Edgar Filing: HYDRON TECHNOLOGIES INC

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

FORM 10-QSB

(Mark One)

/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the Quarterly Period Ended: December 31, 2007

/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

Commission File Number: 0-6333

HYDRON TECHNOLOGIES, INC.
-------------------------
(Exact name of Registrant as specified in its charter)

New York 13-1574215
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)

4400 34th Street N, Suite F
Saint Petersburg, FL 33714 (727)342-5050
--------------------------- -------------
(Address of Principal Executive Offices) (Registrant's telephone number)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. _X_ Yes ___ No.

Number of shares of common stock outstanding as of February 14, 2008: 19,621,176

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X].

HYDRON TECHNOLOGIES, INC.
QUARTERLY PERIOD ENDED, DECEMBER 31, 2007
INDEX TO FORM 10-QSB

TABLE OF CONTENTS PAGE

Part I. Financial Information
-----------------------------

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheet at December 31, 2007 (unaudited) ...... 3

Consolidated Statements of Operations for the Three .............. 4
months ended December 31, 2007 and 2006 (unaudited)

Consolidated Statements of Cash Flows for the .................... 5
three months ended December 31, 2007 and 2006 (unaudited)

Notes to Consolidated Financial Statements (unaudited) ........... 6

Item 2. Management's Discussion and Analysis of Financial Condition ...... 18
and Results of Operations

Item 3. Controls and Procedures .......................................... 24

Part II. Other Information
--------------------------

Item 1. Legal Proceedings ................................................ 25

Item 2. Changes in Securities and Use of Proceeds ........................ 25

Item 3. Defaults Upon Senior Securities .................................. 26

Item 4. Submission of Matters to a Vote of Security Holders .............. 26

Item 5. Other Events ..................................................... 26

Item 6. Exhibits ......................................................... 27

Signatures ................................................................. 31

HYDRON TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
December 31, 2007

ASSETS
Current assets
Cash ...................................................... $ 4,476
Trade accounts receivable, net ............................ 73,475
Inventories ............................................... 343,342
Prepaid expenses and other current assets ................. 8,392
------------
Total current assets ................................... 429,685

Property and equipment, net .................................. 98,733

Deferred product costs, net .................................. 106,483
Intangible assets, net ....................................... 151,040
Restricted cash .............................................. 64,361
Deposits ..................................................... 29,652
------------
Total assets ........................................... $ 879,954
============

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable .......................................... $ 165,034
Loans payable, net ........................................ 236,580
Royalties payable ......................................... 7,547
Deferred revenues ......................................... 90,092
Accrued liabilities ....................................... 303,349
Current portion of obligation under capital leases ........ 24,373
------------
Total current liabilities .............................. 826,975

Minority interest in consolidated partnership ............. 202,994

Shareholders' deficit
Preferred stock - $.01 par value 5,000,000 shares
authorized; no shares issued or outstanding ............ -
Common stock - $.01 par value
30,000,000 shares authorized; 19,021,176
shares, issued and outstanding ......................... 190,211
Additional paid-in capital ................................ 22,082,490
Accumulated deficit ....................................... (22,414,900)
Treasury stock, at cost 10,000 shares ..................... (7,816)
------------
Total Shareholders' deficit ............................ (150,015)
------------
Total liabilities and shareholders' deficit ............ $ 879,954
============

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

HYDRON TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED DECEMBER 31,
2007 2006
------------ ------------

Net sales ................................................ $ 329,200 $ 293,528
Cost of sales ............................................ 159,262 179,126
------------ ------------
Gross profit ............................................. 169,938 114,402

Expenses
Royalty expense ....................................... - 5,168
Research and development .............................. 664 433
Selling, general & administration ..................... 265,565 298,928
Depreciation & amortization ........................... 23,975 27,163
------------ ------------
Total expenses ..................................... 290,204 331,692

------------ ------------
Operating loss ........................................... (120,266) (217,290)

Interest (expense), net of interest income of $0 and $620 (26,545) (13,793)
------------ ------------
Loss before income taxes and minority interest ........ (146,811) (231,083)

Income taxes expense ..................................... - -
Minority interest in net loss of subsidiary .............. 4,813 7,046
------------ ------------
Net loss .............................................. $ (141,998) $ (224,037)
============ ============

Basic and diluted loss per share
Net loss per common share ............................. $ (0.01) $ (0.02)
============ ============

Weighted average shares
outstanding (basic and diluted) ....................... 18,800,703 12,234,395
============ ============

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

HYDRON TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

THREE MONTHS ENDED DECEMBER 31,
2007 2006
------------ ------------

OPERATING ACTIVITIES
Net loss .............................................. $ (141,998) $ (224,037)
Adjustments to reconcile net loss to
net cash used in operating activities
Minority interest ................................ (4,813) (7,046)
Depreciation and amortization .................... 23,975 27,163
Compensation expense from stock option awards .... 12,592 38,028
Deferred financing costs ......................... 16,932 3,567
Stock issued for interest expense ................ 4,583 -
Bad debt expense ................................. 8,318 -
Change in operating assets and liabilities
Restricted cash .................................. 4,492 3,701
Trade accounts receivable ........................ (50,490) (5,023)
Inventories ...................................... (670) 127,760
Prepaid expenses and other current assets ........ (5,338) 2,725
Deposits ......................................... - (6,223)
Accounts payable ................................. (66,020) 12,180
Royalties payable ................................ (4,728) 1,026
Deferred revenues ................................ 10,131 15,884
Accrued interest ................................. 1,355 6,426
Accrued liabilities .............................. 5,855 7,507
------------ ------------
Net cash (used in) provided by operating activities (185,824) 3,638

INVESTING ACTIVITIES ..................................... - -

FINANCING ACTIVITIES
Cash overdraft ..................................... (15,287) -
Stock offering, proceeds ........................... 200,000 -
Payments on capital leases ......................... (6,913) (5,976)
Proceeds from exercise of stock options ............ 12,500 -
------------ ------------
Net cash provided by (used in) financing activities 190,300 (5,976)

Net increase (decrease) in cash and cash equivalents 4,476 (2,338)

Cash and cash equivalents at beginning of period ......... - 9,278

------------ ------------
Cash and cash equivalents at end of period ............... $ 4,476 $ 6,940
============ ============

SUPPLEMENTAL CASH FLOW INFORMATION
Stock issued to pay accrued interest .................. $ 4,583 $ -
Warrants issued in connection with private offering ... 225,000 -

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

HYDRON TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 2007 AND 2006

A - NATURE OF OPERATIONS

Organization of Business

Hydron(R) Technologies, Inc. (the "Company") manufactures and sells
consumer and professional products, primarily in the personal care/cosmetics
field. The Company holds the exclusive license from Valera Pharmaceuticals
(VLRX) recently purchased by Indevus Pharmaceuticals Inc. (IDEV), the assignee
of GP Strategies Corporation (formerly National Patent Development Corporation)
("GPS") to a Hydron(R) polymer-based drug delivery system for topically applied,
nonprescription pharmaceutical products, which the Company uses to develop
proprietary products or to license to third parties. The Company owns U.S. and
international patents on a method to suspend the Hydron polymer in a stable
emulsion for use in personal care/cosmetic products.

