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

                                   FORM 10-KSB
                        FOR ANNUAL AND TRANSITION REPORTS
                        PURSUANT TO SECTIONS 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)

[ ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the year ended September 30, 2007 or

[X] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from January 1, 2007 to September 30,2007.

                          Commission file Number 0-6333

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

                  NEW YORK                                13-1574215
                  --------                                ----------
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                 Identification No.)

            4400 34TH STREET NORTH, SUITE F, ST. PETERSBURG, FL 33714
            ---------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (727) 342-5050
                                                           --------------

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

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

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                     --------------------------------------
                                (Title of Class)

         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 [X] NO [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
other amendment to this Form 10-KSB. [ ]

         Indicate by check mark whether the registrant is a shell company
accelerated filer (as defined in Exchange Act Rule 12b-2). YES [ ] NO [X]

<PAGE>

         The issuers revenues for the fiscal year ended September 30, 2007 was
$885,911

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant was $1,541,338 based upon the closing price of $0.15 on
September 30, 2007.

         Number of shares of Common Stock outstanding as of December 21,
2007:18,958,676.

         No documents are incorporated by reference into this Report except
those Exhibits so incorporated as set forth in the Exhibit index.

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

                                     INDEX

PART I

Item 1.  Business..............................................................3

Item 2.  Properties...........................................................10

Item 3.  Legal Proceedings....................................................10

Item 4.  Submission of Matters to a vote of security holders..................10

PART II

Item 5.  Market for common equity and related stockholder matters.............11

Item 6.  Management's discussion and analysis or plan or operation............14

Item 7.  Consolidated Financial Statements....................................21

Item 8.  Changes & Disagreements with Accountants.............................48

Item 8a. Controls & Procedures................................................48

Item 8b. Other Information....................................................49

PART III

Item 9.  Directors, Executive officers, Promoters and Control persons
         Compliance with Section 16(a) of the Exchange Act....................49

Item 10. Executive Compensation...............................................51

Item 11. Security Ownership of certain beneficial owners and
         Management...........................................................53

Item 12. Certain relationships and related transactions.......................54

Item 13. Exhibits ............................................................54

Item 14. Principal Accounting Fees and Services ..............................58

                                       2
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

INTRODUCTION

         Hydron Technologies, Inc. ("the Company"), a New York corporation
organized on January 30, 1948, maintains its principal office at 4400 34th
Street North, Suite F, St. Petersburg, FL 33714 and its telephone number is
(727) 342-5050.

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

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

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

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

                                       3
<PAGE>

LIQUIDITY

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

         On October 3, 2007, the Company, closed on a private offering of
1,400,000 units ("Units"), comprised of one (1) share ("Share") of its Common
Stock and one (1) warrant ("Warrant") for the purchase of one (1) share of
Common Stock. The Company received gross proceeds of One Hundred Seventy Five
Thousand Dollars ($175,000) from the sale of Units in the Offering. Among the
individuals who purchased Units in the Offering is Ronald J. Saul, a director of
the Company who together with his spouse purchased 300,000 Units

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

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

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

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

         The Company's working capital deficit was approximately ($532,000) at
September 30, 2007, including cash and cash equivalents of approximately
($15,000). Cash used by operating activities was $607,576 and cash used in
investing activities was $2,150 during the year ended September 30, 2007. This
was offset by proceeds from financing activities of $602,786.

         The Company has the following material debt; loan payable of $150,000
borrowed from three shareholders in May 2005, the loan payable of $100,000
borrowed from one shareholder on May 22, 2007 and the loan payable of $25,000
borrowed from one shareholder on August 14, 2007 and two capital leases for
equipment purchases of $31,286. The Company has substantial overdue trade
accounts payables balances. There are no capital expenditures under construction
and no long-term commitments other than royalty payments under an agreement with
Valera Pharmaceuticals, Inc. The Company does not have any lines of credit.
There are no purchase order commitments that exceed 90 days.

                                       4
<PAGE>

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

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

      o  Implement new direct sales and networking initiatives.

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

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

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

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

      o  Continue to reduce overhead and operating costs.

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

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

         HYDRON(R) BRANDED SKIN CARE PRODUCTS

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

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

                                       5
<PAGE>

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

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

CATALOG AND WEB SALES - The Company offers personal care products for sale
directly to consumers. Augmenting direct mail, the Company sells its products on
the World Wide Web and regularly transmits E-mail broadcasts to its customer
base. Catalog and web sales represented approximately 39% of Hydron's total
sales for the year ended September 30, 2007. The Company is continuing to
explore new ways to enhance Catalog and Web sales and operations, including
direct sales initiatives.

PRIVATE LABEL CONTRACTING - Since March 1, 2001, the Company has been a supplier
to Reliv International, Inc ("Reliv") to develop and manufacture a line of
private label skin care products under their brand name, ReversAge(R). Reliv is
a public company traded on NASDAQ (symbol RELV). Private label sales represented
approximately 13% of Hydron's total sales for the year ended September 30, 2007.

CONTRACT MANUFACTURING - Through its acquisition of CRI, the Company now
manufactures consumer products for a number of companies. Products include
proprietary formulations for skin and hair care. During the year ending
September 30, 2007, contract manufacturing revenue represented 42% of Hydron's
total sales.

FORMULATION AND COMMISSION - The Company received a $60,000 payment for
formulation services that its subsidiary Clinical Results, Inc had previously
performed in the nine months ended September 30, 2006. Formulation sales
represented 6% of sales and Commissions represented 2% of sales for the nine
months ended September 30, 2006. The company received $0 commission or
formulation sales during the year ended September 30, 2007.

RESEARCH AND DEVELOPMENT

         For several years prior to 2005, the Company's research and development
efforts advanced groundbreaking research into oxygenated wound treatments,
healing enhancement, and skin care that may provide anti-aging treatments. Where
possible, the Company may license these technologies to other companies with
expertise in specific applications. Research and development efforts include
product formulation, clinical testing, packaging design and prototypes,
extensive product safety and stability testing conducted by medical
professionals, efficacy studies to support product claims, and consumer
research.

                                       6
<PAGE>

         The Company currently continues to concentrate research and development
on proprietary technology-based products as determined by management's
assessment of consumer demand. Management has completed development of an acne
ingredient delivery system. The technology allows for acidic ingredients to be
delivered to the skin's stratum corneum at neutral pH (~6.8 to 7.0), where it
then gradually adjusts to match the pH of the stratum corneum below 5.5. This
delivery technique avoids the irritation and burning associated with traditional
acne treatments that deliver ingredients at pH values as low as 2.0. The Company
was granted U.S. patents on this technology in January 2006.

         In the current acne market, medicinal treatments can often be more
irritating and elicit more redness than the skin condition itself. The Company's
new system significantly reduces the harshness and irritation associated with
such products.

         Prior to June 2005, Charles Fox, a consultant and a former member of
the Company's Board of Directors from September 1997 to October 1998, led the
Company's research and development efforts. Mr. Fox was formerly director of
product development for Warner Lambert Company's personal products division and
was a former president of the Society of Cosmetic Chemists.

         Beginning on July 1, 2005 David Pollock the Company's CEO heads the
Company's R&D effort.

PATENTED TECHNOLOGY

         The Company believes that technology and patent protection are
essential to providing a sound foundation for a new product. In January 2006,
the Company was granted U.S. Patent Number 6,984,391 for its Compositions and
Method for Delivery of Skin Cosmeceuticals. This patent covers a unique
evaporating emulsifier system that the Company believes is a significant
breakthrough in skin care. It is evident in recent skin research that the pH
range of the emulsion system is essential in contributing to the skin's natural
healing process and the enzyme production responsible for rebuilding the skin's
lipid barrier. The benefits provided by this pH self-adjusting system provides
clinically proven benefits over competitive products

         The Company was granted a U.S. patent on its super-oxygenation
technology 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.

         The Company was granted U.S. Patent No. 4,883,659, dated November 28,
1989, and U.S. Patent No. 5,039,516, dated August 13, 1991, which cover a stable
moisturizing emulsion containing an unusual emulsifying agent, as well as the
Hydron polymer and a unique combination of ingredients. These patents have
expiration dates of November 28, 2006 and August 13, 2008, respectively. During
1999 the Company was granted U.S. Patent No. 5,879,684 for its "Line Smoothing
Complex" formula. This product has been clinically shown to reduce fine lines
and wrinkles. The patent has an expiration date of April 11, 2017. In addition,
the Company has registered several trademarks relating to its cosmetic products.

                                       7
<PAGE>

         The Company has also received patent protection for its emulsification
process in several countries to facilitate distribution and sale of these
products outside of the United States. The Hydron polymer, utilized in cosmetic
emulsions, creates a thin moisture-attracting film that is non-greasy; is not
dissolved by sebaceous oils or perspiration; does not emulsify the skin's
natural oils and humectants; and allows the skin to breathe. The film is
insoluble in water and resistant to rub-off, but can easily be removed with
cleanser and water.

MANUFACTURING AND RAW MATERIALS

         Until July 1, 2005, Hydron polymer-based products were manufactured
exclusively for the Company by independent third parties. The Company had used
principally two manufacturers of cosmetic products because of the quality of
their production and reasonable costs. All raw material and packaging components
for the Company's consumer and professional product lines are readily available
to the Company from a variety of sources.

         Since July 1, 2005 the Company is manufacturing the majority of its
products at its own facility.

         The Company is not dependent upon any sole manufacturer or supplier for
any of its raw materials or ingredients.

AGREEMENT WITH VALERA PHARMACEUTICALS ("VALERA")

         Under the terms of an agreement with Valera, which was assigned from GP
Strategies Corporation ("GPS"), the Company has an exclusive worldwide license
to manufacture, market or use non-prescription products that include the Hydron
polymer in the consumer field, including in connection with cosmetic products
and certain personal care products, and in the oral health field, including
dentures. Under the Valera Agreement, Valera retains the exclusive right to
manufacture, sell or distribute any prescription drug or medical device made
with the Hydron polymer, other than in the oral health field. In addition, under
the Valera Agreement, the Company and Valera may each manufacture, sell, and use
non-prescription drug products that include the Hydron polymer as an active
ingredient, that are not included in their respective exclusive fields.

         Under the Valera Agreement, Valera also licenses to the Company the
trademark Hydron for use in connection with the manufacture, marketing and use
of products using Hydron polymers as permitted under the Valera Agreement.

         Under the terms of the GPS Agreement, the Company and GPS are each
required to pay to the other a royalty of five percent (5%) of their respective
net sales of Hydron polymer products, except for sales of certain specified
non-prescription drug products, utilizing the Hydron polymer as an active
ingredient to third parties. Where the seller receives an up-front license fee,
royalty or similar payment the seller shall pay the other party a royalty of
twenty-five percent (25%) of such payments. GPS has assigned its rights under
the GPS Agreement to Valera Pharmaceuticals (formerly known as Hydro-Med
Sciences, Inc.) (Valera).Which has been purchased by Indevus Pharmaceuticals,
Inc (IDEV) on April 17, 2007.

         An aggregate of $12,275 and $28,108 was accrued and unpaid as of
September 30, 2007 and December 31, 2006, respectively. For the nine month
periods ended September 30, 2007 and 2006, the Company recorded royalty expenses
of approximately $0 and $14,000, respectively. For the year ended December 31,

                                       8
<PAGE>

2006, the Company recorded approximately $19,000. While the Company has not
received any royalty payments, or been advised of any sales that would entitle
it to royalty payments to date, according to the Indevus website, certain Hydron
implant milestones are noteworthy:

      o  Indevus currently markets two (2) once-yearly Hydron Implants. One
         addressing prostate cancer and the other, addressing central precocious
         puberty, both of which were specifically excluded from cross-royalties.
         To date, to the extent of the Company's belief, these implants are
         providing appropriate dosing for the life of the implant.

      o  On November 28, 2007, Indevus reported positive results from a Phase II
         Octreotide Implant trial, along with their expectation that a Phase III
         trial will begin in the first half of 2008. If ultimately successful in
         bringing the Octreotide implant to market, this implant is likely to be
         the first product subject to the cross-royalty arrangement.

