Except for historical information contained herein, this "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements. These statements involve known and unknown risks and uncertainties that may cause actual results or outcomes to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements, and statements which explicitly describe such issues. Investors are urged to consider any statement labeled with the terms "believes," "expects," "intends" or "anticipates" to be uncertain and forward-looking.
Comparison of Results for Fiscal Years 2008 and 2007 The Company's net sales decreased from $59,832,157 for the fiscal year ended November 30, 2007 to $56,741,133 for the fiscal year ended November 30, 2008. Net sales reflected an adjustment after reclassifying certain advertising expenses from selling expense to a reduction of net sales, which does not affect net income, and is more fully described in the footnotes to the financial statements. During fiscal 2008, the amount of advertising expenses that were classified as a reduction of net sales was $4,557,507, versus $5,184,112 in fiscal 2007, reflecting a decrease in the net sales reduction of $626,605. Gross sales were lower primarily in the oral care and fragrance categories. Sales returns and allowances were 11.6% of gross sales for fiscal 2008 versus 9.6% in fiscal 2007. Sales returns were higher primarily due to a primary customer's integration of a retail store chain that it had acquired into its operations that resulted in some store closings. The Company also had $321,070 of returns, primarily in the first three quarters of fiscal 2008, from the unsuccessful launch of Pound-X, a dietary supplement launched in the fourth quarter of 2006. In addition, the Company expanded its use of coupons resulting in an expense increase of $387,517 that was charged against sales allowances. The Company continually has returns of products that have been phased out and replaced by new items as part of its marketing plan. Gross profit margins declined from 63.6% in fiscal 2007 to 61.6% in fiscal 2008. The change in the gross profit margin was primarily due to the higher returns and sales allowances in fiscal 2008. In addition, due to the significantly higher fuel costs in 2008, there was an increase in the cost of goods including delivery charges.
The Company's net sales, by category were: Dietary Supplement $18,531,613 or 33%, Skin Care $16,623,447 or 29%, Oral Care $13,944,877 or 25%, Nail Care $5,816,461 or 10%, Fragrance $1,532,679 or 3%, and Hair Care and Miscellaneous $292,056 or 0%.
Income before taxes was $2,466,399 for fiscal 2008 as compared to $9,594,726 for fiscal 2007, a decrease of $7,128,327. The decrease was primarily due to a $3,684,860 increase in media and co-operative advertising in fiscal 2008 versus fiscal 2007. In addition, for the reasons as previously noted, fiscal 2008 returns and allowances were higher by $1,106,135 as compared to fiscal 2007. Other income declined $328,897, primarily due to lower interest rates. Cost of goods increased as a result of the increased fuel costs, including delivery charges of raw materials and components and higher testing costs. Due to the significantly increased fuel charges in 2008, the cost of freight out increased from 4.1% of gross sales in fiscal 2007 to 4.9% of gross sales in fiscal 2008. In an effort to attract new customers, the Company increased its use of advertising in newspaper inserts. Expenses were also higher due to increased donations of inventory in fiscal 2008; however that also resulted in an increased tax benefit which offset the higher expense and created a deferred tax benefit that will be utilized in future periods.

The allowance for doubtful accounts is a combination of specific and general reserve amounts relating to accounts receivable. The general reserve is calculated based on historical percentages applied to aged accounts receivable and the specific reserve is established and revised based on individual customer circumstances. This allowance increased from $141,607 as of November 30, 2007 to $154,290 as of November 30, 2008. The increase is directly attributable to a higher reserve for specific disputes.
The reserve for returns and allowances is based on a reserve for returns equal to its gross profit on its historical percentage of returns on its last five month's sales, and a specific reserve based on customer circumstances. This allowance increased from $1,696,961 as of November 30, 2007 to $2,112,426 as of November 30, 2008. Of this amount, allowances and reserves in the amount of $1,443,688, which are anticipated to be deducted from future invoices, are included in accrued liabilities. The increase is mainly due to the timing of the Company's sales.
The reserve for inventory obsolescence is based on a detailed analysis of inventory movement. The reserve decreased from $604,746 as of November 30, 2007 to $578,941 as of November 30, 2008.
In accordance with GAAP (generally accepted accounting principles), the Company reclassified certain advertising and promotional expenditures as a reduction of sales rather than report them as expenses, which has no affect on the net income. This reclassification is the adoption by the Company of EITF 00-14 "Accounting for Certain Sales Incentives" (codified by EITF 01-9 "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products"), as more fully described in footnote 2 ("Sales Incentives"), of the financial statements for fiscal 2008. The reclassification reflects a reduction in sales for the fiscal years ended November 30, 2008 and 2007 by $4,557,507 and $5,184,112 respectively.
For the year ended November 30, 2008, the Company had revenues of $57,457,946, and net income of $1,412,886, after a provision of $1,053,513 for taxes. For the year ended November 30, 2007, the Company had revenues of $60,877,867, and net income of $5,537,795, after a provision of $4,056,931 for taxes. Fully diluted earnings per share for fiscal 2008 were $0.20 as compared to $0.78 for fiscal 2007. As noted earlier, earnings in fiscal 2007 were impacted by the recording of $717,850 of transaction expenses related to the proposed acquisition of the Company by Dubilier and Company. Other income decreased from $1,045,710 for fiscal 2007 to $716,813 in fiscal 2008, primarily due to the decrease in interest rates.
The effective tax rate for fiscal 2008 was 42.7% of income before tax as compared to 42.3% for fiscal 2007. The slight increase in the tax rate was due to the timing of certain tax deductions in fiscal 2008 versus 2007, which resulted in a $321,855 increase in deferred tax assets.