The Company also owns a patent entitled "Compositions and Methods for
Delivery of Skin Cosmeceuticals." This patent covers the Company's unique
self-adjusting pH emulsion system.

The Company also owns U.S. and international patents on a method to
infuse oxygen into the skin and tissue topically without using the blood stream.
The oxygenation technology was submitted to the Food & Drug Administration to
obtain the necessary approvals for medical applications; however, at this time,
the necessary steps for final approval has not been determined and this project
is currently on hold.

Basis of Presentation and Going Concern

The unaudited consolidated financial statements included in this report
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission for interim reporting and include all
adjustments (consisting only of normal recurring adjustments) that are, in the
opinion of management, necessary for a fair presentation. These financial
statements have not been audited.

Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principleshave been omitted pursuant to such rules and regulations for interim
reporting. The Company believes that the disclosures contained herein are
adequate to make the information presented not misleading. However, these
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report for the year ended September 30, 2007, which is included in the
Company's Form 10-KSB for the year ended September 30, 2007. The financial data
for the interim periods presented may not necessarily reflect the results to be
anticipated for the complete year.

The accompanying consolidated financial statements were prepared
assuming that the Company will continue as a going concern. This basis of
accounting contemplates the recovery of the Company's assets and the
satisfaction of its liabilities in the normal course of operations.

The Company's independent accountants issued a "going concern" opinion
on the Company's September 30, 2007 financial statements, since the Company has
incurred significant losses over the past five years and generates a negative
cash flow on a monthly basis.

On July 1, 2005, the Company acquired Clinical Results, Inc. (CRI), a
St. Petersburg, Florida-based company. CRI was a privately held product
development laboratory and contract manufacturer of cosmeceutical and other
personal care products. CRI's clients ranged from mass market retailers to
marketers of high end brands, and certain health food store brands.

Management believes that Hydron Technologies will benefit from lower
manufacturing costs, and be better positioned to build its catalog and internet
business, as well as expand the sale of its skin care treatments beyond its
historical direct response TV and catalog operations, by utilizing CRI's broker
network. The Company's ultimate ability to attain profitable operations is
dependent upon obtaining additional financing or achieving a level of sales
adequate to support its cost structure.

Accordingly, there are no assurances that the Company will be
successful in achieving the above objectives, or that such objectives, if
realized, will enable the Company to obtain profitable operations or continue as
a going concern.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

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

Principles of Consolidation

The consolidated financial statements include the accounts of Hydron
Technologies, Inc. and its wholly-owned subsidiary CRI purchased as of July 1,
2005, and its majority owned limited liability limited partnership, Hydron
Royalty Partners, LLLP. All significant inter-company transactions have been
eliminated.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The credit risk
associated with cash equivalents is considered low due to the credit quality of
the issuers of the financial instruments.

The cash and cash equivalent balances at December 31, 2007 are covered
by the Federal Deposit Insurance Commission.

Restricted cash

At December 31 2007, the Company had restricted cash of $64,361, all
of which were covered by the Federal Deposit Insurance Commission, which
represents funds from a consolidated entity, that are not available for use in
the Company's normal operations.

Concentration of Credit Risk

Trade accounts receivable are due primarily from contract manufacturing
customers and are usually paid to the Company within 30 days after receipt of
goods. The Company performs ongoing evaluations of its significant customers and
does not require collateral, although in some cases it requires deposits or
advances.

Inventories

Inventories are valued at the lower of cost or market, on a first-in,
first-out (FIFO) basis and include finished goods, components and raw materials.

Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards (SFAS)
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the
Company periodically reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be fully recoverable. The Company recognizes an impairment loss
when the sum of expected undiscounted future cash flows is less than the
carrying amount of the asset. The amount of impairment is measured as the
difference between the asset's estimated fair value and its book value. The
Company did not record any impairment charges during the three months ended
December 31, 2007.

Property and Equipment

Property and equipment, consisting primarily of furniture and
equipment, is carried at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, ranging from four to six
years.

Deferred Product Costs

Deferred product costs consist primarily of costs incurred for the
purchase and development of patents and product rights. The deferred product
costs are being amortized over their estimated useful lives of five to seventeen
years using the straight-line method.

Common Stock, Common Stock Options

In December 2004, the FASB issued SFAS No. 123(R), "Share-Based
Payment", which replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under
SFAS No. 123(R), companies are required to measure the compensation costs of
share based compensation arrangements based on the grant date fair value and
recognize the costs in the financial statements over the period during which
employees are required to provide services. Share based compensation
arrangements include stock options, restricted share plans, performance based
awards, share appreciation rights and employee share purchase plans. In March
2005 the SEC issued Staff Accounting Bulletin No. 107, or "SAB 107". SAB 107
expresses views of the staff regarding the interaction between SFAS No. 123(R)
and certain SEC rules and regulations and provides the staff's views regarding
the valuation of share based payment arrangements for public companies. SFAS No.
123(R) permits public companies to adopt its requirements using one of two
methods. On April 14, 2005, the SEC adopted a new rule amending the compliance

dates for SFAS 123R. Companies may elect to apply this statement either
prospectively, or on a modified version of retrospective application under which
financial statements for prior periods are adjusted on a basis consistent with
the pro forma disclosures required for those periods under SFAS 123. Effective
January 1, 2006, the Company has fully adopted the provisions of SFAS No. 123R
and related interpretations as provided by SAB 107. Such compensation amounts,
if any, are amortized over the respective vesting periods of the option grant.
SFAS 123R requires that the deferred stock-based compensation on the
consolidated balance sheet on the date of adoption be netted against additional
paid-in capital.

For the three month periods ended December 31, 2007 and 2006, the
Company recorded stock-based compensation expense of $12,592 and 38,028
respectively.

Earnings (loss) Per Share

The financial statements are presented in accordance with Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share". Basic
earnings per share is computed using the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflect the
potential dilution from the exercise or conversion of securities into common
stock.

Revenue Recognition

The Company recognizes revenue when:

o Persuasive evidence of an arrangement exists,
o Shipment has occurred,
o Priceis fixed or determinable, and
o Collectability is reasonably assured.

Subject to these criterion, the Company recognizes revenue at the time
of shipment of the relevant merchandise. The Company offers its individual
consumer customers a thirty-day warranty and estimates an allowance for sales
returns based on historical experience with product returns. For the Company's
formulation and contract manufacturing business, revenue is recognized when the
work is complete, the client approves the formula by written correspondence, and
the product is shipped.

Deferred Revenues

Deferred revenues represent prepayments to the Company for merchandise
that had not yet been shipped to the customer. The Company will recognize the
advances as revenue as customers take delivery of the goods, in compliance with
its revenue recognition policy.

Shipping and Handling Fees

The Company follows the provisions of Emerging Issues Task Force Issue
No. 00-10, "Accounting for Shipping and Handling Fees and Costs." Any amounts
billed to third-party customers for shipping and handling is included as a
component of revenue. Shipping and handling costs incurred are included as a
component of cost of sales.

Cost of Sales

Prior to the acquisition of CRI, products were manufactured through
third parties under contract and cost of sales included the cost of ingredients,
packaging material, assembly and processing costs. Currently, with manufacturing
capability, most products are manufactured in house. Inbound freight, internal
transfers, and component handling costs are charged to cost of sales. Costs
associated with shipping product to customers is included in cost of sales. The
cost of warehousing finished product that is available for sale is included in
selling, general and administrative expenses.

