Dear Stockholder,

Once again I am pleased to report that 1999 was another record year for the company, with revenue exceeding $9 million for the first time, and earnings before taxes exceeding $2 million for the first time.  Our net earnings after taxes of $1,390,181 ($.28 per share) was an increase of 37% over last year’s $1,013,537 ($.21 per share).  Our financial strength has also continued to increase, with our current ratio up from 5.9 to 1 at the end of 1998 to 6.9 to 1 at the end of 1999. The following chart clearly illustrates how the far the company has come over the past six years:

What is even more exciting about the results for 1999 is that they were achieved even without the revenue that we anticipate will be generated by some of the projects we have been working on.  By working closely with our marketing partners throughout the world we have been able to continue to increase our core product sales, expanding our sales into new areas, particularly China, that hold the promise of significantly greater sales in coming years.  We also saw the revival of sales in some of the Asian markets that had severe economic problems over the past few years.  Combined with our success in keeping product costs and administrative expenses down, the results for the year were our best ever. 

We are also continuing to work with our marketing partners to increase the market penetration of our core products by taking advantage of customer feedback to make our products even better.  One example of this is our Confetti™ Dermal Essentials, a line of oil soluble ingredients incorporated into colorful flakes of different colors.  The product adds excitement and functionality to personal care products.  With input we received from customers we were able to improve the product to enable it to be used in many more cosmetic products.  We believe that our continuing efforts to make our products the best on the market will result in further increases in sales of our core products.

We are engaged in several ongoing projects that we think will result in significant revenue to the company over the next few years.  The most immediate of these is our project with a global consumer products company headquartered in the United Kingdom.  They have been working with one of our Lubrajel formulations as a replacement for one of their current ingredients.  I have been discussing this project for the past few years, and it has taken that long to come to fruition.  I am happy to report, however, that our efforts have been successful, and in March we received our first purchase order from them.  We are currently negotiating a long-term supply agreement with them, and will be meeting with them in Europe in April to discuss the terms.  While we do not yet know how much revenue will be generated from the project this year, we expect their orders to increase as they phase out their current formulation and replace it with a formulation using our product.  I am still not at liberty to disclose the name of the company, but I hope to be able to do so after a supply agreement is signed.  We are very excited about the potential revenue that will be generated from this new relationship.

As a result of the consulting arrangement we entered into last year with Mertech, Inc., a Massachusetts-based marketing consulting firm, we are now in active discussions with two major oral care companies for the use of Clorpactin®, our proprietary chlorine-based microbicide, for oral care uses.  Although we anticipate that it will be 2-3 years before regulatory approval can be obtained and marketing commenced, this project holds the potential to significantly expand the market for Clorpactin, which is now only sold for limited uses.  We hope to finalize arrangements with one of the two potential marketing partners in the next few months.  If this project is successful we hope to continue to expand the uses for Clorpactin beyond the oral care uses, and we believe that the untapped potential for this product is substantial.  Until now we have been reluctant to proceed with long-term projects for this product due to the expense involved in obtaining F.D.A. approval.  We believe that our strong financial situation, along with the financial support that a major marketing partner will give us, will now make these new projects possible.

As a result of our strong cash position we have discussed the possibility of looking for a suitable candidate for an acquisition, but have decided short term to use those cash reserves to fund internal expansion instead.  We believe that this approach will be less likely to jeopardize our financial health, and will give us greater control over the growth of the company.  In addition to the Clorpactin project, one of the designated uses for some of these funds is for the expansion of our corporate Internet site to allow us to market some of our products ourselves.  We are working with an Internet consulting firm that is in the first phase of this effort, which is to update our web site.  That should be completed by the end of April.  While this is being done we are working on our first product for Internet sales, our RazorRide shaving gel.  This is a non-foaming gel that has unique lubricating properties and, because it contains no soaps, solvents, or dyes, is hypoallergenic and has excellent after-feel.  While it is not for everyone, the product will be marketed as a high-end product for the person who wants the most comfortable shave possible.  We hope to have this product on the market by the end of the first half of the year, and we are excited about the possibilities that the Internet may now afford us.  With our 60 years of product development experience we feel that we have a virtually limitless supply of products that we can market, and we hope to have several of our own products on the market by the end of the year.

I would like now to update you on some of the other projects that I have discussed over this past year:

·       Creative Technologies:  Creative is a marketing consulting company that we have worked with over the past few years to try to find new marketing opportunities for us. One company they had brought to us was Kimberly-Clark, which had shown a strong interest in several of our products, but to date has not made a commitment to go forward with any of them. We are continuing to discuss with Creative the future role that they can play in expanding our sales.

·       Feline Health Products:  This project to develop and market a new animal health care product was put on hold when the key person handling the project left the country for an extended period of time.  Although that person has now returned and has indicated that he is interested in resuming the project, based on the delays we have experienced to date we do not anticipate that this project will be generating revenue for us any time soon.

·       Lubrajel as a vaginal moisturizer:  Ever since Schering Plough cut back on its purchases of Lubrajel for its “Gyne-Moistrin” product we have been looking for other companies we can work with to bring out a similar product.  A few years ago we developed a new formulation for a company that was not able to proceed due to their own internal problems.  Although we still hope to find a company interested in bringing this product to market, we believe that this formulation is so far superior to other products on the market that it is an excellent candidate for direct sale by us via our internet site, and we are looking into the possibility of making this our second internet offering after we bring the Razoride to market.

·       Razoride:  As I mentioned previously, we intend to market this product ourselves very shortly.  In addition, we have been working with another company that intends to market the product for a novel non-consumer use that could open up an interesting new market for the product.  We have already shipped them product for an initial pilot run, and hope to receive a production order from them shortly.

·       Sonarite:  This product was developed by us to address the problems of snoring and sleep apnea.  Some initial clinical studies found the product to be effective in reducing the incidence and severity of sleep apnea and snoring. Over the past year we have working with clinical researchers to develop the most effective formulation, and hope to finalize a formulation by the end of the year.   Since regulatory approval will have to be obtained before the product can be marketed, we do not expect this project to generate any revenue in the near term.

Our worldwide marketing alliances continue to grow stronger, with a new distributor in place in Switzerland and negotiations underway to renew and expand our marketing relationship with International Specialty Products (“ISP”).  We are hoping to set up a joint development program with ISP that will enable us to bring more products to market.  Both ISP and we believe that their extensive research and development facilities may enable us to expand our product development program to bring products to market faster.  We will be meeting with them over the next few months to work out the details.

Our efforts over the past few years to streamline our Eastern Chemical subsidiary in order to make it more saleable have been very successful.  Their inventory levels have been brought down considerably over the past few years, with little or no impact on sales.  We now feel that we are in an excellent position to once again look seriously at selling that operation so that we can concentrate on the expansion of the Guardian Laboratories division.  We are currently in preliminary discussions with a company we believe to be an excellent candidate to take over Eastern.  We have a meeting scheduled for late April to discuss the terms of a possible sale.  If our negotiations are successful the sale should be completed by the end of the year.

While we do not have final figures for the first quarter yet, it appears that sales and earnings for the first quarter will set a new quarterly record, giving us an excellent start to the year.  The second quarter should see the commencement of sales for the project with our U.K partner, as well as the start of our own marketing efforts on the Internet.  We believe that the year ahead is going to be a very exciting one for us, and that with all of the other projects we are involved with, the next few years should prove to be just as exciting.

                                                                      Sincerely,

                                                                      Dr. Alfred R. Globus                                                                       Chairman and CEO