UNITED STATES
    
    SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-Q (Mark One)
    xQuarterly
      Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
    For the Quarterly Period Ended: December 31, 2009Or oTransition
Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Commission File
Number: 000-06333 HYDRON
 TECHNOLOGIES, INC.(Exact name of
 Registrant as specified in its charter)  New York
 13-1574215(State or other jurisdiction
 of
 (I.R.S. Employer
 Identification Number)Incorporation or
 organization)  9843
   18th Street N, Suite 150Saint Petersburg, FL
 33716
 (727)342-5050(Address of Principal
 Executive Offices)
 (Registrants telephone
 number) Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o
 
 No þ Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes o
 
 No þ 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. Yes þ
 
 No o Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o
 
 No þ Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer  o
 
 Accelerated filer                      oNon-accelerated filero
 
 Smaller reporting Company  x Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x Number
of shares of common stock outstanding as of February 12, 2010: 19,621,176   TABLE OF CONTENTS
 PAGEPart I.
 Financial InformationItem 1.
 Financial Statements (Unaudited)Consolidated
 Balance Sheets (unaudited) at December 31, 2009 and September 30, 2009
 3Consolidated
 Statements of Operations (unaudited) for the three months ended December 31,
 2009 and 2008
 4Consolidated
 Statements of Cash Flows (unaudited) for the three months ended December 31,
 2009 and 2008
 5Notes to
 unaudited Consolidated Financial Statements
 6Item 2.
 Managements Discussion and Analysis of Financial Condition and Results of
 Operations
 16Item 4T.
 Controls and Procedures
 19Part II. Other
 InformationItem 1. Legal
 Proceedings
 19Item 2.
 Unregistered Sales Of Securities and Use of Proceeds
 19Item 3. Defaults
 Upon Senior Securities
 19Item 4.
 Submission of Matters to a Vote of Security Holders
 19Item 5. Other
 Information
 19Item 6. Exhibits
 20Signatures
 252

HYDRON TECHNOLOGIES, INC.
Consolidated Balance Sheets

December 31, 2009
 (unaudited)
 
 September 30, 2009
 (audited)ASSETSCurrent
 assetsCash
 
 $
 118,900
 
 $
 120,106Due from joint venture, net of
$116,041
 allowance for doubtful accounts
 
 
 4,771
 
 
 3,964Total current assets
 
 
 123,671
 
 
 124,070Deferred product costs, net
 
 
 78,070
 
 
 81,007Restricted cash
 
 
 2,405
 
 
 2,454Investment in joint venture
 
 
 247,727
 
 
 226,394Total assets
 
 $
 451,873
 
 $
 433,925LIABILITIES AND SHAREHOLDERS
EQUITY / DEFICITCurrent liabilitiesAccounts payable
 
 $
 5,424
 
 $
 2,865Royalties payable
 
 
 4,629
 
 
 3,965Accrued liabilities
 
 
 297,045
 
 
 282,592Total current liabilities
 
 
 307,098
 
 
 289,422Shareholders equity / deficitPreferred stock - $.01 par value
5,000,000
 shares authorized; no shares issued or outstanding
 
 
 
 
 
 Preferred stock Series A - $100 par
value
 15,000 shares authorized; 13,000 shares, issued or outstanding
 
 
 1,300,000
 
 
 1,300,000Common stock - $.01 par value
30,000,000
 shares authorized, 19,621,176 shares, issued and outstanding
 
 
 196,211
 
 
 196,211Additional paid-in
capital
 
 
 22,175,984
 
 
 22,175,034Accumulated deficit
 
 
 (23,686,843
 )
 
 (23,689,566
 )Treasury stock, at cost 10,000
shares
 
 
 (7,816
 )
 
 (7,816
 )Total Hydron Technologies, Inc.
 shareholders deficit
 
 
 (22,464
 )
 
 (26,137
 )Non controlling interest
 
 
 167,239
 
 
 170,640Total equity
 
 
 144,775
 
 
 144,503Total liabilities and
shareholders equity
 
 $
 451,873
 
 $
 433,925See accompanying notes to unaudited
consolidated financial statements.

3

HYDRON TECHNOLOGIES, INC.
Consolidated Statements of Operations(unaudited)

Three months ended December 31,2009
 
 2008Net sales
 
 $
 
 
 $
 Cost of sales
 
 
 
 
 
 Gross profit
 
 
 
 
 
 ExpensesRoyalty expense
 
 
 
 
 
 5,590Selling, general &
administration
 
 
 19,180
 
 
 29,017Amortization
 
 
 2,937
 
 
 4,159(Gain) Loss from interest in joint
venture
 
 
 (21,333
 )
 
 52,537Total expenses
 
 
 784
 
 
 91,303Operating loss
 
 
 (784
 )
 
 (91,303
 )Interest income net of interest
expense of $0 (2009), interest income
 net of interest expense of $1,008 (2008)
 
 
 106
 
 
 645Loss before income taxes
 
 
 (678
 )
 
 (90,658
 )Income taxes expense
 
 
 
 
 
 Loss from Continuing Operations
 
 
 (678
 )
 
 (90,658
 )Discontinued OperationsLoss from Discontinued Operations
 
 
 
 
 
 (51,632
 )Net loss
 
 
 (678
 )
 
 (142,290
 )Add: Net gain attributable to noncontrolling
interest
 
 
 3,401
 
 
 6,388Net gain (loss) attributable to Hydron Technologies,
Inc.
 
 $
 2,723
 
 $
 (135,902
 )Net loss per common share:Basic and fully diluted:Continuing operations
 
 $
 (0.00
 )
 $
 (0.00
 )Discontinued operations
 
 $
 
 
 $
 (0.00
 )$
 (0.00
 )
 $
 (0.01
 )Weighted average common shares outstanding basic and
diluted
 
 
 19,621,176
 
 
 19,621,176See accompanying notes to unaudited consolidated financial statements.

