UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, D.C. 20549


                               FORM 10-K


          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934

              For the Fiscal Year Ended December 31, 2003



                       Commission File No. 1-4436


                             THE STEPHAN CO.
  _______________________________________________________________
        (Exact Name of Registrant 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
                                                     _____________


    Securities Registered Pursuant to Section 12(b) of the Act:

  Title of Class           Name of Exchange on Which Registered
___________________     _________________________________________
Common Stock, $.01                  AMERICAN STOCK EXCHANGE
Par Value


Securities Registered Pursuant to Section 12(g) of the Act:  None











Indicate by check mark whether the Registrant (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 reports), and (2) has been subject to
the filing requirements for at least the past 90 days.

                       YES  X        NO


Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ( )


Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).    YES      NO  X


As of June 30, 2003, the aggregate market value of the Common stock held by
non-affiliates of the Registrant was $12,094,492 based upon the last
reported sale price of $3.71 per share on the American Stock Exchange on
such date.

The above amount excludes shares held by all executive officers and
directors of the Registrant

Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:

4,410,577 Shares of Common Stock, $.01 Par Value,
as of March 15, 2004

List hereunder the following documents if incorporated by reference and the
part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document
is incorporated:  (1) any annual report to security holders; (2) any proxy
or information statement; and (3) any prospectus filed pursuant to Rule
424(b) or (c) under the Securities Act of 1933:

Portions of the proxy statement for the Registrant's 2004 annual meeting of
stockholders, scheduled to be filed no later than April 29, 2004, are
incorporated by reference in Part III of this Form 10-K.









                                     2



                    THE STEPHAN CO. AND SUBSIDIARIES
                         INDEX TO ANNUAL REPORT
                             ON FORM 10-K




                                                                      Page
PART I                                                               ______

Item 1:   Business...................................................   4
Item 2:   Properties.................................................   9
Item 3:   Legal Proceedings..........................................  10
Item 4:   Submission of Matters to a Vote of Security Holders......... 11

PART II

Item 5:   Market for the Registrant's Common Equity
           and Related Stockholder Matters...........................  12
Item 6:   Selected Financial Data....................................  13
Item 7:   Management's Discussion and Analysis of Financial
           Condition and Results of Operations.......................  15
Item 7A:  Quantitative and Qualitative Disclosures about Market Risk.  25
Item 8:   Financial Statements and Supplementary Data................  25
Item 9:   Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure.......................  25
Item 9A:  Controls and Procedures....................................  25

PART III

Item 10:  Directors and Executive Officers of the Registrant.........  26
Item 11:  Executive Compensation.....................................  26
Item 12:  Security Ownership of Certain Beneficial
           Owners and Management.....................................  26
Item 13:  Certain Relationships and Related Transactions.............  26
Item 14:  Principal Accounting Fees and Services.....................  26

PART IV

Item 15:  Exhibits, Financial Statement Schedules
           and Reports on Form 8-K..................................   27

Signatures..........................................................   30










                                     3



                               PART I


     Certain statements in this Annual Report on Form 10-K ("Form 10-K")
under "Item 1. Business", "Item 3. Legal Proceedings" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act").
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
condition (financial or otherwise), performance or achievements of the
Registrant to be materially different from any future results, performance,
condition or achievements expressed or implied by such forward-looking
statements.

     Such factors include, but are not limited to, the following: general
economic and business conditions; competition; relative success of
operating initiatives; development and operating costs; advertising and
promotional efforts; brand awareness; the existence or absence of adverse
publicity; acceptance of any new product offerings; changing trends in
customer tastes; the success of multi-branding; changes in business
strategy or development plans; quality of management; costs and expenses
incurred by the Company in pursuing strategic alternatives; availability,
terms and deployment of capital; business abilities and judgment of
personnel; availability of qualified personnel; labor and employee benefit
costs; availability and cost of raw materials and supplies; changes in or
newly-adopted accounting principles; changes in, or failure to comply with,
law; changes in product mix and associated gross profit margins; and other
factors or events referenced in this Form 10-K.

     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.

Item 1.  Business

  GENERAL

     The Company, founded in 1897 and incorporated in the State of Florida
in 1952, is engaged in the manufacture, sale and distribution of hair care
and personal care products at both the wholesale and retail level.  The
Company is comprised of The Stephan Co. ("Stephan") and its eight wholly-
owned subsidiaries, Foxy Products, Inc., Old 97 Company, Williamsport
Barber and Beauty Corp., Stephan & Co., Scientific Research Products, Inc.
of Delaware, Trevor Sorbie of America, Inc., Stephan Distributing, Inc. and
Morris Flamingo-Stephan, Inc.

                                     4


     The Company has identified three reportable operating segments, which
are Professional Hair Care Products and Distribution ("Professional"),
Retail Personal Care Products ("Retail") and Manufacturing.  The
Professional segment generally consists of a customer base of distributors,
which purchase the Company's hair care products and beauty and barber
supplies for sale to salons and barbershops.  In this segment, a
distinction is made between "wet goods", which include shampoos,
conditioners, gels and similar hair treatments, and "hard goods", which
include scissors, clippers, combs, dryers and other products used in
styling hair.  The customer base for our Retail segment is comprised of
mass merchandisers, chain drug stores and supermarkets that sell hair care
and other personal care products directly to the end user.  The
Manufacturing segment manufactures products for subsidiaries of the
Company, and manufactures private label brands for certain customers.

  THE STEPHAN CO.

     Headquartered in Fort Lauderdale, Florida, we are principally engaged
in the manufacture of hair care products for sale by two of our
subsidiaries, Scientific Research Products, Inc. and Trevor Sorbie of
America, Inc., and the manufacture of products marketed under the STEPHAN
brand name.  We also manufacture, market and distribute hair and skin care
products under various trade names through our subsidiaries. Retail product
lines include brands such as Cashmere Bouquet talc, Quinsana Medicated
talc, Balm Barr and Stretch Mark creams and lotions, Protein 29 liquid and
gel grooming aids and Wildroot hair care products for men.  These brands,
included in the Retail segment of our business, are manufactured at our
Tampa, Florida facility, as are the "Modern" brand of Stiff Stuff products.
The sales of these products are also included in the Company's Retail
segment.  In addition, The Frances Denney division (included in the Retail
segment) markets a full line of cosmetics through retail and mail order
channels.  Under the terms of an exclusive Trademark License and Supply
Agreement with Color Me Beautiful, Inc., we market the brand names HOPE,
INTERLUDE and FADE-AWAY through several retail chains, including J.C.
Penney, in the United States and Canada.

     We also manufacture and sell products under the brand name
"STEPHAN'S".  Such products consist of different types of shampoos, hair
treatments, after-shave lotion, dandruff lotion, hair conditioners and hair
spray which are distributed throughout the United States to approximately
350 beauty and barber distributors and are included in our Professional
segment.  Our trademark, "STEPHAN'S," and the design utilized thereby have
been registered with the United States Patent and Trademark Office, which
registration is due for renewal in November 2006.  Retail brand sales of
Stephan, including the Frances Denney product line, accounted for
approximately $4,621,000 of the Company's 2003 sales.

     Under certain trademark licenses, we have been granted the exclusive
use of certain trademarks in connection with the manufacture and
distribution of the Cashmere Bouquet product line of the Colgate-Palmolive
Company in the United States and Canada.  Any product sold under these
license agreements is included in our net sales for purposes of determining
the deferred payments.

                                     5


     Pursuant to an additional license and supply agreement, we have
granted Color Me Beautiful, Inc. ("CMB") a license to distribute certain
products of our Frances Denney line and to supply the requirements of CMB
for such products.  The agreement provides for royalty payments by CMB
based upon net sales, with guaranteed minimum annual royalty payments
throughout the term of the agreement that are credited against accrued
royalties.  As a result of a decline in the net sales of Frances Denney
products by CMB, we have agreed to a reduction in the amount of minimum
royalty that CMB is required to pay.

     The Company's Fort Lauderdale location serves as our corporate
headquarters. General management services are provided to our subsidiaries
from this location.

     No single customer accounted for more than 10% of our consolidated
revenues in 2003. Private label production, which is the manufacturing of
products marketed and sold under the brand names of customers of the
Company, was not significant in 2003.

  OLD 97 COMPANY.

     Old 97 Company ("Old 97"), a wholly-owned subsidiary of the Company,
located in Tampa, Florida, markets products under brand names such as OLD
97, KNIGHTS, and TAMMY.  In addition to selling more than 100 different
products, including hair and skin care products, fragrances, personal
grooming aids and household items, Old 97 serves as an additional
manufacturing facility for our products.  Its Tampa facility manufac-
tures most of the products sold under the Frances Denney line, all the talc
manufactured for the Cashmere Bouquet and Quinsana brands, as well as all
the other retail hair and skin care brands sold by Stephan and Stephan
Distributing, Inc.  The operations of Old 97 are included in the
Manufacturing segment of our business.

  WILLIAMSPORT BARBER AND BEAUTY CORP.

     Williamsport Barber and Beauty Corp. ("Williamsport"), a wholly-owned
subsidiary of the Company, is located in Williamsport, Pennsylvania.
Williamsport, a mail order beauty and barber supply company, with sales of
approximately $4,671,000 in 2003, accounted for approximately 18.4% of our
consolidated revenues for the year and are included in the Professional
business segment.

  STEPHAN & CO.

     Formerly known as Heads or Nails, Inc., Stephan & Co., a wholly-owned
subsidiary, has focused on the distribution of personal care amenity
products for cruise ships.  For the year ended December 31, 2003, Stephan &
Co. had no sales, but was successful in introducing its amenity program to
resorts and spas and expects a moderate amount of sales in 2004.

  SCIENTIFIC RESEARCH PRODUCTS, INC. OF DELAWARE.

     Scientific Research Products, Inc. of Delaware ("Scientific") is a
wholly-owned subsidiary, which accounted for 11.4% of our consolidated

                                    6

revenues in 2003, with sales of approximately $2,881,000.  The majority of
the sales of Scientific are included in the Retail business segment.

  TREVOR SORBIE OF AMERICA, INC.

     Prior to its acquisition, Sorbie Acquisition Co. ("Sorbie") was one of
our major customers and a distributor of a professional line of hair care
products sold to salons in the United States and Canada through a network
of distributors.  Sales of Sorbie hair care products in 2003 were
approximately $818,000, representing 3.2% of our consolidated revenues, and
are included in the Professional business segment of the Company's
business.

  STEPHAN DISTRIBUTING, INC.

     In 1997 the Company's wholly-owned subsidiary, Stephan Distributing,
Inc., acquired several product lines from New Image Laboratories, Inc.
("New Image").  The primary brands acquired were a professional hair care
line of products marketed under the brand name "Image," and a retail hair
care line known as "Modern" and marketed under the brand name "Stiff
Stuff."  A portion of the purchase price included a contingent payment of
125,000 shares of the Company's common stock payable upon the achievement
of certain earnings levels.

     New Image commenced litigation against the Company seeking, among
other things, a declaratory decree that the 125,000 shares of our common
Stock held in escrow for the contingent payment of certain purchase price
adjustments be released from escrow and turned over to New Image.  Pursuant
to a judgment dated March 20, 2001, the United States District Court for
the Central District of California, among other decisions, granted the
Company partial summary judgment in the amount of approximately $20,000 and
New Image was granted partial summary judgment pursuant to which the escrow
agent was directed to deliver the 125,000 shares to New Image.  The Company
appealed to the United States Court of Appeals for the Ninth Circuit, and
in an opinion issued on April 29, 2002, the Court, among other things,
reversed the judgment of the United States District Court granting summary
judgment in favor of New Image against the Company on New Image's contract
claim for a price adjustment and on New Image's claim of breach of the
implied covenant of good faith and fair dealing.  Also in the opinion, the
Ninth Circuit concurred with the lower court's ruling that on the present
record New Image was not entitled to (i) damages equal to the diminution in
the value of the Company's common stock price between the scheduled and
actual disbursement dates or (ii) any attorney's fees.  As a consequence of
the Ninth Circuit's decision, the judgment granting New Image all shares of
the Company's common stock being held in escrow has been reversed and the
case has been remanded back to the United States District Court for further
proceedings.  On May 28, 2002, New Image filed a Motion for Rehearing with
the Ninth Circuit Court of Appeals and on June 26, 2002, the Court denied
the petition for rehearing.  The parties are engaged in settlement
negotiations and no trial date has been established.  The recorded value of
trademarks assumes the return to the Company of the shares held in escrow.

