SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON
D.C. 20549





**FORM
10-QSB**





QUARTERLY
REPORT UNDER SECTION 13 OR 15 (d)


OF THE
SECURITIES EXCHANGE ACT OF 1934





For the
quarter ended September 30, 2005


Commission
File Number 0-10683





**HYDROMER,
INC.**


(Exact
name of registrant as specified in its charter)


New Jersey
    22-2303576(State
      of incorporation)
    (I.R.S.
      EmployerIdentification
      No.)





35
      Industrial Pkwy, Branchburg, New Jersey
    08876-3424(Address of principal executive offices)
    (Zip
      Code)Registrant's
      telephone number, including area code:
    (908)
      722-5000




Securities
registered pursuant to Section 12 (b) of the Act: None





Securities
registered pursuant to Section 12 (g) of the Act:





Common
Stock Without Par Value


(Title of
class)




Check
whether the issuer (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
report(s), and (2) has been subject to such filing requirements for the past 90
days.


Yes
    x
    No
     ̈




Indicate
the number of shares outstanding or each of the issuer’s classes of Common Stock
as of the close of the period covered by this report.







Class
    Outstanding
      at September 30, 2005Common
    4,631,942










- 1
-
 INDEX


HYDROMER,
      INC.INDEXTO FORM 10-QSB
      September
      30, 2005Page
      No.Part
      I - Financial InformationConsolidated Financial StatementsBalance Sheets- September 30, 2005 & June 30,
      2005...............................................
    2Statements of Income for the three months endedSeptember
      30, 2005 and
      2004.........................................................................
    3Statements of Cash Flows for the three months
      endedSeptember
      30, 2005 and
      2004.........................................................................
    4Notes to Financial
      Statements........................................................................................
    5Management's Discussion and Analysis of the Financial
      Conditionand
      Results of
      Operations...............................................................................
    6Part
      II - Other
      Information......................................................................................................
    8


EXHIBIT
      INDEXExhibit
      No.
    Description
      of Exhibit33.1
    SEC Section 302 Certification - CEO
      certification.................................
    1033.2
    SEC Section 302 Certification - CFO
      certification..................................
    1199.1
    Certification of Manfred F. Dyck, Chief Executive
      Officer, pursuantto 18 U.S.C. Section
      1350....................................................
    1299.2
    Certification of Robert Y. Lee, Chief Financial Officer,
      pursuantto 18 U.S.C. Section
      1350.................................................
    12
















- 2
-
 INDEX




**HYDROMER,
INC. and CONSOLIDATED SUBSIDIARY**


**CONSOLIDATED
BALANCE SHEETS**




September
      30,
      **2005**
      
      UNAUDITED
    
    June
      30,
      2005
      
      AUDITED**Assets**Current
      Assets:Cash
      and cash
      equivalents................................................................................
    
    **$**
    **687,523**
    
    $
    1,376,656Short-term
      investments.....................................................................
    
    
    **394,286**
    
    
    **-**Trade
      receivables less allowance for doubtful accounts of $32,753 as
      of
      September
      30, 2005 and $32,753 as of June 30,
      2005...............................
    
    
    **721,577**
    
    
    1,220,258Inventory.........................................................................................................
    
    
    **1,095,024**
    
    
    1,094,927Prepaid
      expenses ...........................................................................
    
    
    **113,809**
    
    
    126,762Deferred
      tax
      asset.............................................................................................
    
    
    **218,279**
    
    
    91,989Other...........................................................................................................
    
    
    **14,382**
    
    
    14,841Total
      Current
      Assets...............................................................................................
    
    
    **3,244,880**
    
    
    3,925,433Property
      and equipment,
      net...................................................................................
    
    
    **3,267,401**
    
    
    3,276,258Intangible
      assets, net...........................................................................
    
    
    **792,828**
    
    
    780,140Goodwill,
      net......................................................................................
    
