UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                 FORM 10-QSB

[x] Quarterly Report Under Section 13 or 15(d) of The Securities Exchange
    Act of 1934

For the quarterly period ended: September 30, 2007

[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act

For the transition period from _______ to ________


                           Commission File No. 1-4436


                                 THE STEPHAN CO.
        (Exact Name of Small Business Issuer as Specified in its Charter)


               Florida                               59-0676812
   (State or Other Jurisdiction of               (I.R.S. Employer
   Incorporation or Organization)               Identification No.)


   1850 West McNab Road, Fort Lauderdale, Florida      33309
      (Address of Principal Executive Offices)       (Zip Code)


       Registrant's Telephone Number, including Area Code: (954) 971-0600


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

YES       NO X


         Approximate number of shares of Common Stock outstanding as of
                                October 31, 2007:

                                    4,389,781


Transitional Small Business Disclosure Format (Check One)     YES     NO X

<PAGE>

                        The Stephan Co. and Subsidiaries
                               September 30, 2007


                                    INDEX

                                                                 Page
PART I.    FINANCIAL INFORMATION

           ITEM 1.  Financial Statements

           Unaudited Condensed Consolidated Balance Sheets
           as of September 30, 2007 and December 31, 2006          4

           Unaudited Condensed Consolidated Statements
           of Operations for the nine and three months ended
           September 30, 2007 and 2006                             5

           Unaudited Condensed Consolidated Statements
           of Cash Flows for the nine months ended
           September 30, 2007 and 2006                             6

           Notes to Unaudited Condensed Consolidated
           Financial Statements                                    7

           ITEM 2.    Management's Discussion and Analysis
                      or Plan of Operation                         9

           ITEM 3.    Controls and Procedures                     11


PART II.   OTHER INFORMATION

           ITEM 1.  Legal Proceedings                             12

           ITEM 4.  Submission of Matters to a Vote
                    of Security Holders                           12

           ITEM 6.  Exhibits                                      12


SIGNATURES                                                        13



                                        2
<PAGE>

                        The Stephan Co. and Subsidiaries
                               September 30, 2007


              CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR
       PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995


          This quarterly report contains certain "forward-looking" statements.
The Stephan Co. ("Stephan" or the "Company") desires to take advantage of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of 1995
and is including this statement for the express purpose of availing itself of
the protections of such safe harbor with respect to all such forward-looking
statements. Such forward-looking statements involve risks, uncertainties and
other factors which may cause the actual results, condition (financial or
otherwise), performance, trends or achievements of the Company and its
subsidiaries to be materially different from any results, condition,
performance, trends or achievements projected, anticipated or implied by such
forward-looking statements.

         Words such as "projects," "believe," "anticipates," "estimate,"
"plans," "expect," "intends," and similar words and expressions are intended to
identify forward-looking statements and are based on our current expectations,
assumptions, and estimates about us and our industry. In addition, any
statements that refer to expectations, projections or other characterizations of
future events or circumstances are forward-looking statements. Although we
believe that such forward-looking statements are reasonable, we cannot assure
you that such expectations will prove to be correct.

     Our actual results could differ materially from those anticipated in such
forward-looking statements as a result of several factors, risks and
uncertainties. These factors, risks and uncertainties include, without
limitation, our ability to satisfactorily address any material weaknesses in our
financial controls; general economic and business conditions; competition; the
relative success of our operating initiatives; our development and operating
costs; our advertising and promotional efforts; brand awareness for our product
offerings; the existence or absence of adverse publicity; acceptance of any new
product offerings; changing trends in customer tastes; the success of any
multi-branding efforts; changes in our business strategy or development plans;
the quality of our management team; costs and expenses incurred by us in
pursuing strategic alternatives; the availability, terms and deployment of
capital; the business abilities and judgment of our personnel; the availability
of qualified personnel; our labor and employee benefit costs; the availability
and cost of raw materials and supplies; changes in or newly-adopted accounting
principles; changes in, or our failure to comply with, applicable laws and
regulations; changes in our product mix and associated gross profit margins; as
well as management's response to these factors, and other factors that may be
more fully described in the Company's literature, press releases and
publicly-filed documents with the Securities and Exchange Commission. You are
urged to carefully review and consider these disclosures, which describe certain
factors that affect our business.