For fiscal 2008, advertising, cooperative and promotional expenses were $10,466,740 as compared to $6,956,407 for fiscal 2007, or an expense increase of $3,510,333. Advertising expenses were 18.4% of net sales for fiscal 2008 versus 11.6% for fiscal 2007. The increase in advertising expense was due to the Company supporting a new leading diet product.
Selling, general and administrative expenses increased from $21,266,327 in fiscal 2007 to $22,122,849 in fiscal 2008. The increase was primarily due to higher freight out costs as a result of the significant increase in fuel costs, increased selling expenses, and higher donations of inventory as earlier noted. As of November 30, 2008, there was $1,286,692 of open cooperative advertising commitments, of which $748,082 is from 2008, $503,064 is from 2007 and $35,546 is from 2006. The Company's total cooperative advertising commitment decreased from $6,800,000 in fiscal 2007 to $6,264,562 in fiscal 2008. Cooperative advertising is advertising that is run by the retailers in which the Company shares in part of the cost. If it becomes apparent that this cooperative advertising was not utilized, the unclaimed cooperative advertising will be offset against the expense during the fiscal year in which it is determined that it did not run. This procedure is consistent with the prior year's methodology with regard to the accrual of unsupported cooperative advertising commitments. Comparison of Results for Fiscal Years 2007 and 2006 The Company's net sales decreased from $63,302,220 in the 2006 fiscal year to $59,832,157 in the 2007 fiscal year. Net sales were adjusted after reclassifying certain advertising expenses from selling expense to a reduction of net sales, which does not affect the net income, and is more fully described in the footnotes to the financial statements for fiscal 2007. During fiscal 2007, the amount of advertising expenses that were classified as a reduction of net sales was $5,184,112, versus $4,013,619 in fiscal 2006, reflecting an increased net sales reduction of $1,170,493. The Company had been working to adjust its business model by decreasing the amount of its media advertising and focusing more on co-operative advertising with its retail partners. A major portion of the Company's co-operative advertising is reclassified as a reduction of net sales. The decrease in net sales is attributable to the higher sales incentives, discontinued products and higher sales returns. Sales returns and allowances were 9.6% of gross sales for fiscal 2007 versus 8.7% in fiscal 2006. Sales returns were higher due to the Company's unsuccessful launch of Pound-X, a dietary supplement launched in the fourth quarter of 2006, and the returns of other products that were phased out and replaced by new items. Gross profit margins increased slightly from 63.3% in fiscal 2006 to 63.6% in fiscal 2007. The Company's gross sales net of returns and allowances, but before promotional charges, by category were: Dietary Supplement $20,351,748 or 31% of sales, Skin Care $18,862,125 or 29% of sales, Oral Care $16,375,634 or 25% of sales, Nail Care $6,977,616 or 11% of sales, Fragrance $2,259,648 or 3% of sales, and Hair Care and Miscellaneous $686,142 or 1% of sales.
Income before taxes was $9,594,726 for fiscal 2007 as compared to $8,916,645 for fiscal 2006, an increase of $678,081. The increase was primarily due to a decrease in media advertising in 2007 versus 2006 as the Company focused more on co-operative advertising as noted above.