    
    **238,172**
    
    
    238,172Total
      Assets
    
    **$**
    **7,543,281**
    
    $
    8,220,003**Liabilities
      and Stockholders’ Equity**Current
      Liabilities:Accounts
      payable.............................................................................................
    
    **$**
    **411,097**
    
    $
    466,993Short-term
      borrowings.....................................................................................
    
    
    **-**
    
    
    206,663Accrued
      expenses ..........................................................................
    
    
    **266,081**
    
    
    280,944Bonus
      payable...............................................................................
    
    
    **-**
    
    
    77,267Current
      portion of deferred revenue........................................................
    
    
    **129,817**
    
    
    161,317Current
      portion of mortgage payable
      ..............................................................
    
    
    **192,631**
    
    
    178,029Total
      Current Liabilities.........................................................................
    
    
    **999,626**
    
    
    1,371,213Deferred
      tax liability...............................................................................
    
    
    **243,864**
    
    
    243,864Long-term
      portion of deferred
revenue..........................................................
    
    
    **161,275**
    
    
    176,979Long-term
      portion of mortgage payable ......................................................
    
    
    **2,246,612**
    
    
    2,295,292Total
      Liabilities
    
    
    **3,651,377**
    
    
    4,087,348Stockholders’
      EquityPreferred
      stock - no par value, authorized 1,000,000 shares, no shares
      issued
      and outstanding
    
    
    -
    
    
    -Common
      stock - no par value, authorized 15,000,000 shares;
      as
      of September 30, 2005, 4,642,859 shares issued and 4,631,942shares
      outstanding;
      as of
      June 30, 2005, 4,634,859shares
      issued and4,623,942
      shares
      outstanding...................................................................
    
    
    **3,636,015**
    
    
    3,631,615Contributed
      capital...........................................................................................
    
    
    **577,750**
    
    
    577,750Accumulated
      deficit.........................................................................................
    
    
    **(315,721**
    **)**
    
    (70,570)Treasury
      stock, 10,917 common shares at
      cost.................................................
    
    
    **(6,140**
    **)**
    
    (6,140)Total
      Stockholders’ Equity
    
    
    **3,891,904**
    
    
    4,132,655Total
      Liabilities and Stockholders’ Equity
    
    **$**
    **7,543,281**
    
    $
    8,220,003


- 3
-
 INDEX





**HYDROMER,
INC. and CONSOLIDATED SUBSIDIARY**


**CONSOLIDATED
STATEMENTS OF INCOME**











Three
      Months Ended
      September
      30,**2005**
    
    2004**Revenues**Sale of
      products...................................................................................................
    
    **$**
    **1,054,750**
    
    $
    1,071,163Service
      revenues...................................................................................................
    
    
    **245,283**
    
    
    281,629Royalties, options
      and licenses.....................................................................
    
    
    **561,171**
    
    
    593,538**Total
      Revenues**...........................................................................
    
    
    **1,861,204**
    
    
    1,946,330**Expenses**Cost
      of
      Sales..................................................................................................
    
    
    **817,348**
    
    
    698,758Operating
      Expenses.......................................................................
    
    
    **1,381,733**
    
    
    1,277,784Other
      Expenses
      ..............................................................................................
    
    
    **33,564**
    
    
    21,780Income
      Tax Benefit
      ...............................................................................
    
    
    **(126,290**
    **)**
    
    (28,606
    )**Total
      Expenses**............................................................................
    
    
    **2,106,355**
    
    
    1,969,716**Net
      Loss**................................................................................................
    
    **$**
    **(245,151**
    **)**
    $
    (23,386
    )Loss
      Per Common Share..................................................................
    
    **$**
    **(0.05**
    **)**
    $
    (0.01
    )Weighted
      Average Number ofCommon
      Shares
      Outstanding.............................................................................
    
    
    **4,625,542**
    
    
    4,597,987











The
effects of the common stock equivalents on diluted earnings per
share


are not
included as they have no impact.