     Sales of professional brands acquired from New Image amounted to
approximately 6% of consolidated revenues for the year ended December 31,

                                     7

2003. Sales of New Image products are included in the Company's
Professional business segment while sales of the Modern line are included
in the Company's Retail business segment.

  MORRIS FLAMINGO-STEPHAN, INC.

     Morris-Flamingo, Inc. ("Morris Flamingo") is a barber and beauty
supply wholesaler, which markets its products utilizing catalogs published
under the Morris Flamingo brand name as well as the Major Advance brand
name.  Sales for the year ended December 31, 2003 were approximately
$10,442,000, accounting for approximately 41.2% of our consolidated
revenues, and are included in the Professional segment of the Company's
business.

  SEGMENT INFORMATION

     "Operating Segments and Related Information," which provides informa-
tion on net sales, income before income taxes and cumulative effect of
change in accounting principle, interest income and expense and
depreciation and amortization for the last three years and identifiable
assets for the last two years, for each of our three business segments, is
set forth in Note 9 of the consolidated financial statements included
elsewhere in this Form 10-K.

  RAW MATERIALS, PACKAGING and COMPONENTS INVENTORY

     The materials utilized by the Company and our subsidiaries in the
manufacture of its products consist primarily of common chemicals, alcohol,
perfumes, labels, plastic bottles, caps and cartons.  All materials are
readily available at competitive prices from numerous sources and have in
the past been purchased from domestic suppliers.  Neither the Company nor
any of our subsidiaries has ever experienced any significant shortage in
supplies nor do we anticipate any such shortages in the reasonably
foreseeable future.  Due to market conditions in the petroleum industry,
the Company continues to experience price increases in both raw material
and component prices; however, it is not anticipated that these price
increases will have a material adverse effect on our operations and we
believe that such increases can be passed on to our customers.

     The Company and its subsidiaries seek to maintain a level of finished
goods inventory sufficient for a period of at least three months.  The
Company does not anticipate any change in such practice during the
reasonably foreseeable future.

  BACKLOG

     As of December 31, 2003, the Company did not have any significant
amount of backlog orders.

     RESEARCH AND DEVELOPMENT

     During each of the three prior fiscal years ending December 31, 2003,
expenditures on Company sponsored research relating to the development of
new products, services or techniques or the improvement of existing

                                     8

products, services or techniques were not material and were expensed as
incurred.

  COMPETITION

     The hair care and personal grooming business is highly competitive. We
believe that the principal competitive factors are price and product
quality.  Products manufactured and sold by the Company and its
subsidiaries compete with numerous varieties of other such products, many
of which bear well known, respected and heavily advertised brand names and
are produced and sold by companies having substantially greater financial,
technical, personnel and other resources than the Company.  Our products
account for a relatively insignificant portion of the total hair care and
personal grooming products manufactured and sold annually in the United
States.

  GOVERNMENT AND INDUSTRY REGULATION, ENVIRONMENTAL MATTERS

     Certain of our products are subject to regulation by the Food and Drug
Administration, in addition to other federal, state and local regulatory
agencies.  The Company believes that its products are in substantial
compliance with all applicable regulations. The Company does not believe
that compliance with existing or presently proposed environmental
standards, practices or procedures will have a material adverse effect on
operations, capital expenditures or the competitive position of the
Company.

  EMPLOYEES

     As of December 31, 2003, in addition to its four executive officers,
the Company and its subsidiaries employed approximately 120 people engaged
in the production, warehousing and distribution of its products.  Although
we do not anticipate the need to hire a material number of additional
employees, the Company believes that any such employees, if needed, would
be readily available.  No significant number of employees are covered by
collective bargaining agreements and the Company believes its employee
relationships are satisfactory.

Item 2.  Properties

     Our administrative, manufacturing and warehousing facilities are
located in a building of approximately 33,000 square feet, owned by the
Company, located at 1850 West McNab Road, Fort Lauderdale, Florida 33309.
The Company utilizes approximately two-thirds of the space for the
manufacture and warehousing of our products.  The remainder of the space is
utilized by the Company for its administrative offices.  The Company also
owns certain machinery and equipment used in the manufacture of our
products that are stored in the facility in Fort Lauderdale, Florida.  In
addition to this facility, the Company leases approximately 43,000 square
feet of warehouse space located at 5300 North Powerline Road, Fort
Lauderdale, Florida 33309, under a lease extension which terminates July
31, 2004, at an annual net rental of $160,000.

     Old 97 owns three buildings totaling approximately 42,000 square feet

                                     9

of space, one of which is located at 2306 35th Street, Tampa, Florida
33605.  This building is utilized by Old 97 in the manufacture of its
various product lines.  A claim filed with the Department of Transportation
in connection with a leased warehouse facility adjacent to this location
which was utilized by Old 97 was settled in 2003, (see "Item 3. Legal
Proceedings").  It also owns two buildings located at 4829 East Broadway
Avenue, Tampa, Florida 33605.  One building, comprising 10,500 square feet,
is being used for office facilities and order fulfillment for the Frances
Denney line.  The second building, consisting of approximately 30,000
square feet, is used as a warehouse and distribution facility.  From time
to time, and as inventory levels dictate, Old 97 leases temporary warehouse
space, generally on a short-term basis.  Old 97 is currently leasing a
44,000 square foot warehouse located in close proximity to the general
office and warehouse facility.

     The Company leases office and warehouse space of approximately 6,000
square feet in Williamsport, Pennsylvania pursuant to a five-year lease
expiring January 31, 2007. Monthly rent in the amount of $2,100 is payable
to the former owner of Williamsport Barber Supply and the lease has a 60-
day cancellation clause.

     In connection with the Morris Flamingo acquisition, the Company
entered into a lease, and subsequent lease extension, expiring in June
2005, for the office, warehouse and manufacturing facility located at 204
Eastgate Drive, Danville, Illinois 61834, at an annual rental payment of
approximately $210,000, subject to annual consumer price index increases,
with purchase options ranging from $1,850,000 to $2,000,000 over the
remaining life of the lease.  The Danville facility has 7,500 square feet
of office space and 85,500 square feet of warehouse, distribution and
manufacturing space.  The landlord is Shaheen & Co., Inc, the former owner
of Morris-Flamingo.  Shouky A. Shaheen, a minority owner of Shaheen & Co.,
Inc., is currently a member of the Board of Directors and a significant
shareholder of the Company.

Item 3.  Legal Proceedings

     In addition to the matters set forth below, the Company is involved in
other litigation arising in the normal course of business.  It is the
opinion of our management that none of such matters, at December 31, 2003,
would likely, if adversely determined, have a material adverse effect on
our financial position, results of operations or cash flows.

     For a description of certain legal proceedings involving the Company
and New Image, see Item 1. Business.  For a description of certain legal
proceedings involving the Company and a shareholder, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Recent Events.

     On November 1, 2001, a private label customer filed a lawsuit against
the Company alleging causes of action for breach of contract, declaratory
judgment, and trademark infringement.  The Company denied the allegations
and counter claimed against the customer. In January 2004, the parties
reached an amicable resolution of the litigation which will have no
material effect on the financial statements.

                                     10

     In November 2001, the Company filed a claim with the U.S. Department
of Transportation ("DOT") in the 13th Judicial Circuit Court of
Hillsborough County, Florida, in connection with the DOT's widening of
Interstate Highway 4, which the Company alleged would result in the loss of
an adjacent rental facility utilized by one of the Company's subsidiaries.
In the third quarter of 2003, the case was settled and the Company received
a net award of $187,000.

     In November 2002, a stockholder filed a lawsuit in the Circuit Court
for the 17th Circuit of Florida in and for Broward County, styled Joan
Rosoff ("Plaintiff") v. Frank F. Ferola, Shouky Shaheen, Leonard A.
Genovese, Curtis Carlson, John DePinto, Thomas M. D'Ambrosio and The
Stephan Co., Case Number 0222253, against the Company alleging certain
breaches of fiduciary duties and responsibilities.  The Company defended
the claim and on July 15, 2003, the Plaintiff filed a notice of voluntary
dismissal without prejudice.

     In September 2003, in accordance with the Amended and Restated Sorbie
Products Agreement, a Demand for Arbitration was submitted by Sorbie
Acquisition Co. (Trevor Sorbie of America, Inc. "TSA") against Trevor
Sorbie International, PLC ("PLC"). PLC also filed a Demand for Arbitration
and both claims have been consolidated and will be heard together in
Pittsburgh, Pennsylvania.  TSA has denied the allegations raised by PLC and
it has claimed that PLC's assertion of a right to royalty payments is
premised upon an incorrect reading of the underlying agreement, and that
damages should be awarded in favor of TSA based upon PLC's diversion of
Sorbie product and failure to support the brand in violation of the
agreement.  The Company intends to defend itself against the allegations
and does not believe this action will have any material adverse effect on
our financial position or results of operations. However, it is early in
the process and the Company is unable to predict the outcome of this
matter.

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

     No matters were submitted to a vote of our security holders, through
the solicitation of proxies or otherwise, during the quarter ended December
31, 2003.















                                     11


                               PART II

Item 5.  Market for Registrant's Common Equity
         and Related Stockholder Matters


 (a)     Market Information

     The Company's Common Stock is listed on the American Stock Exchange
(the "Exchange").  The following table sets forth the range of high and low
sales prices for the Company's Common Stock during each quarterly period
within the two most recent fiscal years:

                                   High                  Low
         Quarter Ended          Sales Price          Sales Price
         _____________          ___________          ___________

         March 31, 2002            $ 3.24               $ 2.75
         June 30, 2002               3.83                 3.00
         September 30, 2002          3.66                 3.00
         December 31, 2002           3.56                 3.29
___________________________________________________________________________

         March 31, 2003           $  3.61               $ 3.10
         June 30, 2003               3.79                 3.00
         September 30, 2003          4.25                 3.71
         December 31, 2003           4.47                 4.00


 (b)     Holders

      As of March 15, 2004, the Company's Common Stock was held of record
by approximately 330 holders. The Company's Common Stock is believed to be
held beneficially by approximately 1,200 shareholders in "street-name".

 (c)     Dividends

     The Company declared and paid cash dividends at the rate of $.02 per
share for each quarter in 1996 through 2003.  Future dividends, if any,
will be determined by the Company's Board of Directors, in its discretion,
based on various factors, including the Company's profitability, cash on
hand and anticipated capital needs.

There are no contractual restrictions, including any restrictions on
the ability of any of the Company's subsidiaries, to transfer funds to the
Company in the form of cash dividends, loans or advances, that currently
materially limit the Company's ability to pay cash dividends or that the
Company reasonably believes are likely to materially limit the future
payment of dividends on its Common Stock.





                                     12


Item 6.  Selected Financial Data

                       2003      2002       2001       2000      1999
                            (in thousands, except per share data)
                    ____________________________________________________

Net sales            $25,336    $25,067    $28,296    $31,138   $34,356

Income before
 income taxes and
 cumulative effect of
 change in accounting
 principle             1,487      1,400        746      1,006     3,036

Income before
 cumulative effect of
 change in accounting
 principle               760        503        608        622     1,843

Cumulative effect of
 change in accounting
 principle, net of tax   -       (6,762)      -          -         -

Net income/(loss)        760     (6,259)       608        622     1,843

Current assets        23,029     20,284     20,116     28,199    27,447

Total assets          48,063     47,655     57,062     58,769    59,435

Current
 liabilities           5,085      3,514      4,067      4,521     3,725

Long term debt         4,348      6,395      7,758      9,124    10,418

PER COMMON SHARE
  (Basic and Diluted): (a)

Income before
 cumulative effect of
 change in accounting
 principle               .18        .12        .14        .14       .40

Cumulative effect of
 change in accounting
 principle               -        (1.58)       -          -          -

 Net income/(loss)       .18      (1.46)       .14        .14       .40

 Cash dividends          .08        .08        .08        .08       .08

                       Notes to Selected Financial Data

(a)  Net income/(loss) per common share is based upon the weighted average
number of common shares outstanding in accordance with Statement of

                                     13

Financial Accounting Standards No. 128.  The weighted average number of
diluted shares outstanding were 4,312,711 for 2003, 4,285,577 for 2002,
4,285,577 for 2001, 4,385,019 for 2000, and 4,567,439 for 1999.  The
weighted average number of basic shares outstanding were not significantly
different in any of the aforementioned years.