     We do not undertake, subject to applicable law, any obligation to publicly
release the results of any revisions, which may be made to any forward-looking
statements to reflect events or circumstances occurring after the date of such
statements or to reflect the occurrence of anticipated or unanticipated events.
Therefore, we caution each reader of this report to carefully consider the
specific factors and qualifications discussed herein with respect to such
forward-looking statements, as such factors and qualifications could affect our
ability to achieve our objectives and may cause actual results to differ
materially from those projected, anticipated or implied herein.


                                        3

<PAGE>

                        PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

                        The Stephan Co. and Subsidiaries
                 Unaudited Condensed Consolidated Balance Sheets

                                   Assets

                                             September 30,    December 31,
                                                 2007            2006
                                                 ----            ----

Cash and cash equivalents                   $   7,431,477    $  7,064,332

Restricted cash                                 1,110,000       1,110,000

Accounts receivable, net                        1,841,363       1,716,733

Inventories                                     4,968,905       4,792,357

Prepaid expenses and
  other current assets                            401,131         335,429
                                             ------------    ------------

   TOTAL CURRENT ASSETS                        15,752,876      15,018,851

Restricted cash                                   370,000       1,206,392

Property, plant and equipment, net              1,487,403       1,573,560

Deferred income taxes                             542,981         864,471

Goodwill, net                                   2,602,802       2,602,802

Trademarks, net                                 3,069,507       3,069,507

Deferred acquisition costs, net                    76,161          76,161

Other assets, net                               2,345,466       2,354,295
                                             ------------    ------------

   TOTAL ASSETS                             $  26,247,196    $ 26,766,039
                                             ============    ============


                   Liabilities and Stockholders' Equity


                                            September 30,    December 31,
                                                2007             2006
                                                ----             ----

Current portion of
  long-term debt                            $   1,110,000    $  1,110,000

Accounts payable and
  accrued expenses                              2,134,754       2,215,449
                                            -------------    ------------

   TOTAL CURRENT LIABILITIES                    3,244,754       3,325,449

Long-term debt                                    277,500       1,110,000
                                            -------------    ------------

   TOTAL LIABILITIES                            3,522,254       4,435,449
                                            -------------    ------------

Commitments and Contingencies

Common stock, $.01 par value                       43,898          43,898
Additional paid-in capital                     17,714,581      17,646,069
Retained earnings                               4,966,463       4,640,623
                                            -------------     -----------
   TOTAL STOCKHOLDERS' EQUITY                  22,724,942      22,330,590
                                            -------------     -----------
   TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY                   $  26,247,196    $ 26,766,039
                                            =============    ============

    See notes to unaudited condensed consolidated financial statements.


                                     4

<PAGE>

                        The Stephan Co. and Subsidiaries
         Unaudited Condensed Consolidated Statements of Operations


                                            Nine Months Ended September 30,
                                            ------------------------------
                                                  2007            2006
                                                  ----            ----

Revenue                                       $15,194,200     $17,091,655

Cost Of Goods Sold                              8,490,661       9,910,822
                                              -----------      -----------
Gross Profit                                    6,703,539       7,180,833

Selling, General And
  Administrative Expenses                       5,983,440       6,309,038
                                              -----------      -----------

Operating Profit                                  720,099         871,795

Other Income (Expense)
  Interest income                                 277,610         155,312
  Interest expense on long-term debt              (19,739)        (32,641)
                                              -----------      -----------

Income Before Income Taxes                        977,970         994,466

Income Tax Expense                                388,743         414,979
                                              -----------      -----------

Net Income                                    $   589,227     $   579,487
                                              ===========      ===========

Net Income Per Share:
  Basic                                       $       .13     $       .13
  Diluted                                     $       .13     $       .13
Dividends Per Share:                          $       .06     $       .06


                                            Three Months Ended September 30,
                                            ------------------------------

                                                 2007             2006
                                                 ----             -----

Revenue                                       $ 5,382,581     $ 6,109,738

Cost Of Goods Sold                              2,959,631       3,525,412
                                              -----------     -----------
Gross Profit                                    2,422,950       2,584,326

Selling, General And
  Administrative Expenses                       1,846,405       1,977,771
                                              -----------     -----------

Operating Profit                                  576,545         606,555

Other Income (Expense)
  Interest income                                  91,939          48,919
  Interest expense on long-term debt               (5,555)         (9,854)
                                              -----------     -----------

Income Before Income Taxes                        662,929         645,620

Income Tax Expense                                259,569         279,368
                                              -----------     -----------

Net Income                                    $   403,360     $   366,252
                                              ===========     ===========

Net Income Per Share:
  Basic                                       $       .09     $       .08
  Diluted                                     $       .09     $       .08
Dividends Per Share:                          $       .04     $       .02


    See notes to unaudited condensed consolidated financial statements.


