10QSB

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C.  20549

FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2008

Commission File Number 0-10683

HYDROMER, INC. (Exact name of registrant as specified in its charter)
New Jersey	22-2303576
(State of incorporation)	(I.R.S. Employer
	Identification No.)
35 Industrial Pkwy, Branchburg, New Jersey	08876-3424
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code:	(908) 722-5000
Securities registered pursuant to Section 12 (b) of the Act:None
Securities registered pursuant to Section 12 (g) of the Act:

Common Stock Without Par Value

 (Title of class)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days.    Yes x     No ¨

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

Class	Outstanding at March 31, 2008
Common	4,772,318

HYDROMER, INC.

INDEX TO FORM  10-QSB

March 31, 2008

		Page No.
Part I  - Financial Information
	# 1  Consolidated Financial Statements
	Balance Sheets - March 31, 2008 & June 30, 2007	2
	Statements of Income for the three months and nine months ended
	March 31, 2008 and 2007	3
	Statements of Cash Flows for the nine months ended
	March 31, 2008 and 2007	4
	Notes to Financial Statements	5
	# 2  Management's Discussion and Analysis of the Financial Condition
	and Results of Operations	6
	# 3  Controls and Procedures	7
Part II  - Other Information
	# 1  Legal Proceedings	N/A
	# 2  Change in Securities	N/A
	# 3  Default of  Senior Securities	N/A
	# 4  Submission of Motion to Vote of Security Holders	N/A
	# 5  Other Information	N/A
	# 6  Exhibits and Reports on form 8-K	7

EXHIBIT INDEX
Exhibit No.	Description of Exhibit
33.1	SEC Section 302 Certification – CEO certification	9
33.2	SEC Section 302 Certification – CFO certification	10
99.1	Certification of Manfred F. Dyck, Chief Executive Officer,
	pursuant to 18 U.S.C. Section 1350	11
99.2	Certification of Robert Y. Lee, Chief Financial Officer,
	pursuant to 18 U.S.C. Section 1350	11

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Part I – Financial Information

Item # 1

HYDROMER, INC. and CONSOLIDATED SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	March 31,			June 30,
	2008			2007
	UNAUDITED			AUDITED
Assets
Current Assets:
Cash and cash equivalents	$	145,074		$	146,338
Trade receivables less allowance for doubtful accounts of $67,643 and $62,044 as of March  31, 2008 and June 30, 2007, respectively		975,488			1,121,752
Inventory		842,561			956,711
Prepaid expenses		159,707			120,448
Deferred tax asset		8,976			8,976
Other		7,161			13,484
Total Current Assets		2,138,967			2,367,709
Property and equipment, net		3,339,382			3,295,992
Deferred tax asset, non-current		654,601			609,730
Intangible assets, net		931,755			910,303
Total Assets	$	7,064,705		$	7,183,734
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	513,224		$	537,338
Short-term borrowings		457,397			514,096
Accrued expenses		280,188			358,301
Current portion of capital lease		12,772			-
Current portion of deferred payable		82,751			32,215
Current portion of mortgage payable		226,487			215,394
Income tax payable		5,286			9,160
Total Current Liabilities		1,578,105			1,666,504
Deferred tax liability		261,958			261,958
Long-term portion of capital lease		69,328			-
Long-term portion of deferred revenue		50,030			62,978
Long-term portion of mortgage payable		1,706,549			1,878,040
Total Liabilities		3,665,970			3,869,480
Stockholders’ Equity
Preferred stock – no par value, authorized 1,000,000 shares, no shares issued and outstanding		-			-
Common stock – no par value, authorized 15,000,000 shares; 4,783,235 shares issued and  4,772,318 shares outstanding as of March 31, 2008 and 4,698,825 shares issued and 4,687,908  shares outstanding as of June 30, 2007		3,721,815			3,643,815
Contributed capital		633,150			633,150
Accumulated deficit		(950,090	)		(956,571	)
Treasury stock, 10,917 common shares at cost		(6,140	)		(6,140	)
Total Stockholders’ Equity		3,398,735			3,314,254
Total Liabilities and Stockholders’ Equity	$	7,064,705		$	7,183,734