4

HYDRON TECHNOLOGIES, INC.Consolidated Statements of Cash Flows(unaudited)

Three months ended December 31,2009
 
 2008OPERATING ACTIVITIESLoss from
 continuing operations
 
 $
 (678
 )
 $
 (90,658
 )Adjustments to
 reconcile net loss from continuing operations to net cash used in continuing
 operating activitiesAmortization
 
 
 2,937
 
 
 4,159Compensation
 expense from stock option awards
 
 
 950
 
 
 7,800Investment in
 joint venture
 
 
 (21,333
 )
 
 52,537Change in
 operating assets and liabilitiesRestricted
cash
 
 
 49
 
 
 5,098Due from joint
 venture
 
 
 (807
 )
 
 (108,674
 )Accounts
 payable
 
 
 2,559
 
 
 (10,299
 )Accrued
 liabilities
 
 
 14,453
 
 
 (6,986
 )Royalties
 payable
 
 
 664
 
 
 521Net cash used
 in continuing activities
 
 
 (1,206
 )
 
 (146,502
 )Loss from
 discontinued operations
 
 
 
 
 
 (51,632
 )Adjustments to
 reconcile net loss from discontinued operations to net cash provided (used)
 in discontinued operating activities(Decrease)
 Increase in net assets from discontinued operations
 
 
 
 
 
 326,025(Decrease)
 Increase in net liabilities from discontinued operations
 
 
 
 
 
 (165,497
 )Net cash
 provided by (used) in discontinued operations
 
 
 
 
 
 108,896Net cash (used)
 in operating activities
 
 
 (1,206
 )
 
 (37,606
 )INVESTING ACTIVITIESInvestment in
 joint venture
 
 
 
 
 
 (200,000
 )Net cash used
 in investing activities
 
 
 
 
 
 (200,000
 )FINANCING ACTIVITIES
 
 
 Net cash provided
 by financing activities
 
 
 
 
 
 Net increase
 (decrease) in cash and cash equivalents
 
 
 (1,206
 )
 
 (237,606
 )Cash and cash equivalents at beginning
of period
 
 
 120,106
 
 
 439,000Cash and cash equivalents at end of
period
 
 $
 118,900
 
 $
 201,394SUPPLEMENTAL
 CASH FLOW INFORMATIONCash paid for
 interest
 
 $
 
 
 
 349Assets
 contributed in joint venture
 
 
 
 
 
 490,303See accompanying notes to unaudited consolidated financial
statements.

5

Hydron Technologies, Inc
Notes to Consolidated Financial Statements (unaudited)
December 31, 2009 and 2008

Note A. Description of Business and Summary
of Significant Accounting Policies

1. Organization of Business

Hydron
Technologies, Inc. (the Company), a New York corporation organized on January
30, 1948, maintains its principal office in St. Petersburg, Florida.

Through
September 30, 2008, Hydron Technologies, Inc. marketed a broad range of
cosmetic and oral health care products, many using a moisture-attracting
ingredient (the Hydron® 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 also developed
other personal care/cosmetic products for consumers using its patented
technology.

The Company
has also developed a super-oxygenation technology for which it was granted a
patent in November 2003. This patent covers the process of applying a liquid,
containing pure oxygen micro-bubbles to the surface of the skin such that the
oxygen penetrates the skin and oxygenates the underlying tissue. 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. 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.

On November
11, 2008, the Company entered into certain agreements with Brand Builders
International, LLC, a Delaware limited liability company (Harezi) effective
October 1, 2008, relating to a joint venture between the Company and Harezi to
be formed as Brand Builders Rx, LLC, a Delaware limited liability company (the
Joint Venture). The Joint Venture was formed for the purpose of designing,
marketing, selling, and managing certain technologies and products including,
but not limited to, those contributed by the Company.

Brand Builders
International was founded by Ilonka Harezi, the driving force behind Teslar
Technology and the Philip Stein Teslar watches. The new Joint Venture, was
intended to combine the expertise of the two entities for the re-positioning
and re-launching of the Hydron named brands, utilizing the marketing and
distribution expertise of Ilonka Harezi, her success with the Teslar brand and
her Brand Builders International team.

During the
past several years the Company has attempted to expand its sales through
various marketing efforts. The Company was unable to finance these marketing
initiatives from internally generated cash flow alone and when required, raised
the needed capital through a number of private placements in its effort to
remain solvent. Over the past year, the negative cash position became critical
and the Companys Board of Directors weighed a wide variety of alternatives,
including bankruptcy, assignment for the benefit of creditors, the selling of
assets and/or potential mergers with other parties. Only the merger option was
deemed to provide any potential benefit to existing shareholders

The Company
began discussions with Ilonka Harezi and one other interested prospective
investor during the first calendar quarter of 2008. Because of the limited
financial resources of the Company, the Company was unable to engage an outside
placement agent and instead relied on leads obtained from the officers and
directors of the Company. These discussions failed because, at that time the
Companys balance sheet and substantially negative cash flow were significant
liabilities that offset the potential value the Company would contribute to a
merger. A subsequent discussion with another potential merger partner failed
for similar reasons.

As conditions
deteriorated, the Company was faced with the possibility of immediate
bankruptcy, which would have effectively eliminated all shareholder equity. The
Companys Board of Directors sought ways to quickly and decisively protect
shareholder value. Talks were reopened with Ms. Harezi and initial terms to
create a 50/50% LLC were agreed upon in principle.

6

Under the
terms of the Agreement, the Company contributed cash, substantially all of its
operating assets and licensed its patented technologies to the Joint Venture.
Harezi contributed cash, on-going financing, and a new headquarters and
provided sales and marketing expertise, including public relations, the filming
of television commercials, production of print media and the building of a
sales force in the United States and internationally. The Agreement was
contingent upon the Company eliminating all debt and being current on its
payables.