The following data should be read in conjunction with the audited
consolidated financial statements and related notes included elsewhere in
this Form 10-K.
              Selected Quarterly Financial Information (unaudited)
                     (in thousands, except per share data)

                             Quarter     Quarter     Quarter      Quarter
                              Ended       Ended       Ended        Ended
                             3/31/03     6/30/03     9/30/03     12/31/03
                             _______     _______     _______     ________
       Net sales             $ 6,949     $ 6,401     $ 6,698     $  5,288
       Gross profit            3,025       2,994       2,781        2,378
       Net income/(loss)         480         134         402         (256)
       Net income/(loss)
        per share                .11         .03         .09         (.05)

                             Quarter     Quarter     Quarter      Quarter
                              Ended       Ended       Ended        Ended
                             3/31/02     6/30/02     9/30/02     12/31/02
                             _______     _______     _______     ________
       Net sales             $ 6,320     $ 6,839     $ 6,721      $ 5,187

       Gross profit            2,779       2,982       2,539        1,561

       Net income/(loss)
        before cumulative
        effect of change
        in accounting
        principle                327         405         240         (469)

       Cumulative effect of
        change in accounting
        principle, net of tax
        benefit of $1,663     (6,762)       -           -            -

       Net (loss)/income      (6,435)        405         240         (469)

       Net income/(loss)
        per common share:
        Before cumulative
        effect of change in
        accounting principle     .08         .09         .06         (.11)

        Cumulative effect of
        change in accounting
        principle              (1.58)        -            -          -

        Net (loss)/income      (1.50)        .09         .06         (.11)

                                     14

Information presented above for the quarters ended March 31, 2002, June 30,
2002 and September 30, 2002 have been restated to reflect the retroactive
application of the impairment loss recognized in accordance with the
adoption of SFAS No. 142, effective January 1, 2002.

Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations.

RESULTS OF OPERATIONS

OVERVIEW
________

     Net income for the year ended December 31, 2003 was $760,000, the
highest it has been since 1999.  Additionally, 2003 was also encouraging
for several other reasons.  Net sales for the year ended December 31, 2003
was $25,336,000 as compared to $25,067,000 for the year ended December 31,
2002.  This increase ended the trend of a three-year decline in net sales.
In connection with the going-private transaction, in April 2003 the Company
signed a merger agreement, subject to stockholder approval, with a company
formed by the management group interested in taking the Company private; in
September 2003 the Company finalized a $5,000,000 working capital loan
agreement with Merrill Lynch to assist in financing the privatization of
the Company; in November 2003 the Company filed a preliminary proxy with
the Securities and Exchange Commission outlining the basic terms of the
going-private transaction and three lawsuits the Company was involved in
were either settled in the Company's favor or dismissed.

YEAR ENDED DECEMBER 31, 2003 AS COMPARED TO 2002
____________________________________________________________

     As indicated above, net sales increased slightly for the year ended
December 31, 2003, and as disclosed in our previously filed quarterly
reports, sales were favorably impacted by a higher than normal volume of
sales of Quinsana Medicated Talc to the military, as a result of the
deployment of troops to the Middle East.  This factor was instrumental in
increasing net sales for the Retail segment by almost $650,000.  It also
helped increase the overall gross profit margin of the Company because of
the favorable impact these sales had on the sales mix.  Earnings per share,
before the cumulative effect of a change in accounting principle, for the
year ended December 31, 2003 was $.18, compared to the $.12 per share
achieved for the comparable period in 2002.

     Net sales of Professional "wet goods" for the year ended December 31,
2003, declined approximately $545,000, however the net sales of "hard
goods" increased approximately $228,000 for that same period, leaving the
overall Professional segment down approximately $315,000 from the
comparable period in 2002.  The Company continues to seek out reputable and
creditworthy distributors for the Image and Sorbie brands in an effort to
increase the exposure of these products to the public; however, the Company
does not have the marketing budget of more well known and widely
distributed brands.  Increasing market share for wet goods is more
difficult than for hard goods as the Company's subsidiaries are more
strategically positioned in the hardgoods marketplace.

                                      15

     As a result of the decline in the net sales of wet goods, as described
above, net sales of the Manufacturing segment also declined.  A small
portion of this decline can be attributed to a decline in private label
manufacturing; however, management is optimistic that private label
manufacturing will increase in 2004, especially after giving consideration
to new customer accounts developed in the latter part of 2003.

     Gross profit for the year ended December 31, 2003, increased to
$11,178,000 from the $9,861,000 achieved in the comparable period of 2002.
The gross margin in 2003 was 44.1%, compared to 39.3% in 2002.  These
increases, as indicated above, were due to the more favorable sales mix
realized by the Company as a result of higher sales of retail products.

     Selling, general and administrative expenses for the year ended
December 31, 2003 increased substantially over the comparable period in
2002, largely as a result of management bonuses due officers in accordance
with their employment contracts.  Insurance costs increased over $100,000,
a significant portion of which is as a result of the increased cost of the
Directors and Officers insurance.

     Management bonuses were computed based upon the comparison of current
year earnings per share to a base year, in accordance with terms of the
officers employment contracts, and amounted to $755,000 for the year ended
December 31, 2003, and was included in administrative expenses.  No bonuses
were payable for the year ended December 31, 2002 due to the results
achieved in 2002.

     Interest income and interest expense both declined during the year
ended December 31, 2003, as a result of continued low interest rates.
Interest income should decline in 2004 if the anticipated "going-private"
transaction is consummated and a significant amount of cash is utilized in
connection with such transaction.  It is also anticipated that interest
expense will decline significantly in 2004 since the Company will have
satisfied its obligation to the Colgate-Palmolive Company arising as a
result of the 1995 acquisition of certain brands.  Included in other income
was the $50,000 royalty payment from Color Me Beautiful, as well as a
$187,000 settlement in connection with the Department of Transportation
lawsuit.

     The provision for income taxes of $727,000 provided for in the
statement of operations includes state income taxes of approximately
$120,000 payable to certain states outside of Florida where the Company is
deemed to have business nexus.  In addition, both federal and state income
taxes were adversely affected by the non-deductibility of certain expenses
incurred in connection with the "going-private" transaction and are
considered permanent differences.  These items, among others, had the
effect of increasing the effective tax rate of the Company from 34% to
approximately 49%.  Since the management bonuses discussed above were not
disbursed prior to March 15, 2004, they will not be deductible by the
Company on its 2003 Federal income tax return and therefore are considered
a temporary difference and will not be deductible until paid in 2004.  The
Company has sufficient other temporary differences, primarily amortization,
that can be utilized in 2003; as a result it is anticipated that a minimal
amount of federal income taxes will currently be payable for the year ended

                                     16

December 31, 2003.  The ultimate utilization of any tax deduction and/or
any Net Operating Loss (NOL) carryforward that the Company may have may be
limited, however, by the contemplated "going-private" transaction.

YEAR ENDED DECEMBER 31, 2002 AS COMPARED TO 2001
__________________________________________________

     Net sales for 2002 decreased primarily as a result of declines in the
revenues from the Company's Professional and Manufacturing business
segments.  The decline in net sales for the Professional segment was
approximately $1,861,000.  Over the past several years, there has been a
consolidation in the distribution network for professional products and
this has had an adverse impact on net sales.  The Manufacturing segment
experienced a decline in sales as a result of a decline in private label
production.  The Retail segment showed a small sales increase, largely on
the strength of an increase in sales of talc products.  In the retail
environment, the Company is continually faced with demands for up-front
concessions, such as slotting allowances, from major retailers in order to
carry retail products from suppliers like Stephan and the Company's
reluctance to pay all of these charges may inhibit the overall distribution
of some items to certain markets or geographic areas.

     Gross profit decreased $2,192,000, to $9,861,000 in 2002 when compared
to 2001 levels.  This decrease was due to an overall decline in net sales
and a continuing change in the overall mix of business.  The Morris
Flamingo-Stephan and Williamsport subsidiaries (Professional business
segment) accounted for approximately 59% of consolidated net sales, an
increase of 9% over 2001 levels.  These two subsidiaries have traditionally
had lower gross margins than other entities comprising the professional
group.  The Company continues to devote efforts to improving the gross
profit margins of these two divisions, though they have improved slightly
over 2001.

     The Retail Personal Care Products operating segment experienced a
moderate increase in net sales, with a 41% increase in net sales of the
brands acquired from Colgate offsetting decreased net sales of other retail
brands.  Net retail sales in 2002 were $6,728,000, as compared to
$6,496,000 in 2001.  By offering quantity discounts, the Company was
successful in acquiring new customers, but experienced a lower gross margin
due to discounts and promotional pricing.  In addition, due to the
continued consolidation in the chain-drug store industry, the amount of
discounting and promotional allowances large retailers demand of their
suppliers has increased, which reduces the gross profit margins on brands
supplied to those retailers.  The Company responded to these discounting
pressures in an effort to maintain market share without materially
sacrificing our profitability by selectively participating in promotional
programs that would benefit both the Company and the customer.

     Management of the Company was able to substantially reduce expenses,
with selling, general and administrative expenses (SG&A) decreasing in
excess of $2,850,000, from $11,363,000 in 2001 to $8,509,000 in 2002.  The
Company significantly reduced payroll and related costs as well as
professional fees.  In addition, the decline in sales resulted in reduced
freight and delivery expenses.  The implementation of SFAS No. 142, with

                                     17

respect to goodwill and trademark amortization, reduced amortization
expense (which is included in SG&A) by $1,259,000 in 2002.

     Interest expense decreased over $219,000 in 2002 as a result of a
decrease in outstanding debt and lower interest rates; interest income also
declined over $200,000 due to significantly lower interest rates.  Interest
income for the year ended December 31, 2002, was $378,000, compared to
$580,000 earned in 2001.  Other income included royalty payments from Color
Me Beautiful of $105,000 in connection with the marketing of Frances Denney
products, and a royalty fee of $43,750 for the temporary licensing of New
Era products.

     Income before income taxes and cumulative effect of a change in
accounting principle was $1,400,000, an 88% increase over the corresponding
period in 2001, as a result of the reasons indicated above; however income
before the cumulative effect of a change in accounting principle as a
result of the application of SFAS No. 142 was $503,000 for the year ended
December 31, 2002, compared to $608,000 for the year ended December 31,
2001.  This decrease was due to an abnormally high provision for income
taxes as a result of a reduction in the realizable value of the Company's
charitable contribution carryforward.  This valuation allowance caused the
effective tax rate for the year ended December 31, 2002 to increase to 64%,
as compared to 18.5% for the prior year, and was taken because it is
anticipated that the time limit on the deductibility of the charitable
contribution carryforward will expire before it can be utilized.  Should
taxable income increase in the near future, some of this write down may be
recoverable.

     Net income for the year ended December 31, 2002, was adversely
impacted by the write-down of goodwill and other intangible assets; an
aggregate of approximately $8.4 million was written-off, with a net after
tax effect of reducing income by approximately $6.8 million.  The net loss
for the year ended December 31, 2002, after taking into consideration the
goodwill and other intangible assets charge, was $6,259,000.

     Basic earnings per share for the year ended December 31, 2002, before
the effect of the goodwill and other intangible assets charge was $.12,
compared to $.14 for the year ended December 31, 2001.  After giving effect
to the adjustment for the impairment of goodwill and other intangible
assets, the net loss per share was $1.46. The average number of shares
outstanding, 4,285,577, was the same in 2002 and 2001.