                                     5
<PAGE>

                        The Stephan Co. and Subsidiaries
            Unaudited Condensed Consolidated Statements of Cash Flows



                                             Nine Months Ended September 30,
                                             -------------------------------

                                                 2007            2006
                                                 ----            ----

CASH FLOWS FROM OPERATING ACTIVITIES:

 Net income                                 $    589,227      $   579,487

 Adjustments to reconcile net income
  to net cash flows provided
  by operating activities:

   Depreciation                                  102,156          108,931
   Stock-based compensation                       68,596           67,004
   Amortization                                     -              49,518
   Deferred income taxes                         321,490          313,566

 Changes in operating assets and liabilities:
   Accounts receivable                          (124,630)        (861,025)
   Inventories                                  (176,548)          51,560
   Prepaid expenses
      and other current assets                   (65,700)         (11,560)
   Change in other assets                          8,829          350,142
   Accounts payable and accrued expenses         (80,695)         186,810
                                              -----------     -----------

Net cash flows provided by
 operating activities                            642,725          834,433
                                              -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

 Reduction in restricted cash                    836,392          835,983

 Purchase of property, plant
  and equipment                                  (15,999)         (38,223)
                                              -----------      -----------
Net cash flows provided by
 investing activities                            820,393          797,760
                                              -----------      -----------
CASH FLOWS FROM FINANCING ACTIVITIES:

 Repayments of long-term debt                   (832,500)        (740,000)

 Dividends paid                                 (263,389)        (263,389)

 Purchase & retirement of common stock               (84)              --
                                               ----------      -----------
Net cash flows used in
 financing activities                         (1,095,973)      (1,003,389)
                                                ---------      -----------

INCREASE IN CASH AND CASH EQUIVALENTS            367,145          628,804

Cash And Cash Equivalents,
 Beginning Of Period                           7,064,332        5,602,762
                                             -----------      -----------
Cash And Cash Equivalents,
 End Of Period                               $ 7,431,477      $ 6,231,566
                                             ===========      ===========

Supplemental Disclosures of Cash Flow Information:

          Interest paid                      $    19,975      $    32,641
                                             ===========      ===========

          Income taxes paid                  $    82,128      $    35,178
                                             ===========      ===========

    See notes to unaudited condensed consolidated financial statements.

                                        6

<PAGE>

                       The Stephan Co. and Subsidiaries
       Notes To Unaudited Condensed Consolidated Financial Statements
                    Quarters Ended September 30, 2007 and 2006

NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
         ACCOUNTING POLICIES

         NATURE OF  OPERATIONS:  The  Stephan Co. (the  "Company")  is engaged
principally in the manufacture, sale and distribution of hair and personal care
grooming products throughout the United States. We have allocated substantially
all of our business into three segments: professional hair care products, retail
personal care products and manufacturing/other.

         BASIS OF PRESENTATION: In our opinion, all adjustments (consisting only
of normal accruals) necessary for a fair presentation of the Company's financial
position and results of operations are reflected in these unaudited interim
condensed consolidated financial statements. Certain reclassifications of prior
year amounts have been made to effect comparability with current year
classifications.

     The results of operations for the nine- and three-month periods ended
September 30, 2007 are not necessarily indicative of the results to be achieved
for the year ending December 31, 2007. The December 31, 2006 condensed
consolidated balance sheet was derived from the audited consolidated financial
statements, but does not include all disclosures required by generally accepted
accounting principles in the United States of America. These interim condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and accompanying notes in our Annual Report on
Form 10-K for the year ended December 31, 2006, previously filed with the
Securities and Exchange Commission.

         USE OF ESTIMATES: The preparation of consolidated financial statements
in conformity with generally accepted accounting principles requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the dates of
the consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.

         CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash, CDs,
money market investments and floating rate notes with maturities of 90 days or
fewer when acquired. The Company maintains cash deposits at certain financial
institutions in amounts in excess of the federally insured limit.

         REVENUE RECOGNITION: We recognize revenue upon shipment.

         CLASSIFICATION OF CERTAIN COSTS AND EXPENSES: In Cost of Goods Sold, we
include raw materials, packaging, labor and overhead related to manufacturing,
shipping and warehousing our products.