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HYDROMER, INC. and CONSOLIDATED SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended March 31,					Nine Months Ended March 31,
	2008 UNAUDITED		2007 UNAUDITED				2008 UNAUDITED			2007 UNAUDITED
Revenues
Sale of products	$	1,167,022	$	1,006,875			$	3,306,283		$	3,531,205
Service revenues		545,831		394,857				1,330,150			1,124,759
Royalties and Contract Revenues		392,884		395,981				1,187,043			1,253,409
Total Revenues		2,105,737		1,797,713				5,823,476			5,909,373
Expenses
Cost of Sales		829,127		773,469				2,339,935			2,369,712
Operating Expenses		1,191,447		1,310,201				3,400,334			3,855,143
Other Expenses		36,133		43,711				117,173			131,229
Provision for (Benefit from) Income Taxes		4,908		(109,302	)			(40,447	)		(138,199	)
Total Expenses		2,061,615		2,018,079				5,816,995.			6,217,885
Net Income (Loss)	$	44,122	$	(220,366	)		$	6,481		$	(308,512	)
Income (Loss) Per Common Share	$	0.01	$	(0.05	)		$	0.00		$	(0.07	)
Weighted Average Number of          Common Shares Outstanding		4,772,318		4,657,120				4,740,884			4,648,435

The effects of the common stock equivalents on diluted earnings per share for the 2007 periods

 are not included as their effect would be anti-dilutive.

For 2008, there was no impact to earnings per share from dilutive securities.

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HYDROMER, INC. and CONSOLIDATED SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended March 31,
	2008 UNAUDITED			2007 UNAUDITED
Cash Flows From Operating Activities:
Net Income (Loss)	$	6,481		$	(308,512	)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities
Depreciation and amortization		317,325			302,171
Deferred income taxes		(44,871	)		(148,543	)
Changes in Assets and Liabilities:
Trade receivables		146,264			424,994
Inventory		114,150			48,693
Prepaid expenses		(39,259	)		(45,180	)
Other assets		6,323			129,455
Accounts payable and accrued liabilities		(102,227	)		(131,934	)
Deferred income		37,588			(122,994	)
Income taxes payable		(3,874	)		45,657
Net Cash Provided by Operating Activities		437,900			193,807
Cash Flows From Investing Activities:
Cash purchases of property and equipment		(139,601	)		(83,614	)
Cash payments on patents and trademarks		(160,466	)		(190,908	)
Cash purchases of short-term investments		-.			-.
Maturity of short-term investments		-			-
Net Cash Used for Investing Activities		(300,067	)		(274,522	)
Cash Flows From Financing Activities:
Net borrowings against Line of Credit		(56,699	)		43,909
Repayment of long-term borrowings		(160,398	)		(150,695	)
Proceeds from the issuance of common stock		78,000			-.
Net Cash Used for Financing Activities		(139,097	)		(106,786	)
Net Decrease in Cash and Cash Equivalents:		(1,264	)		(187,501	)
Cash and Cash Equivalents at Beginning of Period		146,338			434,865
Cash and Cash Equivalents at End of Period	$	145,074		$	247,364

Supplemental Non-Cash Investing & Financing Activities:
Equipment acquired under Capital Lease	$	80,747	-

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HYDROMER, INC. and CONSOLIDATED SUBSIDIARY

Notes to Consolidated Financial Statements

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

Subsequent Event:

In May 2008, the Company received an one year extension, valued at $1.2 million, to its 2005 Supply and Support Agreement with Cordis Neurovascular, extending the agreement into August 2009.