On November 1, 2006 the Company entered into a letter of intent with Dubilier and Company relating to a proposed acquisition of the Company by Dubilier, and as more fully described in Note 15 of the financial statements for fiscal 2008. The proposed transaction was formally terminated by the Company on April 10, 2007. During fiscal 2007, the Company incurred expenses related to the proposed transaction of $717,850, which is reflected on the financial statements as a special transaction expense.
The allowance for doubtful accounts is a combination of specific and general reserve amounts relating to accounts receivable. The general reserve is calculated based on historical percentages applied to aged accounts receivable and the specific reserve is established and revised based on individual customer circumstances. This allowance decreased from $185,779 as of November 30, 2006 to $141,607 as of November 30, 2007. The decrease is directly attributable to the reduction of reserves for specific disputes.
The reserve for returns and allowances is based on a reserve for returns equal to its gross profit on its historical percentage of returns on its last five month's sales, and a specific reserve based on customer circumstances. This allowance decreased from $1,851,653 as of November 30, 2006 to $1,696,961 as of November 30, 2007. Of this amount, allowances and reserves in the amount of $964,266, which are anticipated to be deducted from future invoices, are included in accrued liabilities. The decrease is mainly due to the timing of the Company's sales.
The reserve for inventory obsolescence is based on a detailed analysis of inventory movement. The reserve decreased from $777,715 as of November 30, 2006 to $604,746 as of November 30, 2007.
In accordance with GAAP (generally accepted accounting principles), the Company reclassified certain advertising and promotional expenditures as a reduction of sales rather than report them as expenses, which has no affect on the net income. This reclassification is the adoption by the Company of EITF 00-14 "Accounting for Certain Sales Incentives" (codified by EITF 01-9 "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products"), as more fully described in footnote 2 ("Sales Incentives"), of the financial statements for fiscal 2008. The reclassification reflects a reduction in sales for the fiscal years ended November 30, 2007 and 2006 by $5,184,112 and $4,013,619 respectively. The increase was due to the Company focusing more on co-operative advertising, most of which is reclassified as a reduction of sales.
For the year ended November 30, 2007, the Company had revenues of $60,877,867, and net income of $5,537,795, after a provision of $4,056,931 for taxes. For the year ended November 30, 2006, the Company had revenues of $64,100,023, and net income of $5,604,251, after a provision of $3,312,394 for taxes. Fully diluted earnings per share for fiscal 2007 were $0.78 as compared to $0.79 for fiscal 2006. As noted earlier, earnings in fiscal 2007 were impacted by the recording of $717,850 of transaction expenses related to the proposed acquisition of the Company by Dubilier and Company.
Other income increased from $797,803 for fiscal 2006 to $1,045,710 in fiscal 2007, primarily due to higher interest income.

The effective tax rate for fiscal 2007 was 42.3% of income before tax as compared to 37.1% for fiscal 2006. The income tax rate in 2006 was lower in part due to an over accrual of the actual tax due for 2005 due to certain deductions and credits that the Company was able to utilize in the final preparation of the 2005 income tax return that were not anticipated at the time of making the accrual for financial reporting. These items resulted in an over accrual of $200,000 for fiscal 2005, which was adjusted by reducing the provision for fiscal 2006. Had that adjustment not been made, the effective tax rate for fiscal 2006 would have been 39.4%. In addition, during fiscal 2006 there was a larger deduction for donations of certain of our inventory as compared to fiscal 2007, which resulted in reducing the effective tax rate for fiscal 2006 further. For fiscal 2007, advertising, cooperative and promotional expenses were $6,956,407 as compared to $10,345,407 for fiscal 2006, or an expense reduction of $3,389,000. Advertising expenses were 11.6% of net sales for fiscal 2007 versus 16.3% for fiscal 2006. The reduction in advertising expense was due to the Company focusing more on cooperative advertising with its retail partners and less on media advertising. Most of the Company's cooperative advertising is reflected as a reduction of net sales in accordance with GAAP.
Selling, general and administrative expenses increased slightly from $21,104,728 in fiscal 2006 to $21,266,327 in fiscal 2007. The increase was primarily due to increased compensation and related benefit costs as a result of hiring additional marketing personnel, as well as salary increases in the normal course of business.
As of November 30, 2007, there was $1,839,016 of open cooperative advertising commitments, of which $1,241,482 is from 2007, $226,427 is from 2006 and $371,107 is from 2005. The Company's total cooperative advertising commitment increased from $6,484,840 in fiscal 2006 to $6,800,000 in fiscal 2007. Cooperative advertising is advertising that is run by the retailers in which the Company shares in part of the cost. If it becomes apparent that this cooperative advertising was not utilized, the unclaimed cooperative advertising will be offset against the expense during the fiscal year in which it is determined that it did not run. This procedure is consistent with the prior year's methodology with regard to the accrual of unsupported cooperative advertising commitments. Liquidity and Capital Resources
As of November 30, 2008, the Company had working capital of $23,836,264 as compared to $24,922,016 at November 30, 2007. The ratio of total current assets to current liabilities is 3.2 to 1 as compared to a ratio of 3.8 to 1 for the prior year. Stockholders' equity decreased to $28,253,879 in fiscal 2008 from $30,750,318 in fiscal 2007. The decrease was due to an increase in dividends declared from $2,109,040 in fiscal 2007 to $3,033,411 in fiscal 2008, and an increase in unrealized losses on marketable securities of $875,914. The Company did not purchase any treasury stock during fiscal 2008.