         INVENTORIES:  Inventories are stated at the lower of cost (determined
on a first-in, first-out basis) or market:

                                      September 30,        December 31,
                                          2007                  2006
                                          ----                  ----

Raw materials                         $  1,217,681         $  1,457,575
Packaging and components                 2,023,654            2,138,017
Work-in-process                            486,449              605,848
Finished goods                           3,522,509            2,872,305
                                         ---------            ---------
                                         7,250,293            7,073,745
Less: Amount included in
      other assets                      (2,281,388)          (2,281,388)
                                         ----------           ---------

                                      $  4,968,905         $  4,792,357
                                         =========            =========

     Raw materials include chemicals and fragrances used in the production
process. Packaging and components include cartons, inner sleeves, boxes,
bottles, containers, jars, caps, pumps and similar items. Finished goods are
comprised of manufactured and purchased "wet" goods and purchased "hard" goods
including hair dryers, electric clippers, lather machines, scissors and salon
accessories.

     Packaging, components and finished goods that are not anticipated to be
used within one year are categorized as other assets. We reduce the value of
inventory included in other assets by an allowance for inventory obsolescence to
provide for the cost, including the estimated costs of disposal of slow moving
goods that may ultimately become unusable or obsolete.

                                        7
<PAGE>

         BASIC AND DILUTED NET INCOME PER SHARE: Basic net income per share was
computed by dividing net income by the weighted average shares of common stock
outstanding (4,389,801 shares). Diluted net income per share was computed by
dividing net income by the weighted average shares of common stock outstanding
increased by shares assumed to be outstanding after the exercise of certain
stock options.

         The inclusion of dilutive stock options in the calculation of diluted
net income per share was not significant for the nine- or three-month periods
ended September 30, 2007 and 2006. We have approximately 400,000 stock options
outstanding, of which approximately 150,000 are "in the money" and therefore
used in the calculation of diluted net income per share. The additional shares
assumed to be outstanding using the treasury stock method are immaterial.

         In late June 2007 we purchased 22 shares of common stock as an
accommodation to a shareholder. The stock was later retired and the shares are
no longer outstanding.

         STOCK-BASED COMPENSATION: As a result of adopting FAS 123R on January
1, 2006, we incurred compensation expense related to stock options granted to
the CEO and certain directors of $69,000 and $21,000, net of income tax
benefits, or about $.02 and $.01, respectively. For the nine- and three-month
periods ended September 30, 2006, our net income was reduced by approximately
$67,000 and $42,000 for the nine- and three-month periods, or about $.02 and
$.01, respectively.

         NEW FINANCIAL ACCOUNTING STANDARDS: In February 2007, the FASB issued
SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("SFAS 159"), which establishes a fair value option under which
entities can elect to report certain financial assets and liabilities at fair
value, with changes in fair value recognized in earnings. SFAS 159 is effective
for fiscal years beginning after November 15, 2007. We are currently evaluating
the impact, if any, that SFAS 159 will have on our financial statements.

      In September 2006, the Securities and Exchange Commission staff published
Staff Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements." SAB No. 108 addresses the effect on current year financial
statements of prior year uncorrected errors. SAB No. 108 was effective for
fiscal years ended after November 15, 2006. The adoption of SAB No. 108 by us in
the fourth quarter of 2006 did not have a material impact on our consolidated
financial statements.

     In July 2006 the FASB issued FASB Interpretation No. 48, ("FIN 48")
"Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109". FIN 48 requires that we recognize in our financial statements the
impact of a tax position taken or expected to be taken in a tax return, provided
that such position is more likely than not of being sustained on audit. FIN 48
was effective for fiscal years beginning after December 15, 2006. We adopted FIN
48 effective January 1, 2007 and do not anticipate that it will have an adverse
effect on our financial statements.

NOTE 2: COMMITMENTS AND CONTINGENCIES

     We are involved in litigation matters arising in the ordinary course of
business. It is our opinion that none of these matters, at September 30, 2007,
would likely, if adversely determined, have a material adverse effect on our
financial position, results of operations or cash flows. Additionally, there has
been no material change in the status of any pending litigation since the filing
of our most recent Annual Report on Form 10-K with the Securities and Exchange
Commission for the year ended December 31, 2006.