Research and Development Costs

Research and development expenditures, consist of costs incurred in
performing research and development activities, and are expensed as incurred.
For the three month periods ended December 31, 2007 and 2006, expenses charged
to Research and Development were $664 and $433, respectively.

Advertising

Advertising costs are expensed as incurred and are included in
"Selling, general and administrative expenses." Advertising expenses amounted to
approximately $5,535 and $0 for the three month periods ended December 31, 2007
and 2006, respectively.

Reclassifications

Certain prior period balances have been reclassified to conform to the
current year's presentation. These reclassifications had no impact on previously
reported results of operations or stockholders' deficit.

Recent accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements" ("SFAS 157"), which clarifies the definition of fair value,
establishes guidelines for measuring fair value, and expands disclosures
regarding fair value measurements. SFAS 157 does not require any new fair value
measurements and eliminates inconsistencies in guidance found in various prior
accounting pronouncements. SFAS 157 will be effective for the Company on January
1, 2008. The Company is currently evaluating the impact of adopting SFAS 157 on
its financial position, cash flows, and results of operations.

In September 2006, the Securities and Exchange Commission ("SEC")
released Staff Accounting Bulletin No. 108, "Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements" ("SAB 108"). SAB 108 provides interpretive guidance on the SEC's
views on how the effects of the carryover or reversal of prior year
misstatements should be considered in quantifying a current year misstatement.
The provisions of SAB 108 will be effective for the Company for the fiscal year
ended December 31, 2006. The Company is currently evaluating the impact of
applying SAB 108 but does not believe that the application of SAB 108 will have
a material effect on its financial position, cash flows, and results of
operations.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
for Financial Assets and Financial Liabilities-including an amendment of FAS
115" (Statement 159). Statement 159 allows entities to choose, at specified
election dates, to measure eligible financial assets and liabilities at fair
value that are not otherwise required to be measured at fair value. If a company
elects the fair value option for an eligible item, changes in that item's fair
value in subsequent reporting periods must be recognized in current earnings.
Statement 159 is effective for fiscal years beginning after November 15, 2007.
We are currently evaluating the potential impact of Statement 159 on our
financial statements. The Company is currently evaluating the timing of adoption
and the impact that adoption might have on its financial position or results of
operations.

NOTE C - INVENTORIES

Inventories consisted of the following at December 31, 2007:

Finished Goods ...................... $ 97,015
Raw materials and components ........ 576,616
---------
673,631
Less : inventory valuation allowance (330,289)
---------

Inventories, net .................... $ 343,342
=========

NOTE D - ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at December 31, 2007:

Accounts Receivable .................. $ 93,475
Less : Allowance for Doubtful accounts (20,000)
--------
Accounts Receivable, Net ............. $ 73,475
========

NOTE E - SHARE BASED COMPENSATION

The Company recognized $12,592 and $38,028 in share based compensation
expense for the three month period ended December 31, 2007 and 2006,
respectively. No options were granted to employees during the three months ended
December 31, 2007 or 2006.

For the stock-based awards granted on or after January 1, 2006, the
Company is amortizing stock-based compensation expense on a straight-line basis
over the requisite service period, which is generally a one year vesting period.
The fair value for these options was estimated at the date of the grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for the period ended December 31, 2007:

Risk-free interest rate ....... 5.3%
Expected life ................. 5 years
Expected volatility ........... 301%
Expected dividend yield ....... 0%

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. As the Company's stock options have characteristics significantly
different than those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in Management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.

NOTE F - LOANS PAYABLE

On June 14, 2005, the Company borrowed an aggregate of One Hundred
Fifty Thousand Dollars ($150,000) (collectively, the "Loans") from three
individual lenders (collectively, the "Lenders"), including individuals who are
(i) the Chairman of the Board and Interim President, and (ii) a second director
of the Company.

In connection with the Loans, the Company issued to each of the Lenders
a promissory note in the principal amount of Fifty Thousand Dollars ($50,000)
(individually, a "Note" and collectively, the "Notes") providing for (a)
quarterly payments of interest at ten percent (10%) per annum and (b) repayment
of principal in a balloon payment on the second anniversary of the date of the
Notes. Under the terms of the Notes, the Company may elect to pay quarterly
interest to the holders of the Notes in shares of common stock, $.01 par value,
of the Company (the "Common Stock"), in an amount calculated by dividing the
amount of interest due and payable by ten cents ($.10). The Notes also provide
that, in the event of a default by the Company under the Notes, the holders may
elect to receive payment of principal and accrued and unpaid interest in shares
of Common Stock, in an amount calculated by dividing the amount of principal and
accrued and unpaid interest payable by the "Average Market Price" for a share of
Common Stock. Under the terms of the Notes, "Average Market Price" means the
average closing sale price for a share of Common Stock measured over the last
ten trading days of the month preceding the interest payment date or, if no
trading in the Common Stock has occurred during such period, the average closing
sale price on the last date on which a share of Common Stock was sold in
over-the-counter trading in the Common Stock. In the event that no shares of
Common Stock have traded in the over-the-counter market for a period of six
months or more, the Average Market Price shall be the fair market price for a
share of Common Stock as determined in good faith by the Board of Directors of
the Company. In October 2005, the Company elected to pay the accrued interest
due on the Notes of $11,040 in stock of the Company and issued 44,000 shares at
$.25 to the Note holders. In January 2006, the Company elected to pay the
accrued interest due on the Notes of $13,230 in stock of the Company and issued
37,800 shares at $.35 to the Note holders. In March 2006, the Company elected to
pay the accrued interest due on the notes of $21,546 in stock of the Company and
issued 37,800 shares at $.57 to the Note holders. In July 2006, the Company
elected to pay the accrued interest due on the notes of $16,254 in stock of the
Company and issued 37,800 shares at $.43 to the Note holders. In January 2007,
the Company elected to pay the accrued interest due on the notes of $15,120 in
stock of the Company and issued 37,800 shares at $.17 to the Note holders, and
37,800 shares at $.23 to the Note holders. In May 2007, the Company elected to
pay the accrued interest due on the notes and issued 37,800 shares at $.17 to
the Note holders.

In addition, in connection with the Loans, each Lender received a
Common Stock Purchase Warrant (collectively, the "Warrants") entitling the
holder to purchase One Hundred Thousand (100,000) shares of Common Stock at an
exercise price of ten cents ($.10) per share for a five-year period. The
warrants were valued using the Black Scholes model at $24,000, which is being
amortized as interest expense over the life of the notes.

The Notes and the Warrants each provide that in the event that the
Company shall grant "piggy back" registration rights to any other party to cause
the Company's Common Stock or any security exercisable or exchangeable for, or
convertible into, shares of Common Stock to be included in a registration
statement filed by the Company for sale by any selling shareholder or by the
Company, the Company will grant the holders of the Notes and Warrants similar
registration rights.