Faced with the
necessity to raise the money required to meet the terms of the Joint Venture
Agreement and to fund the Companys anticipated expenses until the Joint
Venture was expected to deliver results, the Board concluded that the best
available option for the Company was to raise the funds by soliciting interest
in the Companys only other salable asset, the potential value of the
cross-royalty arrangement with Valera Pharmaceuticals, Inc. (Valera), which
is held indirectly by the Company through its interest in Hydron Royalty
Partners, Ltd., LLLP, a Florida limited partnership (the Partnership). Based
on the Companys balance sheet, debt position, and the results of other options
explored to date, the Company determined that no other available option would
raise the necessary funds in the timeframe necessary to complete the Joint
Venture.

On July 2, 2008 by Unanimous Written Consent, the Board of Directors authorized an amendment to its
Certificate of Incorporation (the Certificate) to designate the terms of a Series A Preferred Shares offering from authorized
undesignated shares of Preferred Stock as allowed by its Certificate and New York law. On July 30, 2008 the Company closed on a $1.3
million private placement of Series A Preferred Shares which was raised primarily through existing accredited Hydron common
shareholders.

Following the
closing of the Series A Preferred Shares offering, funds received by the
Company relating to any royalties derived by the Partnership from the Valera
Agreement will be paid as dividends to the extent legally available to holders
of the Series A Preferred Shares, subject to the terms of the Series A
Preferred Shares and New York law. Holders of the Series A Preferred Shares are
not entitled to receive dividends or other distributions, other than the stated
value of their shares, derived from any other revenues of the Company,
including distributions, if any, made to the Company by the Joint Venture.

Subsequent to
March 31, 2009, the Company and BBRX became aware of potentially fraudulent
transactions and both parties are investigating the nature, perpetrators, and
scope of the fraudulent activity. Based on our findings to date, the Company
believes that the financial statements as reported herein and previously
reported are not materially misstated as a result of these suspected fraudulent
transactions.

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 consolidated financial
statements have not been audited.

Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have 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, 2009, which is included in the Companys Form 10-K for
the year ended September 30, 2009. The financial data for the interim periods
presented may not necessarily reflect the results to be anticipated for the
complete year.

In November
2008, the Company transferred substantially all of its assets, including all of
its operating assets, to Brand Builders International, LLC (the JV). Although
the Company holds a 50% member interest and has representation on the JVs
board of managers, the Company no longer operates the business. The financial
information we are relying on was provided to the Company by the JV.

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.

7

The Companys
independent accountants issued a going concern opinion on the Companys September
30, 2009 financial statements, since the Company has experienced losses from
operations in 2009 and 2008. This matter raises substantial doubt about the
Companys ability to continue as a going concern

Note B  Summary of Significant Accounting Policies

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
Ltd., LLLP. All significant inter-company transactions have been eliminated.

Use of Estimates

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

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.

Restricted cash

The Company
had restricted cash of $2,405 and $2,454 at December 31, 2009 and September 30,
2009 respectively, 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

Financial
instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash deposits. Accounts at each institution are
insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At
December 31, 2009, the Company had no amounts in excess of FDIC insured limit.
While the Company periodically evaluates the credit quality of the financial
institutions in which it holds deposits, it cannot reasonably alleviate the
risk associated with the sudden possible failures of such institutions.

Impairment of
Long-Lived Assets

The Company
evaluates the recoverability of long-lived assets and the related estimated
remaining useful lives when events or circumstances lead management to believe
that the carrying value of an asset may not be recoverable and the undiscounted
cash flows estimated to be generated by those assets are less than the assets
carrying amount. In such circumstances, those assets are written down to
estimated fair value. 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.

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.

8

Investments

The Company
accounts for its investments using the equity method unless the value of an
investment has been determined to be other than temporarily impaired, in which
case we write the investment down to its impaired value. The Company reviews
these investments periodically for impairment and makes appropriate reductions
in carrying values when the other-than-temporary decline is evident; however,
for non-marketable equity securities, the impairment analysis requires
significant judgment. During its review, the Company evaluates the financial
condition of the investment, market conditions, and other factors providing an
indication of the fair value of the investments. Adverse changes in market
conditions or operating results of the issuer that differ from expectations,
could result in additional other-than-temporary losses in future periods.

Non-controlling
Interest

Non-controlling
interests in our subsidiary are recorded as a component of our equity, separate
from the parents equity. Purchase or sale of equity interests that do not
result in a change of control are accounted for as equity transactions. Results
of operations attributable to the non-controlling interest are included in our
consolidated results of operations and, upon loss of control, the interest
sold, as well as interest retained, if any, will be reported at fair value with
any gain or loss recognized in earnings.

Income Taxes

Under the asset and liability method prescribed under ASC 740, Income Taxes, The Company uses
the liability method of accounting for income taxes. The liability method measures deferred income taxes by applying enacted
statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their
reported amounts on the financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in
tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be
realized.

The Company recognizes the financial statement benefit of an uncertain tax position only after
considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a
more-likely-than-not threshold, the amount recognized in the financial statements is the benefit expected to be realized
upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized.
As of December 31, 2009, the Company has had no uncertain tax positions. The Company recognizes interest and penalties, if any,
related to uncertain tax positions as general and administrative expenses. The Company currently has no federal or state tax
examinations nor has it had any federal or state examinations since its inception. All of the Companys tax years are subject
to federal and state tax examination.

Common Stock, Common
Stock Options

The Company uses the fair value recognition provision of ASC 718, Compensation-Stock
Compensation, which requires the Company to expense the cost of employee services received in exchange for an award of equity
instruments based on the grant date fair value of such instruments. The Company uses the Black-Scholes option pricing model to
calculate the fair value of any equity instruments on the grant date.

The Company
also uses the provisions of ASC 505-50, Equity
Based Payments to Non-Employees, to account for stock-based compensation
awards issued to non-employees for services. Such awards for services are
recorded at either the fair value of the services rendered or the instruments
issued in exchange for such services, whichever is more readily determinable,
using the measurement date guidelines enumerated in ASC 505-50.For the three
month periods ended September 30, 2009 and 2008, the Company recorded
stock-based compensation expense of $950 and $7,800 respectively.