                                        8

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Adjustments Related to Prior Interim Periods of the Current Year

We recently discovered, with the aid of our system of internal controls, that a
manager at our Midwest subsidiary had caused overstated results to be included
in our previously reported revenue, net income and net income per share to the
extent of $504,000, $124,000, and $.02 per common share, respectively, for the
six months ended June 30, 2007. Cash was unaffected. The actions of the former
manager were unauthorized and unilateral and resulted in the aforementioned
overstatement of revenue and earnings. We do not consider the actions of the
former manager to be indicative of a material weakness in our system of internal
controls, but we are reviewing our control systems at this subsidiary for any
weaknesses or deficiencies. Any needed strengthening of our Internal Controls
over Financial Reporting will be implemented before December 31, 2007.

We plan to amend our reports on Form 10-QSB for the first and second quarters of
2007 as follows:


Quarter Ended March 31, 2007                  As Filed         As Restated
                                              --------         -----------
         Revenue                           $  5,209,364        $ 4,946,952
         Net income                             103,546             57,005
         Net income per share              $        .02        $       .01

Quarter Ended June 30, 2007                   As Filed         As Restated
                                             ---------         -----------
         Revenue                           $  5,106,714        $ 4,864,668
         Net income                             163,750            128,751
         Net income per share              $        .04        $       .03

Six Months Ended June 30, 2007                As Filed         As Restated
                                              --------         -----------
         Revenue                           $ 10,316,078        $ 9,811,620
         Net income                             267,296            185,756
         Net income per share              $        .06        $       .04


The "As Restated" amounts above have been included in the year-to-date results
in this report on Form 10-QSB for the third quarter of 2007.

Comparison of the Nine-Month Periods ended September 30, 2007 and September 30,
2006:

Our revenue was $15.2 million for the nine months ended September 30, 2007, a
decrease of 11.1% from the comparable period in 2006, principally due to
shortfalls in our two main product segments: professional and retail. Revenue in
our professional segment, consisting principally of lower margin hard goods
(clippers, scissors, manikins, lather machines, etc.) sold to distributors,
accounted for approximately 76.0% of our total revenue for the nine-month period
ended September 30, 2007, representing a decline of 12.4% from the comparable
period in the prior year. Revenue in our retail segment, principally comprised
of sales to chain stores and mass merchandisers, accounted for approximately
17.0% of our total revenue for this nine-month period and was 15.5% less than
the revenue attributed to this product segment for the comparable 2006 period.
Revenue for the remaining sales categories was greater than that in 2006 by
25.3%, due principally to higher cosmetic and amenity sales. It was not
practicable to determine interim profit or loss by segment; we plan to report
segment profitability in our Annual Report on Form 10-KSB for the year ending
December 31, 2007.

                                                Revenue by Segment
                                                 ($ in thousands)

                                   Nine Months    Nine Months    % Increase
                                      2007            2006        (Decrease)
                                      ----            ----       ----------

Professional                       $  11,535       $  13,172       (12.4%)
Retail                                 2,594           3,070       (15.5%)
Manufacturing/Other                    1,065             850        25.3%
                                     -------          ------
         Total                     $  15,194       $  17,092       (11.1%)


While sales of certain of our brands, sold principally to retail chains and
sales of amenities and cosmetics, outperformed results in the prior year,
revenue in our largest category, professional hard goods, was below that in the
nine-month period ended September 30, 2006. We believe that several factors
contributed to this shortfall including: 1) a decrease in the number of
distributors resulting from industry consolidation, 2) increased competitive
pressures, 3) lower beauty school sales and 4) general economic conditions.

Our operating profit declined 17.4%, to $720,000, in the first three quarters of
2007 compared to the comparable period in 2006. Our gross profit percentage was
higher, 44.1% compared to 42.0% in the first nine months of 2006, and our
selling, general and administrative ("SG&A") expenses were lower, as described
below, partially offsetting the effect of the revenue decline. The gross margin
percentage improved due in part to 1) a shift in the mix of products sold as
fewer lower margin hard goods were sold in the first three quarters of 2007
compared to those sold in the comparable period of 2006 and 2) our emphasis on
controlling our inventory levels by utilizing raw materials and components more
efficiently.

Lower SG&A expenses contributed to better operating profit as our payroll and
freight costs, two of the principal components of our SG&A expenses, were
$109,000 and $75,000, respectively, less in the nine-month period ended
September 30, 2007 compared to the same period in 2006. SG&A expenses in the
first three quarters of 2006 included legal costs of $78,000, classified in
previous reports as a component of interest expense and lower amortization costs
of $50,000; these costs were not incurred in 2007.