On May 20, 2007, the Company agreed to extend and amend certain of the
terms of the loans (collectively, the "Loan Extension") made to the Company on
June 14, 2005 (collectively, the "Original Loans") by Mr. Saul, Richard Banakus,
the Chairman and a director of the Company, and Regis Synan (individually, a
"Lender" and collectively, the "Lenders") in the amounts of $50,000, $50,000 and
$50,000, respectively. Under the terms of the Loan Extension, the Lenders agreed
to extend the maturity date of the Original Loans from June 14, 2007 to June 14,
2008. In consideration for the Loan Extension, the Company agreed to grant each
Lender a common stock warrant (the "Loan Extension Warrants") exercisable for
Seventy Five Thousand (75,000) shares of the Common Stock for a five-year period
at an exercise price of $0.20 per share of Common Stock. The warrants were
valued using the Black Scholes model at $43,400, which is being amortized as
interest expense over the life of the notes.

In addition, the Lenders agreed to continue to allow the Company to pay
quarterly interest in cash or in shares of Common Stock. In the case of interest
paid in shares of Common Stock, the Company agreed to modify the valuation for
such shares to $0.20 per share of Common Stock. The Board of Directors of the
Company approved the Loan Extension and the Loan Extension Warrants unanimously
with Messrs. Saul and Banakus abstaining from the vote, and agreed to reserve
sufficient shares of Common Stock in the event of the exercise of the Loan
Extension Warrant. In June 2007, the Company elected to pay the accrued interest
due on the notes and issued 31,260 shares at $.22 to the Note holders. In
October 2007, the Company elected to pay the accrued interest due on the notes
of $3,750 in stock of the Company and issued 18,750 shares at $.20 to the Note
holders. At December 31, 2007 the Company had $3,750 in accrued interest due to
the Note holders.

On May 22, 2007, Ronald J. Saul, a director of Hydron Technologies,
Inc., lent the Company One Hundred Thousand Dollars ($100,000) (the "Loan"). The
term of the Loan is six months and bears interest at the rate of ten percent
(10%). Interest on the Loan is payable monthly and may be paid in cash, or at
the option of the Company, in shares of common stock of the Company ("Common
Stock"), valued for this purpose at the average of the high and low sale prices
for a share of Common Stock averaged over the last ten days on which the Common
Stock traded. In addition, in consideration of the Loan, the Company has granted
Mr. Saul a common stock warrant (the "Loan Warrant") exercisable for One Hundred
Thousand (100,000 shares of Common Stock for a five-year period at an exercise
price of $0.2115 per share of Common Stock. The warrants were valued using the
Black Scholes model at $21,040, which is being amortized as interest expense
over the life of the notes. In June 2007, the Company elected to pay the accrued
interest due on the note of $833 in stock of the Company and issued 3,771 shares
at $.221 to the Note holder. In August 2007, the Company elected to pay the

accrued interest due on the note of $1,666 in stock of the Company and issued
4,433 shares at $.188 and 5,274 shares at $.158 to the Note holder. In October
2007, the Company elected to pay the accrued interest due on the note of $833 in
stock of the Company and issued 5,258 shares at $.1585 to the Note holder. At
December 31, 2007, the Company had accrued $2,722 of interest on the note due to
the Note holder.

The Board of Directors of the Company approved the Loan and the Loan
Warrant unanimously with Mr. Saul abstaining from the vote, and agreed to
reserve sufficient shares of Common Stock in the event of the exercise of the
Loan Warrant. The purpose of the Loan was to provide the Company with additional
cash to remain current on its operating expenses, help reestablish credit terms
with the Company's vendors, reduce outstanding payables and purchase additional
raw materials on more advantageous terms.

On August 14, 2007, Ronald J. Saul, a director of Hydron Technologies,
Inc., lent the Company Twenty five Thousand Dollars ($25,000) (the "Loan"). The
term of the Loan is two weeks and expires on August 28, 2007 and bears interest
at the rate of ten percent (10%) per annum to be paid in cash at the expiration
of the loan agreement. The loan expiration was extended until it was converted
in the private offering dated October 3, 2007. Mr. Saul and his spouse paid for
200,000 Units in the private offering by the cancellation of the loan.

Loans Payable consisted of the following at December 31, 2007:

2007
---------

Loans Payable ......................... $ 250,000
Accrued interest ...................... 6,472
Less: Deferred financing costs ........ (19,892)
---------
$ 236,580
=========

NOTE G - ACCRUED LIABILITIES

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

Accrued liabilities consisted of the following at December 31, 2007:

Dividends payable ..................... $ 83,163
Director fees payable ................. 127,270
Professional fees ..................... 52,024
Other ................................. 40,892
---------
$ 303,349
=========

NOTE H - EQUITY

Common Stock

For the three month period ended December 31, 2007 and 2006, the
Company recorded stock-based compensation expense of $12,592 and $38,028
respectively

During the three months ended December 31, 2007, the Company issued
62,500 shares of common stock in connection with the exercise of common stock
options for net proceeds of $12,500. Of these options, 62,500 were exercised at
$0.20.

In connection with loans payable to the Company (Note F) during the
three months ended December 31, 2007 the Company issued 24,008 shares of common
stock, interest on the Loans may be paid in cash, or at the option of the
Company, in shares of common stock of the Company ("Common Stock"), valued for
this purpose at the average of the high and low sale prices for a share of
Common Stock averaged over the last ten days on which the Common Stock traded:

Among the individuals who purchased Units in the Offering is Ronald J.
Saul, a director of the Company who together with his spouse purchased 300,000
Units pursuant to two separate subscription agreements. Mr. Saul and his spouse
paid for 200,000 Units by the cancellation of certain indebtedness owed to them
by the Company evidenced by a promissory note in the principal amount of Twenty
Five Thousand Dollars ($25,000) and paid for 100,000 Units by payment in cash.

On October 30, 2007, the Company, closed on a private offering of
400,000 units ("Units"), comprised of one (1) share ("Share") of its Common
Stock and one (1) warrant ("Warrant") for the purchase of one (1) share of
Common Stock of the Company for each Unit purchased or a total of 400,000 Shares
and 400,000 Warrants to purchase Shares. The Company received gross cash
proceeds of Fifty Thousand Dollars ($50,000) from the sale of Units in the
Offering.

Ronald J. Saul, a director of the Company, purchased the 400,000 Units
together with his spouse pursuant to a subscription agreement dated October 30,
2007.

Under the terms of the Offering, the Company has agreed that in the
event that the Company shall grant "piggy back" registration rights to any other
party to cause the Company's Common Stock or any security exercisable or
exchangeable for, or convertible into, shares of Common Stock to be included in
a registration statement filed by the Company for sale by any selling
shareholder or by the Company, the Company will grant the holders of the Shares
and Warrants similar registration rights.

Each purchaser of Units is an "accredited investor" as defined in Rule
501(a) under the Securities Act of 1933, as amended (the "Securities Act"). The
Company issued the Shares and the Warrants without registration under the
Securities Act in reliance on the exemptions from registration provided by Rule
506 of Regulation D and Section 4(2) of the Securities Act, as well as
preemption from applicable state registration requirements under Section 18(a)
of the Securities Act.

The Company used the proceeds of the Offering to pay current
obligations of the Company.

NOTE I - RELATED PARTY

On October 3, 2007, the Company, closed on a private offering (the
"Offering") of 1,400,000 units ("Units"), Among the individuals who purchased
Units in the Offering is Ronald J. Saul, a director of the Company who together
with his spouse purchased 300,000 Units pursuant to two separate subscription
agreements (Note H).