The Company's cash position and short-term investments at November 30, 2008 were $15,583,056, versus $14,747,784 as at November 30, 2007. Non-current or long term investments were $2,945,740 at November 30, 2008 versus $4,801,504 as at November 30, 2007. The Company paid cash dividends during fiscal 2008 in the amount of $2,892,322, representing the dividends declared at the end of fiscal 2007 but not paid until fiscal 2008 of $634,900 and $2,257,422 in dividends declared and paid for fiscal 2008. As of November 30, 2008, there were dividends declared but not paid of $775,989. The Board of Directors increased the dividends declared during fiscal 2008 resulting in the larger amount of paid cash dividends in fiscal 2008 versus fiscal 2007. The securities the Company purchased are all classified as "Available for Sale Securities", and are reported at fair market value as of November 30, 2008, with the resultant unrealized gains or losses reported as a separate component of shareholders' equity. Due to the current securities market conditions, the Company cannot ascertain the risk of any future change in market value. Our investments are spread among many different Obligors and Municipalities to decrease the risk due to any specific concentrations.
The Company's investment in property and equipment consisted mostly of computer hardware and software, racking for our warehouse facilities, leasehold improvements and furniture to accommodate our personnel in addition to tools and dies used in the manufacturing process.
Inventories were $7,932,798 and $7,857,322, as of November 30, 2008 and 2007 respectively. The Company increased the amount of inventory on hand in order to accommodate its customer's needs for just in time inventory shipments. In addition, the inventory obsolescence reserve was reduced from $604,746 to $578,941.
Accounts receivable as of November 30, 2008 and 2007 were $8,230,716 and $9,119,179 respectively. The decrease in accounts receivable is due to the timing of the Company's sales. Accounts Receivable allowances and reserves decreased in the aggregate by $51,273 from November 30, 2007 to November 30, 2008. The reserves were higher as of November 30, 2007 due to additional provisions for Pound-X, a dietary supplement product which was discontinued. The Company does not anticipate any further Pound-X returns that would be material. The amount of deferred income tax reflected as a current asset increased from $765,821 as of November 30, 2007 to $973,732 as of November 30, 2008. The increase was mainly due to the increase of deferred tax credits for charitable contributions during fiscal 2008. Other material components of the deferred tax asset are the timing differences caused by changes in the reserve for returns, inventory and bad debt, as well as the accrual for unused vacation pay. The Company anticipates that these amounts will be deductible in future tax years. The amount of non-current deferred tax increased from $29,475 as of November 30, 2007 to $143,419 as of November 30, 2008. The increase was due to a portion of the charitable contributions for which the benefit is estimated to be beyond the 2009 fiscal year, and thus has been classified as a long term asset. Current liabilities are $11,016,196 and $9,038,676, as of November 30, 2008 and 2007 respectively. Current liabilities at November 30, 2008 consisted of accounts payable, accrued liabilities, short term capital lease obligations and dividends payable. The Company's only long term obligation is for a portion of its capitalized leases, which is for certain office and warehouse equipment. At November 30, 2008, the Company had long and short-term triple A investments and cash of $18,528,796 as compared to $19,549,288 as of November 30, 2007. As of November 30, 2008, the Company was not utilizing any of the funds available under its $20,000,000 unsecured credit line. During fiscal 2007, 52,089 shares of Company Common Stock were issued to Dunnan Edell, the Company's President, upon his exercise of stock options for 55,000 shares.