LIMITED LIABILITY PARTNERSHIP

         In August 2004, The Company established Hydron Royalty Partners, LLLP,
a limited liability limited partnership, to fund the then existing royalty
obligations in consideration for the right to receive future royalty receipts
from Valera Pharmaceuticals, Inc. Hydron Technologies, Inc., the general
partner, assigned its rights in the Valera Agreement to the Partnership. The
Partnership assumed the existing liability for prior period royalties ($127,984)
and will annually pay the first $30,000 of any future royalties due to Valera
through 2008 in return for the right to receive any future royalties that may be
due from Valera on their new products. The Company, as general partner, holds
50.001% of the partnership interests, and the limited partnership interests
represent in the aggregate the remaining 49.999%.

INVENTORY

         The Company did not have any backorder of firm booked orders of Hydron
branded product as of September 30, 2007 and generally delivers its orders
within two weeks of the date orders are booked. Although the Company's business
is not seasonal, orders placed by Hydron's private label customers and
television retailers fluctuate on a monthly and quarterly basis. Orders placed
by the Company's Catalog customers are generally shipped within two business
days of the placement of the order.

         Most items can be produced within a 45-day period. Since the Company
manufactures products in-house and has reduced the lead time for production, the
finished goods inventory can be reduced to an average between 3 - 6 months of
sales. Packaging components must be printed in larger quantities and the level
of those types of items may exceed 12 months of sales. The inventory level of
the Hydron polymer exceeds several years.

GOVERNMENT REGULATION

         The Company's oxygenation process uses pure oxygen, which is a natural
substance and is not controlled. However, the containers, devices used, and the
handling of oxygen require the Food and Drug Administration's approval (FDA).
The Company complies with the Federal Food, Drug and Cosmetic Act ("FDC Act")
and must comply with the labeling requirements of the FDC Act, the Fair
Packaging and Labeling Act ("FPL Act"), and the regulations thereunder. Many

                                       9
<PAGE>

products and applications that are derived from Hydron's oxygenation technology
will be considered medical in nature and FDA approval will be required for this
area. New skin care products and most of the Company's existing products are
"cosmetics" as that term is defined under the FDC Act. Some of the Company's
products (i.e. its topical analgesic and products that contain a sunscreen or
Triclosan) are also classified as over-the-counter drugs.

         Additional regulatory requirements for existing products include
certain labeling requirements, registration of the manufacturer and semi-annual
update of the drug list. Management believes that it is in compliance with these
requirements and that it faces no material costs associated with such
compliance.

COMPETITION

         The skin care business is characterized by vigorous competition
throughout the world. Product recognition, quality, performance and price have
significant influence on customers' choices among competing products and brands.
Advertising, promotion, merchandising, the pace and timing of new product
introductions and line extensions also have a significant impact on consumer
buying decisions. The Company competes against a number of marketers of skin
care products, many of which have substantially greater resources than the
Company.

SEASONALITY

         The Company's results of operations are not subject to seasonal
fluctuations.

EMPLOYEES

         The Company satisfies its human resource needs utilizing an outsourcing
firm that provides all administrative services relating to payroll, personnel
and employee benefits. Management continues to hire, fire, set pay rates and
supervises its staff. This arrangement enables the Company to reduce its
administrative and benefits costs relating to employees. The Company, as of
September 30, 2007, had seventeen full time positions

ITEM 2.  PROPERTIES

         The Company currently leases office space at 4400 34th Street North,
Suites E, F and H, under three non-cancelable leases in St. Petersburg, Florida,
which expire between April and September 2008. The lease on this office space
(35,000 square feet) requires a monthly rent of approximately $18,100, including
taxes and common area expenses.

ITEM 3.  LEGAL PROCEEDINGS

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

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

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

                                       10
<PAGE>

The results of the voting appointed the following Directors:

         Richard Banakus
         Joshua Rochlin
         Karen Gray
         Ronald J. Saul

         The Shareholders also approved the adoption of the Company's 2003 Stock
Plan and ratified the Audit Committee's selection of Daszkal Bolton LLP as the
Company's independent Certified Public Accountants for the year ended December
31, 2004. There was no shareholder meeting held in 2006 or 2007.

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

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

                                     PART II

ITEM 5.  MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

         The Company's Common Stock is quoted on the OTC Bulletin Board, a
regulated quotation service for over-the-counter securities not listed or traded
on NASDAQ or a national securities exchange, under the symbol HTEC.OB. The
following tables indicate the high and low closing prices for the Company's
Common Stock as reported by the OTC Bulletin Board.

                               HIGH           LOW
                              CLOSING       CLOSING
                               PRICE         PRICE
                              -------       -------
              2007
         --------------
         Third Quarter         $0.22         $0.12
         Second Quarter         0.29          0.17
         First Quarter          0.20          0.10

              2006
         --------------
         Fourth Quarter        $0.30         $0.10
         Third Quarter          0.54          0.15
         Second Quarter         0.65          0.42
         First Quarter          0.65          0.35

         As of September 30, 2007, there were approximately 1,020 shareholders
of record of the Company's Common Stock. The number of shareholders of record
will decline as the Company's transfer agent has notified the Company of its
intent to transfer shares, held in the name of shareholders that it has not been
able to locate, to the proper authorities in compliance with state law
requirements relating to unclaimed property.

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<PAGE>

DIVIDENDS AND DIVIDEND POLICY

         The Company does not contemplate paying dividends in the near-term. The
Board of Directors will determine the payment of dividends in the future in
light of conditions then existing, including the Company's earnings and
financial condition.

RECENT SALES OF UNREGISTERED SECURITIES

         On February 1, 2007, the Company, commenced an offering of up to
3,300,000 units ("Units") comprised of one (1) share ("Share") of its Common
Stock and one (1) warrant ("Warrant") for the purchase of one (1) share of
Common Stock having a total gross purchase price of $330,000. On February 1,
2007 the Company closed on the sale of 2,100,000 Units resulting in gross
proceeds to the Company of $210,000. On February 5, 2007, the Company closed on
the sale of an additional 1,100,000 Units resulting in gross proceeds to the
Company of $110,000. On February 8, 2007 the Company closed on the sale of an
additional 100,000 Units resulting in gross proceeds to the Company of $10,000.
Among the individuals who purchased Units in the Offering were Richard Banakus,
the Chairman, acting President, and a director of the Company, who purchased
350,000 Units, and Ronald J. Saul, a director of the Company who with his spouse
purchased 850,000 Units.

         On March 21, 2007 the Company closed on the sale of an additional
500,000 Units resulting in gross proceeds to the Company of $50,000 to Ronald J.
Saul, a director of the Company, and his spouse jointly.

         On July 18, 2007, the Company, sold 250,000 units ("Units") comprised
of one (1) share ("Share") of its Common Stock and one (1) warrant ("Warrant")
for the purchase of one (1) share of Common Stock, for each Unit sold for a
total gross purchase price of $35,000 to Ronald J. Saul, a director of the
Company, and his spouse jointly, pursuant to a Subscription Agreement dated July
18, 2007.

EQUITY COMPENSATION PLAN INFORMATION

         The following table summarizes share information about the Company's
equity compensation plans, including the company's Stock Option Plan ("the
Plan") and non-plan equity compensation agreements as of September 30, 2007:
<TABLE>
<CAPTION>
                                NUMBER OF SECURITIES                          NUMBER OF SECURITIES
                                    TO BE ISSUED         WEIGHTED-AVERAGE     REMAINING AVAILABLE
                                  UPON EXERCISE OF      EXERCISE PRICE OF     FOR FUTURE ISSUANCE
                                OUTSTANDING OPTIONS,   OUTSTANDING OPTIONS,       UNDER EQUITY
PLAN CATEGORY                   WARRANTS AND RIGHTS    WARRANTS AND RIGHTS     COMPENSATION PLANS
-----------------------------   --------------------   --------------------   --------------------
<S>                             <C>                    <C>                    <C>
Equity compensation plans
approved by security holders          1,251,500               $0.33                   (1)

Equity Compensation plans not
approved by security holders             37,000               $0.43                   (1)

                                      ---------
                        Total         1,288,500               $0.36
                                      =========
</TABLE>

(1) The 2003 Stock Plan was approved at the November 15, 2004 shareholders'
    meeting. The aggregate number of shares that may be issued under the Plan
    cannot exceed 15% of the total outstanding shares. As of September 30, 2007,
    the number of Securities for future issuance under the 2003 Stock Plan was
    1,418,700 and 159,100 for all previous plans.

                                       12
<PAGE>

EQUITY COMPENSATION PLANS APPROVED BY SHAREHOLDERS

         The 1993 Non-Employee Director Stock Option Plan ("1993 Plan") was
adopted by the Board of Directors on December 22, 1993, approved by the
shareholders on July 19, 1994 and approved, as amended, by the shareholders on
December 17, 1997. The purpose of the 1993 Plan is to assist the Company in
attracting and retaining key directors who are responsible for continuing the
growth and success of the Company. No options were granted under the 1993 Plan
during the year ended September 30, 2007.

         During 1997, the Company adopted the 1997 Non-Employee Director Stock
Option Plan. Such plan provides grants of stock options to non-employee
directors of the Company to purchase an aggregate of 100,000 shares of the
Company's common stock. Each non-employee director shall be granted an option to
purchase 2,000 shares of the Company's common stock on each May 1st throughout
the term of this plan at exercise prices equal to the average of the fair market
value of the Company's common stock during the ten business days preceding the
date of the grant. In addition, each non-employee director who sits on a
committee of the Board of Directors shall be granted an option to purchase 500
shares of the Company's common stock under the same pricing arrangements as
above. Subject to certain exceptions, no options granted under this plan shall
be exercisable until one year after the date of grant. During August 1999, the
Company agreed to increase the annual May 1st grant to the Board members from
2,000 to 20,000 shares of the Company`s common stock and committee members from
500 to 5,000. These options expire five years from the date of grant and all
outstanding options are exercisable at September 30, 2007.

         No options were granted under this provision of the 1997 Plan during
the year ended September 30, 2007

         On November 19, 2003, the Board approved, subject to shareholder
approval, the 2003 Stock Plan (the "2003 Plan"). The shareholders approved this
plan on November 15, 2004. The 2003 Plan permits the grant of nonqualified and
incentive stock options, as well as restricted stock purchases. The form of the
equity is left up to the discretion of the committee of the Board (or the Board,
if no committee) at the time of each grant. This 2003 Plan is designed to
consolidate and replace two Stock Option Plans, which have expired; the 1993
Stock Option Plan and the 1997 Non-Employee Director Stock Option Plan. The
purpose of the 2003 Plan is to assist the Company in attracting, retaining, and
motivating key employees, officers, directors, and consultants by offering
selected individuals an opportunity to acquire a proprietary interest in the
success of the Company.

         The Board of Directors had approved the issuance of 943,500 options in
prior periods subject to the adoption of a new stock plan at the November 15,
2004 shareholders' meeting. All of these options have been reflected as being
granted in 2004.

         Options to purchase 345,000 shares were granted to employees during the
year ended September 30, 2007, necessitating adjustments to the pro forma
information regarding net income and earnings per share as required by FASB
Statement No. 123.

         On January 25, 2005, the Board of Directors, by unanimous consent,
re-authorized the issuance of 743,500 stock options from the 2003 Stock Plan to
Directors and Officers of the Company. Since the original approval date was more
than 12 months before the shareholder adoption of the 2003 Stock Plan, the
options had to be re-authorized to include them under the plan.

                                       13
<PAGE>

EQUITY COMPENSATION PLANS NOT APPROVED BY SHAREHOLDERS

         The Company has agreements with several consultants who provide
financial, business, and technical advice to the Company in connection with the
research, development, marketing and promotion of its products and other
matters. As part of their compensation, these consultants were granted warrants
and nonqualified stock options to purchase shares of the Company's common stock
at prices representing the fair market value of the shares at the date of grant.

ITEM 6.  MANAGEMENT'S DISCUSSIONS 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 condensed
consolidated financial statements and related notes contained in this annual
report on Form 10-KSB ("Form 10-KSB"). All statements other than statements of
historical fact included in this Form 10-KSB 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-KSB 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-KSB. 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.

OVERVIEW

         In 2002 the Company virtually eliminated sales made through television
retailers, having terminated the exclusive relationship with HSN in late 2001,
and as revenues derived from resales by QVC to prior customers declined.
Management expects that in 2005 and beyond, an increasing portion of the
Company's skin care sales will be generated from direct marketing utilizing
direct response mail, the Company's catalog and web site, and licensing
arrangements. Management also expects that the Company will generate an
increasing portion of its revenues from sales made through private label
partners and will look for other opportunities to sell the Company's products
through similar arrangements. Management anticipates introducing new cosmetic
products based on its oxygenation technology, which it believes will open doors
for new distribution. However, the types and timing of the introduction of new
cosmetic products will depend upon the results of further clinical testing.