LIQUIDITY AND CAPITAL RESOURCES
_______________________________

     Working capital increased $1,173,000 from December 31, 2002, and was
approximately $17,943,000 at December 31, 2003.  Cash and cash equivalents
increased to $13,302,000 as compared to $10,786,000 as of December 31,
2002.  Total cash, including certificates of deposit ("CDs"), increased
from $17,538,000 at December 31, 2002 to $18,945,000 at December 31, 2003.
The Company has continued to secure its outstanding long-term debt with
Wachovia Bank with all of these CDs.  While the CDs periodically mature,
they are classified as non-current and not included in working capital or
cash and cash equivalents.  The Company does not anticipate any significant

                                     18

capital expenditures in the near term and management believes that there is
sufficient cash on hand and working capital to satisfy upcoming
requirements, including any funds that may be needed in connection with the
going-private transaction.  As announced in October 2003, the Company
secured a $5,000,000 line of credit with Merrill Lynch Business Financial
Services, Inc.  This line of credit will be available for use in the
"going-private" transaction, if necessary, and contains certain financial
and other related covenants, all of which the Company is currently in
compliance with.

     The Company does not have any off-balance sheet financing or similar
arrangements.

Inventory levels continued to decline as management continued to
engage its efforts to reduce the overall amount of inventory on hand, both
through the use of more effective inventory control techniques, as well as
a more thorough phasing out of old, obsolete or slow moving items.

          The Company has not experienced any material adverse impact from the
effects of inflation in the last several years.  Management maintains some
flexibility to increase prices and does not have any binding contract
pricing with either customers or vendors.  Many of the Company's products,
as well as the components used, are petroleum-based products, and as a
result, the prices for raw materials are and will continue to be subject to
oil prices which, in turn, are subject to various political or economic
pressures.  The Company does not presently foresee any material increase in
the costs of raw materials or component costs, and our management believes
it has the flexibility of calling upon multiple vendors and the ability to
increase prices to offset any price changes.

     The following table sets forth certain information regarding future
contractual obligations of the Company as of December 31, 2003:


                              Payments due by period (in thousands)

                                      Less than   1-3
       Contractual obligation      Total    1 year    years
       ______________________     _______  _________ _______

        Bank debt payable         $ 5,458   $ 1,110   $4,348

        Colgate debt payable        1,332     1,332     -

        Employment contracts        1,739       828      911

        Operating leases              314       209      105
                                  _______   _______   ______

          TOTAL OBLIGATIONS       $ 8,843   $ 3,479   $5,364
                                  =======   =======   ======



                                     19


NEW FINANCIAL ACCOUNTING STANDARDS
__________________________________

     In November 2002, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (an interpretation of FASB Statements No. 5, 57 and
107 and rescission of FASB Interpretation No. 34)".  FIN 45 clarifies the
requirements of FASB Statement No. 5, "Accounting for Contingencies".  It
requires that upon issuance of a guarantee, the guarantor must recognize a
liability for the fair value of the obligation it assumes under that
guarantee regardless of whether or not the guarantor receives separate
identifiable consideration (i.e., a premium).  We adopted the disclosure
requirements in 2002 and the initial recognition and measurement provisions
in 2003.  The adoption of FIN 45 did not have a material impact on the
Company's financial statements.

     In December 2002, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation-
Transition and Disclosure". This Statement provides alternative methods of
transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation and amends the disclosure
requirement of SFAS No. 123, "Accounting for Stock-Based Compensation", to
require prominent disclosure in both annual and interim financial
statements about the effect of the method used on reported results.  SFAS
No. 148 is effective for financial statements issued for fiscal years
ending after December 15, 2002 and, as it relates to Opinion No. 28,
"Interim Financial Reporting", the interim periods beginning after December
15, 2002, although earlier application is encouraged. The Company applies
the intrinsic value method as prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
interpretations in measuring stock-based compensation. Accordingly, no
compensation expense has been recognized for options granted under the
Company's compensation plan as no grants were made at less than market
value.

     In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46"), an interpretation
of ARB 51. FIN 46, as revised in December 2003, provides guidance on
identifying entities for which control is achieved through means other than
through voting rights, variable interest entities ("VIE"), and how to
determine when and which business enterprises should consolidate the VIE.
In addition, FIN 46 requires both the primary beneficiary and all other
enterprises with a significant variable interest in a VIE to make
additional disclosures. The consolidation provisions of FIN 46 are
effective immediately for variable interests in VIE's created after January
31, 2003.  For variable interests in VIE's created before February 1, 2003,
the provisions of FIN 46 are effective for the first interim or annual
period ending after December 15, 2003. The adoption of FIN 46 did not
require a change in accounting treatment of any VIE's.  The Company did not
become a party to any VIE's during 2003.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and

                                     20

Equity".  This statement establishes standards for the classification and
measurement of financial instruments that possess characteristics similar
to both liability and equity instruments.  SFAS No. 150 also addresses the
classification of certain financial instruments that include an obligation
to issue equity shares.  On October 29, 2003, the FASB voted to defer, for
an indefinite period, the application of certain provisions of the guidance
in SFAS No. 150.  The FASB decided to defer the application of certain
aspects of Statement 150 until it could consider some of the resulting
implementation issues. The Company has adopted certain provisions of SFAS
No. 150 which did not have a material impact on the Company's financial
condition or results of operations.  The Company does not believe the
effect of the provisions of SFAS No. 150 that have been deferred to future
periods will have a material impact on the Company's financial statements.

RECENT EVENTS
_____________

     As previously reported, on April 16, 2002, the Company announced that
the previously-formed Special Committee (consisting of two outside
directors) had accepted a bid by a management-led group to purchase all of
the shares of common stock of the Company not already owned by such group.
The acquisition group's initial bid was to purchase all of the Company's
common stock at $4 per share in cash, which offer was later revised to
$4.50 per share with $3.25 to be paid in cash, and $1.25 to be paid by a
42-month, unsecured debt instrument providing for interest at an annual
rate of 4 1/2%.  On March 22, 2004, the Company announced that the bid was
further revised to an all cash price of $4.60 per share, to more
appropriately reflect the updated fairness opinion received from SunTrust
Robinson Humphrey.  On September 19, 2003, at no cost to shareholders, the
Company entered into a Working Capital Management Account ("WCMA")
agreement with Merrill Lynch Business Financial Services Inc. providing for
the creation of a WCMA line of credit not to exceed $5,000,000. Borrowings
against the line of credit will be collateralized by the Company's accounts
receivable and inventories and the debt will bear a variable interest rate
using a 1-month LIBOR rate plus 2.25%.  The provisions of the credit line
include periodic accounting and reporting requirements, maintenance of
certain business and financial ratios as well as restrictions on additional
borrowings.

     In late 2001 and during 2002 the Special Committee received from
Curtis Rudolph, a shareholder of the Company, an indication of his interest
in acquiring the common stock of the Company; however, no offer was
forthcoming.  In November 2002, Mr. Rudolph initiated an action in Florida
state court (Broward County, Florida) seeking to obtain a review of certain
"books and records" of the Company to which he claimed he was entitled as a
shareholder of the Company.  The Company had previously denied him access
to those books and records due to his unwillingness to sign a non-
disclosure agreement relating to the Company's non-public information in
the standard form required of other potential bidders for the Company.  In
January 2003, pursuant to a settlement agreement with the Company, Mr.
Rudolph agreed to execute the non-disclosure agreement.  By letter dated
January 13, 2003, Mr. Rudolph reiterated his interest in making a proposal
to acquire the Company.  On or about February 14, 2003, Mr. Rudolph
submitted an unexecuted proposal to acquire substantially all of the assets

                                     21

and assume certain liabilities of the Company.  The Special Committee
rejected this proposal as it was unexecuted, contained certain unacceptable
terms, was subject to unacceptable conditions, and was structured as an
asset purchase rather than a stock purchase.  In particular, the asset
purchase structure presented substantial negative tax consequences to the
Company and its shareholders and was deemed impractical.  Under the
circumstances, the Special Committee determined Mr. Rudolph's proposal to
not be in the best interests of the Company's shareholders.  The Board of
Directors, through its Special Committee, attempted to negotiate with Mr.
Rudolph, but no further offer has been forthcoming.

     On April 30, 2003, the Board of Directors approved a definitive merger
agreement (the "Merger Agreement") pursuant to which the Company will be
acquired by Gunhill Enterprises, Inc., a wholly-owned subsidiary of
Eastchester Enterprises, Inc.  Eastchester Enterprises, Inc. is owned by
Frank F. Ferola, Thomas M. D'Ambrosio, John DePinto and Shouky A. Shaheen
(all of whom are current Board members) together with their affiliates (the
"Acquisition Group").  The Company entered into the Agreement following
approval by its Board of Directors based in part upon the unanimous
recommendation of the Special Committee comprised of non-management and
disinterested directors of the Company's Board of Directors. The Special
Committee has received an opinion from SunTrust Robinson Humphrey that the
merger consideration to be paid pursuant to the Merger Agreement is fair
from a financial point of view to the stockholders other than the
Acquisition Group.  On October 24, 2003, the Company executed an Amended
and Restated Merger Agreement extending certain dates and making minor
changes to the original Merger Agreement and on November 4, 2003, in
connection with the "going-private" transaction, the Company filed a
Preliminary Proxy with the Securities and Exchange Commission.  In March
2004, the Company executed a further amendment to the merger agreement
which, among other things, incorporated the new consideration offered by
the acquisition group of $4.60 per share in cash.

     If prior to the closing of the transactions contemplated by the Merger
Agreement, as amended, the Special Committee concludes that its failure to
provide information to, or engage in discussions with, third parties who
are interested in acquiring the Company, would be inconsistent with its
fiduciary duties to Stephan's stockholders, then the Special Committee may
thereafter continue to provide information to, and engage in discussions
and negotiations with, such interested parties. Under specified circum-
stances, Stephan has the right to terminate the Agreement and to enter into
an agreement with a party proposing a competing transaction which is deemed
superior to the transaction proposed by the Acquisition Group.

     Completion of the merger is subject to customary closing conditions,
including stockholder approval.  The Special Committee has agreed to extend
the closing date of the transaction to no later than July 31, 2004.  As
discussed above, the Company has secured a $5,000,000 line of credit with
Merrill Lynch (unused at December 31, 2003), a portion of which may be used
in the "going-private" transaction.  Company stockholder approval will be
solicited by means of a proxy statement, which will be mailed by the
Company to stockholders upon completion of the required Securities and
Exchange Commission filing and review process.

                                     22

     Independent legal counsel and investment banking advisors have been
retained to advise the Special Committee in connection with the
transaction.  After incurring approximately $530,000 of expenses through
December 31, 2003, it is estimated that the remaining costs associated with
this process will be approximately $175,000.

     As previously reported, due to the length of time for the "going
private" transaction to be consummated, the Company has not submitted any
matters to a vote of its security holders since the Company's September 1,
2000 Annual Meeting.  In accordance with the rules and regulations of the
American Stock Exchange (AMEX), the Company was required to promptly notify
its stockholders and AMEX, in writing, indicating the reasons for the
failure to have a meeting and to use good faith efforts to ensure that an
annual meeting is held as soon as reasonably practicable.  The Company
expects to do this in its proxy materials to be filed in connection the
proposed "going private" transaction.  In addition, the Company will
include annual meeting materials in its revised proxy statement.  The
Company believed it was in violation of certain AMEX rules with respect to
the composition of the Board of Directors and the Audit Committee which
could subject the Company to civil penalties and/or the delisting of the
Company's stock.  The Company, based upon on-going discussions with AMEX
and the Company's legal counsel, now believes that none of the
aforementioned issues are of a material nature and any penalties, if
levied, would not be material to the Company's financial position or
results of operations.

CURRENT TRENDS
______________

     While net sales were favorably impacted in 2003 from the sales of
Quinsana Medicated Talc to the military, as previously indicated, sales
levels of this product returned to normal after the initial phase of the
Middle East conflict.  The Company is optimistic that new supply and
manufacturing agreements for amenities and retail products, executed in
2003 with several new customers, will help maintain a level of sales
consistent with the prior year.  These sales, however, will be at a lower
gross margin and in all likelihood, will adversely impact the gross profit
margin of the Company.  Additionally, it is anticipated that the effect of
these new customers will not be felt until the latter part of 2004, and as
such, first and second quarter sales for 2004, when compared to 2003, may
be significantly lower.