- 4
-
 INDEX





**HYDROMER,
INC. and CONSOLIDATED SUBSIDIARY**


**CONSOLIDATED
STATEMENTS OF CASH FLOWS**











Three
      Months Ended
      September
      30,**2005**
      **UNAUDITED**
    
    2004
      UNAUDITED**Cash
      Flows From Operating Activities:**Net
      Loss..................................................................................................................
    
    **$**
    **(245,151**
    **)**
    $
    (23,386
    )Adjustments
      to reconcile net loss to net cash provided by (used for) operating
      activitiesDepreciation
      and
      amortization................................................................................
    
    
    **56,033**
    
    
    48,724Deferred
      income taxes
      .........................................................................................
    
    
    **(126,290**
    **)**
    
    (8,947
    )Changes
      in Assets and LiabilitiesTrade
      receivables................................................................................................
    
    
    **498,681**
    
    
    227,086Inventory............................................................................................................
    
    
    **(97**
    **)**
    
    (81,537
    )Prepaid
      expenses.................................................................................................
    
    
    **12,953**
    
    
    34,242Patents
      and
      Trademark.......................................................................................
    
    
    **(12,688**
    **)**
    
    (52,497
    )Other
      assets........................................................................................................
    
    
    **(7,967**
    **)**
    
    20,118Accounts
      payable and accrued
      liabilities............................................................
    
    
    **(148,026**
    **)**
    
    (101,080
    )Deferred
      revenues
      ............................................................................................
    
    
    **(47,204**
    **)**
    
    -Income
      taxes
      payable..........................................................................................
    
    
    **6,773**
    
    
    (64,659
    )Net
      Cash Used for Operating
      Activities........................................................
    
    
    **(12,983**
    **)**
    
    (1,936
    )**Cash
      Flows From Investing Activities:**Cash
      purchases of property and
      equipment.................................................................
    
    
    **(47,176**
    **)**
    
    (171,652
    )Cash
      purchases of short-term
      investments..................................................................
    
    
    **(392,633**
    **)**
    
    -Net
      Cash Used for Investing
      Activities..........................................................
    
    
    **(439,809**
    **)**
    
    (171,652
    )**Cash
      Flows From Financing Activities:**Net
      (repayments) borrowings against Line of
      Credit............................................
    
    
    **(206,663**
    **)**
    
    235,089Repayment
      of long-term borrowings............................................................
    
    
    **(34,078**
    **)**
    
    (22,095
    )Proceeds
      from the issuance of common stock..................................................
    
    
    **4,400**
    
    
    4,000Net
      Cash (Used for) Provided by Financing
    Activities............................
    
    
    **(236,341**
    **)**
    
    216,994**Net
      (Decrease) Increase in Cash and Cash Equivalents:**
    
    
    **(689,133**
    **)**
    
    43,406Cash
      and Cash Equivalents at Beginning of
      Period.............................................................
    
    
    **1,376,656**
    
    
    142,476Cash
      and Cash Equivalents at End of
      Period.......................................................................
    
    **$**
    **687,523**
    
    $
    185,882








- 5
-
 INDEX





**HYDROMER,
INC. and CONSOLIDATED SUBSIDIARY**





Notes to
Consolidated Financial Statements





In the
opinion of management, the accompanying unaudited financial statements include
all adjustments (consisting of only normal adjustments) necessary for a fair
presentation of the results for the interim periods. Certain reclassifications
have been made to the previous year’s results to present comparable financial
statements.





Segment
Reporting:


The
Company operates two primary business segments. The Company evaluates the
segments by revenues, total expenses and earnings before taxes. Corporate
Overhead is excluded from the business segments as to not distort the
contribution of each segment.





The
results for the three months ended September 30, by segment are:


Polymer
      Research
    
    Medical
      Products
    
    Corporate
      Overhead
    
    Total2005Revenues.................................................
    
