of which the Grantee is notified by the Board or that Committee, as the case may be, in writing), the Option shall be exercisable within one (1) year after the date of such termination of employment, but in any event not later than the date on which the Option terminates under this Agreement. In such event, the Option shall be exercisable to the extent that the right to purchase the Shares hereunder has vested on the date of such cessation of employment.

 

1
 

 

In the event of the death of the Grantee while an employee of the Company or within three (3) months after the termination of employment (other than termination for Cause, disability or voluntary termination by the Grantee without consent of the Company), the Option shall be exercisable to the extent exercisable but not exercised as of the date of death and in such event, the Option must be exercised, if at all, within one (1) year after the date of death of the Grantee, but in any event not later than the date on which the Option terminates under this Agreement.

 

For purposes hereof, “Business Day” shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close.

 

5.            Non-Assignability . The Option shall not be transferable by the Grantee otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the Grantee's lifetime, only by the Grantee. The Option shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 5, or the levy of any attachment or similar process upon the Option or such right, shall be null and void.

 

6.            Exercise of Option and Issue of Shares . The Option may be exercised in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice to the Company, together with the tender of the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised, shall contain any warranty required by Section 7 below and shall otherwise comply with the terms and conditions of this Agreement and the Plan. The Company shall pay all original issue taxes with respect to the issue of the Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection herewith. Except as specifically set forth herein, the Grantee acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the responsibility of the Grantee. The Grantee of this Option shall have rights as a shareholder only with respect to any Shares covered by the Option after due exercise of the Option and tender of the full exercise price for the Shares being purchased pursuant to such exercise.

 

7.            Purchase for Investment . Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, or any successor legislation (the "Act"), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

(a)         The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for his or her own account, for investment and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing their option Shares issued pursuant to such exercise:

 

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). Such shares may not be sold, transferred or otherwise disposed of unless they have first been registered under the Act or, unless, in the opinion of counsel satisfactory to the Company's counsel, such registration is not required."

 

2
 

 

(b)        The Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws).

 

8.           Notices . Any notices required or permitted by the terms of this Agreement or the Plan shall be given by hand delivery, overnight courier service, or registered or certified mail, return receipt requested, and sent, if to the Company, at its principal executive offices, and if to the Grantee, at the Grantee’s most current residence address as reflected in the records of the Company or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given when received in accordance with the foregoing provisions. Either party hereto may change the address of which notices shall be given by providing the other party hereto with written notice of such change.

 

9.            Governing Law . This Agreement shall be construed and enforced in accordance with the law of the State of New York.

 

10.          Benefit of Agreement . This Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Grantee has hereunto set his or her hand, all as of the day and year first above written.

 

  HUDSON TECHNOLOGIES, INC.  
     
     
  (insert name and title of Company officer)  
     
     
  (insert Grantee’s name) , Grantee  

 

3

 

Exhibit 10.9

 

NON-QUALIFIED STOCK OPTION AGREEMENT (BARRIER OPTION)

HUDSON TECHNOLOGIES, INC.

 

AGREEMENT made as of (insert date) (the "Grant Date") between Hudson Technologies, Inc. (the "Company"), a New York corporation, having a principal place of business at PO Box 1541, One Blue Hill Plaza, 14th Floor, Pearl River, New York 10965, and (insert name of Grantee) (the "Grantee").

 

WHEREAS, the Company desires to grant to the Grantee a Non-Qualified Option to purchase shares of its common stock, par value $.01 per share (the "Shares"), under and pursuant to the Company’s 2008 Stock Incentive Plan (the “Plan”);

 

WHEREAS, the Company and the Grantee understand and agree that unless otherwise defined herein any terms used herein have the same meanings as in the Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

 

1.            Grant of Option . The Company hereby grants to the Grantee the right and option to purchase all or any part of an aggregate of (Insert number of shares) shares of its Common Stock, $.01 par value, on the terms and conditions and subject to all the limitations set forth herein and in the Plan, which is incorporated herein by reference (the "Option"). The Grantee acknowledges receipt of a copy of the Plan.