On October 30, 2007, the Company, closed on a private offering of
400,000 units ("Units"), Ronald J. Saul, a director of the Company, purchased
the 400,000 Units together with his spouse pursuant to a subscription agreement
dated October 30, 2007 (Note H).

On January 23, 2008, the Company, closed on a private offering of
600,000 units ("Units"), comprised of one (1) share ("Share") of its Common
Stock and one (1) warrant ("Warrant") for the purchase of one (1) share of
Common Stock. The Company received gross proceeds of Seventy Five Thousand
Dollars ($75,000) from the sale of Units in the Offering.

Among the individuals who purchased Units in the Offering is Ronald J.
Saul, a director of the Company who together with his spouse purchased 200,000
Units and Richard Banakus, the Chairman acting interim president and a director
of the Company, who purchased 200,000 units pursuant to a subscription
agreement.

NOTE J - GOING CONCERN AND MANAGEMENT'S PLAN

The Company's working capital deficit was approximately ($397,000) at
December 31, 2007, including cash and cash equivalents of $4,476. Cash used in
operating activities was $185,824, cash used in investing activities was $0 and
cash provided by financing activities was $190,300 during the period ended
December 31, 2007.

The Company has the following material debt; loan payable of $150,000
borrowed from three shareholders in May 2005 (see Note F), the loan payable of
$100,000 borrowed from one shareholder on May 22, 2007 (Note F) and two capital
leases for equipment purchases of $24,373. The Company has substantial overdue
trade accounts payables balances. There are no capital expenditures under
construction and no long-term commitments other than royalty payments under an
agreement with Valera Pharmaceuticals, Inc. The Company does not have any lines
of credit. There are no purchase order commitments that exceed 90 days.

Management's plan includes implementing one or more of the following
elements:

o Emphasize and expand the marketing and manufacturing of private
label products.

o Implement new direct sales and networking initiatives.

o Emphasize Catalog sales, including sales made over the Internet,
since these sales have higher profit margins.

o Evaluate the possibilities of increasing direct marketing and direct
response television exposure to build brand awareness and revenues.

o Team with third parties to build the advertising and promotion of
the Hydron(R) brand, as the Company does not have the financial
resources to sustain a national advertising campaign to support
distribution of its production into retail stores.

o Develop and market new product lines based on the Company's
proprietary technologies.

o Continue to reduce overhead and operating costs.

o Obtain an infusion of capital that will sustain the Company's
operation until the newly established licensing initiatives can
produce positive cash flow.

There can be no assurances that management's plan will be successful
and the Company's actual results could differ materially. No estimate has been
made to the financial statements to account for the possibility that the plan
may be unsuccessful.

NOTE K - SUBSEQUENT EVENTS

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

FORWARD LOOKING INFORMATION

The following discussion and analysis of the Company's financial
condition and results of operations should be read with the consolidated
financial statements and related notes contained in this quarterly report on
Form 10-QSB ("Form 10-QSB"). All statements other than statements of historical
fact included in this Form 10-QSB are, or may be deemed to be, forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements involve
known and unknown risks, uncertainties and other factors that may cause the
Company's actual results, levels of activity, performance or achievements to be
materially different than any expressed or implied by these forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," "continue," or the negative of
these terms or other comparable terminology. Important factors that could cause
actual results to differ materially from those discussed in such forward-looking
statements include: 1. General economic factors including, but not limited to,
changes in interest rates and trends in disposable income; 2. Information and
technological advances; 3. Cost of products sold; 4. Competition; and 5. Success
of marketing, advertising and promotional campaigns. The Company is subject to
specific risks and uncertainties related to its business model, strategies,
markets and legal and regulatory environment You should carefully review the
risks described in this Form 10-QSB and in other documents the Company files
from time to time with the SEC. You are cautioned not to place undue reliance on
the forward-looking statements, which speak only as of the date of this Form
10-QSB. The Company undertakes no obligation to publicly release any revisions
to the forward-looking statements to reflect events or circumstances after the
date of this document.

BUSINESS

During early 2005, the Company returned its focus to the development
and sales of its skin care products. For several years prior, the Company's
research and development efforts were concentrated on products and medical
applications utilizing its patented tissue oxygenation technology, and on
accumulating data for a Food & Drug Administration (FDA) application related to
this technology. On January 10, 2005, the Company attended a Pre-Investigational
Device Exemption meeting with the FDA in the belief that a clear pathway for
safety and clinical research requirements could be determined at that time;
however, a defined methodology could not be agreed upon at that time. As a
result of that meeting, and in consideration of the Company's limited working
capital, management decided to refocus its efforts on non-medical technologies.
The Company continues to believe that its tissue oxygenation technology has
significant potential, and expects to re-institute research and development in
that area when working capital allows.

The Company's current focus is on furthering development and sales of
its other proprietary products, including a newly patented evaporating
emulsifier technology for use in cosmetic treatments and acne products, a number
of patented polymer skin care formulas using a moisture-attracting ingredient
(the "Hydron(R) polymer") that provide superior skin moisturization benefits and
sunscreen delivery, and a patented formula for a wrinkle reduction serum.

Currently, the Company markets a broad range of cosmetic and oral
health care products using a moisture-attracting ingredient (the "Hydron(R)
polymer") and a topical delivery system for active ingredients including
pharmaceuticals. The Company holds U.S. and international patents on, what
management believes is, the only known cosmetically acceptable method to suspend
the Hydron polymer in a stable emulsion for use in personal care/cosmetic
products. The Company is developing other personal care/cosmetic products for
consumers using its patented technology and would, when appropriate, either seek
licensing arrangements with third parties, or develop and market proprietary
products through its own efforts. Management believes that because of their
unique properties, products that utilize the Hydron polymer have the potential
for wide acceptance in consumer and professional health care markets.

On July 1, 2005, the Company purchased Clinical Results, Inc. ("CRI"),
for two million (2,000,000) shares of the Company's common stock. Through the
purchase of CRI the Company has entered the business of proprietary formulations
and contract manufacturing for other consumer product companies.

LIQUIDITY

The Company anticipated that present working capital balances and
internally generated funds will not be sufficient to meet our working capital
needs for the next three months. It will be necessary to sell selected assets,
or obtain an infusion of capital. The Company's independent accountants issued a
"going concern" opinion on the Company's September 30, 2007 financial
statements, since the Company has incurred significant losses over the past five
years and generates a negative cash flow on a monthly basis.

On October 3, 2007, the Company, closed on a private offering of
1,400,000 units ("Units"), comprised of one (1) share ("Share") of its Common
Stock and one (1) warrant ("Warrant") for the purchase of one (1) share of
Common Stock. The Company received gross proceeds of One Hundred Seventy Five
Thousand Dollars ($175,000) from the sale of Units in the Offering. Among the
individuals who purchased Units in the Offering is Ronald J. Saul, a director of
the Company who together with his spouse purchased 300,000 Units pursuant to two
separate subscription agreements. Mr. Saul and his spouse paid for 200,000 Units
by the cancellation of certain indebtedness owed to them by the Company
evidenced by a promissory note in the principal amount of Twenty Five Thousand
Dollars ($25,000) and paid for 100,000 Units by payment in cash.

Ronald J. Saul, a director of the Company, purchased the 400,000 Units
together with his spouse pursuant to a subscription agreement dated October 30,
2007.

The Company used the proceeds of the Offering to pay current
obligations of the Company, including payments made to its landlord for
outstanding rent.