9

Earnings (loss) Per
Share

Basic income
(loss) per share is calculated using the weighted-average number of common
shares outstanding during each reporting period. Diluted loss per share
includes potentially dilutive securities such as outstanding options and
warrants, using various methods such as the treasury stock or modified treasury
stock method in the determination of dilutive shares outstanding during each
reporting period. Common equivalent shares are excluded from the computation of
net loss per share since their effect is anti-dilutive.

For the
net-loss periods ended December 31, 2009 and 2008, we excluded any effect of
the 605,000 and 0, and 650,000 and 412,000 outstanding options and warrants,
respectively, as their effect would be anti-dilutive.

Discontinued
Operations

On November
11, 2008, the Company, entered into certain agreements with Brand Builders
International, LLC, a Delaware limited liability company (Harezi) relating to
a joint venture between the Company and Harezi to be formed as Brand Builders
Rx, LLC, a Delaware limited liability company (the Joint Venture). The Joint
Venture was formed for the purpose of designing, marketing, selling, and
managing certain technologies and products including, but not limited to, those
contributed by the Company.

Pursuant to
the Capital Contribution Agreement, the Company contributed Two Hundred
Thousand Dollars ($200,000) in cash and assigned substantially all of its
assets, other than certain excluded assets provided therein, and license or
sublicense certain rights to the Companys intellectual property, subject to
performance and payment obligations of the Joint Venture and to the terms of
the License Agreement entered into between the Company and the Joint Venture.
The Company assigned such assets to the Joint Venture pursuant to the Assignment
Agreement.

Accordingly,
the Company has reported the assets assigned as discontinued operations, and
prior periods have been restated in the Companys financial statements and
related footnotes to conform to this presentation

Fair value of
Financial Instruments

The Company
adopted ASC topic 820, Fair Value Measurements and Disclosures (ASC 820),
formerly SFAS No. 157 Fair Value Measurements, effective January 1, 2009. ASC
820 defines fair value as the price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants on the measurement date. There was no impact relating to the
adoption of ASC 820 to the Companys financial statements.

ASC 820 also describes three levels of
 inputs that may be used to measure fair value:
 Level 1: Observable inputs that reflect
 unadjusted quoted prices for identical assets or liabilities traded in active
 markets.
 Level 2: Inputs other than quoted prices
 included within Level 1 that are observable for the asset or liability,
 either directly or indirectly.
 Level 3: Inputs that are generally
 unobservable. These inputs may be used with internally developed
 methodologies that result in managements best estimate of fair value.Financial
instruments consist principally of cash, prepaid expenses, accounts payable,
and accrued liabilities. The carrying amounts of such financial instruments in
the accompanying balance sheets approximate their fair values due to their
relatively short-term nature. It is managements opinion that the Company is
not exposed to any significant currency or credit risks arising from these
financial instruments.

10

Recent accounting
Pronouncements

In October
2009, the FASB issued Accounting Standards Update (ASU) ASU No. 2009-13 (ASC
Topic 605) which provides authoritative guidance for revenue recognition with
multiple deliverables. This authoritative guidance impacts the determination of
when the individual deliverables included in a multiple-element arrangement may
be treated as separate units of accounting. Additionally, this guidance
modifies the manner in which the transaction consideration is allocated across
the separately identified deliverables by no longer permitting the residual
method of allocating arrangement consideration. The Company will adopt this
authoritative guidance prospectively commencing in its first quarter of fiscal
2010. The implementation is not expected to have a material impact on the
Companys financial position or results of operations.

In October
2009, the FASB issued ASU No. 2009-14 (ASC Topic 985) which provides
authoritative guidance for the accounting for certain revenue arrangements that
include software elements. This authoritative guidance amends the scope of
pre-existing software revenue guidance by removing from the guidance
non-software components of tangible products and certain software components of
tangible products. The Company will adopt this authoritative guidance
prospectively commencing in its first quarter of fiscal 2010. The
implementation is not expected to have a material impact on the Companys
financial position or results of operations.

In August
2009, the FASB issued ASU No. 2009-05 (ASC Topic 820) which amends the
accounting standards related to the measurement of liabilities that are
recognized or disclosed at fair value on a recurring basis. This standard
clarifies how a company should measure the fair value of liabilities and that
restrictions preventing the transfer of a liability should not be considered as
a factor in the measurement of liabilities within the scope of this standard.
This standard is effective for the Company on October 1, 2009 and did not have
a material impact on our financial statements.

In June 2009,
the FASB issued ASU No. 2009-17 (ASC Topic 810) that revises the guidance on
variable interest entities, which becomes effective the first annual reporting
period after November 15, 2009 and will be effective for the Company in fiscal
2011. This authoritative guidance requires revised evaluations of whether
entities represent variable interest entities, ongoing assessments of control
over such entities, and additional disclosures for variable interests. The
Company is evaluating the potential impact of the implementation of this
authoritative guidance on its financial statements, but would not expect it to
have a material impact.

Subsequent Events

(Included in Accounting Standards
Codification (ASC) 855 Subsequent Events, previously SFAS No. 165
Subsequent Events) SFAS No. 165
established general standards of accounting for and disclosure of events that
occur after the balance sheet date, but before the financial statements are
issued or available to be issued (subsequent events). An entity is required
to disclose the date through which subsequent events have been evaluated and
the basis for that date. For public entities, this is the date the financial
statements are issued. SFAS No. 165 does not apply to subsequent events or
transactions that are within the scope of other GAAP and did not result in
significant changes in the subsequent events reported by the Company. SFAS No.
165 became effective for interim or annual periods ending after June 15, 2009
and did not impact the Companys financial statements. The Company evaluated
for subsequent events through the issuance date of the Companys financial
statements. No recognized or non-recognized subsequent events were noted.

Determination of the Useful Life of
Intangible Assets

(Included in ASC 350 Intangibles  Goodwill
and Other, previously FSP SFAS No. 142-3 Determination of the Useful Lives of
Intangible Assets)

FSP SFAS No.
142-3 amended the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized
intangible asset under previously issued goodwill and intangible assets topics.
This change was intended to improve the consistency between the useful life of
a recognized intangible asset and the period of expected cash flows used to
measure the fair value of the asset under topics related to business
combinations and other GAAP. The requirement for determining useful lives must
be applied prospectively to intangible assets acquired after the effective date
and the disclosure requirements must be applied prospectively to all intangible
assets recognized as of, and subsequent to, the effective date. FSP SFAS No.
142-3 became effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal
years. The adoption of FSP SFAS No. 142-3 did not impact the Companys
financial statements.