Inventory, Seasonality, Inflation and General Economic Factors The Company attempts to keep its inventory for every product at levels that will enable shipment against orders within a three-week period. However, certain components must be inventoried well in advance of actual orders because of time-to-acquire circumstances. For the most part, purchases are based upon projected quarterly requirements, which are projected based upon sales indications received by the sales and marketing departments, and general business factors. All of the Company's contract-manufacture products and components are purchased from non-affiliated entities. Warehousing is provided at Company facilities, and all products are shipped from the Company's warehouse facilities.
The Company does not have any products that are particularly seasonal, but sales of its sun-care, depilatory and diet-aid products usually peak during the spring and summer seasons, and perfume sales usually peak in fall and winter. The Company does not have a product that can be identified as a 'Christmas item'. The Company plans to continue to promote its sales through an advertising program consisting of a combination of media and co-op advertising. We continue to invest money into research and development to build our core products to become leaders in their respective categories. We are trying to decrease the amount of "on hand" inventory we stock; however to better service our customers we often find it difficult to reduce our "safety stock". We continue to evaluate our sales staff and to try to attract aggressive salespeople to increase the distribution of our current product line. We are also continuing to look for additional businesses or product lines which we think will help the company to grow and are also reviewing possible acquisitions or any other offers which we feel will enhance shareholders' value.
Because our products are sold to retail stores (throughout the United States and, in small part, abroad), sales are particularly affected by general economic conditions. Accordingly, any adverse change in the economic climate can have an adverse impact on the Company's sales and financial condition. The Company does not believe that inflation or other general economic circumstance that would further negatively affect operations can be predicted at present, but if such circumstances should occur, they could have material and negative impact on the Company's net sales and revenues, unless the Company was able to pass along related cost increases to its customers. As noted earlier, significantly higher fuel costs resulted in higher cost of goods and freight out costs during fiscal 2008. On January 21, 2009, the Company filed Form 8-K with the United States Securities and Exchange Commission advising that Wal-mart had informed the Company that starting in March 2009, due to the slowdown in the economy, it will only carry the leading brands in their oral care sections. Therefore starting sometime in March, Wal-Mart will no longer be purchasing the company's Plus+White oral care products brand. In 2008 the company's net sales of Plus+White to Wal-Mart totaled $6 million.

Contractual Obligations
The following table sets forth the contractual obligations in total for each
year of the next five years as at November 30, 2008. Such obligations include
the current lease for the Company's premises, written employment contracts and
License Agreements.

                                    2009             2010             2011             2012             2013
Lease on Premises (1)                751,421          692,106          665,323          326,197                -
Royalty Expense (2)                   25,000           25,000           25,000           25,000           25,000
Employment Contracts (3)           2,733,050        2,859,533        1,907,994        1,984,974        1,441,572
Open Purchase Orders               3,727,992

Total Contractual Obligations      7,227,463        3,700,155        2,619,348        2,343,463        1,466,572

(1) The major lease is a net, net lease requiring a yearly rental of $327,684 plus Common Area Maintenance "CAM". See
Section Part I, Item 2. The rental provided above is the base rental and estimated CAM. CAM for 2008 is estimated at $150,000. The figures above do not include adjustments for the CPI. The lease has an annual CPI adjustment, not to cumulatively exceed 15% in any consecutive five year period. The lease expires on May 31, 2012 with a renewal option for an additional five years. On September 26, 2007, the Company entered into a warehouse lease with Ninth Avenue Equities Co., Inc. to lease 16,438 square feet of space known as Unit B located at Murray Hill Industrial Center in East Rutherford, New Jersey for a four and a half year period. The year end net rental expense including CAM was $28,150. The annual rental is $123,285 plus CPI adjustments, real estate taxes and common area maintenance expenses.

(2) See
Section Part I, Item 1(f). The Company is not required to pay any royalty in excess of realized sales if the Company chooses not to continue under the license. The figures set forth above reflect estimates of the royalty expense anticipated minimum requirements to maintain the licenses under the various contracts for the licensed products based on fiscal 2008 sales. Royalty expense includes Alleghany Pharmacal, Solar Sense, Nail Consultants, Tea-Guard, Inc. and Stephen
Hsu, PhD.

(3) The Company had executed Employment Contracts on December 1, 1993, with its CEO, David Edell, and its Chairman of the Board, Ira W. Berman. The contracts for both are exactly the same. The contracts expire on December 31, 2010. The contracts provide for a base salary which commenced in 1994 in the amount of $300,000 (plus a bonus of 20% of the base salary), with a year-to-year CPI or 6% increase, plus 2.5% of the Company's pre-tax income less depreciation and amortization (EBITDA) plus certain fringe benefits including the cost of certain life insurance, auto expenses, and health insurance. (The 2.5% measure in the bonus provision of the Edell/Berman contracts was amended on November 3, 1998 so as to calculate it against earnings before income taxes, less depreciation, amortization and . . .