    $
    1,108,114
    
    $
    753,090
    
    
    
    
    $
    1,861,204Expenses..................................................
    
    
    (909,361
    )
    
    (937,049
    )
    $
    (386,235
    )
    
    (2,232,645
    )Pre-tax
      Income (Loss)..............................
    
    $
    198,753
    
    $
    (183,959
    )
    $
    (386,235
    )
    $
    (371,441
    )2004Revenues................................................
    
    $
    1,211,899
    
    $
    734,431
    
    
    
    
    $
    1,946,330Expenses.................................................
    
    
    (873,192
    )
    
    (812,105
    )
    $
    (313,025
    )
    
    (1,998,322
    )Pre-tax
      Income (Loss)..............................
    
    $
    338,707
    
    $
    (77,674
    )
    $
    (313,025
    )
    $
    (51,992
    )


Geographic
revenues were as follows for the three months ended September 30,


2005
    2004Domestic
    91%
    80%Foreign
    9%
    20%





- 6
-
 INDEX


**MANAGEMENT’S
DISCUSSION AND ANALYSIS OF THE**


**FINANCIAL
CONDITION AND RESULTS OF OPERATIONS**





Results
of Operations





The
Company’s revenues for the quarter ended September 30, 2005 were $1,861,204 as
compared to $1,946,330 for the same period last year or a 4.4% decrease.
Revenues are comprised of the sale of Products and Services and Royalty, Options
and License payments.





Product
sales and services were $1,300,033 for the quarter ended September 30, 2005 as
compared to


$1,352,792
for the same period last year, a decrease of $52,759 or 3.9%. The timing of
product sales


(accelerated
into the quarter ending June 30, 2005 or delayed, at the customer’s request,
post-Sept 30 th ),


reduced
product sales by approximately $40,000.





Royalty,
license and option revenues from patented products were $561,171 for the
quarter, down 5.5%


from
$593,538 the same period a year ago. The September 30, 2004 quarter included
$524,000 in


royalties
and option revenues related to the Company’s ‘267 patent which expired in May
2005. The


Company
was successful in reaching new agreements during the quarter ended September 30,
2005


with
three of the four former licensees. The new agreements, primarily supply and
availability


agreements,
provides for revenues at approximately 80% of the previous royalty level. The
more


significant
new agreement, a three year agreement with a renewal option but also a 90-day
termination


clause,
was effective upon the expiration of the ‘267 patent, allowing for an additional
$175,000 to be


realized
this quarter.





As of
September 30, 2005, our open sales order book for delivery this fiscal year was
approximately


$1,677,000.
Although some of these orders are subject to cancellation, the Company is of the
opinion


that no
substantial cancellations will occur. Our open order book excludes though,
future orders that


would
come up during the normal course of business for immediate delivery also during
the fiscal year.








Total
Expenses for the quarter ended September 30, 2005 were $2,106,355 as compared
with $1,969,716 the year before, an increase of 6.9%.





The
Company’s Cost of Goods Sold was $817,348 for the quarter ended September 30,
2005 as compared


with
$698,758 the year prior, an increase of 17.0%. The change in the mix of higher
cost margin products


sold this
quarter in addition to higher direct labor costs (including fringe benefits)
resulted in the higher


cost of
goods sold.





Operating
expenses were $1,381,733 for the quarter ended September 30, 2005 as compared with


$1,277,784
the year before, higher by $103,949 or 8.1%. The Company expended an additional


$77,000
in litigation costs this quarter in its continued infringement claim against a
former licensee and


other
parties. This amount was $43,000 higher than the corresponding period a year
ago. To date,


since
March 2004 when formal legal action was initiated, $329,000 in legal fees has
been spent. Such


legal
actions ceased infringement by one of the parties, which allowed the Company to
increase sales


during
the past fiscal years in the T-Hexx business line. An arbitration hearing held
in September 2005


provided
no results to settle the matter.  On November 9, 2005, the Company got
a default judgement


against
its former licensee, AST, Inc.  The Company is vigorously pursuing its case
against Veterinary


Pharmaceuticals,
Inc. Also
included in this quarter’s operating expenses is $33,592


for the
Company’s announced 401(k) matching contributions on the employees’ July 2004 -
June 2005


contributions.
The Company match for the previous year was announced in November
2004.