Segment Reporting:

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

The results for the nine months ended March 31, by segment are:

	Polymer Research			Medical Products			Corporate Overhead			Total
2008
Revenues	$	3,196,180		$	2,627,296					$	5,823,476
Expenses		(2,384,019	)		(2,308,429	)	$	(1,164,994	)		(5,857,442	)
Pre-tax Income (Loss)	$	812,161		$	318,867		$	(1,164,994	)	$	(33,966	)
2007
Revenues	$	3,264,708		$	2,644,665					$	5,909,373
Expenses		(2,813,142	)		(2,425,388	)	$	(1,117,554	)		(6,356,084	)
Pre-tax Income (Loss)	$	451,566		$	219,277.		$	(1,117,554	)	$	(446,711	)

Geographic revenues were as follows for the nine months ended March 31,

	2008	2007
Domestic	82%	86%
Foreign	18%	14%

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Item #2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The Company’s revenues for the quarter ended March 31, 2008 were $2,105,737, 17.1% higher than the $1,797,713 for the same period the previous year.  Revenues for the nine months ended March 31, 2008 were $5,823,476 or 1.5% lower than the $5,909,373 in the corresponding period a year ago.  Revenues are comprised of the sale of Products and Services and Royalty and Contract payments.

Product sales and services were $1,712,853 for the quarter ended March 31, 2008 as compared to $1,401,732 for the same period the year before, an increase of $311,121 or 22.2%.  For the nine months ended March 31, 2008, product sales and services were $4,636,433, flat (-0.4% or $19,531 lower) from the $4,655,964 the year before.  The increase in demand of contract coating services this year offset the inventory call (customer shifted production to their foreign facilities while purchasing all the remaining inventory at that time) on a Biosearch OEM medical device line the previous year.

Royalty and Contract revenues include royalties received and the periodic recurring payments from license, option and other agreements for other than product and services.  Included in Royalty and Contract revenues are revenues from support and supply agreements.  For the quarter ended March 31, 2008, Royalty and Contract revenues were $392,884, identical to the $395,981 the same period a year ago.  Royalty and Contract revenues were $1,187,043 and $1,253,409 for the nine month periods ended March 31, 2008 and 2007, respectively.  The 2007 period included the tail end of a standstill agreement and a technology transfer agreement.

As of March 31, 2008, our open sales order book was approximately $1,086,000.  During the month of April 2008, over $700,000 of additional orders were received, some calling for immediate delivery and others for over the following twelve months.  The open sales order book at April 30, 2008 was approximately $1,425,000.  Although some of the sales orders can be cancelled prior to production, the Company is of the opinion that no substantial cancellations will occur.

Total Expenses for the quarter ended March 31, 2008 were $2,061,615 as compared with $2,018,079 the year before, a 2.2% increase.  For the nine months ended March 31, 2008, total Expenses were $5,816,995 as compared with $6,217,885 the same period the year before, or lower by 6.4%.

The Company’s Cost of Goods Sold was $829,127 for the quarter ended March 31, 2008 as compared with $773,469 the year prior, higher by 7.2%, reflecting the increase in product and service revenues.  On a year-to-date basis, Cost of Goods Sold was $2,339,935 for fiscal 2008 as compared with $2,369,712 in fiscal 2007, $29,777 or 1.3% lower.  The change in product line mix (elimination of a medical device product line during 2007 - transferred to the customer’s internal facilities, whereas there was growth in contracting coating services in 2008), reduced material costs.

Operating expenses were $1,191,447 for the quarter ended March 31, 2008 as compared with $1,310,201 the year before, down $118,754 or 9.1%.  For the nine months ended March 31, 2008, Operating expenses were $3,400,334 as compared with $3,855,143 the year before, down $454,809 or 11.8%.  Lower staffing levels accounted for the lower expenses.

Interest expense, interest income and other income are included in Other Expenses.  Interest expense for the nine months ended March 31, 2008 and March 31, 2007 were $129,877 and $143,259, respectively, down due to lower utilization and interest rates of the line-of-credit facility.

Net income of $44,122 ($0.01 per share) is reported for the quarter ended March 31, 2008 as compared to a loss of $220,366 ($0.05 per share) the year before.  For the nine months ended March 31, 2008, net income of $6,481 ($0.00 per share) is reported as compared to a net loss of $308,512 ($0.07 per share) the year before.