                                       14
<PAGE>

         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
steam. 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 Technologies, Inc. (Hydron), as general partner,
formed Hydron Royalty Partners, LLLP (Partners) a Limited Liability Limited
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 Pharmaceuticals, Inc.
(Valera). Partners has completed a non-brokered private placement of Limited
Partnership Interest to ten accredited investors including Hydron's Chairman,
Richard Banakus and a Hydron Director, Ronald J. Saul. Each limited partner
invested $30,000 or an aggregate of $300,000 for a 49.999% interest in Partners.
The establishment of Partners 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 believes that the
vertical capabilities added by this acquisition will 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.

RESULTS OF OPERATIONS - 2007 VERSUS 2006

         Total net sales for the nine months ended September 30, 2007 were
$885,911, a decrease of $294,564 or 25% from net sales of $1,180,475 for the
nine months ended September 30, 2006. Total net sales for the year ended
December 31, 2006 were $1,474,003. Catalog Sales net sales for the nine months
ended September 30, 2007 were $349,308, a decrease of $70,304 or 17% from sales
of the nine months ended September 30, 2006 of $419,612. Catalog Sales net sales
for the year ended December 31, 2006 were $610,677. Private Label and Contract
Manufacturing net sales for the nine months ended September 30, 2007 were
$488,962, a decrease of $146,620 or 23% from sales the nine months ended

                                       15
<PAGE>

September 30, 2006 of $635,582. Private Label and Contract Manufacturing net
sales for the year ended December 31, 2006 were $724,182. Formulation and
commission net sales for the nine months ended September 30, 2007 were $0, a
decrease of $86,521 or 100% from sales for the nine months ended September 30,
2006. Formulation and commission net sales for the year ended December 31, 2006
were $86,434. Shipping and handling revenues for the nine months ended September
30, 2007 were $47,641, an increase of $8,882 or 23% from shipping and handling
revenues for the nine months ended September 30, 2006 of $38,759. Shipping and
handling revenues for the year ended December 31, 2006 were $52,710.

         The decrease in catalog sales was the result of the attrition of the
Company's customer base without marketing spending to replace those customers.
Private Label Manufacturing sales decreased due to the timing of shipments to
contact manufacturing customers.

         For the nine months ended September 30, 2007 cost of sales was
$326,394, a decrease of $12,350 or 4% from cost of sales of $338,744 for the
nine months ended September 30, 2006. Shipping and handling costs for the nine
months were $56,519, an increase of $2,243 or 4% from shipping and handling
costs of $54,276 for the same period in 2006. Shipping and handling costs for
year ended December 31, 2006 were $53,922. Cost of sales was $669,049 for the
year ended December 31, 2006.

         The Company's overall gross profit margin decreased to 63% of net sales
for the nine months ended September 30, 2007 versus 71% for the nine months
ended September 30, 2006. This reflects the decrease in formulation and
commission sales. The Company's overall gross profit margin was 55% of net sales
for the year ended December 31, 2006.

         For the nine month periods ended September 30, 2007 and 2006, the
Company recorded royalty expenses of approximately $0 and $14,000, respectively.
For the year ended December 31, 2006, the Company recorded approximately
$19,000. An aggregate of $12,275 was accrued and unpaid as of September 30,
2007. This amount is adequate to cover any royalties that are payable through
September 2007.

         Research and development ("R&D") expenses reflect the Company's efforts
to identify new product opportunities, obtain regulatory approval, develop and
package the products for commercial sale, perform appropriate efficacy and
safety tests, and conduct consumer panel studies and focus groups. R&D expenses
were $3,721 for the nine months ended September 30, 2007, a decrease of $7,762
or 67% from R&D expenses of $11,483 for the nine months ended September 30,
2006. For the year ended December 31, 2006, expenses charged to Research and
Development were $11,916. The amount of annual R&D expenses will vary year to
year depending on the Company's research requirements.

         Selling, general and administrative ("SG&A") expenses for the nine
months ended September 30, 2007 were $963,464, representing a decrease of
$65,381 or 6% from SG&A expenses of $1,028,845 for the nine months ended
September 30, 2006. Employment expense was $410,807 for the nine months ended
September 30, 2007, a decrease of $69,021, or 14%, from $479,828 for the nine
months ended September 30, 2006. Employment expense decreased primarily due to
the resignation of the Executive Vice President in May 2007. Advertising and
promotional expenses was $3,848 for the nine months ended September 30, 2007, a
decrease of $70,891, or 95% from $74,739 for the nine months ended September 30,
2006. This decrease is due to the Company cutting back on the new advertising
initiatives taken by the Company in 2006 to increase sales. Rent expense was

                                       16
<PAGE>

$92,760 for the nine months ended September 30, 2007, an increase of $26,886, or
41% from $65,876 for the nine months ended September 30, 2006. The increase in
rent is due primarily to increased pass through costs for property insurance
from the landlord and yearly increase in rent. Professional expenses (legal and
audit) was $110,284 for the nine months ended September 30, 2007, an increase of
$6,201 or 6% from $104,083 for the nine months ended September 30, 2006. The
increase in professional fees involved increased legal expenses. Settlement
expense was $38,404 for the nine months ended September 30, 2007, an increase of
$38,404, or 100% from $0 for the nine months ended September 30, 2006. The
increase in settlement expense was due to the Company resolving a dispute with a
customer. Insurance expense was $18,795 for the nine months ended September 30,
2007, a decrease of $22,769, or 55% from $41,564 for the nine months ended
September 30, 2006. Insurance decreased primarily due to the cancellation of
certain policies in 2007. Telephone expense was $18,734 for the nine months
ended September 30, 2007, a decrease of $14,044, or 43% from $32,778 for the
nine months ended September 30, 2006. Telephone decreased primarily due to the
Company discontinuing the use of a outside call center that was used in 2006.
All other expenses were $269,832 for the nine months ended September 30, 2007,
an increase of $39,855 or 17% from $229,977 for the nine months ended September
30, 2006. Selling, general and administrative ("SG&A") expenses for the year
ended December 31, 2006 were $1,176,594.

         Depreciation and amortization expense for the nine months ended
September 30, 2007 was $72,017, a decrease of $4,212 or 5.5% from $76,229 for
the nine months ended September 30, 2006. For the year ended December 31, 2006,
expenses charged to depreciation and amortization were $103,392.

         Net interest (expense) was ($55,303) for the nine months ended
September 30, 2007 compared to net interest (expense) of ($60,305) for the nine
months ended September 30, 2006. The decrease in interest expense was due
primarily to the interest on the loan payable and amortization of related debt
discount. For the year ended December 31, 2006, net interest (expense) was
($74,098).

         Minority interest in net loss for the nine months ended September 30,
2007 was $13,906 compared to $21,103 for the nine months ended September 30,
2006. This minority interest is created from a consolidated limited liability
partnership, Hydron Royalty Partners, LLLP, established by the Company in August
2004 (see Limited Liability Partnership, Item 1. Business). For the year ended
December 31, 2006, minority interest in net loss was $28,149.

         The Company had a net loss of $521,082 for the nine months ended
September 30, 2007, representing an increase of $193,011 or 59% from the net
loss of $328,071 for the nine months ended September 30, 2006, primarily as a
result of the factors discussed above. For the year ended December 31, 2006, the
Company had a net loss of $552,108.

LIQUIDITY AND CAPITAL RESOURCES

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

                                       17
<PAGE>

         The Company's working capital deficit was approximately ($532,000) at
September 30, 2007, including cash and cash equivalents of approximately
($15,000). Cash used by operating activities was $607,576 and cash used in
investing activities was $2,150 during the year ended September 30, 2007. This
was offset by proceeds from financing activities of $602,786.

         On February 1, 2007, the Company, commenced an offering of up to
3,300,000 units ("Units") comprised of one (1) share ("Share") of its Common
Stock and one (1) warrant ("Warrant") for the purchase of one (1) share of
Common stock having a total gross purchase price of $330,000. On February 1,
2007 the Company closed on the sale of 2,100,000 Units resulting in gross
proceeds to the Company of $210,000. On February 5, 2007, the Company closed on
the sale of an additional 1,100,000 Units resulting in gross proceeds to the
Company of $110,000. On February 8, 2007 the Company closed on the sale of an
additional 100,000 Units resulting in gross proceeds to the Company of $10,000.
Among the individuals who purchased Units in the Offering were Richard Banakus,
the Chairman, acting President, and a director of the Company, who purchased
350,000 Units, and Ronald J. Saul, a director of the Company who with his spouse
purchased 850,000 Units.

         On March 21, 2007 the Company closed on the sale of an additional
500,000 Units resulting in gross proceeds to the Company of $50,000 to Ronald J.
Saul, a director of the Company, and his spouse jointly.

         On July 18, 2007 the Company, sold 250,000 units ("Units") comprised of
one (1) share ("Share") of its Common Stock and one (1) warrant ("Warrant") for
the purchase of one (1) share of Common Stock, for each Unit sold for a total
gross purchase price of $35,000 to Ronald J. Saul, a director of the Company,
and his spouse jointly, pursuant to a Subscription Agreement dated July 18,
2007.

         On October 3, 2007, the Company, closed on a private offering of
1,400,000 units ("Units"), comprised of one (1) share ("Share") of its Common
Stock and one (1) warrant ("Warrant") for the purchase of one (1) share of
Common Stock. The Company received gross proceeds of One Hundred Seventy Five
Thousand Dollars ($175,000) from the sale of Units in the Offering. Among the
individuals who purchased Units in the Offering is Ronald J. Saul, a director of
the Company who together with his spouse purchased 300,000 Units.

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

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

         The Company has the following material debt: loan payable of $150,000
borrowed from three shareholders in May 2005, the loan payable of $100,000
borrowed from one shareholder on May 22, 2007 and the loan payable of $25,000
borrowed from one shareholder on August 14, 2007 and two capital leases for
equipment purchases of $31,286. The Company has substantial overdue trade
accounts payables balances. There are no capital expenditures under construction
and no long-term commitments other than royalty payments under an agreement with
Valera Pharmaceuticals, Inc. The Company does not have any lines of credit.
There are no purchase order commitments that exceed 90 days.

                                       18
<PAGE>

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

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

      o  Implement new direct sales and networking initiatives.

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

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

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

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

      o  Continue to reduce overhead and operating costs.

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

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

NEW ACCOUNTING PRONOUNCEMENTS

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

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

                                       19
<PAGE>

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

APPLICATION OF CRITICAL ACCOUNTING POLICIES

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

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

REVENUE RECOGNITION AND ALLOWANCE FOR SALES RETURNS

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

INVENTORY VALUATION

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

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

                                       20
<PAGE>

ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS

                                                                          Page
                                                                         -------

Reports of Independent Registered Public Accounting Firm ............         22

Consolidated Financial Statements:

         Balance Sheet as of
         September 30, 2007 .........................................         23

         Statements of Operations for the
         Nine month period ended September 30, 2007 and 2006,
         and the year ended December 31, 2006 .......................         24

         Statements of Changes in Shareholders'
         Equity / (Deficit) for the Year ended December 31, 2006, and
         Nine month period ended September 30, 2007 .................         25

         Statements of Cash Flow for the
         Nine month period ended September 30, 2007 and 2006,
         and the year ended December 31, 2006 .......................         26

         Notes to Consolidated Financial Statements .................    27 - 47


                                       21
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee
Hydron Technologies, Inc.

         We have audited the accompanying consolidated balance sheet of Hydron
Technologies, Inc. as of September 30, 2007 and the related consolidated
statements of operations, changes in shareholders' equity (deficit) and cash
flows for the nine months ended September 30, 2007 and the year ended December
31, 2006. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

         We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the accounting
principles used, and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hydron
Technologies, Inc. as of September 30, 2007, and the results of their operations
and their cash flows for the nine months ended September 30, 2007 and the year
ended December 31, 2006 in conformity with accounting principles generally
accepted in the United States of America.