Income before income taxes decreased 1.8% as the decline in operating profit was
offset by the impact of higher interest income. Net income was 1.7% better than
that in the first three quarters of 2006.

Comparison of the Three-Month Periods ended September 30, 2007 and September 30,
2006:

Our revenue was $5.4 million for the three months ended September 30, 2007, a
decrease of 11.9% from the comparable period in 2006 principally due to
shortfalls in our two main segments: professional and retail. Revenue in our
professional segment, consisting principally of lower margin hard goods,
accounted for approximately 80.0% of our total revenue for the three-month
period ended September 30, 2007, representing a decline of 14.4% from the
comparable period in the prior year. Revenue in the retail segment, principally
comprised of sales to chain stores and mass merchandisers, accounted for
approximately 16.0% of our total revenue for this three-month period and was
13.3% less than revenue attributed to this product segment for the comparable
2006 period. Revenue for our remaining product segment increased in 2007 over
that in 2006 due to higher cosmetic and amenity sales. It was not practicable to
determine profit or loss by segment for the subject period.

                                        Revenue by Segment
                                         ($ in thousands)

                           Three Months     Three Months     % Increase
                               2007             2006         (Decrease)
                               ----             ----         ----------

Professional               $  4,296         $  5,023           (14.4%)
Retail                          836              964           (13.3%)
Manufacturing/Other             251              123           104.1%
                             ------            -----
         Total             $  5,383         $  6,110           (11.9%)


(See above for a description of revenue shortfalls from the third quarter of
2006.)

Our operating profit decreased 4.9% in the third quarter of 2007 as lower SG&A
expenses helped to offset the effect of the revenue decline. Our gross profit
percentage was higher, 45.0% in the third quarter of 2007 compared to 42.2% in
the comparable period of 2006. We incurred lower payroll, professional fees and
freight costs, principal components of our SG&A expense, during this third
quarter period compared to the comparable period last year. SG&A expenses in the
third quarter of 2006 included legal costs of $52,000 classified in 2006 reports
as a component of interest expense.

Income before income taxes for the three-month period ended September 30, 2007
increased 2.6% from that in the third quarter of 2006, primarily due to
increased interest income that offset the effect of lower operating profit. Net
income for the period improved by 10.1% from the comparable period in 2006.

                                        9

<PAGE>

LIQUIDITY & CAPITAL RESOURCES

For the nine months ended September 30, 2007, we generated cash flow from
operating activities of $643,000. In the comparable period in 2006 we generated
$834,000; the decline from 2006 to 2007 was the result of changes in non-cash
working capital. Most of our revenue and cash flow comes from our Professional
market segment. This segment markets non-manufactured barber and beauty supplies
to distributors, barbershops, beauty schools and salons. We had $7.4 million
cash and cash equivalents at September 30, 2007, up from $7.1 million at
December 31, 2006. Over and above our $7.4 million we had cash of $1.7 million
pledged as security for a bank loan of a like amount. Other than this bank loan,
which has been fully funded by pledged ("restricted") cash, we have no long-term
debt.

Our changes in cash are generally driven by our profitability, dividend payments
and changes in non-cash working capital. Our long-term debt is fully funded by
restricted cash; the restricted cash decreases as principal payments on the loan
are paid. Cash and cash equivalents, approximately $7.4 million at September 30,
2007, was in excess of the amount due for principal payments under this loan.

During the nine-month period ended September 30, 2007, we generated cash flows
from operations sufficient to fund our operating, capital and dividend
requirements. We do not anticipate the need for additional long-term debt or
capital contributions at this time. We do not have any off-balance sheet
financing or similar arrangements. We currently have sufficient cash on hand
combined with cash generated from our ongoing operations to satisfy our planned
operating and recurring capital requirements.

We paid our third dividend of the year, $.02 per share of common stock, on
September 28, 2007. We declared our second dividend of 2007 on July 10 in the
amount of $.02 per share of common stock, and it was paid on July 31, 2007. We
have paid dividends every year since mid-1995.

Our cash flow from operations has been growing in the past few years; in 2004,
however, we paid a special dividend of $2.00 per share of common stock that
decreased cash on hand by approximately $9.0 million.

NEW FINANCIAL ACCOUNTING STANDARDS

See Note 1 to the Unaudited Condensed Consolidated Financial Statements included
in Part I, Item 1 for a discussion of new financial accounting standards.