DISCUSSION OF CRITICAL ACCOUNTING POLICIES
__________________________________________

     The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States of
America ("generally accepted accounting principles") requires management 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 could
differ significantly from those estimates if different assumptions were
used or different events ultimately transpire.  We believe that the
following are the most critical accounting policies that requires

                                     23
management to make difficult, subjective and/or complex judgments, often
due to a need to make estimates about matters that are inherently
uncertain:

     VALUATION OF ACCOUNTS RECEIVABLE:  The ultimate amount of collections
received against outstanding accounts receivable must take into account
returns, allowances and deductions that may be made by our customers.  Many
retailers to whom we sell products take deductions for various forms of
marketing expenses, as well as participating in nationwide reclamation
cooperatives for processing damaged goods.  Other expenses to which we are
subject to, in addition to those experienced in the retail environment (but
also with Professional products sold to distributors) include deductions
for freight if the invoice is paid within specified terms, co-op
advertising allowances, new store/warehouse allowances and, from time to
time, limited rebate programs.  We attempt to estimate these costs, as well
as providing for anticipated bad debts, by recording allowances based upon
our experience, economic conditions, normal customer inventory levels
and/or competitive conditions.  Actual returns, credits or allowances, as
well as the condition of any product actually returned, may differ
significantly from the estimates used by the Company.

     INVENTORIES:  Inventories are stated at the lower of cost, determined
by the first-in, first-out (FIFO) method, or market.  We periodically
evaluate inventory levels, giving consideration to factors such as the
physical condition of the goods, the sales patterns of finished goods and
the useful life of particular packaging, componentry and finished goods and
estimate a reasonable amount to be provided for slow moving, obsolete or
damaged inventory.  These estimates could vary significantly, either
favorably or unfavorably, from actual requirements based upon future
economic conditions, customer inventory levels or competitive factors that
were not foreseen or did not exist when the valuation allowances were
established.

     IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL:  The Company
periodically evaluates whether events or circumstances have occurred that
would indicate that long-lived assets may not be recoverable or that the
remaining useful life may be impaired.  When such events or circumstances
are present, the Company assesses the recoverability of long-lived assets
by determining whether the carrying value will be recovered through the
expected future cash flows resulting from the use of the asset.  If the
results of this testing indicates an impairment of the carrying value of
the asset, an impairment loss equal to the excess of the asset's carrying
value over its fair value is recorded. The long-term nature of these assets
requires the estimation of its cash inflows and outflows several years into
the future and only takes into consideration circumstances known at the
time of the impairment test.

     In accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets," goodwill and other indefinite lived intangible assets are to be
evaluated for impairment on an annual basis, and between annual tests,
whenever events or circumstances indicate that the carrying value of an
asset may exceed its fair value. The use of various acceptable and
appropriate methods of valuation requires the use of long-term planning
forecasts and assumptions regarding industry-specific economic conditions
that are outside the control of the Company.

                                     24

Item 7A.  Quantitative and Qualitative Disclosure about Market Risk

     The Company does not own or maintain an interest in derivative or
other financial instruments for which fair value disclosure would be
required under Statement of Financial Accounting Standards No. 107.  In
addition, the Company does not invest in securities that would require
disclosure of market risk, nor does it have floating rate loans or foreign
currency exchange rate risks.  The Company has no interest rate risk on its
fixed rate debt since the interest rate on the note payable to a bank
resets annually upon the anniversary of the loan (August) at 50 basis
points above the Certificate of Deposit interest rate that collateralizes
the loan.

Item 8.  Financial Statements and Supplementary Data

     Reference is made to the consolidated financial statements and
supplementary data contained elsewhere in this Form 10-K.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

     Not applicable.

Item 9A:  Controls and Procedures

 (a) Evaluation of Disclosure Controls and Procedures

     As of the end of the period covered by this annual report, an
evaluation of the effectiveness of the design and operation of the
Company's disclosure controls and procedures was performed under the
supervision and with the participation of the Company's management,
including the chief executive officer and principal financial officer.
Based on that evaluation, the Company's management, including the chief
executive officer and chief financial officer, concluded that the Company's
disclosure controls and procedures were effective as of the evaluation
date.

 (b) Change in Internal Control over Financial Reporting

     No change in the Company's internal control over financial reporting
occurred during the Company's fourth fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.











                                     25



                               PART III


     The information required by Part III of this Form 10-K (Items 10-14)
is incorporated herein by reference from the Company's proxy statement with
respect to the Company's 2004 annual meeting of stockholders scheduled to
be filed with the Securities and Exchange Commission no later than April
29, 2004.













































                                     26


                                PART IV

Item 15.  Exhibits, Financial Statement Schedules
          and Reports on Form 8-K

(a)	Exhibits

          10.1     Acquisition Agreement, dated December 31, 1995, between
Colgate-Palmolive Company and The Stephan Co., with exhibits, including the
Transition Agreement, included with the Form 8-K filed January 16, 1996,
and as amended on January 22, 1996, is incorporated herein by reference.

	   	10.2     Acquisition Agreement, dated December 31, 1995, between
The Mennen Company and The Stephan Co., with exhibits, included with the
Form 8-K filed January 16, 1996 and as amended on January 22, 1996, is
incorporated herein by reference.

	   	10.3     Letter agreement, dated December 31, 1995, between
Colgate-Palmolive Company, The Mennen Company and The Stephan Co., included
with the Form 8-K filed January 16, 1996 and as amended on January 22,
1996, is incorporated herein by reference.

        	10.4     Settlement Agreement and Amendment, dated December 5,
1996, between The Stephan Co., The Mennen Company and Colgate-Palmolive
Company, included with the Form 10-K filed April 15, 1997, is incorporated
herein by reference.

	   	10.5	    The Trademark License Agreement, dated December 5, 1996,
between Colgate-Palmolive Canada, Inc. and The Stephan Co., included with
the Form 10-K filed April 15, 1997, is incorporated herein by reference.

        	10.6     Trademark License and Supply Agreement, dated March 7,
1996, between Color Me Beautiful, Inc. and The Stephan Co., included with
the Form 8-K filed March 20, 1996, is incorporated herein by reference.

        	10.7     Agreement, dated June 28, 1996, for the acquisition of
Sorbie Acquisition Co. and Subsidiaries, with exhibits, included with the
Form 8-K filed July 15, 1996, and as such was amended on August 21,
September 16 and October 9, 1996, is incorporated herein by reference.

	   	10.8     Amended and Restated Sorbie Products Agreement, dated
June 27, 1996, among Sorbie Acquisition Co., Sorbie Trading Limited, Trevor
Sorbie International, PLC and Trevor Sorbie, included with the Form 8-K/A
filed August 21, 1996, is incorporated herein by reference.

          10.9     Settlement Agreement and Amendment, dated December 5,
1996, between The Stephan Co., The Mennen Company and Colgate-Palmolive
Company, included with the Form 10-K for the year ended December 31, 1996,
filed April 15, 1997, is incorporated herein by reference.

          10.10    Trademark License and Supply Agreement, dated March 7,
1996, between Color Me Beautiful, Inc. and The Stephan Co., included with
the Form 8-K filed March 20, 1996, is incorporated herein by reference.

                                     27


          10.11    Acquisition Agreement, dated as of May 23, 1997, between
New Image Laboratories, Inc., The Stephan Co. and Stephan Distributing,
Inc., in connection with the acquisition of brands, included with the Form
10-Q for the period ended June 30, 1997, filed August 13, 1997, is
incorporated herein by reference.

          10.12    Acquisition Agreement, dated as of March 18, 1998,
between Morris Flamingo-Stephan, Inc., The Stephan Co., Morris-Flamingo,
L.P., Morris-Flamingo Beauty Products, Inc., Shaheen & Co., Inc. and Shouky
A Shaheen, included with the Form 10-Q for the period ended June 30, 1998,
filed May 15, 1998, is incorporated herein by reference.

          10.13    1990 Key Employee Stock Incentive Plan, as amended.

          10.14    1990 Non-Employee (Outside Directors) Plan, as amended.

          10.15    Merger Agreement, dated April 30, 2003, by and among The
Stephan Co., Gunhill Enterprises and Eastchester Enterprises, including
exhibits, included with Form 8-K filed May 8, 2003, is incorporated herein
by reference.

          10.16   Working Capital Management Account agreement dated
September 19, 2003 with Merrill Lynch Business Financial Services Inc.,
creating a line of credit not to exceed $5,000,000, included with Form 8-K
filed October 3, 2003, and amended October 9, 2003, is incorporated herein
by reference.

          10.17   Second Amended and Restated Agreement and Plan of Merger,
dated March 24, 2004, by and among The Stephan Co., Gunhill Enterprises and
Eastchester Enterprises, including exhibits, included with Form 8-K filed
March 30, 2004, is incorporated herein by reference.

          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 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.

          32.2    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.

  (b)     Financial Statements and Financial Statement Schedules
          (i)  Financial Statements

          Independent Auditors' Report.

          Consolidated Balance Sheets as of December 31, 2003
          and 2002.

                                         28


          Consolidated Statements of Operations for the years
          ended December 31, 2003, 2002, and 2001.

          Consolidated Statements of Changes in Stockholders'
          Equity for the years ended December 31, 2003, 2002,
          and 2001.

          Consolidated Statements of Cash Flows for the years
          ended December 31, 2003, 2002, and 2001.

               Notes to Consolidated Financial Statements.

          (ii) Financial Statement Schedules
               All schedules are omitted because they are not applicable
               or the required information is shown in the consolidated
               financial statements or notes thereto.






































                                     29





INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
 of The Stephan Co.:


We have audited the accompanying consolidated balance sheets of The Stephan
Co. and subsidiaries (the "Company") as of December 31, 2003 and 2002, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 2003. These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December
31, 2003 and 2002, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2003, in
conformity with accounting principles generally accepted in the United
States of America.

As discussed in Notes 1 and 5 to the consolidated financial statements, the
Company changed its method of accounting for goodwill and other intangible
assets in 2002 to conform to Statement of Financial Accounting Standards
No. 142.




DELOITTE & TOUCHE LLP
Certified Public Accountants




Fort Lauderdale, Florida
April 7, 2004



                                  F-1


                    THE STEPHAN CO. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS
                       DECEMBER 31, 2003 AND 2002



                                ASSETS


                                              2003           2002
                                           ___________    ___________
 CURRENT ASSETS

  Cash and cash equivalents                $13,302,159    $10,785,995

  Accounts receivable, net                   1,444,508      1,451,299

  Inventories                                7,497,262      7,623,764

  Income taxes receivable                         -            65,378

  Prepaid expenses
   and other current assets                    784,601        357,829
                                           ___________    ___________

   TOTAL CURRENT ASSETS                     23,028,530     20,284,265


CERTIFICATES OF DEPOSIT                      5,642,500      6,752,500

PROPERTY, PLANT AND EQUIPMENT, net           1,702,330      2,004,465

GOODWILL, net                                5,857,980      5,857,980

TRADEMARKS, net                              8,664,809      8,664,809

OTHER INTANGIBLE ASSETS, net                   298,773        391,365

OTHER ASSETS                                 2,867,958      3,699,657
                                           ___________    ___________
     TOTAL ASSETS                          $48,062,880    $47,655,041
                                           ===========    ===========








             See notes to consolidated financial statements.