         The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company has a working
capital deficiency at September 30, 2007 and has experienced losses from
operations in 2007 and 2006. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regards
to these matters are discussed in Note 16. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

                                       /s/ Sherb & Co., LLP
                                       --------------------
                                       Certified Public Accountants

Boca Raton, Florida
December 19, 2007

                                       22
<PAGE>

                            HYDRON TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEET

                                                                   SEPTEMBER 30,
                                                                       2007
                                                                   -------------
                                     ASSETS
Current assets
   Trade accounts receivable, net ............................     $     31,303
   Inventories ...............................................          342,672
   Prepaid expenses and other current assets .................            3,054
                                                                   ------------
      Total current assets ...................................          377,029

Property and equipment, net ..................................          108,707

Deferred product costs, net ..................................          111,538
Intangible assets, net .......................................          159,989
Restricted cash ..............................................           68,853
Deposits .....................................................           29,652
                                                                   ------------
      Total assets ...........................................     $    855,768
                                                                   ============

                      LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities
   Overdraft liability .......................................     $     15,287
   Accounts payable ..........................................          231,057
   Loans payable, net ........................................          243,293
   Royalties payable .........................................           12,275
   Deferred revenues .........................................           79,961
   Accrued liabilities .......................................          297,494
   Current portion of obligation under capital leases ........           29,233
                                                                   ------------
      Total current liabilities ..............................          908,600

Long term liabilities
   Obligation under capital lease payable ....................            2,053

   Minority interest in consolidated partnership .............          207,807

Commitments and contingencies

Shareholders' deficit
   Preferred stock - $.01 par value 5,000,000 shares
      authorized; no shares issued or outstanding ............                -
   Common stock - $.01 par value 30,000,000 shares
      authorized; 17,134,668 shares issued and outstanding ...          171,346
   Additional paid-in capital ................................       21,846,680
   Accumulated deficit .......................................      (22,272,902)
   Treasury stock, at cost 10,000 shares .....................           (7,816)
                                                                   ------------
      Total Shareholders' deficit ............................         (262,692)
                                                                   ------------
      Total liabilities and shareholders' deficit ............     $    855,768
                                                                   ============

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       23
<PAGE>
<TABLE>
                                            HYDRON TECHNOLOGIES, INC.
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
                                                                          NINE MONTHS ENDED          YEAR ENDED
                                                                            SEPTEMBER 30,           DECEMBER 31,
                                                                        2007            2006            2006
                                                                                     (Unaudited)
                                                                    ------------    ------------    ------------
<S>                                                                 <C>             <C>             <C>
Net sales .......................................................   $    885,911    $  1,180,475    $  1,474,003
Cost of sales ...................................................        326,394         338,744         669,049
                                                                    ------------    ------------    ------------
Gross profit ....................................................        559,517         841,731         804,954

Expenses
  Royalty expense ...............................................              -          14,043          19,211
  Research and development ......................................          3,721          11,483          11,916
  Selling, general & administration .............................        963,464       1,028,845       1,176,594
  Depreciation & amortization ...................................         72,017          76,229         103,392
                                                                    ------------    ------------    ------------
    Total expenses ..............................................      1,039,202       1,130,600       1,311,113

                                                                    ------------    ------------    ------------
Operating loss ..................................................       (479,685)       (288,869)       (506,159)

Interest (expense), net of interest income of $0 and $620 and $60        (55,303)        (60,305)        (74,098)
                                                                    ------------    ------------    ------------
    Loss before income taxes and minority interest ..............       (534,988)       (349,174)       (580,257)

Income taxes expense ............................................              -               -               -
Minority interest in net loss of subsidiary .....................         13,906          21,103          28,149
                                                                    ------------    ------------    ------------
    Net loss ....................................................   $   (521,082)   $   (328,071)   $   (552,108)
                                                                    ============    ============    ============

Basic and diluted loss per share
  Net loss per common share .....................................   $      (0.03)   $      (0.03)   $      (0.05)
                                                                    ============    ============    ============

Weighted average shares
  outstanding (basic and diluted) ...............................     15,971,283      12,157,642      12,178,334
                                                                    ============    ============    ============

                           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                        24
</TABLE>
<PAGE>
<TABLE>
                                            HYDRON TECHNOLOGIES, INC.
                       Consolidated Statements of Changes in Shareholders' Equity (Deficit)
<CAPTION>
                                           Common Stock        Additional                   Treasury
                                      ---------------------     Paid-in      Accumulated      Stock      Total
                                        Shares      Amount      Capital        Deficit      (at cost)   Equity
                                      ----------   --------   -----------   ------------    ---------  ---------
<S>                                   <C>          <C>        <C>           <C>             <C>        <C>
Balance at December 31, 2005 ......   11,926,836   $119,268   $21,126,925   $(21,199,712)   $ (7,816)  $  38,665
                                      ----------   --------   -----------   ------------    --------   ---------
  Exercise of stock options .......      199,500      1,995        42,540              -           -      44,535
  Issuance of common shares in
   lieu of interest on loan payable      113,400      1,134        49,896              -           -      51,030
  Compensation expense from
   stock option awards ............            -          -        56,908              -           -      56,908
  Net loss ........................            -          -             -       (552,108)          -    (552,108)
                                      ----------   --------   -----------   ------------    --------   ---------
Balance at December 31, 2006 ......   12,239,736    122,397    21,276,269    (21,751,820)     (7,816)   (360,970)
                                      ==========   ========   ===========   ============    ========   =========
  Exercise of stock options .......      625,000      6,250        60,538              -           -      66,788
  Issuance of common shares for
   payment of interest on loan
   payable ........................      161,108      1,611        29,965              -           -      31,576
  Warrants issued in connection
   with loan payable ..............            -          -        64,443              -           -      64,443
  Issuance of common shares for
   settlement of account payable ..       58,824        588         9,412              -           -      10,000
  Compensation expense from
   stock option awards ............            -          -        31,553              -           -      31,553
  Issuance of common shares for
   cash ...........................    4,050,000     40,500       374,500              -           -     415,000
  Net loss ........................            -          -             -       (521,082)          -    (521,082)
                                      ----------   --------   -----------   ------------    --------   ---------
Balance at September 30, 2007 .....   17,134,668   $171,346   $21,846,680   $(22,272,902)   $ (7,816)  $(262,692)
                                      ==========   ========   ===========   ============    ========   =========

                           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        25
</TABLE>
<PAGE>
<TABLE>
                                    HYDRON TECHNOLOGIES, INC.
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                             NINE MONTHS ENDED       YEAR ENDED
                                                               SEPTEMBER 30,        DECEMBER 31,
                                                             2007         2006          2006
                                                                      (Unaudited)
                                                          ---------    ---------    ------------
<S>                                                       <C>          <C>          <C>
OPERATING ACTIVITIES
  Net loss ............................................   $(521,082)   $(328,071)     (552,108)
    Adjustments to reconcile net loss to
     net cash used in operating activities
      Minority interest ...............................     (13,906)     (21,103)      (28,149)
      Depreciation and amortization ...................      72,017       76,229       103,392
      Compensation expense from stock option awards ...      31,553       18,880        56,908
      Warrants issued from loans payable ..............      64,443            -             -
      Stock issued in settlement ......................      10,000            -             -
      Deferred financing costs ........................     (34,562)      10,701        14,268
      Stock issued for interest expense ...............      31,576       51,030        51,030
      Bad debt expense ................................      10,008            -             -
    Change in operating assets and liabilities
      Restricted cash .................................      21,302       18,478        22,179
      Trade accounts receivable .......................       6,365       88,977        83,954
      Inventories .....................................     (73,419)       9,151       136,911
      Prepaid expenses and other current assets .......       1,245       24,169        26,894
      Deposits ........................................        (400)     (15,450)      (21,673)
      Accounts payable ................................    (158,170)      43,648        55,828
      Royalties payable ...............................     (15,833)      (2,430)       (1,404)
      Deferred revenues ...............................     (50,071)     (20,385)       (4,501)
      Accrued interest ................................     (10,003)      (4,536)        1,890
      Accrued liabilities .............................      21,361       13,899        21,406
                                                          ---------    ---------     ---------
    Net cash used in operating activities .............    (607,576)     (36,813)      (33,175)

INVESTING ACTIVITIES
    Purchase of fixed assets ..........................      (2,150)     (18,052)      (18,052)
                                                          ---------    ---------     ---------
    Net cash used in investing activities .............      (2,150)     (18,052)      (18,052)

FINANCING ACTIVITIES
    Cash overdraft ....................................      15,287            -             -
    Stock offering, proceeds ..........................     415,000            -             -
    Loan payable, proceeds ............................     125,000            -             -
    Payments on capital leases ........................     (19,289)     (16,673)      (22,649)
    Proceeds from exercise of stock options ...........      66,788       44,535        44,535
                                                          ---------    ---------     ---------
    Net cash provided by financing activities .........     602,786       27,862        21,886

    Net (decrease)  in cash and cash equivalents ......      (6,940)     (27,003)      (29,341)

Cash and cash equivalents at beginning of period ......       6,940       36,281        36,281

                                                          ---------    ---------     ---------
Cash and cash equivalents at end of period ............   $       -    $   9,278     $   6,940
                                                          =========    =========     =========

SUPPLEMENTAL CASH FLOW INFORMATION
  Stock issued to pay accrued interest ................   $  31,576    $  51,030     $  51,030
                                                          =========    =========     =========
  Warrants issued in connection with private offering .   $ 415,000    $       -     $       -
                                                          =========    =========     =========
  Equipment received for payment of accounts receivable   $  15,500    $       -     $       -
                                                          =========    =========     =========

                  SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                               26
</TABLE>
<PAGE>

                            Hydron Technologies, Inc
                   Notes to Consolidated Financial Statements
                    September 30, 2007 and December 31, 2006

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization of Business

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

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

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

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

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

Principles of Consolidation

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

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.

                                       27
<PAGE>

Cash and Cash Equivalents

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

         The cash and cash equivalent balances at September 30, 2007 and 2006
are covered by the Federal Deposit Insurance Commission.

Restricted cash

         At September 30, 2007, the Company had restricted cash of $68,853, all
of which were covered by the Federal Deposit Insurance Commission, which
represents funds from a consolidated entity, that are not available for use in
the Company's normal operations.

Concentration of Credit Risk

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

Inventories

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

Impairment of Long-Lived Assets

         In accordance with Statement of Financial Accounting Standards (SFAS)
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the
Company periodically reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be fully recoverable. The Company recognizes an impairment loss
when the sum of expected undiscounted future cash flows is less than the
carrying amount of the asset. The amount of impairment is measured as the
difference between the asset's estimated fair value and its book value. The
Company did not record any impairment charges during the nine months ended
September 30, 2007.

Property and Equipment

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

Deferred Product Costs

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

                                       28
<PAGE>

Income Taxes

         Income taxes are accounted for in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 requires the recognition of deferred
tax assets and liabilities to reflect the future tax consequences of events that
have been recognized in the Company's financial statements or tax returns.
Measurement of the deferred items is based on enacted tax laws. In the event the
future consequences of differences between financial reporting bases and tax
bases of the Company's assets and liabilities result in a deferred tax asset,
SFAS No. 109 requires an evaluation of the probability of being able to realize
the future benefits indicated by such assets. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some or the
entire deferred tax asset will not be realized.

Common Stock, Common Stock Options

         In December 2004, the FASB issued SFAS No. 123(R), "Share-Based
Payment", which replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under
SFAS No. 123(R), companies are required to measure the compensation costs of
share based compensation arrangements based on the grant date fair value and
recognize the costs in the financial statements over the period during which
employees are required to provide services. Share based compensation
arrangements include stock options, restricted share plans, performance based
awards, share appreciation rights and employee share purchase plans. In March
2005 the SEC issued Staff Accounting Bulletin No. 107, or "SAB 107". SAB 107
expresses views of the staff regarding the interaction between SFAS No. 123(R)
and certain SEC rules and regulations and provides the staff's views regarding
the valuation of share based payment arrangements for public companies. SFAS No.
123(R) permits public companies to adopt its requirements using one of two
methods. On April 14, 2005, the SEC adopted a new rule amending the compliance
dates for SFAS 123R. Companies may elect to apply this statement either
prospectively, or on a modified version of retrospective application under which
financial statements for prior periods are adjusted on a basis consistent with
the pro forma disclosures required for those periods under SFAS 123. Effective
January 1, 2006, the Company has fully adopted the provisions of SFAS No. 123R
and related interpretations as provided by SAB 107. As such, compensation cost
is measured on the date of grant as the excess of the current market price of
the underlying stock over the exercise price. Such compensation amounts, if any,
are amortized over the respective vesting periods of the option grant. SFAS 123R
requires that the deferred stock-based compensation on the consolidated balance
sheet on the date of adoption be netted against additional paid-in capital.