DISCUSSION OF CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results would differ significantly from those
estimates if different assumptions were used or unexpected events transpire.
Please see Item 7 in our Annual Report on Form 10-K for the year ended December
31, 2006 filed with the Securities and Exchange Commission.


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<PAGE>

ITEM 3.  CONTROLS AND PROCEDURES

     (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES: As of the end of the
period covered by this quarterly report, we, including our principal executive
and financial officers, performed an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that a material weakness existed in our internal controls over financial
reporting and, consequently, that our disclosure controls and procedures were
not effective in timely alerting them as to material information relating to our
Company and our subsidiaries that is required to be included in this quarterly
report.

     The material weakness in our internal controls over financial reporting as
of September 30, 2007 related to the fact that as a small public company, we,
currently, have an insufficient number of personnel with clearly delineated and
fully documented responsibilities and with the appropriate level of accounting
expertise. We also have insufficient documented procedures to identify and
prepare a conclusion on matters involving material accounting issues and to
independently review conclusions as to the application of generally accepted
accounting principles. The lack of a sufficient number of accounting personnel
is not considered appropriate for an internal control structure designed for
external reporting purposes.

     The principal factors management considered in determining whether a
material weakness existed in this regard was based upon management's evaluation
discussed above and advice from our independent registered public accounting
firm. As a result, management has determined that a material weakness in the
effectiveness of the Company's internal controls over financial reporting
existed as of September 30, 2007.

     During the second quarter of 2007 we retained a financial consultant who
acted as our controller and also analyzed procedures and evaluated internal
controls and reported his findings and recommendations for addressing the
material weakness described above as well as other proposed changes to the Audit
Committee of the Board. To the extent practicable we will implement these
recommended changes by the end of 2007. So far, we have improved our method of
preparing consolidated financial statements and upgraded our accounting staff.
The consultant remains with us as our chief financial officer.

     (b) CHANGES IN INTERNAL CONTROLS: Except as noted in Management's
Discussion and Analysis or Plan of Operation, no change in the Company's
internal control over financial reporting occurred during the third quarter that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting. However, the Audit Committee and we
recognize that current staffing levels will have to be enhanced and/or
arrangements will have to be made with other accounting firms to act in a
consulting capacity in an effort to satisfy our reporting obligations and
over-all standards of disclosure controls and procedures.


                                    11

<PAGE>

                      PART II.  OTHER INFORMATION


ITEM 1.  Legal Proceedings

     There has been no significant change in the status of litigation since the
issuance of our Annual Report on Form 10-K for the year ended December 31, 2006.

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

         Our annual meeting of stockholders was held on September 17, 2007; our
stockholders voted upon three matters:

            1)    To elect one (1) Class I and two (2) Class II members of the
                  Company's Board of Directors.
                        Results of voting: 3,393,893 votes were cast for Shouky
                        A. Shaheen; 731,663 votes were withheld. 3,404,192 votes
                        were cast for the election of Curtis Carlson; 721,363
                        votes were withheld. 3,988,692 votes were cast for
                        Elliot Ross; 136,863 votes were withheld.

            2)    To reclassify one (1) Class III member of the Company's Board
                  of Directors to be a Class I member:
                        Results of voting: 1,997,527 votes were cast for the
                        reclassification of William M. Gross as a Class I
                        director. Votes against were 113,670; votes abstaining
                        were 2,400. Broker non-votes were 2,011,958.

            3)    To ratify the appointment of the Company's independent public
                  accounting firm, Goldstein Lewin & Co.
                        Results of voting: 4,027,739 votes were cast for the
                        ratification of auditors. Votes against were 95,999;
                        votes abstaining were 1,817.

         After the aforementioned voting by our stockholders the following
persons comprised our Board of Directors: Messrs. Richard Barone, Curtis
Carlson, Frank Ferola, William Gross, Elliot Ross and Shouky Shaheen.

ITEM 6.  Exhibits

          31.1    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer.

          31.2    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer.

          32.1    Certification by the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

          32.2    Certification by the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

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<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.



THE STEPHAN CO.




   /s/ Frank F. Ferola
-------------------------------------
Frank F. Ferola
President and Chief Executive Officer
November 18, 2007




  /s/ Robert C. Spindler
------------------------------------
Robert C. Spindler
Principal Financial and
Accounting Officer
November 18, 2007







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