11

Non-controlling Interests

(Included in ASC 810 Consolidation, previously
SFAS No. 160 Non-controlling Interests in Consolidated Financial Statements an
amendment of ARB No. 51)

SFAS No. 160
changed the accounting and reporting for minority interests such that they will
be recharacterized as non-controlling interests and classified as a component
of equity. SFAS No. 160 became effective for fiscal years beginning after
December 15, 2008 with early application prohibited. The Company implemented
SFAS No. 160 at the start of fiscal 2010 and no longer records an intangible
asset when the purchase price of a non-controlling interest exceeds the book
value at the time of buyout. Any excess or shortfall for buyouts of
non-controlling interests is recognized as an adjustment to additional paid-in
capital in stockholders equity. Any shortfall resulting from the early buyout
of non-controlling interests will continue to be recognized as a benefit in
partner investment expense up to the initial amount recognized at the time of
buy-in. Additionally, operating losses can be allocated to non-controlling
interests even when such allocation results in a deficit balance (i.e. book
value can go negative).

The Company
presents non-controlling interests (previously shown as minority interest) as a
component of equity on its consolidated balance sheets. Minority interest
expense is no longer separately reported as a reduction to net income on the
consolidated income statement, but is instead shown below net income under the
heading net income attributable to non-controlling interests. The company
adopted SFAS No. 160 as of fiscal 2010.

Note C - Investment in Brand Builders Rx, LLC

On November
11, 2008, the Company, entered into certain agreements with Brand Builders
International, LLC, a Delaware limited liability company (Harezi) relating to
a joint venture between the Company and Harezi to be formed as Brand Builders
Rx, LLC, a Delaware limited liability company (the Joint Venture). The Joint
Venture was formed for the purpose of designing, marketing, selling, and
managing certain technologies and products including, but not limited to, those
contributed by the Company.

The terms of
the Joint Ventures business and contractual relationship are governed by the
following agreements, all of which are dated as of October 1, 2008: (i) Capital
Contribution and Joint Venture Agreement (the Contribution Agreement); (ii)
Assignment and Assumption Agreement (the Assignment Agreement); (iii) License
Agreement; (iv) Limited Liability Company Agreement (LLC Agreement); (v)
Buy-Sell Agreement; and (vi) Management Services Agreement (collectively, the
Joint Venture Documents).

Pursuant to
the Capital Contribution Agreement, the Company contributed Two Hundred
Thousand Dollars ($200,000) in cash and assigned substantially all of its
assets, other than certain excluded assets provided therein, and license or
sublicense certain rights to the Companys intellectual property, subject to
performance and payment obligations of the Joint Venture and to the terms of
the License Agreement entered into between the Company and the Joint Venture.
The Company assigned such assets valued at $490,303 to the Joint Venture
pursuant to the Assignment Agreement.

As
contemplated by the Joint Venture Documents and discussed with Harezi, Harezi
will contribute cash, financing, a new headquarters, marketing expertise,
including public relations, filming of television commercials, print media
production and the building of a domestic and international sales force.

Pursuant to
the Companys LLC Agreement, the Company and Harezi each own a fifty percent
(50%) member interest in the Joint Venture. The Joint Venture is controlled by
the board of managers composed of four (4) managers, three of which are
appointed by Harezi and one of which shall be appointed by the Company. The
Company initially appointed Richard Banakus, the Companys Chairman and Interim
President as its initial manager. Certain major decisions will require the
unanimous approval of the Joint Ventures board of managers.

The Management
Services Agreement between the Joint Venture and the Company entitles Harezi to
a management fee in exchange for Harezis marketing, administrative and
management services. The management fee is equal to an additional ten percent
(10%) of the total amount of distributions made to the members of the Joint
Venture, other than distributions made for the purpose of paying taxes.

The Company
and Harezi entered into a Buy-Sell Agreement providing for restrictions on
transfer of its respective member interests in the Joint Venture, including
right of first refusals, come-along rights and drag-along rights.

12

Assets
assigned to the joint venture consisted of the following:

Trade
 accounts receivable
 
 $
 (12,000
 )Inventories
 
 
 457,601Prepaid
 expenses
 
 
 19,737Property and
 equipment, net
 
 
 108,036Intangible
 assets, net
 
 
 128,359Deposits
 
 
 5,699Accounts
 Payable
 
 
 (72,252
 )Deferred
 revenues
 
 
 (65,247
 )Accrued
 liabilities
 
 
 (27,998
 )541,935Loss on
 discontinued assets
 
 
 (51,632
 )Assets assigned to joint venture
 
 
 490,303Cash
 contributed
 
 
 200,000Investment in joint venture
 
 
 690,303December 31, 2009
 
 September 30, 2009Investment in joint venture
 
 $
 226,394
 
 $
 690,303Gain (Loss) from interest in joint venture
 
 
 21,333
 
 
 (237,517
 )247,727
 
 
 452,786Loss on impairment of investment in joint venture
 
 
 
 
 
 (226,392
 )Investment in joint venture
 
 $
 247,727
 
 $
 226,394Management is
still analyzing details of the transaction that may require future adjustments.

Due From Joint Venture

Amounts due to
the Company from the joint venture consisted of the following :



December 31,2009
 
 September 30,2009Accounts
 Receivable
 
 $
 120,812
 
 $
 120,005Less :
 Allowance for doubtful accounts
 
 
 (116,041
 )
 
 (116,041
 )Accounts
 receivable net
 
 $
 4,771
 
 $
 3,964The Companys
allowance for doubtful accounts was $116,041 at December 31, 2009 and September
30, 2009.