         For the nine month period ended September 30, 2007 and 2006, the
Company recorded stock-based compensation expense of $31,553 and $18,880
respectively. For the year ended December 31, 2006, the Company recognized
$56,908 of stock-based compensation expense under the intrinsic value method.

Earnings (loss) Per Share

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

                                       29
<PAGE>

Revenue Recognition

         The Company recognizes revenue when

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

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

Deferred Revenues

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

Shipping and Handling Fees

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

Cost of Sales

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

Research and Development Costs

         Research and development expenditures, consist of costs incurred in
performing research and development activities, and are expensed as incurred.
For the nine month periods ended September 30, 2007 and 2006, expenses charged
to Research and Development were $3,721 and $11,483, respectively. For the year
ended December 31, 2006, expenses charged to Research and Development were
$11,916.

Advertising

         Advertising costs are expensed as incurred and are included in
"Selling, general and administrative expenses." Advertising expenses amounted to
approximately $3,800 and $75,000 for the nine month periods ended September 30,
2007 and 2006, respectively. For the year ended December 31, 2006, expenses
charged to Advertising were approximately $83,000.

                                       30
<PAGE>

Recent accounting Pronouncements

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

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

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

NOTE 2 - FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying value of cash, accounts receivables, deposits, accounts
payable, and other payables approximates fair value because of their short term
maturities.

NOTE 3 - INVENTORIES

         At September 30, 2007, inventories consist of the following:

                                                2007
                                             ---------

         Finished goods ...................  $ 103,385
         Raw materials and components .....    569,680
                                             ---------
                                               673,065
         Less Inventory valuation allowance   (330,393)
                                             ---------
         Inventories, net .................  $ 342,672
                                             =========

                                       31
<PAGE>

NOTE 4 - TRADE ACCOUNTS RECEIVABLE

         Accounts receivable consisted of the following at September 30, 2007:

                                                   2007
                                                 --------

         Accounts Receivable ..................  $ 61,303
         Less : Allowance for Doubtful accounts   (30,000)
                                                 --------
         Accounts Receivable, Net .............  $ 31,303
                                                 ========

         The Company's allowance for doubtful accounts was $30,000 at September
30, 2007.

NOTE 5 - PROPERTY AND EQUIPMENT

         At September 30, 2007, property and equipment consisted of the
following:
                                           2007
                                        ---------

         Furniture and equipment .....  $ 393,067
         Less accumulated depreciation   (284,360)
                                        ---------
                                        $ 108,707
                                        =========

         Depreciation for the nine month periods ended September 30, 2007 and
2006 was $30,008 and $24,000, respectively. Depreciation for the year ended
December 31, 2006 was $33,340.

NOTE 6 - DEFERRED PRODUCT COSTS

         The Company was granted U.S. Patent No. 4,883,659, dated November 28,
1989, and U.S. Patent No. 5,039,516, dated August 13, 1991, which cover a stable
moisturizing emulsion containing an unusual emulsifying agent, as well as the
Hydron polymer and a unique combination of ingredients. These patents have
expiration dates of November 28, 2006 and August 13, 2008, respectively. During
1999 the Company was granted U.S. Patent No. 5,879,684 for its "Line Smoothing
Complex" formula. This product has been clinically shown to reduce fine lines
and wrinkles. The patent has an expiration date of April 11, 2017.

         The Company was granted U.S. Patent No. 6,984,391 dated January 10,
2006, which is titled "Compositions and Methods for Delivery of Skin
Cosmaceuticals." This patent covers the Company's unique self-adjusting pH
emulsion system.

         At September 30, 2007 deferred product costs consisted of the
following:
                                           2007
                                        ---------

         Deferred product cost .......  $ 351,818
         Less accumulated amortization   (240,280)
                                        ---------
                                        $ 111,538
                                        =========

                                       32
<PAGE>

         Amortization for the nine month periods ended September 30, 2007 and
2006 was approximately $15,000 and $26,000, respectively. Amortization for the
year ended December 31, 2006 was approximately $28,000.

         Estimated future amortization of deferred product costs are as follows:

         2008 ..........  $  16,666
         2009 ..........     12,738
         2010 ..........      9,432
         2011 ..........      9,064
         2012 ..........      8,696
         thereafter ....     54,942
                          ---------
                          $ 111,538
                          =========

NOTE 7 - ACQUISITION

On July 1, 2005, the Company acquired all the outstanding common stock of
Clinical Results, Inc. (CRI). As consideration, the Company issued 2,000,000
shares of common stock (fair value of $260,000). The acquisition was accounted
for using the purchase method of accounting. The results of operations are
included in the consolidated statements of operations since the date of
acquisition. Intangible assets which are comprised of customer lists,
formularies, product developments and employment contract for key employee of
$241,311 were recorded in this transaction and are being amortized over 3 to 10
years using the straight line method.

                                           2007
                                        ---------

         Intangibles .................  $ 241,311
         less accumulated amortization    (81,322)
                                        ---------
                                        $ 159,989
                                        =========

         Post-acquisition amortization of the identifiable intangible assets for
Amortization for the nine month periods ended September 30, 2007 and 2006 was
approximately $26,800 and $26,800, respectively. Amortization for the year ended
December 31, 2006 was approximately $28,000.

         Estimated future amortization of the identifiable intangible assets is
as follows:

         2008 ..........  $  31,632
         2009 ..........     19,113
         2010 ..........     19,113
         2011 ..........     19,113
         2012 ..........     19,113
         Thereafter ....     51,905
                          ---------
                          $ 159,989
                          =========

                                       33
<PAGE>

NOTE 8 - ROYALTY AGREEMENTS

         From 1976 through 1989, the Company and GP Strategies Corporation
("GPS") entered into various agreements, wherein the Company obtained the
exclusive worldwide rights to market products using Hydron polymers in cosmetic
and oral health fields, the two fields in which the Company has concentrated its
research and development efforts, and to utilize the Hydron polymer as a drug
release mechanism in topically applied, nonprescription pharmaceutical products.
The Hydron polymer is one of the underlying technologies in many of the
Company's skin care products. GPS has the exclusive worldwide license to market
prescription drugs and medical devices using Hydron polymers. Further, each has
the right to exploit products with Hydron polymers not in the other's exclusive
fields.

         Under the terms of the GPS Agreement, the Company and GPS are each
required to pay to the other a royalty of five percent (5%) of their respective
net sales of Hydron polymer products, except for sales of certain specified
non-prescription drug products, utilizing the Hydron polymer as an active
ingredient to third parties. Where the seller receives an up-front license fee,
royalty or similar payment the seller shall pay the other party a royalty of
twenty-five percent (25%) of such payments. GPS has assigned its rights under
the GPS Agreement to Valera Pharmaceuticals (formerly known as Hydro-Med
Sciences, Inc.) (Valera).Which has been purchased by Indevus Pharmaceuticals,
Inc (IDEV) on April 17, 2007.

         The Company and Valera were discussing possible ways to simplify the
GPS Agreement in 2004 but were unable to reach agreement. As a result, the
Company assigned its rights under the GPS Agreement to Hydron Royalty Partners,
LLLP, and a newly created limited liability partnership with the Company as the
"General Partner." The partnership assumed the existing liability for prior
period royalties ($127,984) and will annually pay the first $30,000 of any
royalties due to Valera and, in return, will receive future royalties from
Valera.

         An aggregate of $12,275 was accrued and unpaid as of September 30,
2007. For the nine month periods ended September 30, 2007 and 2006, the Company
recorded royalty expenses of approximately $0 and $14,000, respectively. For the
year ended December 31, 2006, the Company recorded approximately $19,000. While
the Company has not received any royalty payments, or been advised of any sales
that would entitle it to royalty payments to date, according to the Indevus
website, certain Hydron implant milestones are noteworthy:

      o  Indevus currently markets two (2) once-yearly Hydron Implants. One
         addressing prostate cancer and the other, addressing central precocious
         puberty, both of which were specifically excluded from cross-royalties.
         To date, to the extent of the Company's belief, these implants are
         providing appropriate dosing for the life of the implant.

      o  On November 28, 2007, Indevus reported positive results from a Phase II
         Octreotide Implant trial, along with their expectation that a Phase III
         trial will begin in the first half of 2008. If ultimately successful in
         bringing the Octreotide implant to market, this implant is likely to be
         the first product subject to the cross-royalty arrangement.

                                       34
<PAGE>

NOTE 9 - ACCRUED LIABILITIES

         At September 30, 2007, accrued liabilities consisted of the following:

                                 2007
                               --------

         Dividends payable ..  $ 83,163
         Director fee payable   123,520
         Professional fees ..    40,754
         Other ..............    50,057
                               --------
                               $297,494
                               ========

NOTE 10 - INCOME TAXES

         The Company accounts for income taxes under FASB Statement No. 109,
"Accounting for Income Taxes" (FASB 109). Deferred income tax assets and
liabilities are determined based upon differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. Due to losses, the Company has not provided for current income tax
expense in either the nine months ended September 30, 2007 or the year ended
December 31, 2006.

         Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's net deferred income taxes are as follows:

                                      SEPTEMBER 30, 2007       DECEMBER 31, 2006
                                      ------------------       -----------------

Net operating loss carryforwards          $ 7,544,000             $ 7,389,000
Tax credit carry forwards ......              168,000                 168,000
Other ..........................              278,000                 259,000
                                          -----------             -----------
Deferred tax assets ............            7,990,000               7,816,000

Less valuation allowance .......           (7,990,000)             (7,816,000)
                                          -----------             -----------
Total net deferred taxes .......          $         -             $         -
                                          ===========             ===========

         FASB 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that an $7,990,000 valuation allowance at September 30, 2007 is
necessary to reduce the deferred tax assets to the amount that will more likely
than not be realized. The valuation allowance increased by $174,000 in 2007 and
decreased $438,000 in 2006. The increase in 2007 was due to the net operating
loss carryforward.

                                       35
<PAGE>

         As of September 30, 2007, the Company had an unused net operating loss
carry forward of approximately $20,049,000 available for use on its future
corporate income tax returns. These net operating loss carry forwards expire in
September 2027. Pursuant to Sections 382 and 383 of the Internal Revenue Code,
annual use of any of the Company's net operation loss and credit carry forwards
may be limited if cumulative changes in ownership of more than 50% occur during
any three year period.

         The reconciliation of income tax rates, computed at the U.S. federal
statutory tax rates, to income tax expense is as follows:

                                                           2007    2006
                                                           ----    ----

         Tax at U.S. statutory rates ..................     34%     34%
         State income taxes, net of federal tax benefit      3%      3%
         Permanent differences ........................     -4%     -6%
         Increase in valuation allowance ..............    -33%    -31%
                                                           ----    ----
                                                             0%      0%
                                                           ====    ====

NOTE 11 - LOAN PAYABLE

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

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

                                       36
<PAGE>

$.25 to the Note holders. In January 2006, the Company elected to pay the
accrued interest due on the Notes of $13,230 in stock of the Company and issued
37,800 shares at $.35 to the Note holders. In March 2006, the Company elected to
pay the accrued interest due on the notes of $21,546 in stock of the Company and
issued 37,800 shares at $.57 to the Note holders. In July 2006, the Company
elected to pay the accrued interest due on the notes of $16,254 in stock of the
Company and issued 37,800 shares at $.43 to the Note holders. In January 2007,
the Company elected to pay the accrued interest due on the notes of $15,120 in
stock of the Company and issued 37,800 shares at $.17 to the Note holders, and
37,800 shares at $.23 to the Note holders. In May 2007, the Company elected to
pay the accrued interest due on the notes and issued 37,800 shares at $.17 to
the Note holders. In June 2007, the Company elected to pay the accrued interest
due on the notes and issued 31,260 shares at $.22 to the Note holders. At
September 30, 2007 the Company had $3,750 in accrued interest to the note
holders.