                                  F-2

                     THE STEPHAN CO. AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEETS
                        DECEMBER 31, 2003 AND 2002


                    LIABILITIES AND STOCKHOLDERS' EQUITY

                                                 2003             2002
                                             ___________      ____________
CURRENT LIABILITIES

 Accounts payable and
  accrued expenses                           $ 2,614,731       $2,018,236

 Current portion of
  long-term debt                               2,442,273        1,496,147

 Income taxes payable                             28,270             -
                                             ___________      ___________
   TOTAL CURRENT LIABILITIES                   5,085,274        3,514,383

DEFERRED INCOME TAXES, net                     1,133,051          655,773

LONG-TERM DEBT, less current
 maturities                                    4,347,500        6,395,443
                                             ___________      ___________
   TOTAL LIABILITIES                          10,565,825       10,565,599
                                             ___________      ___________

COMMITMENTS AND CONTINGENCIES (NOTE 10)

STOCKHOLDERS' EQUITY
  Preferred stock, $.01 par value;
   1,000,000 shares authorized; none issued         -                -
  Common stock, $.01 par value;
   25,000,000 shares authorized;
   4,410,577 shares issued at
   December 31, 2003 and 2002                     44,106           44,106
  Additional paid in capital                  18,417,080       18,417,080
  Retained earnings                           20,387,432       19,979,819
                                             ___________      ___________
                                              38,848,618       38,441,005
  LESS:
   125,000 CONTINGENTLY
    RETURNABLE SHARES                         (1,351,563)      (1,351,563)
                                             ___________      ___________
   TOTAL STOCKHOLDERS' EQUITY                 37,497,055       37,089,442
                                             ___________      ___________
   TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUITY                     $48,062,880      $47,655,041
                                             ===========      ===========


              See notes to consolidated financial statements.

                                    F-3

                    THE STEPHAN CO. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS
              YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

                 2003           2002            2001
                                 ___________    ___________    ___________
NET SALES                        $25,336,017    $25,066,950    $28,296,312

COST OF GOODS SOLD                14,157,918     15,206,352     16,243,428
                                 ___________    ___________    ___________
GROSS PROFIT                      11,178,099      9,860,598     12,052,884

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES          9,752,137      8,509,114     11,363,190
                                 ___________    ___________    ___________
OPERATING INCOME                   1,425,962      1,351,484        689,694

OTHER INCOME(EXPENSE)
 Interest income                     227,399        378,441        579,866
 Interest expense                   (403,028)      (479,125)      (698,207)
 Royalty and other income            237,000        148,750        175,000
                                 ___________     __________    ___________
INCOME BEFORE INCOME TAXES
 AND CUMULATIVE EFFECT OF
 CHANGE IN ACCOUNTING PRINCIPLE    1,487,333      1,399,550        746,353

INCOME TAX EXPENSE                  (726,874)      (896,880)      (138,398)
                                 ___________     __________    ___________
INCOME BEFORE CUMULATIVE
  EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE               760,459        502,670        607,955

CUMULATIVE EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE, NET OF
  TAX BENEFIT OF $1,662,911             -        (6,761,576)          -
                                 ___________    ___________    ___________
NET INCOME/(LOSS)                $   760,459    $(6,258,906)   $   607,955
                                 ===========    ===========    ===========
BASIC AND DILUTED EARNINGS/
  (LOSS) PER SHARE:

 INCOME BEFORE CUMULATIVE
   EFFECT OF CHANGE IN
   ACCOUNTING PRINCIPLE          $       .18     $      .12    $       .14

 CUMULATIVE EFFECT OF CHANGE
   IN ACCOUNTING PRINCIPLE               -            (1.58)           -
                                 ___________     __________    ___________
 BASIC AND DILUTED EARNINGS/
   (LOSS) PER SHARE              $       .18     $    (1.46)   $       .14
                                 ===========     ==========    ===========
WEIGHTED AVERAGE NUMBER OF
  DILUTED SHARES OUTSTANDING       4,312,711      4,285,577      4,285,577
                                 ===========     ==========    ===========
              See notes to consolidated financial statements.

                                   F-4

                             THE STEPHAN CO. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                       YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


              Common Stock      Additional             Contingently
          ____________________   Paid in    Retained    Returnable    Treasury
           Shares   Par Value   Capital     Earnings      Shares        Stock
          _________ _________ ___________  ___________  ____________ _________
Balances,
 Jan. 1,
 2001    4,426,897  $ 44,269  $18,477,341  $26,336,463  $(1,351,563) $(60,424)

Treasury
 stock
 retired   (16,320)     (163)    (60,261)       -            -         60,424

Dividends
 paid        -          -            -        (352,847)        -         -
Net income   -          -            -         607,955         -         -
          _________  _________ __________   __________   __________  _________

Balances,
 Dec. 31,
 2001     4,410,577    44,106  18,417,080   26,591,571   (1,351,563)-      -

Dividends
 paid          -          -            -      (352,846)        -           -

Net loss       -          -            -    (6,258,906)        -           -
          _________   ________  ___________ ___________  ___________ _________

Balances,
 Dec. 31,
 2002     4,410,577   44,106   18,417,080   19,979,819   (1,351,563)       -

Dividends
 paid         -          -            -       (352,846)        -           -

Net income   -          -            -         760,459         -            -
          _________  ________  ___________  ___________  ___________ _________

Balances,
 Dec. 31,
 2003     4,410,577  $ 44,106  $18,417,080  $20,387,432 $(1,351,563)  $     -
          =========  ========  ===========  ===========  ===========  ========

                             See notes to consolidated financial statements.





                                     F-5



                     THE STEPHAN CO. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
               YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001


                                        2003         2002         2001
                                    ___________  ___________   __________

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income/(loss)                   $   760,459  $(6,258,906)  $  607,955
                                    ___________  ___________   __________

Adjustments to reconcile net income/
 (loss) to net cash flows provided
 by/(used in) operating activities:

   Depreciation                         287,978      333,632      394,556
   Amortization of intangibles             -            -       1,353,568
   Amortization of deferred
    acquisition costs                    92,592       93,464      146,137
   Loss on disposal of property
    plant and equipment                  34,422         -            -
   Deferred income
    tax provision/(benefit)             477,278     (879,512)    (142,520)
   Provision for doubtful accounts       80,899       80,725      131,164
   Impairment loss on goodwill             -       8,424,487         -

   Changes in operating assets
   and liabilities:

     Accounts receivable                (74,108)     276,804    1,086,561
     Inventories                        126,502    1,662,531    1,091,556
     Income taxes receivable/payable     93,648      279,842      682,892
     Prepaid expenses
      and other current assets         (426,772)     (91,369)     (59,399)
     Other assets                       831,699      (78,554)    (551,392)
     Accounts payable
      and accrued expenses              596,495     (541,815)    (441,669)
                                     __________    _________    _________

     Total adjustments                2,120,633    9,560,235    3,691,454
                                     __________    _________    _________
Net cash flows provided
 by operating activities              2,881,092    3,301,329    4,299,409
                                     __________    _________    _________





              See notes to consolidated financial statements.


                                     F-6


                     THE STEPHAN CO. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001


                                         2003         2002        2001
                                      __________  __________   __________

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of property, plant
   and equipment                        (20,265)     (30,094)     (85,038)

  Purchase of intangible assets            -            -         (49,070)
                                      _________    _________   __________
Net cash flows used in
 investing activities                   (20,265)     (30,094)    (134,108)
                                      _________    _________   __________

CASH FLOWS FROM FINANCING ACTIVITIES:

  Repayments of long-term debt       (1,101,817)  (1,374,036)  (9,517,580)

  Proceeds from notes payable
   to bank                                 -            -       8,140,000

  Change in certificates
   of deposit                         1,110,000      832,500   (7,585,000)

  Dividends paid                       (352,846)    (352,846)    (352,847)

                                    ___________   __________   __________
Net cash flows used in
 financing activities                  (344,663)    (894,382)  (9,315,427)
                                    ___________   __________   __________

NET INCREASE/(DECREASE) IN
  CASH AND CASH EQUIVALENTS           2,516,164    2,376,853   (5,150,126)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                10,785,995    8,409,142   13,559,268
                                    ___________  ___________  ___________
CASH AND CASH EQUIVALENTS,
  END OF PERIOD                     $13,302,159  $10,785,995  $ 8,409,142
                                    ===========  ===========  ===========




              See notes to consolidated financial statements.




                                     F-7



                    THE STEPHAN CO. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
             YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



Supplemental Disclosures of Cash Flow Information:


                                      2003          2002          2001
                                   __________    __________    __________

  Interest paid                    $  248,051    $  448,650    $  651,533
                                   ==========    ==========    ==========
  Income taxes paid                $  122,255    $  212,324    $  100,614
                                   ==========    ==========    ==========


Supplemental Disclosure of Non-Cash Investing and Financing Activities:


For the year ended December 31, 2001, 16,320 shares of treasury stock were
retired.


























                See notes to consolidated financial statements.



                                     F-8


                    THE STEPHAN CO. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         PRINCIPLES OF CONSOLIDATION:  The consolidated financial
statements include the accounts of The Stephan Co. and its wholly-owned
subsidiaries, Foxy Products, Inc., Old 97 Company, Williamsport Barber and
Beauty Supply Corp., Stephan & Co., Scientific Research Products, Inc. of
Delaware, Trevor Sorbie of America, Inc., Stephan Distributing, Inc. and
Morris Flamingo-Stephan, Inc.  (collectively, the "Company").  All signifi-
cant intercompany balances and transactions have been eliminated in
consolidation.

         NATURE OF OPERATIONS:  The Company is engaged in the manufacture,
sale, and distribution of hair and personal care grooming products
principally throughout the United States, and as more fully explained in
Note 9, the Company has allocated substantially all of its business into
three segments, which include professional hair care products and
distribution, retail personal care products and manufacturing.

         USE OF ESTIMATES:  The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in
the United States of America ("generally accepted accounting principles")
requires management 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 could differ from those estimates.

         MAJOR CUSTOMERS:  There were no sales to any single customer in
excess of 10% of net sales in 2003.  The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires
no collateral.  The Company does not believe that its customers' credit
risk represents a material risk of loss to the Company.  However, the loss
of a large customer could have an adverse effect on the Company.

         GOODWILL and OTHER INTANGIBLE ASSETS:  Goodwill is the excess of
the purchase price over the fair value of identifiable assets acquired in
transactions accounted for as a purchase.  The Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other
Intangible Assets," on January 1, 2002.  Goodwill and trademarks having
indefinite lives, which were being amortized over various periods, are no
longer being amortized and in accordance with SFAS No. 142, are now subject
to periodic testing for impairment.  Deferred acquisition costs that have
definite lives are continuing to be amortized over their estimated useful
lives of 10 years.  Goodwill and trademarks of a reporting unit (as defined
in SFAS No. 142) are tested  for impairment on an annual basis at a
minimum, or as circumstances dictate.  As a result of implementing SFAS No.
142, the Company incurred a $6,762,000 impairment charge (net of an income
tax benefit of $1,663,000) upon adoption in 2002.

                                     F-9


NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


         IMPAIRMENT OF LONG-LIVED ASSETS: Long-lived assets are reviewed
for impairment whenever events or changes in circumstances warrant, which
may be an indication that the carrying value of the asset may ultimately be
unrecoverable.  The Company uses fair value methods to determine the amount
of impairment, if any.  If necessary, an impairment loss equal to the
difference between the asset's fair value and its carrying value is
recognized.

         STOCK-BASED COMPENSATION:  SFAS No. 123, "Accounting for Stock-
Based Compensation", permits entities to recognize as an expense over the
vesting period the fair value of all stock-based awards on the date of
grant.  Alternatively, SFAS No. 123 allows entities to continue to measure
compensation cost for stock-based awards using the intrinsic value based
method of accounting prescribed by Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and to provide
pro forma net income and pro forma earnings per share disclosures as if the
fair value method defined in SFAS No. 123 had been applied.  The Company
has elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.  There were no
stock based compensation charges to operations during 2003, 2002 or 2001.