Management's plan includes implementing one or more of the following
elements:

o Emphasize and expand the marketing and manufacturing of private
label products.

o Implement new direct sales and networking initiatives.

o Emphasize Catalog sales, including sales made over the Internet,
since these sales have higher profit margins.

o Evaluate the possibilities of increasing direct marketing and direct
response television exposure to build brand awareness and revenues.

o Develop and market new product lines based on the Company's
proprietary technologies.

o Continue to reduce overhead and operating costs.

o Obtain an infusion of capital that will sustain the Company's
operation until the newly established licensing arrangements can
produce positive cash flow.

HYDRON(R) BRANDED SKIN CARE PRODUCTS

The Company has been developing various consumer products using Hydron
polymers since 1986. The Company's products are designed to address concerns
about the visible signs of aging, and include Hydron(R) skincare, hair care,
bath and body and sun care lines. The Company currently has forty three
individual branded products available in the following product categories: skin
care (34 products), hair care (6 products), bath and body (12 products), dental
(3 products) and sun care (2 products). These products are also packaged into
collections and sold at a more favorable value than the individual products sold
separately. All of the products are available through the Hydron catalog and web
site at www.hydron.com ("Catalog"). The Company also markets a number of
customized formulations under private label and contract manufacturing for
various outside brands.

Management believes that the Company's moisturizers and skin treatments
are unique and offer the following competitive benefits: they self-adjust to
match the skin's optimal pH balance soon after they are applied to the skin;
they become water-insoluble on the skin's surface, and unlike all other
water-based cremes and lotions, are not removed by the skin's perspiration or
plain water; they are oxygen-permeable, allowing the skin to breathe; they do
not emulsify the skin's natural moisturizing agents, as do conventional cremes
and lotions; and they attract and hold water, creating a cushion of moisture on
the skin's surface that promotes penetration of other beneficial product
ingredients, all while leaving no greasy after-feel.

The Company's products are independently tested by dermatologists and,
in their opinion, are considered to be safe, non-irritating and applicable to
most skin types. Products for use around the eye area are also ophthalmologist
tested and safe for contact lens wearers. Most of the Company's branded
moisturizing products are based on the Company's patented emulsion system, which
permits the product ingredients to deliver their intended benefits over an
extended period of time and in a more efficient manner.

Management believes that the Hydron(R) emulsion system can enhance the
effectiveness of topical over-the-counter medications. The emulsion system is
designed to deposit a polymer film on the skin's surface which has a number of
advantages over traditional lotions: it promotes hydration of the outer layer of
skin, improves penetration into the skin's pores, and has good tactility and
flexibility. The Company expects to continue to focus research and development
resources on proprietary technology-based products as determined by management's
assessment of consumer demand.

Catalog and Web Sales - The Company offers personal care products for
sale directly to consumers. Augmenting direct mail, the Company sells its
products on the World Wide Web and regularly transmits E-mail broadcasts to its
customer base. Catalog and Web sales represented approximately 33% of Hydron's
total sales for the three months ended December 31, 2007 and 65% of sales the
three months ended December 31, 2006. The Company is continuing to explore new
ways to enhance Catalog and Web sales and operations, including direct sales
initiatives.

Private Label Contracting - Since March 1, 2001, the Company has been a
supplier to Reliv International, Inc ("Reliv") to develop and manufacture a line
of private label skin care products under their brand name, ReversAge(R). Reliv
is a public company traded on NASDAQ (symbol RELV). Private label sales
represented approximately 15% of Hydron's total sales for the three months ended
December 30, 2007 and 0% of sales for the three months ended December 31, 2006.

Contract Manufacturing - Through its acquisition of CRI, the Company
now manufactures consumer products for a number of companies. Products include
proprietary formulations for skin and hair care. During the three month period
ending December 31, 2007, contract manufacturing revenue represented 47% of
Hydron's total sales and 30% for the three months ended December 31, 2006.

RESULTS OF OPERATIONS

RESULTS OF OPERATIONS - 2007 VERSUS 2006

Total net sales for the three months ended December 31, 2007 were
$329,200, an increase of $35,672 or 12% from net sales of $293,528 for the three
months ended December 31, 2006. Catalog Sales net sales for the three months
ended December 31, 2007 were $110,116, a decrease of $80,950 or 42% from sales
of the three months ended December 31, 2006 of $191,066. Private Label and
Contract Manufacturing net sales for the three months ended December 31, 2007
were $203,706, an increase of $116,068 or 132% from sales the three months ended
December 31, 2006 of $87,638. Shipping and handling revenues for the three
months ended December 31, 2007 were $15,378, an increase of $1,427 or 10% from
shipping and handling revenues for the three months ended December 31, 2006 of
$13,951.

The decrease in catalog sales was the result of the attrition of the
Company's customer base without marketing spending to replace those
customers,and the sale of goods to the Founders Club in 2006. Private Label
Manufacturing sales increased due to the timing of shipments to contact
manufacturing customers.

Cost of sales was $159,262 for the three months ended December 31,
2007, a decrease of $19,864, or 11%, from cost of sales of $179,126 for the
three months ended December 31, 2006. Cost of sales was 48% of total sales for
the three months ended December 31, 2007, compared to 61% for the three months
ended December 31, 2006. The decrease in the cost of sales percentage reflects
the impact of greater margins on catalog and private label sales. Shipping and
handling costs for the three months ended December 31, 2007 were $20,955, an
increase of $12,907, or 160%, from shipping and handling cost of $8,048 for the
same period in 2006. This increase reflects the increase in postage rates and a
refund from a shipper in 2006 for prior disputed amounts.

The Company's overall gross profit margin increased to 52% of net sales
for the three months ended December 31, 2007 versus 39% for the three months
ended December 31, 2006.

Royalty expenses for the three months ended December 31, 2007 were $0
and $5,168 for the three months ended December 31, 2006. An aggregate of $7,547
was accrued and unpaid as of December 31, 2007. This amount is adequate to cover
any royalties that are payable through December 2007.

Research and development ("R&D") expenses reflect the Company's efforts
to identify new product opportunities, obtain regulatory approval, develop and
package the products for commercial sale, perform appropriate efficacy and
safety tests, and conduct consumer panel studies and focus groups. R&D expenses
were $664 for the three months ended December 31, 2007, an increase of $231 or
53% from R&D expenses of $433 for the three months ended December 31, 2006. The
amount of annual R&D expenses will vary year to year depending on the Company's
research requirements.

Selling, general and administrative ("SG&A") expenses for the three
months ended December 31, 2007 were $265,565, representing a decrease of $33,363
or 11% from SG&A expenses of $298,928 for the three months ended December 31,
2006. Rent and related expenses was $45,612 for the three months ended December
31, 2007, an increase of $20,160, or 80% from $25,452 for the three months ended
December 31, 2006. The increase in rent is due primarily to increased pass
through costs for property insurance from the landlord. Professional expenses
(legal and audit) was $854 for the three months ended December 31, 2007, a
decrease of $39,601 or 98% from $40,455 for the three months ended December 31,
2006. The decrease in professional fees involved a credit from a law firm for
previous fees billed. All other expenses were $219,099 for the three months
ended December 31, 2007, a decrease of $13,922 or 6% from $233,021 for the three
months ended December 31, 2006.