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

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

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

         In addition, the Lenders agreed to continue to allow the Company to pay
quarterly interest in cash or in shares of Common Stock. In the case of interest
paid in shares of Common Stock, the Company agreed to modify the valuation for
such shares to $0.20 per share of Common Stock. The Board of Directors of the
Company approved the Loan Extension and the Loan Extension Warrants unanimously
with Messrs. Saul and Banakus abstaining from the vote, and agreed to reserve
sufficient shares of Common Stock in the event of the exercise of the Loan
Extension Warrant. In June 2007, the Company elected to pay the accrued interest
due on the notes and issued 2,970 shares at $.22 to the Note holders.

                                       37
<PAGE>

         On May 22, 2007, Ronald J. Saul, a director of Hydron Technologies,
Inc., lent the Company One Hundred Thousand Dollars ($100,000) (the "Loan"). The
term of the Loan is six months and bears interest at the rate of ten percent
(10%). Interest on the Loan is payable monthly and may be paid in cash, or at
the option of the Company, in shares of common stock of the Company ("Common
Stock"), valued for this purpose at the average of the high and low sale prices
for a share of Common Stock averaged over the last ten days on which the Common
Stock traded. In addition, in consideration of the Loan, the Company has granted
Mr. Saul a common stock warrant (the "Loan Warrant") exercisable for One Hundred
Thousand (100,000 shares of Common Stock for a five-year period at an exercise
price of $0.2115 per share of Common Stock. The warrants were valued using the
Black Scholes model at $21,040, which is being amortized as interest expense
over the life of the notes. In June 2007, the Company elected to pay the accrued
interest due on the note of $833 in stock of the Company and issued 3,771 shares
at $.221 to the Note holder. In August 2007, the Company elected to pay the
accrued interest due on the note of $1,666 in stock of the Company and issued
4,433 shares at $.188 and 5,274 shares at $.158 to the Note holder. At September
30, 2007, the Company had accrued $1,055 of interest on the note due to the Note
holder.

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

         On August 14, 2007, Ronald J. Saul, a director of Hydron Technologies,
Inc., lent the Company Twenty five Thousand Dollars ($25,000) (the "Loan"). The
term of the Loan is two weeks and expires on August 28, 2007 and bears interest
at the rate of ten percent (10%) per annum to be paid in cash at the expiration
of the loan agreement. The loan expiration was extended until it was converted
in the private offering dated October 3, 2007. Mr. Saul and his spouse paid for
200,000 Units in the private offering by the cancellation of the loan. At
September 30, 2007, the Company had accrued $312 of interest on the note due to
the Note holder.

         Loans Payable consisted of the following at September 30, 2007:

                                             2007
                                          ---------

         Loans Payable ................   $ 275,000
         Accrued interest .............       5,117
         Less: Deferred financing costs     (36,824)
                                          ---------
                                          $ 243,293
                                          =========

                                       38
<PAGE>

NOTE 12 - STOCK OPTIONS AND WARRANTS

         The number of shares of common stock reserved for issuance was
8,386,000 for September 30, 2007 and 4,938,500 for December 31, 2006.

STOCK OPTION PLANS

THE 1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

         The 1993 Non-Employee Director Stock Option Plan ("1993 Plan") was
adopted by the Board of Directors on December 22, 1993, approved by the
shareholders on July 19, 1994 and approved, as amended, by the shareholders on
December 17, 1997. The purpose of the 1993 Plan is to assist the Company in
attracting and retaining key directors who are responsible for continuing the
growth and success of the Company. No options were granted under the 1993 Plan
during the year ended September 30, 2007.

1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

         During 1997, the Company adopted the 1997 Non-Employee Director Stock
Option Plan. Such plan provides grants of stock options to non-employee
directors of the Company to purchase an aggregate of 100,000 shares of the
Company's common stock. Each non-employee director shall be granted an option to
purchase 2,000 shares of the Company's common stock on each May 1st throughout
the term of this plan at exercise prices equal to the average of the fair market
value of the Company's common stock during the ten business days preceding the
date of the grant. In addition, each non-employee director who sits on a
committee of the Board of Directors shall be granted an option to purchase 500
shares of the Company's common stock under the same pricing arrangements as
above. Subject to certain exceptions, no options granted under this plan shall
be exercisable until one year after the date of grant. During August 1999, the
Company agreed to increase the annual May 1st grant to the Board members from
2,000 to 20,000 shares of the Company`s common stock and committee members from
500 to 5,000. These options expire five years from the date of grant and all
outstanding options are exercisable at September 30, 2007.

2003 STOCK PLAN

         On November 19, 2003, the Board approved, subject to shareholder
approval, the 2003 Stock Plan (the "2003 Plan"). The shareholders approved this
plan on November 15, 2004. The 2003 Plan permits the grant of nonqualified and
incentive stock options, as well as restricted stock purchases. The form of the
equity is left up to the discretion of the committee of the Board (or the Board,
if no committee) at the time of each grant. This 2003 Plan is designed to
consolidate and replace two Stock Option Plans, which have expired; the 1993
Stock Option Plan and the 1997 Non-Employee Director Stock Option Plan. The
purpose of the 2003 Plan is to assist the Company in attracting, retaining, and
motivating key employees, officers, directors, and consultants by offering
selected individuals an opportunity to acquire a proprietary interest in the
success of the Company.

         The Board of Directors had approved the issuance of 943,500 options in
prior periods subject to the adoption of a new stock plan at the November 15,
2004 shareholders' meeting. All of these options have been reflected as being
granted in 2004.

                                       39
<PAGE>

         Options to purchase 345,000 shares were granted to employees during the
year ended September 30, 2007, necessitating adjustments to the pro forma
information regarding net income and earnings per share as required by FASB
Statement No. 123.

         On January 25, 2005, the Board of Directors, by unanimous consent,
re-authorized the issuance of 743,500 stock options from the 2003 Stock Plan to
Directors and Officers of the Company. Since the original approval date was more
than 12 months before the shareholder adoption of the 2003 Stock Plan, the
options had to be re-authorized to include them under the plan.

         Activity with respect to these plans is as follows:

                                                                       Weighted
                                       Number of                        Average
                                       Options/          Price         Exercise
                                       Warrants        Per Share         Price
                                       ---------    ---------------    ---------

Outstanding at December 31, 2005 ...   1,242,000     $0.13 TO $0.81      $0.37

         Stock options granted .....      74,500       .5225 TO .53       0.53
         Stock options expired .....    (120,000)    0.281 TO .5225       0.32
                                       ---------
Outstanding at December 31, 2006 ...   1,196,500     $0.13 TO $0.81      $0.38
                                       =========

         Stock options granted .....     345,000      .118 TO .2115       0.20
         Stock options expired .....    (290,000)   0.2715 TO .3155       0.29
                                       ---------
Outstanding at September 30, 2007 ..   1,251,500     $0.11 TO $0.81      $0.33
                                       =========

OTHER OPTIONS

         The Company completed a non-brokered private placement of 1,750,000
Units at $.20 per Unit ($350,000), on December 10, 2002 to several accredited
investors. Each Unit is comprised of one share of common stock and one
three-year option to buy one additional common share at $.20.

         On October 24, 2005 the Company received proceeds of $112,500 through
the partial exercise of certain warrants relating to a previous private
placement of its securities in December 2002. These funds were received from
three individuals including two individuals who are (i) the Chairman of the
Board and Interim President, and (ii) a second director of the Company.

         On October 24, 2005, the Board of Directors adopted a resolution
authorizing the extension of the exercise period for certain options to purchase
common stock (the "Options") granted in connection with a private placement of
securities by the Company from December 9, 2005 to December 9, 2007 (the "New
Expiration Date") in consideration of the agreement of certain holders to
immediately exercise a portion of the Options and purchase the underlying common
stock. The shares underlying the original Options were registered by the Company
under the Securities Act of 1933, as amended (the "Securities Act"). The shares
of common stock underlying the Options totaled 1,750,000 shares or approximately
14.3% of the total outstanding shares of the Company.

                                       40
<PAGE>

         Richard Banakus, the Chairman and acting President and a director, and
Ronald J. Saul, a director of the Company, together with his spouse, Antonette
G. Saul, are among the holders of the Options. Mr. Banakus assigned for nominal
consideration certain of his Options exercisable for 250,000 shares to Mr. Saul
and effective October 27, 2005 exercised Options representing an aggregate of
250,000 shares of common stock in consideration of the extension of the exercise
period to the New Expiration Date for Options representing an aggregate of
750,000 shares of common stock. Mr. Saul exercised an aggregate of 250,000
shares and had Options representing an aggregate of 125,000 extended to the New
Expiration Date. In 2006 Mr. Saul exercised the remaining 125,000 options. In
addition in 2005, certain other holders of Options exercised Options
representing an aggregate of 62,500 shares and had the exercise period for
Options representing an aggregate of 62,500 shares extended to the New
Expiration Date bringing the total number of shares represented by the new
Options (the "New Options") exercisable at any time prior to the New Expiration
Date to 812,500 or approximately 4.7% of the total outstanding shares.

                                                                 Options/
                                                                 Warrants
                                                                 --------

         Outstanding at December 31, 2006 ....................   812,500

         Stock options granted (including extended options) ..         -
         Stock options exercised .............................         -
         Stock options expired ...............................         -
                                                                 -------
                 Granted and outstanding at September 30, 2007   812,500
                                                                 =======

         The Company has agreements with several consultants who provide
financial, business and technical advice to the Company in connection with the
research, development, marketing and promotion of its products and other
matters. As part of their compensation, these consultants were granted warrants
and nonqualified stock options to purchase shares of the Company's common stock
at prices representing the fair market value of the shares at the date of grant.
Activity with respect to options and warrants granted to these consultants is
summarized below:

                                       Number of                        Average
                                        Options           Price         Exercise
                                       Warrants         Per Share        Price
                                       ---------     --------------     --------

Outstanding at December 31, 2006 ...     169,500     $0.22 to $0.66       $0.53

         Stock options expired .....    (132,500)
                                       ---------
Outstanding at September 30, 2007 ..      37,000       0.29 to 0.50       $0.43
                                       =========

                                       41
<PAGE>

OTHER WARRANTS

         On November 14, 2003, the Company completed a non-brokered private
placement of 2,210,000 Units at $.50 per Unit ($1,105,000) to accredited
investors. Each Unit is comprised of one share of Common Stock and one five-year
warrant to buy one additional Common Share at $1.00. As of September 30, 2007,
all 2,210,000 warrants are outstanding.

         In June 2005, in connection with the loan payable, each Lender received
a Common Stock Purchase Warrant entitling the holder to purchase One Hundred
Thousand (100,000) shares of Common Stock at an exercise price of ten cents
($.10) per share for a five-year period. The warrants were valued using the
Black Scholes model at $24,000, which will be amortized as interest expense over
the life of the notes.

         On May 20, 2007, the Company agreed to extend and amend certain of the
terms of the loans (collectively, the "Loan Extension") made to the Company on
June 14, 2005 (collectively, the "Original Loans") by Mr. Saul, Richard Banakus,
the Chairman and a director of the Company, and Regis Synan (individually, a
"Lender" and collectively, the "Lenders") in the amounts of $50,000, $50,000 and
$50,000, respectively. Under the terms of the Loan Extension, the Lenders agreed
to extend the maturity date of the Original Loans from June 14, 2007 to June 14,
2008. In consideration for the Loan Extension, the Company agreed to grant each
Lender a common stock warrant (the "Loan Extension Warrants") exercisable for
Seventy Five Thousand (75,000) shares of the Common Stock for a five-year period
at an exercise price of $0.20 per share of Common Stock. The warrants were
valued using the Black Scholes model at $43,400, which is being amortized as
interest expense over the life of the notes. As of September 30, 2007, 425,000
warrants are outstanding.

         In February 2007, the Company completed a non-brokered private
placement of 3,300,000 Units at $.10 per Unit ($330,000) to accredited
investors. Each Unit is comprised of one share of Common Stock and one five-year
warrant to buy one additional Common Share at $.10. On March 21, 2007 the
Company closed on the sale of an additional 500,000 Units at $.10 per Unit
($50,000) to an accredited investor. On July 18, 2007 the Company closed on the
sale of an additional 250,000 Units at $.14 per Unit ($35,000) to an accredited
investor. As of September 30, 2007, 3,550,000 warrants are outstanding.