     The following table illustrates the effect on net income/(loss) and
net income/(loss) per share as if the Company had applied the fair value
recognition provisions of SFAS No. 123 to stock-based employee compensation
(in thousands, except per share data):

                                            2003      2002       2001
                                          ________  ________   ________

  Net income/(loss), as reported          $    760   $(6,259)     $ 608

  Deduct: Total stock-based employee
   compensation expense determined
   under fair value based method for all
   awards, net of related tax effects          165       311        384
                                          ________   _______    _______

  Pro forma net income/(loss)             $    595   $(6,570)   $   224
                                          ========   =======    =======
  Net income/(loss) per share:

        As reported                        $  .18   $ (1.46)   $   .14

        Pro forma                          $  .14   $ (1.53)   $   .05

     In connection with the pro-forma information above, the pro forma
effect takes into consideration only options granted since January 1, 1997
and is likely to increase in future years as additional options are granted
and amortized ratably over the vesting period.  The average fair value of
stock options granted during 2003, 2002 and 2001 was $ 1.58, $1.30, and
$1.37, respectively.  The fair value of stock options granted was

                                     F-10

NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

estimated using the Black-Scholes option-pricing model and included the
following assumptions for the years ended December 31, 2003, 2002 and 2001:

                                    2003        2002        2001
                                 __________  __________  __________

      Life expectancy              5 years    5 years      5 years
      Risk-free interest rate        3%          3%           5%
      Expected volatility           59%         55%          59%
      Dividends per share           $.08        $.08        $.08


         FAIR VALUE OF FINANCIAL INSTRUMENTS:  The estimated fair values of
financial instruments which are presented herein have been determined by
the Company using available market information and recognized valuation
methodologies.  However, considerable judgment is required in interpreting
market data to develop estimates of fair value.  Accordingly, the estimates
presented herein are not necessarily indicative of amounts the Company
could realize in a current market sale of such instruments.

          The following methods and assumptions were used to estimate fair
value:
     - the carrying amounts of cash and cash equivalents, receivables and
accounts payable approximate fair value due to their short term
nature;

     - discounted cash flows using current interest rates for financial
instruments with similar characteristics and maturity were used to
determine the fair value of notes payable and debt.

     As of December 31, 2003 and 2002 there were no significant differences
in the carrying values and fair market values of financial instruments.

         REVENUE RECOGNITION:  Revenue is recognized when all significant
contractual obligations have been satisfied, which involves the delivery of
manufactured goods and reasonable assurance as to the collectability of the
resulting account receivable.

         PROMOTIONAL AND SALES RETURNS ALLOWANCES:  The Company partici-
pates in various promotional activities in conjunction with its retailers
and distributors, primarily through the use of discounts, new warehouse
allowances, slotting allowances, co-op advertising and periodic price
reduction programs. All such costs are netted against sales and amounted to
approximately $345,000, $335,000 and $310,000 for the years ended December
31, 2003, 2002 and 2001, respectively.  The allowances for sales returns
and consumer and trade promotion liabilities are established based on the
Company's best estimate of the amounts necessary to settle future and
existing obligations for such items on products sold as of the balance
sheet date.  While the Company believes that promotional allowances are
adequate and that the judgment applied is appropriate, amounts estimated to
be due and payable could differ materially from actual costs incurred in
the future.

                                     F-11

NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         CASH AND CASH EQUIVALENTS:  Cash and cash equivalents include
cash, certificates of deposit, U. S. Government issues, and municipal bonds
having maturities of 90 days or less when acquired.  The Company maintains
cash deposits at certain financial institutions in amounts in excess of
federally insured limits of $100,000.  Cash and cash equivalents held in
interest-bearing accounts as of December 31, 2003 and 2002 were
approximately $12,698,000 and $10,121,000, respectively. At December 31,
2003 and 2002, the Company excluded certificates of deposit in the amount
of $5,642,500 and $6,752,500, respectively, from the above as they are
pledged as collateral for a bank loan.

         INVENTORIES:  Inventories are stated at the lower of cost
(determined on the first-in, first-out basis) or market. Direct labor and
overhead costs charged to inventories for the years ended December 31, 2003
and 2002 were approximately $2,940,000 and $2,614,000, respectively. Direct
labor and overhead costs capitalized in inventories as of December 31, 2003
and 2002 were approximately $979,000 and $1,257,000, respectively.

         PROPERTY, PLANT AND EQUIPMENT:  Property, plant and equipment are
recorded at cost.  Routine repairs and maintenance are expensed as
incurred.  Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets as follows:

           Buildings and improvements                   15-30 years
           Machinery and equipment                      5-10 years
           Furniture and office equipment               3-5 years

         INCOME TAXES:  Income taxes are calculated under the asset and
liability method of accounting.  Deferred income taxes are recognized by
applying the enacted statutory rates applicable to future year differences
between the financial statement carrying amounts and the tax basis of
existing assets and liabilities.  A valuation allowance is recorded when it
is more likely than not that some portion or all of the deferred tax asset
will not be realized.

         BASIC AND DILUTED EARNINGS PER SHARE:  Basic and diluted earnings
per share are computed by dividing net income/(loss) by the weighted
average number of shares of common stock outstanding.  For the years ended
December 31, 2003, 2002 and 2001, the Company had 547,570, 672,120 and
743,648 outstanding stock options, respectively.  At December 31, 2003,
27,134 options were included in the calculation of diluted earnings per
share.  For the years ended December 31, 2002 and 2001, none of the options
were included in the calculation of earnings per share because their
inclusion would be anti-dilutive, and as such, 4,285,577 shares were used
for the calculation of basic earnings per share.
         NEW FINANCIAL ACCOUNTING STANDARDS:  In November 2002, the
Financial Accounting Standards Board ("FASB") issued FASB Interpretation
No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (an
interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB


                                     F-12


NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Interpretation No. 34)".  FIN 45 clarifies the requirements of FASB
Statement No. 5, "Accounting for Contingencies".  It requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the
fair value of the obligation it assumes under that guarantee regardless of
whether or not the guarantor receives separate identifiable consideration
(i.e., a premium).  The Company adopted the disclosure requirements in 2002
and the initial recognition and measurement provisions in 2003.  The
adoption of FIN 45 did not have a material impact on the Company's
financial statements.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-
Based Compensation-Transition and Disclosure". This Statement provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation and amends
the disclosure requirement of SFAS No. 123, "Accounting for Stock-Based
Compensation", to require prominent disclosure in both annual and interim
financial statements about the effect of the method used on reported
results.  SFAS No. 148 is effective for financial statements issued for
fiscal years ending after December 15, 2002 and, as it relates to Opinion
No. 28, "Interim Financial Reporting", the interim periods beginning after
December 15, 2002, although earlier application is encouraged. The Company
applies the intrinsic value method as prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees", and
related interpretations in measuring stock-based compensation. Accordingly,
no compensation expense has been recognized for options granted under the
Company's compensation plan as no grants were made at less than market
value.

      In January 2003, FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46"), an interpretation
of ARB 51. FIN 46, as revised in December 2003, provides guidance on
identifying entities for which control is achieved through means other than
through voting rights, variable interest entities ("VIE"), and how to
determine when and which business enterprises should consolidate the VIE.
In addition, FIN 46 requires both the primary beneficiary and all other
enterprises with a significant variable interest in a VIE to make
additional disclosures. The consolidation provisions of FIN 46 are
effective immediately for variable interests in VIE's created after January
31, 2003.  For variable interests in VIE's created before February 1, 2003,
the provisions of FIN 46 are effective for the first interim or annual
period ending after December 15, 2003. The adoption of FIN 46 did not
require a change in accounting treatment of any VIE's.  The Company has not
become a party to any VIE's during 2003.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity".  This statement establishes standards for the classification and
measurement of financial instruments that possess characteristics similar
to both liability and equity instruments.  SFAS No. 150 also addresses the
classification of certain financial instruments that include an obligation
to issue equity shares.  On October 29, 2003, the FASB voted to defer, for
an indefinite period, the application of certain provisions of the guidance

                                     F-13


NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

in SFAS No. 150.  The FASB decided to defer the application of certain
aspects of Statement 150 until it could consider some of the resulting
implementation issues. The Company has adopted certain provisions of SFAS
No. 150 which did not have a material impact on the Company's financial
condition or results of operations.  The Company does not believe the
effect of the provisions of SFAS No. 150 that have been deferred to future
periods will have a material impact on the Company's financial statements.

NOTE 2.  ACCOUNTS RECEIVABLE

     Accounts receivable at December 31, 2003 and 2002 consisted of the
following:

                                        2003             2002
                                     __________       __________
Trade accounts receivable            $1,557,432      $1,614,580
Less: Allowance for
 doubtful accounts                     (112,924)        (163,281)
                                     __________       __________
Accounts receivable, net             $1,444,508       $1,451,299
                                     ==========       ==========

     The following is an analysis of the allowance for doubtful accounts
for the year ended December 31:
                                      2003           2002          2001
                                   _________      _________     _________
Balance, beginning of year         $ 163,281      $ 152,225     $ 105,002
Provision for doubtful
 accounts                             80,899         80,725       131,164
Uncollectible accounts
 written off, net of recoveries     (131,256)       (69,669)      (83,941)
                                   _________      _________     _________
Balance, end of year               $ 112,924      $ 163,281     $ 152,225
                                   =========      =========     =========

NOTE 3.  INVENTORIES

     Inventories at December 31, 2003 and 2002 consisted of the following:

                                     2003               2002
                                 ____________       ____________
  Raw materials                  $  2,007,174       $  2,162,273
  Packaging and components          2,612,798          3,100,917
  Work in progress                    257,476            328,976
  Finished goods                    5,338,369          5,579,290
                                 ____________       ____________
                                   10,215,817         11,171,456
  Less: Amount included
        in other assets            (2,718,555)        (3,547,692)
                                 ____________       ____________
  Balance, end of year           $  7,497,262       $  7,623,764
                                 ============       ============

                                     F-14

NOTE 3.  INVENTORIES (Continued)

     Raw materials include surfactants, chemicals and fragrances used in
the production process.  Packaging materials include cartons, inner sleeves
and boxes used in the actual product, as well as outer boxes and cartons
used for shipping purposes.  Components are the bottles or containers
(plastic or glass), jars, caps, pumps and similar materials that will
become part of the finished product. Finished goods also include hair
dryers, electric clippers, lather machines, scissors and salon furniture.

     Included in other assets is inventory not anticipated to be utilized
within one year and is comprised primarily of packaging, components and
finished goods.  The Company provides an allowance for these slow moving
goods that includes the estimated costs of disposal of inventory that may
ultimately become unusable or obsolete.

NOTE 4.  PROPERTY, PLANT, AND EQUIPMENT

     Property, plant and equipment at December 31, 2003 and 2002 consisted
of the following:
                                        2003                2002
                                     __________         ___________
  Land                               $  379,627         $   379,627
  Buildings and improvements          2,129,570           2,129,570
  Machinery and equipment             1,854,287           1,934,774
  Furniture and office equipment        547,024             526,762
                                     __________          __________
                                      4,910,508           4,970,733
  Less: accumulated depreciation     (3,208,178)         (2,966,268)
                                     __________          __________
  Balance, end of year               $1,702,330          $2,004,465
                                     ==========          ==========

NOTE 5.  GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS

          In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets".  SFAS No. 142 provides that goodwill and other
intangible assets with indefinite lives will not be amortized, but will be
tested for impairment at least annually.  The Company adopted SFAS No. 142
on January 1, 2002.  SFAS No. 142 requires that goodwill and other
intangible assets be tested for impairment upon adoption and at least
annually thereafter.

     As a result of the impairment review mandated by SFAS No. 142, the
Company determined that the carrying value of certain goodwill and
trademarks with indefinite lives was impaired, decreasing the carrying
value of goodwill and other such intangible assets, upon adoption, by
approximately $8,424,000 ($6,762,000, net of taxes).






                                     F-15


NOTE 5.  GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS (Continued)

     The above impairment charge, recorded as a cumulative effect of change
in accounting principle, as prescribed by SFAS No. 142, impacted several
different subsidiaries and divisions.  Based upon information available to
the Company, in general, goodwill and trademark valuations were performed
using present value techniques involving estimates of future cash flows.
The change in the carrying amount of goodwill and trademarks, by segment
impacted, for the year ended December 31, 2002 can be summarized as follows
(in thousands):

                                      Total   Professional   Retail
                                    _________ ____________  ________

     Balance, December 31, 2001     $ 22,947    $  9,905    $ 13,042
     Goodwill and trademark
      impairment upon adoption
      of SFAS No. 142                 (8,424)     (3,440)     (4,984)
                                    ________    ________    ________

     Balance, December 31, 2002     $ 14,523    $  6,465    $  8,058
                                    ========    ========    ========

     The Company performed its annual impairment test as of December 31,
2003 and 2002 and determined that no change in the carrying value of
goodwill and trademarks was required.