Depreciation and amortization expense was $23,975 for the three months
ended December 31, 2007, a decrease of $3,188 or 12% from $27,163 for the three
months ended December 31, 2006.

Net interest (expense) was ($26,545) for the three months ended
December 31, 2007 an increase of 12,752 or 92% compared to net interest
(expense) of ($13,793) for the three months ended December 31, 2006. The
increase in interest expense was due primarily to the interest on the loan
payable and amortization of related debt discount.

Minority interest in net loss for the three months ended December 31,
2007 was $4,813 compared to $7,046 for the three months ended December 31, 2006.
This minority interest is created from a consolidated limited liability
partnership, Hydron Royalty Partners, LLLP, established by the Company in August
2004.

The Company had a net loss of $141,998 for the three months ended
December 31, 2007, representing a decrease of $82,039 or 37% from the net loss
of $224,037 for the three months ended December 31, 2006, primarily as a result
of the factors discussed above.

APPLICATION OF CRITICAL ACCOUNTING POLICIES
-------------------------------------------

The preparation of financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
sales and expenses, and related disclosure of contingent assets and liabilities.
On an ongoing basis, management evaluates these estimates, including those
related to bad debts, inventories, investments, intangible assets, income taxes,
restructuring, and contingencies and litigation. Management bases these
estimates on historical experience and on various other assumptions that
management believes to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies are
significant in preparation of our financial statements.

Allowance for Sales Returns
---------------------------

The Company records product sales when persuasive evidence of an
arrangement exists, shipment has occurred, the price to the buyer is fixed or
determinable, and collectability is reasonably assured. Catalog sales are sold
on a cash basis with a 30-day guarantee. Returns have been less than $10,000
annually for the last five years. A provision is made at the time sales are
recognized for the estimated cost of product warranties. Private label sales are
sold on account and are collected in 30 to 45 days. If there is a production or
packaging problem, the Company would correct the problem and replace the product
sold. To minimize that possibility, the Company inspects all production batches
before they are packaged to ensure quality, efficacy, and consistency.

Inventory Valuation
-------------------

Shifting sales from one item in our product line to another or minimum
production requirements may create a situation where inventory levels of
specific items may exceed the annual sales of that item. This can create
inventory levels in excess of net realizable value. Management regularly reviews
inventory quantities on hand and, where necessary, records provisions for excess
and obsolete inventory based on either estimated forecast of product demand or
historical usage of the product. If sales do not materialize as planned or
decline below historic levels, management increases the reserve for excess
(quantities in excess of one year's sales) and obsolete inventory. This would
reduce earnings and cash flows.

Packaging changes are planned far in advance in order to limit the
impact of out-dated or obsolete components. Private label customers are required
to prepay the cost of packaging materials in order to take advantage of volume
discounts and protect the Company from any sudden packaging changes.

ITEM 3. CONTROLS AND PROCEDURES

As of the end of this period, the Company carried out an evaluation,
under the supervision and with the participation of management, including its
Chief Executive Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-15(e). Based upon that evaluation, the Chief Executive Officer concluded
that the Company had material weaknesses associated with insufficient personnel
resources with appropriate accounting experience and lack of controls relating
to inventory valuation and segregation of inventory. During the second quarter
management hired new personnel with appropriate accounting experience, and is in
the process of implementing a perpetual inventory system which should mitigate
these material weaknesses in 2008.

Disclosure controls and procedures (as defined in the Exchange Act
Rules 13a-15(e) and 15d-15(e)) are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act are recorded, processed, summarized
and reported, within the time periods specified in the Securities and Exchange
Commission's rules. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management to allow timely decisions regarding required
disclosure.

The Certifying Officer has also indicated that there were no
significant changes in our internal controls or other factors that could
significantly affect such controls subsequent to the date of their evaluation,
and there were no corrective actions with regard to significant deficiencies and
material weaknesses.

Our management, including the Certifying Officer, does not expect that
our disclosure controls or our internal controls will prevent all error and
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. In addition, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within a company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake.

Additionally, controls can be circumvented by the individual acts of
some persons, by collusion of two or more people or by management override of
the control. The design of any systems of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Over time, control may become inadequate because of
changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of these inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not a party to, and its property is not the subject of,
any material pending legal proceedings.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Ronald J. Saul, a director of the Company, purchased the 400,000 Units
together with his spouse pursuant to a subscription agreement dated October 30,
2007.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

A Meeting of the Shareholders of the Company was held on November 15,
2004, in Boca Raton, Florida (the "Meeting"). At the Meeting, the shareholders
of the Company voted on proposals to (i) elect a Board of four directors to
serve until the Company`s next meeting of shareholders and until their
successors are elected and qualified and approved the Company's 2003 Stock Plan.
The results of the voting appointed the following Directors:

Richard Banakus
Joshua Rochlin
Karen Gray
Ronald J. Saul

The Shareholders also approved the adoption of the Company's 2003 Stock
Plan and ratified the Audit Committee's selection of Daszkal Bolton LLP as the
Company's independent Certified Public Accountants for the year ended December
31, 2004. There was no shareholder meeting held in 2007.

Mr. Joshua Rochlin resigned from the Board of Directors of Hydron
Technologies, Inc. effective March 31, 2005 due to his increased commitments at
Marc Ecko Enterprises. Mr. David Pollock was appointed to replace him on July 1,
2005.

No meeting of shareholders of the Company was held in 2006 and 2007.
Directors elected by the shareholders at the last annual meeting, as well as
David Pollock, the director elected by the Board of Directors, have continued in
office. Moreover, in light of the absence of a meeting of shareholders, the
Board of Directors has appointed Sherb & Co. as the Company's independent
accounting firm.

ITEM 5. OTHER EVENTS

None

ITEM 6. EXHIBITS

The following documents are filed as a part of this report or are
incorporated by reference to previous filings, if so indicated:

3.1 Restated Certificate of Incorporation of Dento-Med Industries, Inc.
("Dento-Med"), as filed with the Secretary of State of New York on
March 4, 1981.(1)

3.2 Certificate of Amendment of the Certificate of Incorporation of
Dento-Med as filed with the Secretary of State of New York on September
7, 1984.(2)

3.3 By-laws of the Company, as amended March 17, 1988.(3)

3.4 Certificate of Change of Dento-Med as filed with the Secretary of State
of New York on July 14, 1988.(2)

3.5 Certificate of Amendment of the Restated Certificate of Incorporation
of Dento-Med, as filed with the Secretary of State of New York on
November 14, 1988.(4)

3.6 Certificate of Amendment of the Restated Certificate of Incorporation
of Dento-Med, as filed with the Secretary of State of New York on July
30, 1993.(5)

3.7 Certificate of Amendment of the Restated Certificate of Incorporation
of Hydron Technologies, Inc., as filed with the Secretary of State of
New York on April 10, 2002.(2)

4.1 Non-Qualified Stock Option Plan.(6)

4.2 Registration Rights Agreement dated July 11, 2002, by and between
Hydron Technologies, Inc. and Life International Products, Inc.(2)

4.3 Warrant Agreement dated November 14, 2003 between Hydron Technologies,
Inc. and the parties named therein.(2)

5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.(18)