         On May 22, 2007, Ronald J. Saul, a director of Hydron Technologies,
Inc., lent the Company One Hundred Thousand Dollars ($100,000) (the "Loan"). The
term of the Loan is six months and bears interest at the rate of ten percent
(10%). Interest on the Loan is payable monthly and may be paid in cash, or at
the option of the Company, in shares of common stock of the Company ("Common
Stock"), valued for this purpose at the average of the high and low sale prices
for a share of Common Stock averaged over the last ten days on which the Common
Stock traded. In addition, in consideration of the Loan, the Company has granted
Mr. Saul a common stock warrant (the "Loan Warrant") exercisable for One Hundred
Thousand (100,000 shares of Common Stock for a five-year period at an exercise
price of $0.2115 per share of Common Stock. The warrants were valued using the
Black Scholes model at $21,040, which is being amortized as interest expense
over the life of the notes. As of September 30, 2007, 100,000 warrants are
outstanding.

         For the nine months ended September 30, 2007, interest expense includes
$14,919 representing the amortization of the debt discount.

                                       42
<PAGE>

         The fair value for these options was estimated at the date of the grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for the nine month period ended September 30, 2007 and the year
ended December 31, 2006:

                                        2007      2006
                                      -------   -------

         Risk-free interest rate ..      5.3%      4.3%
         Expected life ............   5 years   5 years
         Expected volatility ......      183%      124%
         Expected dividend yield ..        0%        0%

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

         The weighted average remaining contractual life of all options
outstanding at September 30, 2007 was 0.91 years.

NOTE 13 - STOCKHOLDERS' EQUITY

Common Stock

         For the nine month period ended September 30, 2007 and 2006, the
Company recorded stock-based compensation expense of $31,553 and 18,880
respectively. For the year ended December 31, 2006, the Company recognized
$56,908 of stock-based compensation expense.


         During the nine months ended September 30, 2007, the Company issued
625,000 shares of common stock in connection with the exercise of common stock
options for net proceeds of $66,788. Of these options, 600,000 were exercised at
$0.10, and 25,000 were exercised at $0.2715


         During the year ended December 31, 2006, the Company issued 199,500
shares of common stock in connection with the exercise of common stock options
for net proceeds of $44,535. Of these options, 125,000 were exercised at $0.20,
and 54,500 were exercised at $0.20157, and 20,000 were exercised at .4275.

         In connection with loans payable to the Company (Note 11) during the
nine months ended September 30, 2007 the Company issued 161,108 shares of common
stock and during the year ended December 31, 2007 the Company issued 113,400
shares of common stock. Interest on the loans may be paid in cash, or at the
option of the Company, in shares of common stock of the Company ("Common
Stock"), valued for this purpose at the average of the high and low sale prices
for a share of Common Stock averaged over the last ten days on which the Common
Stock traded.

                                       43
<PAGE>

         On February 1, 2007, the Company, commenced an offering of up to
3,300,000 units ("Units") comprised of one (1) share ("Share") of its Common
Stock and one (1) warrant ("Warrant") for the purchase of one (1) share of
Common Stock having a total gross purchase price of $330,000. On February 1,
2007 the Company closed on the sale of 2,100,000 Units resulting in gross
proceeds to the Company of $210,000. On February 5, 2007, the Company closed on
the sale of an additional 1,100,000 Units resulting in gross proceeds to the
Company of $110,000. On February 8, 2007 the Company closed on the sale of an
additional 100,000 Units resulting in gross proceeds to the Company of $10,000.
Among the individuals who purchased Units in the Offering were Richard Banakus,
the Chairman, acting President, and a director of the Company, who purchased
350,000 Units, and Ronald J. Saul, a director of the Company who with his spouse
purchased 850,000 Units.

         On March 21, 2007 the Company closed on the sale of an additional
500,000 Units resulting in gross proceeds to the Company of $50,000 to Ronald J.
Saul, a director of the Company, and his spouse jointly.

         On July 18, 2007, the Company, sold 250,000 units ("Units") comprised
of one (1) share ("Share") of its Common Stock and one (1) warrant ("Warrant")
for the purchase of one (1) share of Common Stock, for each Unit sold for a
total gross purchase price of $35,000 to Ronald J. Saul, a director of the
Company, and his spouse jointly, pursuant to a Subscription Agreement dated July
18, 2007.

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

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

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

NOTE 14 - RELATED PARTY

         During February and March 2007 the Company commenced and closed on an
Offering (Note 13). Among the individuals who purchasing Units in the Offering
were Richard Banakus, the Chairman acting President and a director of the
Company, who purchased 350,000 Units, and Ronald J. Saul, a director of the
Company who with his spouse purchased 1,350,000 Units.

         On May 20, 2007, the Company agreed to extend and amend certain of the
terms of the loans (collectively, the "Loan Extension") made to the Company on
June 14, 2005 (collectively, the "Original Loans") by Mr. Saul, Richard Banakus,
the Chairman, acting President and a director of the Company, and Regis Synan
(individually, a "Lender" and collectively, the "Lenders") in the amounts of
$50,000, $50,000 and $50,000, respectively.(Note 11). Under the terms of the
Loan Extension, the Lenders agreed to extend the maturity date of the Original
Loans from June 14, 2007 to June 14, 2008.

                                       44
<PAGE>

         On May 20, 2007, the Board of Directors approved the grant to Mr. Saul
of an option to purchase Two Hundred Thousand (200,000) shares of Common Stock
(the "Option Grant"), with a grant date effective May 18, 2007, the last trading
date for the Common Stock prior to the grant, for a five-year period at an
exercise price of $0.2115 per share of Common Stock, being the average of the
high and low sale prices for a share of Common Stock averaged over the last ten
days on which the Common Stock traded and having such other terms as provided in
the Company's 2003 Stock Plan. The Board made the Option Grant to compensate Mr.
Saul for services provided and to be provided by him in connection with the
Company's financial and treasury operations, as well as the production of its
products. Mr. Saul will assume certain of Dr. Reitz's responsibilities on an
interim basis.

         On May 22, 2007, Ronald J. Saul, a director of Hydron Technologies,
Inc., lent the Company One Hundred Thousand Dollars ($100,000) (the "Loan"). The
term of the Loan is six months and bears interest at the rate of ten percent
(10%) (Note 11).

         On July 18, 2007, the Company, sold 250,000 units ("Units") for a total
gross purchase price of $35,000 to Ronald J. Saul, a director of the Company,
and his spouse jointly, pursuant to a Subscription Agreement dated July 18, 2007
(Note 13).

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

         Subsequent to year end on October 3, 2007, the Company, closed on a
private offering (the "Offering") of 1,400,000 units ("Units"), Among the
individuals who purchased Units in the Offering is Ronald J. Saul, a director of
the Company who together with his spouse purchased 300,000 Units pursuant to two
separate subscription agreements (Note 17).

         Subsequent to year end on October 30, 2007, the Company, closed on a
private offering of 400,000 units ("Units"), Ronald J. Saul, a director of the
Company, purchased the 400,000 Units together with his spouse pursuant to a
subscription agreement dated October 30, 2007 (Note 17).

NOTE 15 - COMMITMENTS

Lease

         The Company currently leases 35,000 square feet of office space under
three non-cancelable leases in St Petersburg, Florida which expire between April
and September 2008. Rent expense for the nine months ended September 30, 2007
was approximately $92,760. Rent expense for the year ended December 31, 2006 was
approximately $91,400 under these new leases. The Company also leases equipment.
Equipment lease expense for the nine month period ended September 30, 2007 was
$19,289 and $22,649 for the year ended December 31, 2006.

         The leased property under capital leases as of September 30, 2007 had a
cost of $93,078, and accumulated depreciation of $35,016. Amortization of the
leased property is included in depreciation expense.

                                       45
<PAGE>

         Future minimum lease payments for these leases at September 30 are as
follows:

               YEAR ENDING                            CAPITAL        OPERATING
              September 30,                            LEASES          LEASES
              -------------                           --------       ---------

                  2008                                 $31,951        $124,115
                  2009                                   2,096               -

TOTAL MINIMUM LEASE OBLIGATION ....................     34,047         124,115
   LESS: INTEREST .................................     (2,761)              -
                                                      --------        --------
   PRESENT VALUE OF TOTAL MINIMUM LEASE PAYMENTS ..     31,286        $124,115
                                                                      ========
   LESS: CURRENT PORTION ..........................    (29,233)
                                                      --------
      NON-CURRENT PORTION .........................   $  2,053
                                                      ========

NOTE 16 - MANAGEMENT'S PLAN

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

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

         The Company's working capital deficit was approximately ($532,000) at
September 30, 2007, including cash and cash equivalents of approximately
($15,000). Cash used by operating activities was $607,576 and cash used in
investing activities was $2,150 during the year ended September 30, 2007. This
was offset by proceeds from financing activities of $602,786.

         The Company has the following material debt; loan payable of $150,000
borrowed from three shareholders in May 2005 (see Note 11), the loan payable of
$100,000 borrowed from one shareholder on May 22, 2007 (Note 11) and the loan
payable of $25,000 borrowed from one shareholder on August 14, 2007 (Note 11)
and two capital leases for equipment purchases of $31,286. The Company has
substantial overdue trade accounts payables balances. There are no capital
expenditures under construction and no long-term commitments other than royalty
payments under an agreement with Valera Pharmaceuticals, Inc. The Company does
not have any lines of credit. There are no purchase order commitments that
exceed 90 days.

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

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

                                       46
<PAGE>

      o  Implement new direct sales and networking initiatives.

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

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

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

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

      o  Continue to reduce overhead and operating costs.

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

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

NOTE 17 - SUBSEQUENT EVENTS

         On October 3, 2007, the Company, closed on a private offering of
1,400,000 units ("Units"), comprised of one (1) share ("Share") of its Common
Stock and one (1) warrant ("Warrant") for the purchase of one (1) share of
Common Stock. The Company received gross proceeds of One Hundred Seventy Five
Thousand Dollars ($175,000) from the sale of Units in the Offering.

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

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

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

                                       47
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.

ITEM 8A. CONTROLS AND PROCEDURES

         As of the end of this period, the Company carried out an evaluation,
under the supervision and with the participation of management, including its
Chief Executive Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-15(e). Based upon that evaluation, the Chief Executive Officer concluded
that the Company had material weaknesses associated with insufficient personnel
resources with appropriate accounting experience and lack of controls relating
to inventory valuation and segregation of inventory. During the second quarter
management hired new personnel with appropriate accounting experience, and is in
the process of implementing a perpetual inventory system which should mitigate
these material weaknesses in 2007.

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

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

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

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

                                       48
<PAGE>

ITEM 8B. OTHER INFORMATION

         None.

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

         Listed below are the directors and executive officers of the Company as
of September 30, 2007:

         Name                     Position
         ----                     --------
         Richard Banakus          Director, Chairman of the Board
         Karen Gray               Director
         Ronald J. Saul           Director
         David Pollock            Director, Chief Executive Officer

Business Experience

         Richard Banakus, age 61, has served as Chairman, acting President and a
director of the Company since June 1995 and as Interim President of the Company
since September 19, 1997. From April 1991 to the present, Mr. Banakus has been a
private investor with interests in a number of privately and publicly held
companies. From July 1988 through March 1991, he was managing partner of Banyan
Securities, Larkspur, California, a securities brokerage firm that he founded.

         Karen Gray, age 49, has served as a director of the Company since
December 1997 and was a consultant to the Company on marketing and
communications matters from November 1996 to December 1999. Ms. Gray has over 17
years of management experience in marketing communications in various capacities
with various companies. From 1993 to November 1996, Ms. Gray served as Vice
President, Corporate Communications, of the Company. From June 1992 to November
1993, Ms. Gray served as President of MarCom Associates, Inc., a marketing
communications company that she founded.

         Ronald J. Saul, age 60, has served as a director of the company since
January 2003. From September 1992 to the present, Mr. Saul has been a financial
consultant. From October 1985 through August 1992, Mr. Saul was the Treasurer
and Vice President of National Intergroup, a multi company holding company. From
November 1970 to September 1985, Mr. Saul held various accounting and financial
positions with National Intergroup Inc. and its predecessor company, National
Steel Corporation.