 

2.            Purchase Price . The purchase price of the Shares covered by the Option shall be $ (insert option price) per share.

 

3.            Exercise of Option . The Options granted hereby shall vest and be exercisable in full as of the Grant Date.

 

4.            Term of Option . The Option shall terminate ( insert term ) years from the date of this Agreement, but shall be subject to earlier termination immediately and without further notice (i) if the Fair Market Value of a share of Common Stock for five (5) consecutive Business Days is below $( insert barrier price ) or (ii) as provided in the Plan. In the event of the death of the Grantee, the Option shall be exercisable to the extent exercisable but not exercised as of the date of death and, in such event, the Option must be exercised, if at all, within one (1) year after the date of death of the Grantee or, if earlier, within the originally prescribed term of the Option.

 

For purposes hereof, “Business Day” shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close.

 

5.            Non-Assignability . The Option shall not be transferable by the Grantee otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the Grantee's lifetime, only by the Grantee. The Option shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 5, or the levy of any attachment or similar process upon the Option or such right, shall be null and void.

 

1
 

 

6.            Exercise of Option and Issue of Shares . The Option may be exercised in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice to the Company, together with the tender of the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised, shall contain any warranty required by Section 7 below and shall otherwise comply with the terms and conditions of this Agreement and the Plan. The Company shall pay all original issue taxes with respect to the issue of the Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection herewith. Except as specifically set forth herein, the Grantee acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the responsibility of the Grantee. The Grantee of this Option shall have rights as a shareholder only with respect to any Shares covered by the Option after due exercise of the Option and tender of the full exercise price for the Shares being purchased pursuant to such exercise.

 

7.           Purchase for Investment . Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, or any successor legislation (the "Act"), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

(a)        The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for his or her own account, for investment and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing their option Shares issued pursuant to such exercise:

 

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). Such shares may not be sold, transferred or otherwise disposed of unless they have first been registered under the Act or, unless, in the opinion of counsel satisfactory to the Company's counsel, such registration is not required."

 

(b)         The Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws).

 

8.          Notices . Any notices required or permitted by the terms of this Agreement or the Plan shall be given by hand delivery, overnight courier service, or registered or certified mail, return receipt requested, and sent, if to the Company, at its principal executive offices, and if to the Grantee, at the Grantee’s most current residence address as reflected in the records of the Company or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given when received in accordance with the foregoing provisions. Either party hereto may change the address of which notices shall be given by providing the other party hereto with written notice of such change.

 

9.           Governing Law . This Agreement shall be construed and enforced in accordance with the law of the State of New York.

 

10.         Benefit of Agreement . This Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

 

2
 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Grantee has hereunto set his or her hand, all as of the day and year first above written.

 

  HUDSON TECHNOLOGIES, INC.  
     
     
  (Insert name & title of Company Officer)  
     
     
  (Insert name) Grantee  

 

3

 

Exhibit 31.1

 

Hudson Technologies, Inc.

Certification of Principal Executive Officer

 

I, Kevin J. Zugibe, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Hudson Technologies, Inc.;
 
2. Based on my knowledge, this 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 report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;
 
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
 
  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: October 29, 2014

 

  /s/ Kevin J. Zugibe  
  Kevin J. Zugibe
  Chief Executive Officer and
  Chairman of the Board

 

 

 

Exhibit 31.2

 

Hudson Technologies, Inc.

Certification of Principal Financial Officer

 

I, James R. Buscemi, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Hudson Technologies, Inc.;
 
2. Based on my knowledge, this 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 report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;
 
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
 
  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: October 29, 2014

 

  /s/ James R. Buscemi  
  James R. Buscemi
  Chief Financial Officer

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Hudson Technologies, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”),

I, Kevin J. Zugibe, as Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  /s/ Kevin J. Zugibe  
  Kevin J. Zugibe
  Chief Executive Officer and
  Chairman of the Board
   
  October 29, 2014

 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Hudson Technologies, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”),

I, James R. Buscemi, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  /s/ James R. Buscemi  
  James R. Buscemi
  Chief Financial Officer
   
  October 29, 2014