Note D  Share Based Compensation

The
Company recognized $950 and $7,800 in share based compensation expense for the
three month period ended December 31, 2009 and 2008, respectively. An option to
purchase 25,000 shares was granted to a director during the three months ended
December 31, 2009. An option to purchase 400,000 shares was granted to a
consultant during the three months ended December 31, 2008 which were
subsequently forfeited.

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
of the options is the estimated value at October 23, 2009 using the
Black-Scholes Option Pricing Model with the following weighted average
assumptions: Exercise price of $0.038; expected volatility of 827% a risk free
interest rate of 2.5%; and expected term of 5 years.

13

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 E  Accrued Liabilities

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

Accrued
liabilities consisted of the following:

December 31, 2009
 
 September 30, 2009Dividends
 payable
 
 $
 83,163
 
 $
 83,163Director fee
 payable
 
 
 162,270
 
 
 157,270Professional
 fees
 
 
 29,213
 
 
 19,760Interest
 
 
 21,651
 
 
 21,651Other
 
 
 748
 
 
 748$
 297,045
 
 $
 282,592Note F  Equity

Common Stock

For the three
month period ended December 31, 2009 and 2008, the Company recorded stock-based
compensation expense of $950 and $7,800 respectively

Note G  Managements Plan

As a
consequence of its participation in the Joint Venture, the Companys need for
cash is no longer tied to funding the working capital and other capital
requirement of an operating business. Other than the obligation to pay
dividends on the Series A Preferred Shares to the extent of distributions
received from the Partnership from funds legally available, the Company will
have only certain administrative costs, including legal and accounting costs
relating to the preparation and filing of periodic reports with the Securities
and Exchange Commission. As a result, the Company believes that its current
capital balances will be sufficient to meet its working capital needs for at
least the next year. Additionally, while the Company has retained certain
liabilities, it has retained sufficient cash to meet them should they become
payable and due.

The Companys
working capital was approximately ($183,000) at December 31, 2009, including
cash and cash equivalents of approximately $119,000. Cash used by continuing
operating activities was $1,200 during the period ended December 31, 2009.

Hydron Continuing
Operations

The Companys
continuing operations include:

1.
 Its 50%
 investment in the Joint Venture2.
 Its
 ownership and licensing of its patented intellectual propertyInvestment in Brand
Builders Rx, LLC, a Delaware limited liability company (the Joint Venture)

The Company
owns a 50% interest in the Joint Venture and under the terms of the Joint
Venture Agreement, will share in 50% of the Joint Venture net profits if
earned. The Companys risk is limited to its original investment.

14

Licensing of the
Companys Patented Intellectual Property

The Company
continues to own its patented intellectual property (IP) but has licensed its
user according to the terms agreed to in the Joint Venture Agreement. With the
exception of the super-oxygenation technology the licensing is royalty free to
the Joint Venture. The Joint Venture is however responsible to the Company for
any royalties required to be paid by Hydron under the Hydron Agreement.

Majority ownership
of Hydron Royalty Partners Ltd., LLLP (the Partnership)

The Company
will continue to serve as General Partner and own the majority ownership
percentage of the Partnership.

Note H  Related Party

During the
year ended September 30, 2008, the Company borrowed $40,000 from Hydron Royalty
Partners Ltd., LLLP, a Florida limited liability partnership (the Partnership);
The Company is the general partner of the Partnership which includes three
directors of the Company and several significant shareholders of the Company as
limited partners. Under the terms of the promissory note evidencing the loan,
the partnership may, but is not obligated to, lend up to an aggregate $40,000
in principal amount to the Company. Amounts lent bear interest at 10% per
annum. The outstanding principal and interest on the note is payable on
December 6, 2008. The loan is still outstanding as of December 31, 2009.

Note I  Discontinued Operations

As described
in Note A, on November 11, 2008, the Company, entered into certain agreements
with Brand Builders International, LLC, a Delaware limited liability company
(Harezi) relating to a joint venture between the Company and Harezi to be
formed as Brand Builders Rx, LLC, a Delaware limited liability company (the
Joint Venture). The Joint Venture was formed for the purpose of designing,
marketing, selling, and managing certain technologies and products including, but
not limited to, those contributed by the Company.

Pursuant to
the Capital Contribution Agreement, the Company has agreed to contribute Two
Hundred Thousand Dollars ($200,000) in cash and assign substantially all of its
assets, other than certain excluded assets provided therein, and license or
sublicense certain rights to the Companys intellectual property, subject to
performance and payment obligations of the Joint Venture and to the terms of
the License Agreement entered into between the Company and the Joint Venture.
The Company assigned such assets valued at $490,303 to the Joint Venture
pursuant to the Assignment Agreement. The Company realized a loss from
discontinued operations of $51,632 during the three months ended December 31,
2008.

Note J  Subsequent Events

We have
evaluated subsequent events through February 12, 2010, the date of issuance of
the unaudited consolidated financial statements. During this period we did not
have any material recognizable subsequent events.

15

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-Q (Form
10-Q). All statements other than statements of historical fact included in
this Form 10-Q 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-Q 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-Q. 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

In November
2003, the Company was granted a patent on its new oxygenation technology that
provides a method for delivering oxygen into the skin and tissue at depths
considered medically therapeutic. This unique technology utilizes topical
applications, eliminating reliance on the blood stream. Preliminary research
was conducted at the University of Massachusetts and Florida Atlantic University
and the process to obtain FDA approval was initiated. Management plans to
research additional medical applications if and when Hydron obtains FDA
approval.

The Company
raised $1.1 million in December 2003 in a non-brokered private placement exempt
from registration under the Securities Act to fund the initial research and
initiate the lengthy FDA approval process. As research results begin to
quantify the broad applications of this technology and the FDA hurdles are
passed, management anticipates that Hydron will attract key strategic partners
and new investment money will become available. Management also expects that
product development will accelerate in medical areas such as wound and burn
treatment, and skin care applications such as scar reduction, acne, and diaper
rash treatment, oral health, etc.