Although revenues were essentially flat (a 1.5% difference or $85,897 variance on almost $ 6 million in revenues for both nine month periods), staff reductions, mainly in R&D, resulted in a $412,745 swing to pre-tax income.  Such staff reductions were from normal attrition (resignation and retirement) and job elimination (due to changes to R&D requirements/scope/direction).  Re-investment expenditures of Research and development and patents expenditures accounted for approximately $806,987 or 23.7% of the operating expenses.

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Financial Condition

Working capital decreased $140,343 during the nine months ended March 31, 2008.

Net operating activities provided $437,900 for the nine month period ended March 31, 2008.

Net income as adjusted for non-cash expenses, provided $278,935 in cash.  The collections of accounts receivables provided an additional $146,264 source of cash.

Investing activities used $300,067 and financing activities used $139,097 during the nine months ended March 31, 2008.

During the nine months, the Company expended $139,601 on capital expenditures and $160,466 into its patent estate.  The Company also paid down $56,699 against its revolving line of credit, paid down long-term borrowings by $160,398 and received $78,000 from the exercise of stock options.

Following the organizational rebuilding, which occurred primarily during fiscal 2006 (July 1, 2005 – June 30, 2006) in which a new foundation, including new patent pending anti-thrombogenic and anti-cell adhesion/proliferation technologies, was established for the future, the Company is setup for a new forefront.  Now no longer focused primarily in lubricious coatings, its legacy technological base, the Company has a broader range of product offerings [under the previously mentioned foundation], along with its more recent anti-microbial technologies, to leverage against in the years to come.  This rebuilding entailed, in part, the addition of a new intellectual and skill base of scientists.  The cost of the rebuilding program, without the aid of any external funding, along with only a flat revenue line and a reduced revolving line of credit, resulted in a tight financial environment.  Under such situation, and based on the upcoming development pipeline schedule and having completed the majority of the base developments, unfortunately, a part of our talent pool was reduced.  Until new product developments support revenue growth, which we anticipate to begin within a year, the Company will continue to monitor its financial resources, including the requirement to replace its current revolving line of credit, through additional revenues and cost reduction initiatives.

Item # 3

Disclosure Controls and Procedures

As of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and President and the Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures.

       Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, our disclosure controls and procedures were effective and that there were no changes to our Company’s internal control over financial reporting that have materially affected, or is reasonably likely to materially affect the Company’s internal control over financial reporting during the period covered by the Company’s quarterly report.

PART II – Other Information

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

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

Item # 6.  Exhibits and Reports on form 8-K:

a)	Exhibits – none
b)	Reports on form 8-K – There were no Form 8-K’s filed during the quarter ending March 31, 2008.

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SIGNATURES

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

	HYDROMER, INC.
	/s/ Robert Y. Lee, VP
	Robert Y. Lee
	Chief Financial Officer
DATE: May 13, 2008

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EX-33.1

EXHIBIT 33.1

I, Manfred F. Dyck, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Hydromer, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer, Mr. Robert Y. Lee and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer, Mr. Robert Y. Lee and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer, Mr. Robert Y. Lee and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2008

/s/ Manfred F. Dyck                             

Manfred F. Dyck, President and CEO

EX-33.2

EXHIBIT 33.2

I, Robert Y. Lee, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Hydromer, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer, Mr. Manfred F. Dyck and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer, Mr. Manfred F. Dyck and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer, Mr. Manfred F. Dyck and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2008

/s/Robert Y. Lee, VP

Robert Y. Lee, Vice President of Finance and CFO

EX-99.1

EXHIBIT 99.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Manfred F. Dyck, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Hydromer, Inc. on Form 10-QSB for the nine months ended March 31, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such report fairly presents in all material respects the financial condition and results of operations of Hydromer, Inc.

Date: May 13, 2008                                                                 By: /s/ Manfred F. Dyck                             

Manfred F. Dyck

Chairman, President and Chief Executive Officer

EX-99.2

EXHIBIT 99.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Y. Lee, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Hydromer, Inc. on Form 10-QSB for the nine months ended March 31, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such report fairly presents in all material respects the financial condition and results of operations of Hydromer, Inc.

Date: May 13, 2008                                                                 By: /s/ Robert Y. Lee,VP       

Robert Y. Lee

Chief Financial Officer and Vice President of Finance