Interest
expense, included in Other Expenses, for the three months ended September 30,
2005 and


September
30, 2004 were $41,216 and $24,208, respectively, higher as a result of the
mortgage


refinance
on June 30, 2005. The refinance provided the Company an additional $1,091,643 in
funds


which the
Company is using for working capital requirements and investments in short-term


instruments.


- 7
-
 INDEX





A net
loss of $245,151 ($0.05 per share) is reported for the quarter ended September
30, 2005 as compared to a net loss of $23,386 ($0.01 per share) the year before.





Although
the Company’s sales are not cyclical, its revenues have been historically lower
in the first


quarter
as compared with the other quarters as of recent. Combined with higher costs and
expenses,


some due
to timing, some non-recurring, a net loss resulted for the period. It is the
Company’s


investment
back into the Company (R&D staffing, engineering department, patent estate)
which


increases
the current operating expenses for expected returns in the future. Our
developmental projects,


including
those Medical related, are typically long-term initiatives where the costs come
way before any


revenues
are returned. We have seen an annualized compounded growth rate of 22% in
revenues over


the past
ten years as a result of our reinvestment back into the Company.








Financial
Condition





Working
capital decreased $308,966 during the three months ended September 30, 2005.




The collection of trade and Royalties receivables utilized for the repayment of
accounts payable,
 accrued liabilities and the current period's working capital/operational needs
reduced working capital.


Net
operating activities used $12,983 for the three month period ended September 30,
2005.





The net
loss as adjusted for non-cash expenses used $315,408 in net cash.  Working
capital accounts


provided
$302,425 in net cash: primarily due to the decrease in accounts receivables by
$498,681 as


offset by
a decrease in accounts payable and accrued liabilities of $148,026.





Investing
activities used $439,809 and financing activities used $236,341 during the
quarter ended September 30, 2005.





During
the quarter, the Company purchased $392,633 in 6-month U.S. Treasury Bills,
recorded


as
short-term investments, and expended $47,176 on capital expenditures. The
Company also repaid


down its
revolving line of credit by $206,663 during the period.





Management
believes that its current working capital and available line of credit, along
with expected income and expense streams, are sufficient to maintain its current
level of operations.








Disclosure
Controls and Procedures





The
evaluation of the Company’s Internal Controls Environment concluded that it was
effective for the safeguarding of assets and in ensuring that management is
presented material information regarding the organization. The evaluation also
determined that there are areas that could be improved upon; however, the
controls and procedures in place were appropriate for the type and size of the
Company.




The
Company has again reviewed its Internal Controls Environment during the prior 90
days, and it has been determined that there have been no significant changes in
internal controls or in other factors that could significantly affect the
financial statements.













- 8
-
 INDEX





PART II -
Other Information







The
Company operates entirely from its sole location at 35 Industrial Parkway in
Branchburg, New Jersey, an owned facility secured by mortgages through banks.




The
existing facility will be adequate for the Company’s operations for the
foreseeable future.







Item
      6.
    Exhibits
      and Reports on form 8-K:a)
    Exhibits
      - noneb)
    Reports
      on form 8-K - A Form 8-K was filed during the quarter ending September 30,
      2005
      announcing earnings for the fiscal year ending June 30,
    2005


- 9
-
 INDEX





**SIGNATURES**











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











HYDROMER,
      INC./s/ Robert Y. LeeRobert
      Y. LeeChief
      Financial Officer











DATE:
November 14, 2005