In August 2004, Hydron, as general partner, formed the Partnership for the purpose of funding existing
royalty obligations and a portion of future royalty obligations in consideration of sharing future royalty income that may arise
from Hydrons agreement with Valera. The Partnership completed a non-brokered private placement of Limited Partnership Interest
to ten accredited investors including Hydrons Chairman, Richard Banakus and three other Hydron Directors, Ronald J. Saul,
Regis Synan and Donna M. Murphy. Each limited partner invested $30,000 or an aggregate of $300,000 for a 49.999% interest in the
Partnership. The establishment of the Partnership allowed Hydron to meet its current and future royalty obligations and retain the
possibility of a significant royalty income stream opportunity.

In late
January 2005, the Company refocused its efforts to skin care formulations and
sales. On July 1, 2005, the Company purchased CRI, Inc. and BRI, Inc., related
companies providing both skin care formulation consulting and a newly started
contract manufacturing business. The Company believed that the vertical
capabilities added by this acquisition would be beneficial to the Company as it
expands beyond its historical base.

In January
2006, the Company was granted U.S. Patent Number 6,984,391 for its Compositions
and Method for Delivery of Skin Cosmeceuticals, which also applies to a new
acne treatment system. The Company believes that this unique emulsion system
has significant advantages over the widely used surfactant emulsions employed
by most skin care formulators and manufacturers, and will seek licensing
opportunities whenever possible.

16

On November
11, 2008, the Company entered into certain agreements with Brand Builders
International, LLC, a Delaware limited liability company (Harezi) effective
October 1, 2008, relating to a joint venture between the Company and Harezi to
be formed as Brand Builders Rx, LLC, a Delaware limited liability company (the
Joint Venture). The Joint Venture was formed for the purpose of designing,
marketing, selling, and managing certain technologies and products including,
but not limited to, those contributed by the Company.

Liquidity

As a
consequence of its participation in the Joint Venture, the Companys need for
cash is no longer tied to funding the working capital and other capital
requirement of an operating business. Other than the obligation to pay
dividends on the Series A Preferred Shares to the extent of distributions received
from the Partnership from funds legally available, the Company will only have
certain administrative costs, including legal and accounting costs relating to
the preparation and filing of periodic reports with the Securities and Exchange
Commission. As a result, the Company believes that its current capital balances
will be sufficient to meet its working capital needs for at least the next two
years. Additionally, while the Company has retained certain liabilities, it has
retained sufficient cash to meet them should they become payable and due.

The Companys
working capital was approximately ($183,000) at December 31, 2009, including
cash and cash equivalents of approximately $119,000. Cash used by continuing
operating activities was $1,200 during the period ended December 31, 2009.

Hydron Continuing
Operations

The Companys
continuing operations include:

1.
 Its 50%
 investment in the Joint Venture2.
 Its
 ownership and licensing of its patented intellectual propertyInvestment in Brand
Builders Rx, LLC, a Delaware limited liability company (the Joint Venture)

The Company
owns a 50% interest in the Joint Venture and under the terms of the Joint
Venture Agreement, will share in 50% of the Joint Venture net profits if
earned. The Companys risk is limited to its original investment.

Licensing of the
Companys Patented Intellectual Property

The Company
continues to own its patented intellectual property (IP) but has licensed its
use according to the terms agreed to in the Joint Venture Agreement. With the
exception of the super-oxygenation technology the licensing is royalty free to
the Joint Venture. The Joint Venture is however responsible to the Company for
any royalties required to be paid by Hydron under the Hydron Agreement.

Majority ownership
of Hydron Royalty Partners Ltd., LLLP (the Partnership)

The Company
will continue to serve as General Partner and own the majority ownership
percentage of the Partnership.

Results of
Operations

Results of Operations - 2009 versus 2008

Royalty
expenses for the three months ended December 31, 2009 were $0 representing a
decrease of $5,590 or 100% from royalty expense of $5,590 for the three months
ended December 31, 2008. The decrease is due to The Company being reimbursed
from Brand Builders Rx in the amount of $3,964 for the royalty expenses in the
three months ended December 2009. An aggregate of $4,629 was accrued and unpaid
as of December 31, 2009. This amount is adequate to cover any royalties that
are payable through December 2009.

17

Selling,
general and administrative (SG&A) expenses for the three months ended
December 31, 2009 were $19,180 representing a decrease of $9,837 or 34% from
SG&A expenses of $29,017 for the three months ended December 31, 2008. The
decrease is due primarily to decreased professional fees due to the joint
venture in 2008.

Amortization
expense was $2,937 for the three months ended December 31, 2009, a decrease of
$1,222 or 29% from $4,159 for the three months ended December 31, 2008.

Net
interest income was $106 for the three months ended December 31, 2009 a
decrease of $539 or 84% compared to net interest income of $645 for the three
months ended December 31, 2008.

Gain
(Loss) from interest in joint venture for the three months ended December 31,
2009 was $21,333 compared to ($52,537) the three months ended December 31,
2008. This interest is created from a 50% interest in Brand Builders Rx, LLC,
increase is due to better operating results in Brand Builders Rx, LLC.

The
Company had a net loss from continuing operations of $678 for the three months
ended December 31, 2009, representing a decrease of $89,980 or 99% from the net
loss of $90,658 for the three months ended December 31, 2008, primarily as a
result of the factors discussed above.

The
Company had a net loss from discontinuing operations of $0 for the three months
ended December 31, 2009, representing a decrease of $51,632 or 100% compared to
$51,632 for the three months ended December 31, 2008. This decrease was due to
the Company discontinuing operations due to the formation of the joint venture.

Net
income attributable to non-controlling interest for the three months ended
December 31, 2009 was $3,401 compared to $6,388 for the three months ended
December 31, 2008. This non-controlling interest is created from a consolidated
limited liability partnership, Hydron Royalty Partners Ltd., LLLP, established
by the Company in August 2004.

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, 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.

Share Based Payments

The Company
uses the fair value recognition provision of ASC 718, Compensation-Stock
Compensation, which requires the Company to expense the cost of employee
services received in exchange for an award of equity instruments based on the
grant date fair value of such instruments. The Company uses the Black-Scholes
option pricing model to calculate the fair value of any equity instruments on
the grant date.