         David Pollock age 42, has served as a director of the Company and as
CEO of the Company from July 1, 2005 to present. Mr. Pollock is responsible for
developing a number of innovative products, including some of the early glycolic
and alpha hydroxy acid products, the first mass market Vitamin C line, one of
the best selling acne systems in the mass market, plus products for such brands
as SkinCeuticals, Bliss, Shaklee, Ted Gibson, Vogue International, DermaFresh,
Keri Lotion, CaliforniaBeauty, Desert Essence and more.

                                       49
<PAGE>

         Mr. Pollock's experience in formulating is augmented by his product
marketing background as the former Vice President of Product Development for the
Home Shopping Network and his senior management position with the Fuller Brush
company. Mr. Pollock has been a keynote speaker at various national conferences,
written a number of articles for various consumer and trade publications, been a
contributing writer to a text book on delivery systems for chemists, currently
serves on the Scientific Advisory Committee for CTFA(Cosmetic Toiletries &
Fragrance Association) and has served on the board for FCPMA (Florida Cosmetic
Pharmaceutical Manufacturers Association).

DIRECTOR AND OFFICER RESIGNATIONS

         Dr. R. Douglas Reitz, an Executive Vice President of the Company, who
had responsibilities that included oversight over production of the Company's
products, resigned on May 17, 2007. Dr. Reitz was employed by the Company
pursuant to an employment agreement dated as of July 1, 2005 (the "Employment
Agreement").In connection with Dr. Reitz's resignation, the Company and Dr.
Reitz executed a Separation Agreement which paid Dr. Reitz his salary thru May
31, 2007 and all Vacation Pay he was entitled to in consideration for certain
releases and agreements.

CORPORATE GOVERNANCE

AUDIT COMMITTEE

         The Audit Committee of the Board of Directors, comprised of Ronald Saul
reviewed and discussed the audited financial statements with management. The
audit committee has discussed with the independent auditors the matters required
to be discussed by the statement on Auditing Standards No. 61 and No. 100 as
amended (AICPA, Professional Standards, vol. 1, AU section 380), as adopted by
the Public Company Accounting Oversight Board in Rule 3600T. The audit committee
has received the written disclosures and the letter from the independent
accountants required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees), as adopted by the Public Company Accounting Oversight Board
in Rule 3600T, and has discussed with the independent accountant the independent
accountant's independence.

         Based on this review and discussion, the audit committee recommended to
the Board of Directors that the audited financial statements be included in the
Company's annual report on Form 10-KSB for the fiscal year ended September 30,
2007 and filed and the Securities and Exchange Commission.

AUDIT COMMITTEE FINANCIAL EXPERT

         The Company's Board of Directors has determined that the Company's
audit committee does have a financial expert serving on the audit committee.
Ronald Saul is the financial expert serving on the audit committee.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         The Company's officers, directors and beneficial owners of more than
10% of any class of its equity securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934 ("Reporting Persons") are required under the
Act to file reports of ownership and changes in beneficial ownership of the
Company's equity securities with the Securities and Exchange Commission. Copies
of those reports must also be furnished to the Company. Based solely on a review
of the copies of reports furnished to the Company pursuant to the Act, the
Company believes that during the year ended September 30, 2007 all filing
requirements applicable to Reporting Persons were complied with.

                                       50
<PAGE>

CODE OF ETHICS

         As of the date of this report, the Company has not adopted a Code of
Ethics applicable to its principal executive officer, principal financial
officer, principal accounting officer or controller or persons performing
similar functions.

         Although the Company recognizes the desirability of a Code of Ethics,
it does not believe that the development of a comprehensive Code is necessary or
a desirable use of the Company's limited financial resources, particularly given
the simple administrative structure and limited number of management personnel
of the Company. The Company intends to develop and adopt a suitable Code of
Ethics when its financial condition and management structure warrants.

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets forth certain information about compensation
paid, earned or accrued for services by (i) our principal executive officer and
(ii) our two most highly compensated executive officers, other than the
principal executive officer, who served as executive officers at September 30,
2007, who earned in excess of $100,000 ("Named Executive Officers"). In
accordance with the transition rules implementing the new executive compensation
disclosure requirements set forth in Securities Act Release No. 8732 (Aug. 29,
2006), we are disclosing in this Summary Compensation table only information
concerning our fiscal year ended September 30, 2007.

                                                 Stock
                                                Option     All Other
Name and Principal Position   Year   Salary    Award (1)  Compensation    Total
---------------------------   ----   -------   ---------  ------------   -------

David Pollock
Chief Executive Officer (2)   2007   $79,540       -             -       $79,540
_________

(1) Based upon the aggregate grant date fair value calculation in accordance
    with the Financial Accounting Standards Board ("FASB") Statement of
    Accounting Standard ("FAS") No. 123R, Share Based Payments. Our policy and
    assumptions made in valuation of share-based payments are contained in Note
    12 to our September 30, 2007 financial statements.

(2) Mr. Pollock serves as our principal executive officer and has held such
    position since July 1, 2005.

EMPLOYMENT AGREEMENTS

         The Company has employment agreements with David Pollock, Chief
Executive Officer of the Company, and Dr. Douglas Reitz, Executive Vice
President of the Company. Each employment agreement expires on June 30, 2008 and
each provides for an annual salary of $106,000. Dr. R. Douglas Reitz, an
Executive Vice President of the Company, resigned on May 17, 2007. In 2005 Mr.
Reitz was issued 200,000 options. The options issued to Mr. Reitz were cancelled
in 2007 when his employment terminated.

                                       51
<PAGE>

OPTION GRANTS

         During 2007, pursuant to the Company's 2003 Stock Plan, the Named
Executive Officers, were granted options to purchase shares of the common stock
of the Company exercisable at the fair market value on the date of grant. During
2007, no Named Executive Officer received a grant of options under the 2003
Option plan.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

         The following table sets forth certain information concerning
outstanding stock awards held by the Named Executive Officers as of September
30, 2007.
<TABLE>
<CAPTION>
                Number of Securities   Number of Securities
                Underlying Options     Underlying Options     Option   Option
Name            (#) Exercisable        (#) Unexercisable      Price    Expiration Date
-------------   --------------------   --------------------   ------   -----------------
<S>             <C>                    <C>                    <C>      <C>
David Pollock             -                 400,000 (1)       $.281    September 5, 2010
</TABLE>
_________

(1) Based on the Company reaching outlined performance goals. 200,000 shares
    vest automatically when the Company reaches $3,000,000 in revenues within a
    period of no more than four consecutive quarters, and 200,000 shares vest
    when the Company generates a pre-tax earnings goal of $1,000,000 in a period
    of no more than four consecutive quarters.

2003 STOCK PLAN

         This 2003 Plan is designed to consolidate and replace two Stock Option
Plans, which have expired; the 1993 Stock Option Plan and the 1997 Non-Employee
Director Stock Option Plan. The purpose of the 2003 Plan is to assist the
Company in attracting, retaining, and motivating key employees, officers,
directors, and consultants by offering selected individuals an opportunity to
acquire a proprietary interest in the success of the Company.

DIRECTOR COMPENSATION

         The following table sets forth compensation paid, earned or accrued for
service as a director in our fiscal year ended September 30, 2007.

                  Fees Earned or
Name               Paid in Cash    Option Awards (1)    Total
---------------   --------------   -----------------   -------
Richard Banakus      $11,554            $ 3,646        $15,200
Karen Gray           $ 3,750            $ 3,646        $ 7,396
Ronald J. Saul       $ 3,750            $ 4,558        $ 8,308
_________

(1) Based upon the aggregate grant date fair value calculation in accordance
    with FAS No. 123R, Share Based Payments. Our policy and assumptions made in
    valuation of share-based payments are contained in Note 12 to our September
    30, 2007 financial statements.

                                       52
<PAGE>

FEES

         Employees of the Company who also serve as directors are not entitled
to any additional compensation for such service, except for Mr. Richard Banakus.
Because of his status as Interim President, Mr. Banakus is treated as a
non-employee director. The Company does not have a written employment agreement
with Mr. Banakus.

         Non-employee directors, including for this purpose Mr. Banakus, each
receive an annual fee of $5,000 for serving on the Board of Directors. Such fees
have not been paid but are accrued quarterly. As of September 30, 2007, unpaid
directors' fees total approximately $123,520.

OPTION GRANTS

         In addition, pursuant to the terms of the Company's 2003 Stock Plan, in
2007, the Company granted each director options to purchase 20,000 shares of
common stock having an exercise price equal to the fair market value of the
Company's common stock on the date of grant, and awarded additional options for
the purchase of 5,000 shares of common stock having an exercise price equal to
the fair market value of the Company's common stock on the date of grant to
directors serving on a committee of the Board of Directors.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

         The following table sets forth information as of September 30, 2007
regarding (i) the share ownership of the Company by each person who is known to
the Company to be the record or beneficial owner of more than five percent (5%)
of the Common Stock, (ii) the share ownership of each director of the Company,
(iii) the share ownership of the Chief Executive Officer of the Company and each
other most highly paid executive officer of the Company who earned in excess of
$100,000 during the year ended September 30, 2007, and (iv) the share ownership
of all directors and executive officers of the Company, as a group (five
persons).

Name and Address of                  Amount and Nature of         Approximate
Beneficial Owner                     Beneficial Ownership      Percent of Class
-------------------------------      --------------------      ----------------

Richard Banakus                          4,408,050(1)                23.16%
4400 34th Street North, Suite F
St. Petersburg, FL 33714

Karen Gray                                 124,000(2)                  1.0%
4400 34th Street North, Suite F
St. Petersburg, FL 33714

Ronald J. Saul                           5,427,028(3)                28.21%
4400 34th Street North, Suite F
St. Petersburg, FL 33714

David Pollock                            1,400,000(4)                 7.98%
4400 34th Street North, Suite F
St. Petersburg, FL 33714

All directors and executive
officers as a group (4 persons)         11,359,078(5)                52.50%


                                       53
<PAGE>

_________

(1) Consists of 2,508,050 shares held directly and 1,900,000 shares issuable
    upon exercise of options and warrants.

(2) Consists of 24,000 shares held directly and 100,000 shares issuable upon
    exercise of options.

(3) Consists of 3,327,028 shares held directly and 2,100,000 shares issuable
    upon exercise of options.

(4) Consists of 1,000,000 shares held directly and 400,000 shares issuable upon
    exercise of options and warrants.

(5) Consists of 6,859,078 shares held directly and 4,500,000 shares issuable
    upon exercise of options.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         No applicable transactions.

ITEM 13. EXHIBITS

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

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

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

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

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

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

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

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

4.1      Non-Qualified Stock Option Plan.(6)

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

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

                                       54
<PAGE>

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

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

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

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

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

10.4     1997 Nonemployee Director Stock Option Plan.(7)

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

10.6     2003 Stock Plan (8)

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

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

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

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

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

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

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

10.14    Employment Agreement for David Pollock (10)

10.15    Employment Agreement for Richard Douglas Reitz (10)

10.16    Form of Assignment (11)

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

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

                                       55
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

23.1     Consent of Independent Registered Public Accounting Firm - Sherb & Co.
         LLP (filed herewith)

                                       56
<PAGE>

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

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

99.      Press Release dated July 6, 2005 (10)
_________

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       57
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

         The following table sets forth the aggregate fees billed by the
Company's principal accountants:

                                                        2007        2006
                                                      -------     -------

         Sherb & Co., LLP -Audit fees ...........     $32,000     $30,000
         Sherb & Co., LLP 3/31, 6/30 10Q's ......     $10,000           -
         Daszkal Bolton LLP 3/31, 6/30,9/30 10Q's           -      15,000
         Tax fees (Tax compliance and planning) .       5,430       8,453
                                                      -------     -------
                                                      $47,430     $53,453
                                                      =======     =======

         Under the procedures of the Company's audit committee, prior to
engagement of the Company's auditors to provide audit services and non-audit
services, the audit committee considers whether the provisions of such services
would be compatible with maintaining the independence of the Company's principal
accountants, and has determined that the provision of such services is
compatible with such accountants' independence.


                                       58
<PAGE>

                                   SIGNATURES

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


HYDRON TECHNOLOGIES, INC.


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


Dated: December 28, 2007


                                       59
<PAGE>

EXHIBIT INDEX                                                            INDEX #
-------------                                                            -------

Consent of Independent Registered Public Accounting Firm -
Sherb & Co. LLP                                                            23.1

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                                     31.1

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                 32.1


                                       60