Since our audit for 1999 has not been completed I cannot yet discuss the financial results for fiscal year 1999. However, I can tell you that once again sales for the year have set a record, and we expect earnings to do the same. For the first time sales have exceeded $9 million. We anticipate that our fourth quarter will be profitable, and we believe that our stockholders are going to be very pleased with the final results for 1999.

We are continuing to actively work on several exciting projects, one of which has been taking longer to come to fruition than we had hoped, but looks as if it is just about ready to go. That project is with a large consumer products company headquartered in the United Kingdom that is interested in purchasing a large volume of a new addition to our Lubrajel® line of water-based lubricating and moisturizing gels. Our product will replace another that they are currently using, and will be a component of a product that will be marketed worldwide. We are expecting final word on this project by March 15th, and if the project proceeds we anticipate that shipments to them will begin by May. I will post an update to this letter as soon as we receive word on the status of this project.

Another very exciting project that we are actively engaged in involves the use of Clorpactin®, our proprietary chlorine-based microbicide, for oral care uses. We are currently in discussions with two large companies brought to us by Mertech, the consulting group that we retained last year to assist us in this project. We have already had a very successful meeting with one of the two companies, and expect to meet with the other by the end of March. Both appear to be very interested in working with us. Since the marketing of Clorpactin for these uses will probably require F.D.A. approval, we do not expect to see any revenue from it for 2-3 years. However, if the project proceeds and we are successful in our F.D.A. filing, we expect this project to generate considerable revenue for us. We also hope that it will open the door to additional uses for Clorpactin.

We are in the process of working with an Internet marketing company that is helping us update our web site and assist us with the launching of what we hope will be the first of several products that we intend to market directly via the Internet. The first product is a unique shaving gel that is unlike anything currently on the market. It is a non-foaming gel that is hypoallergenic and has extremely high lubricity. It contains no soaps, solvents, or surfactants to dry out the skin, and actually conditions and moisturizes the skin. We believe that it will appeal to people looking for a high-end product that will give them the most comfortable shave possible. The product will be launched initially by making free samples available over the Internet. We hope that this will not only give us some immediate market feedback, but also generate some initial sales. Our current schedule is to launch this product by the end of the first half of this year. If our marketing of this product via the Internet is successful, we intend to supplement this with additional products, many of which we developed but never marketed. We are very excited about the new opportunities that the Internet may now provide us.

This is our first time releasing a stockholders’ letter only on the Internet. Those stockholders who have requested that a copy be mailed to them should have that within a short time after this letter is posted to our web site. By releasing our stockholders’ letter on the Internet the company will be saving considerable printing and mailing costs, and the information will be in the hands of our stockholders much sooner. If this initial experiment goes well we are going to consider the possibility of disseminating all of our future stockholders’ letters this way (with the exception of the Annual Report To Stockholders that is issued in April). As I stated in my last letter, we will still mail out a hard copy to any stockholder who requests it.

Our new web site should be up and running by the end of March, so please check back from time to time. I think that everyone is going to be very pleased with the changes.

Sincerely,

UNITED-GUARDIAN, INC.

DR. ALFRED R. GLOBUS
Chairman and CEO