The Company
also uses the provisions of ASC 505-50, Equity
Based Payments to Non-Employees, to account for stock-based
compensation awards issued to non-employees for services. Such awards for
services are recorded at either the fair value of the services rendered or the
instruments issued in exchange for such services, whichever is more readily
determinable, using the measurement date guidelines enumerated in ASC 505-50.

18

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and
Procedures.

The Company
has established and maintains disclosure controls and other procedures (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended
(the Exchange Act)), that are designed to provide reasonable assurance that
material information relating to the Company required to be disclosed in its
reports filed or submitted under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in the SECs rules
and forms, and that such information is accumulated and communicated accurately
to the Companys management, including its Chairman of the Board and Interim
President who also acts as our principal financial and principal accounting
officer, as appropriate, to allow timely decisions regarding required
disclosure. There are inherent limitations to the effectiveness of any system
of disclosure controls and procedures, including the possibility of human error
and the circumvention or overriding of the controls and procedures. In
designing and evaluating our disclosure controls and procedures, management
recognized that disclosure controls and procedures, no matter how well conceived
and operated, can only provide reasonable, not absolute assurance, that the
objectives of the disclosure controls and procedures are met.

For the
quarter ended December 31, 2009, management, with the participation of the
Companys Chairman of the Board and Interim President who also acts as our
principal financial and principal accounting officer, has evaluated the
effectiveness of the design and operation of the Companys disclosure controls
and procedures. Based on such evaluation of these disclosure controls and
procedures, the Companys Chairman of the Board and Interim President who also
acts as our principal financial and principal accounting officer have concluded
that the Companys disclosure controls and procedures were effective during the
period covered by this Quarterly Report on Form 10-Q.

The Company
has also established and maintains internal control over financial reporting as
a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of condensed consolidated financial
statements for external purposes in accordance with accounting principles
generally accepted in the United States. In the ordinary course of business,
the Company routinely enhances its internal controls and procedures for
financial reporting by either upgrading its current systems or implementing new
systems. During the fiscal quarter ended December 31, 2009, there was no change
in the Companys internal controls over financial reporting (as defined in Rule
13a-5(f) under the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, the Companys internal control over financial
reporting.

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. Unregistered Sales Of Equity
Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

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

None

Item 5. Other Information

Subsequent to
March 31, 2009, the Company and BBRX became aware of potentially fraudulent
transactions and both parties are investigating the nature, perpetrators, and
scope of the fraudulent activity. Based on our findings to date, the Company
believes that the financial statements as reported herein and previously
reported are not materially misstated as a result of these suspected fraudulent
transactions.

19

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)3.8
 Certificate
 of Amendment of the Certificate of Incorporation dated July 30, 2008, as
 filed with the Secretary of State of the State of New York. (24)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)5.02
 Departure of
 a director (26)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 Richard Banakus
 (9)20


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
 Promissory
 note dated August 14, 2007 in the principal amount of twenty five thousand
 dollars ($25,000) payable to Ronald J Saul and Antonette 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)21

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)10.38
 Promissory
 note Dated April 9, 2008 between Hydron Technologies, Inc. and Richard
 Banakus for the principal amount of forty thousand dollars ($40,000). (22)10.39
 Subscription
 Agreement dated April 9, 2008 between Hydron Technologies, Inc. and Richard
 Banakus for the purchase of 1 unit. (22)10.40
 Common stock
 Purchase Warrant dated April 9, 2008 in favor of Richard Banakus (22)10.41
 OTCC
 Delinquency Notification dated May 21, 2008. (23)10.42
 Promissory
 note Dated June 6, 2008 between Hydron Technologies, Inc. and Hydron Royalty
 Partners Ltd, LLLP for the principal amount of forty thousand dollars
 ($40,000).10.43
 Subscription
 Agreement between Hydron Technologies and Richard Banakus for the purchase of
 5,270 Series A Preferred Shares [paid in cash and cancellation of promissory
 notes of the Company in the original principal amounts of $50,000 and
 $40,000]. (24)10.44
 Subscription
 Agreement between Hydron Technologies and Ronald J. Saul and Antonette G.
 Saul, jointly for the purchase of 1,500 Series A Preferred Shares [paid in
 cash and cancellation of promissory notes in the original principal amounts
 of $100,000 and $50,000]. (24)10.45
 Subscription
 Agreement dated between Hydron Technologies and Karen Gray for the purchase
 of 100 Series A Preferred Shares (paid in cash) (24)10.46
 Subscription
 Agreement dated January 31, 2007 between Hydron Technologies, Inc. and
 Richard Banakus10.47
 Subscription
 Agreement dated January 31, 2007 between Hydron Technologies and Ronald J.
 Saul and Antonette G. Saul, jointly10.48
 Subscription
 Agreement dated February 5, 2007 between Hydron Technologies and Ronald J.
 Saul and Antonette G. Saul, jointly22

10.49
 Common Stock
 Purchase Warrant dated February 1, 2007 in favor of Richard Banakus10.50
 Common Stock
 Purchase Warrant dated February 1, 2007 in favor of Ronald J. Saul and
 Antonette G. Saul, jointly10.51
 Common Stock
 Purchase Warrant dated February 5, 2007 in favor of Ronald J. Saul and
 Antonette G. Saul, jointly16.
 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. LLP31.1
 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.(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, 200723

(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(22)
 Incorporated
 by reference to Form 8-K filed April 15, 2008(23)
 Incorporated
 by reference to Form 8-K filed May 3, 2008(24)
 Incorporated
 by reference to Form 8-K filed August 6, 2008(25)
 Incorporated
 by reference to Form 8-K filed November 18, 2008(26)
 Incorporated
 by reference to Form 8-K filed October 27, 200924

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/: Richard
 BanakusRichard
 Banakus 
 Interim President 
 Principal Financial and Accounting OfficerDated:
February 12, 2010

25