7.1 Letter of Sherb & Co LLP dated May 25, 2007 addressed to the United
States Securities Exchange Commission. (15)

10.1 Subscription Agreement dated November 22, 2002 between Hydron
Technologies, Inc. and the subscribers named therein.(2)

10.2 Subscription Agreement dated September 31, 2003 between Hydron
Technologies, Inc. and the subscribers named therein.(2)

10.3 Agreement dated July 11, 2002 between Hydron Technologies, Inc. and
Life International Products, Inc.(2)

10.4 1997 Nonemployee Director Stock Option Plan.(7)

10.5 Bridge Loan Term Sheet for Interim Loans Between Hydron Technologies,
Inc and Members of the Board of Directors.(2)

10.6 2003 Stock Plan(8)

10.7 Note dated June 14, 2005 in the principal amount of $50,000 payable to
payable to Richard Banakus (9)

10.8 Note dated June 14, 2005 in the principal amount of $50,000 payable to
Ronald J. Saul and Antonette G. Saul, jointly (9)

10.9 Note dated June 14, 2005 in the principal amount of $50,000 payable to
Regis Synan (9)

10.10 Common Stock Purchase Warrant dated June 14, 2005 in favor of Richard
Banakus (9)

10.11 Common Stock Purchase Warrant dated June 14, 2005 in favor of Ronald J.
Saul and Antonette G. Saul, jointly (9)

10.12 Common Stock Purchase Warrant dated June 14, 2005 in favor of Regis
Synan (9)

10.13 Purchase and Sale Agreement by and among Clinical Results, Inc., David
Pollock and Douglas Reitz and Hydron Technologies, Inc., dated July 1,
2005 (10)

10.14 Employment Agreement for David Pollock (10)

10.15 Employment Agreement for Richard Douglas Reitz (10)

10.16 Form of Assignment (11)

10.17 Subscription Agreement dated January 31, 2007 between Hydron
Technologies, Inc. and Richard Banakus (13)

10.18 Subscription Agreement dated January 31, 2007 between Hydron
Technologies, Inc. and Ronald J. Saul and Antonette G. Saul, jointly
(13)

10.19 Subscription Agreement dated February 5, 2007 between Hydron
Technologies, Inc. and Ronald J. Saul and Antonette G. Saul, jointly
(13)

10.20 Common stock Purchase Warrant dated February 1, 2007 in favor of
Richard Banakus (13)

10.21 Common stock Purchase Warrant dated February 1, 2007 in favor of Ronald
J. Saul and Antonette G. Saul, jointly (13)

10.22 Common stock Purchase Warrant dated February 5, 2007 in favor of Ronald
J. Saul and Antonette G. Saul, jointly (13)

10.23 Subscription Agreement dated March 21, 2007 between Hydron
Technologies, Inc. and Ronald J. Saul and Antonette G. Saul, jointly
(14)

10.24 Common stock Purchase Warrant dated March 21, 2007 in favor of Ronald
J. Saul and Antonette G. Saul, jointly (14)

10.25 Subscription Agreement dated July 18, 2007 between Hydron Technologies,
Inc. and Ronald J. Saul and Antonette G. Saul, jointly (16)

10.26 Common stock Purchase Warrant dated July 18, 2007 in favor of Ronald J.
Saul and Antonette G. Saul, jointly (16)

10.27 Prommisory note dated August 14, 2007 in the principal amount of twenty
five thousand dollars ($25,000) payable to Ronald J Saul and Annotte G.
Saul , jointly. (17)

10.28 Subscription Agreement dated October 3, 2007 between Hydron
Technologies, Inc. and Ronald J. Saul and Antonette G. Saul, jointly
for the purchase of 200,000 units paid by the cancellation of $25,000
promissory note.(19)

10.29 Common stock Purchase Warrant dated October 3, 2007 in favor of Ronald
J. Saul and Antonette G. Saul, jointly (19)

10.30 Subscription Agreement dated October 3, 2007 between Hydron
Technologies, Inc. and Ronald J. Saul and Antonette G. Saul, jointly
for the purchase of 100,000 units paid in cash.(19)

10.31 Common stock Purchase Warrant dated October 3, 2007 in favor of Ronald
J. Saul and Antonette G. Saul, jointly (19)

10.32 Subscription Agreement dated October 30, 2007 between Hydron
Technologies, Inc. and Ronald J. Saul and Antonette G. Saul, jointly
for the purchase of 400,000 units.(20)

10.33 Common stock Purchase Warrant dated January 23, 2008 in favor of Ronald
J. Saul and Antonette G. Saul, jointly (21)

10.34 Subscription Agreement dated January 23, 2008 between Hydron
Technologies, Inc. and Ronald J. Saul and Antonette G. Saul, jointly
for the purchase of 200,000 units.(21)

10.35 Common stock Purchase Warrant dated January 23, 2008 in favor of
Richard Banakus (21)

10.36 Subscription Agreement dated January 23, 2008 between Hydron
Technologies, Inc. and Richard Banakus,for the purchase of 200,000
units.(21)

10.37 Common stock Purchase Warrant dated October 30, 2007 in favor of Ronald
J. Saul and Antonette G. Saul, jointly (20)

16. Letter from Daszkal Bolton LLP dated December 4, 2006 to the Securities
and Exchange Commission (12)

23.2 Consent of Independent Registered Public Accounting Firm - Sherb & Co.
LLP

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

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

99. Press Release dated July 6, 2005 incorporated by reference to Form 8-K
filed on July 8, 2005. (10)
__________________

(1) Incorporated by reference to the Company's report on Form 10-K for the year
ended December 31, 1985.

(2) Incorporated by reference to the Company's report on Form S-3 filed
February 11, 2004.

(3) Incorporated by reference to the Company's report on Form 10-K for the year
ended December 31, 1987.

(4) Incorporated by reference to the Company's report on Form 10-K for the year
ended December 31, 1988.

(5) Incorporated by reference to the Company's report on Form 10-K for the year
ended December 31, 1993.

(6) Incorporated by reference to the Company's report on Form 10-K for the year
ended December 31, 1986.

(7) Incorporated by reference to the Company's Definitive Proxy Statement on
Schedule 14A for the year ended December 31, 1996.

(8) Incorporated by reference to the Company's Definitive Proxy Statement for
the year ended December 31, 2003.

(9) Incorporated by reference to Form 8-K filed June 20, 2005

(10) Incorporated by reference to Form 8-K filed July 8, 2005

(11) Incorporated by reference to Form 8-K filed November 2, 2005

(12) Incorporated by reference to Form 8-K filed December 5, 2006

(13) Incorporated by reference to Form 8-K filed February 7, 2007

(14) Incorporated by reference to Form 8-K filed March 21, 2007

(15) Incorporated by reference to Form 8-K filed May 20, 2007

(16) Incorporated by reference to Form 8-K filed July 18, 2007

(17) Incorporated by reference to Form 8-K filed August 14, 2007

(18) Incorporated by reference to Form 8-K filed September 20, 2007

(19) Incorporated by reference to Form 8-K filed October 3, 2007

(20) Incorporated by reference to Form 8-K filed October 30, 2007

(21) Incorporated by reference to Form 8-K filed January 23, 2008

SIGNATURES

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

HYDRON TECHNOLOGIES, INC.

/s/ David Pollock
-----------------
David Pollock
Chief Executive Officer
Principal Financial and Accounting Officer

Dated: February 14, 2008