     Amortization of goodwill and other intangible assets with indefinite
lives ceased upon adoption of SFAS No. 142 on January 1, 2002.  The table
below reflects the impact of the implementation of SFAS No. 142 for the
years ended December 31, 2003, 2002 and 2001 (in thousands, except per
share data):

                                                    2003    2002    2001
                                                  _______  ______  ______
 Income before cumulative effect of change
     in accounting principle (as reported)        $   760  $  503  $  608
    After tax goodwill amortization                   -       -     1,026
                                                  _______  ______  ______
 Pro forma income before cumulative effect
     of change in accounting principle            $   760  $  503  $1,634
                                                  =======  ======  ======
Income per share before cumulative effect
     of change in accounting principle
     (as reported) (basic and diluted)            $   .18  $  .12  $  .14
                                                  =======  ======  ======
 Pro forma basic and diluted earnings
     per share before cumulative effect of
     change in accounting principle               $   .18  $  .12  $  .38
                                                  =======  ======  ======




                                     F-16


NOTE 5.  INTANGIBLE ASSETS (Continued)

Other intangible assets can be summarized as follows:

                                               2003       2002
                                            _________  _________

      Deferred acquisition costs            $ 934,544  $ 934,544
      Less: Accumulated amortization         (635,771)  (543,179)
                                            _________  _________

      Balance, end of year                  $ 298,773  $ 391,365
                                            =========  =========

     Amortization expense of other intangible assets for 2003, 2002 and
2001 was $93,000, $93,000 and $146,000, respectively.  Amortization expense
of other intangible assets, recorded as of December 31, 2003, for the years
ended December 31, 2004 through 2007 is anticipated to be as follows: 2004:
$84,000; 2005: $82,000; 2006: $66,000; 2007: $66,000.

NOTE 6.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses at December 31, 2003 and 2002
consisted of the following:

                                               2003            2002
                                           ___________     ___________

Accounts payable                           $   539,311     $   486,262
Accrued marketing expenses                     735,091         673,125
Accrued payroll, bonuses
 and related costs                           1,046,311         272,254
Accrued legal and professional fees            223,490         285,401
Other accrued expenses                          70,528         301,194
                                           ___________     ___________
Balance, end of year                       $ 2,614,731     $ 2,018,236
                                           ===========     ===========

NOTE 7.  LONG-TERM DEBT

     Long-term debt at December 31, 2003 and 2002 consisted of the
following:
                                               2003             2002
                                           ____________     ____________

1.89% note payable to bank, principal
 of $92,500 plus interest due monthly
 through August 2, 2006; collateralized
 by a security interest in a certificate
 of deposit of like amount, which bears
 interest at 50 basis points below the
 interest charged on the note.             $ 5,457,500       $ 6,567,500


                                     F-17

NOTE 7.  LONG-TERM DEBT (Continued)
                                               2003             2002
                                           ____________     ____________

Guaranteed minimum payments of $250,000
 due semi-annually to Colgate-Palmolive
 through January 31, 2004, discounted
 at an 8% rate; collateralized by a
 security interest in the brand trade-
 marks acquired from Colgate-Palmolive,
 with a net carrying value of
 approximately $5,198,000.                   1,332,273         1,324,090
                                           ___________       ___________

                                             6,789,773         7,891,590

Less: current portion                       (2,442,273)       (1,496,147)
                                           ___________       ___________
Long-term debt                             $ 4,347,500       $ 6,395,443
                                           ===========       ===========

     At December 31, 2003, approximate maturities of long-term debt
are $2,442,000 in 2004, $1,110,000 in 2005, $1,110,000 in 2006 and
$2,127,500 in 2007.

     On April 7, 2004, the Company and Colgate-Palmolive mutually agreed
to settle all outstanding claims and issues between them.  The net result
of this settlement was a reduction of the above obligation by
approximately $418,000. This amount will be reflected as a gain in 2004.

NOTE 8.  INCOME TAXES

     The provision/(benefit) for income taxes is comprised of the following
for the years ended December 31:

                           2003              2002             2001
                       ___________       ___________      ___________
Current tax:
 Federal                 $ 117,021       $      -         $   213,843
 State                     132,575           113,482           67,075
                       ___________       ___________      ___________
  Total current
   provision               249,596           113,482          280,918
                       ___________       ___________      ___________
Deferred tax:
 Federal                   433,266           703,396          (83,715)
 State                      44,012            80,002          (58,805)
                       ___________       ___________      ___________
  Total deferred
   provision/(benefit)     477,278           783,398         (142,520)
                       ___________       ___________      ___________
Total provision
 for income taxes      $   726,874       $   896,880      $   138,398
                       ===========       ===========      ===========

                                     F-18

NOTE 8.  INCOME TAXES (Continued)

     In 2002, the Company recorded a deferred tax benefit of $1,663,000
from the cumulative effect of a change in accounting principle resulting
in a net tax benefit for the year ended December 31, 2002 of $766,000.

     Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for tax purposes.

     The net deferred income tax liability in the accompanying consolidated
balance sheets includes deferred tax assets and liabilities attributable to
the following items:
                                            2003              2002
                                         __________       ___________
   Net operating losses                  $     -          $  (105,900)
   Accounts receivable allowances           (44,604)          (64,496)
   Inventory allowance                     (101,845)             -
   Property, plant and equipment             95,208            68,758
   Amortization of intangibles            1,601,809           984,776
   Charitable contribution
    carryforward                           (121,747)         (268,359)
   State income taxes                       (57,407)          (34,912)
   Accrued liabilities and other           (360,110)         (192,453)
                                         __________       ___________
                                          1,011,304           387,414
   Less: Valuation allowance                121,747           268,359
                                         __________       ___________
   Deferred income tax liability, net    $1,133,051       $   655,773
                                         ==========       ===========
     The provision for Federal and state income taxes differs from
statutory tax expense (computed by applying the U.S. Federal corporate tax
rate to income before taxes) as follows:
                                           2003        2002        2001
                                          ______      ______      ______
Amount computed on pretax income           35.0%       35.0%       35.0%
Increase(decrease) in taxes:
 State income taxes, net of
  federal tax benefit                       7.8         9.1          .7
 Change in valuation allowance               -         19.2          -
 Goodwill                                    .2          .2        16.8
 Benefit of graduated rates                (1.0)       (1.0)       (1.0)
 Privatization transaction costs            6.7          -           -
 Tax exempt interest                       (1.6)       (1.8)       (3.3)
 Other                                      1.8         3.3       (29.7)
                                          _____       _____       _____
 Total income tax                          48.9%       64.0%       18.5%
                                          =====       =====       =====
     For the year ended December 31, 2002, the tax provision was increased
by recording an income tax valuation allowance of approximately $268,000 in
order to provide for the likelihood that the Company's charitable
contribution carryforward will expire unused.

     For the year ended December 31, 2001, the tax provision was reduced by
approximately $210,000 due to a reduction for tax liabilities which are no
longer required.
                                     F-19

NOTE 9.  SEGMENT INFORMATION

     The Company has identified three reportable operating segments based
upon how management evaluates its business.  These segments are
Professional Hair Care Products and Distribution ("Professional"), Retail
Personal Care Products ("Retail") and Manufacturing.  The Professional
segment generally has a customer base of distributors that purchase the
Company's hair products and beauty and barber supplies for sale to salons
and barbershops.  The customer base for the Retail segment is mass
merchandisers, chain drug stores and supermarkets that sell the product to
the end user.  The Manufacturing segment manufactures products for
subsidiaries of the Company, and manufactures private label brands for
customers.

     The Company conducts operations primarily in the United States and
sales to international customers are not material to consolidated revenues.
The following tables, in thousands, summarize significant accounts and
balances by reportable segment:

                                             INCOME BEFORE INCOME TAXES
                                           AND CUMULATIVE EFFECT OF CHANGE
                        NET SALES              IN ACCOUNTING PRINCIPLE
                 ________________________   ______________________________
                  2003     2002    2001        2003      2002     2001
                 _______________________    ______________________________
Professional     $17,573 $17,891 $19,752     $ 1,449   $ 1,081  $   379
Retail             7,373   6,728   6,496         873       885      596
Manufacturing      6,713   7,144   9,358        (112)      (29)     325
                 _______ _______ _______     _______   _______  _______
   Total          31,659  31,763  35,606       2,210     1,937    1,300

Intercompany
  Manufacturing   (6,323) (6,696) (7,310)       (723)     (537)    (554)
                 _______ _______ _______     _______   _______  _______
   Consolidated  $25,336 $25,067 $28,296     $ 1,487   $ 1,400  $   746
                 ======= ======= =======     =======   =======  =======


                    INTEREST INCOME              INTEREST EXPENSE
                 _______________________     __________________________
                   2003    2002    2001        2003     2002      2001
                 _______________________     __________________________
Professional     $  174  $  233  $  316      $   90    $ 270    $  388
Retail               47      95     150         304      201       292
Manufacturing         6      50     114           9        8        18
                 ______  ______  ______      ______    ______   ______
   Total         $  227  $  378  $  580      $  403    $ 479    $  698
                 ======  ======  ======      ======    ======   ======






                                     F-20


NOTE 9.  SEGMENT INFORMATION (Continued)

                     DEPRECIATION AND
                       AMORTIZATION                 TOTAL ASSETS
                 ______________________           _________________
                    2003   2002    2001              2003     2002
                 ______________________           _________________
Professional      $   89 $  135  $  941           $17,116   $15,284
Retail                43     43     799            20,866    20,280
Manufacturing        249    249     154            10,081    12,091
                 _______ _______ ______           _______   _______
   Total          $  381 $  427  $1,894           $48,063   $47,655
                 ======= ======= ======           =======   =======

     The accounting policies used for each of the segments are the same as
those used for the Company and are described in the summary of significant
accounting policies in Note 1.  Included in Manufacturing net sales are
intercompany sales to related segments, which are generally recorded at
cost plus 10%.  Management of the Company evaluates the performance of each
segment based upon results of operations before income taxes, intercompany
allocations, interest and amortization.

NOTE 10. COMMITMENTS AND CONTINGENCIES

          The Company has entered into employment agreements with certain
officers.  These agreements, which expire on various dates through January
2006, provide for incentive bonuses based on consolidated earnings per
share in excess of the applicable base year, as defined in the employment
agreement.  For the year ended December 31, 2003, management bonuses
included in selling, general and administrative expenses were $755,000. No
bonuses were payable for the year ended December 31, 2002 due to the
results achieved in 2002.

     Annual rent payments due under non-cancelable operating leases at
December 31, 2003 are:

                     2004               $ 209,600
                     2005                 104,800
                                        _________
                                        $ 314,400
                                        =========

      Annual rent expense for each of the last three years is as follows:

                     2003                $620,800
                     2002                 600,800
                     2001                 624,400

     Included in rent expense above for the years ended December 31, 2003,
2002 and 2001 is $ 213,000, $179,000 and $191,000, respectively, paid to
Shaheen & Co., Inc., the former owner of Morris Flamingo.  Shouky A.
Shaheen, a minority owner of Shaheen & Co., Inc., who owns the building the
Company leases in Danville, Illinois, is currently a member of the Board of
Directors and a significant shareholder of the Company.

                                     F-21

NOTE 10. COMMITMENTS AND CONTINGENCIES (Continued)

     In addition to the matters set forth below, the Company is involved in
other litigation arising in the normal course of business.  It is the
opinion of management that none of such matters, at December 31, 2003,
would likely, if adversely determined, have a material adverse effect on
the Company's financial position, results of operations or cash flows.

     The United States Court of Appeals for the Ninth Circuit entered an
order on April 29, 2002 that, among other things, reversed the judgment of
the United States District Court granting summary judgment in favor of New
Image Laboratories, Inc. ("New Image") against the Company on New Image's
contract claim for a price adjustment and on New Image's claim of breach of
the implied covenant of good faith and fair dealing.  In addition, the
Ninth Circuit's opinion affirmed the lower court's ruling that on the
present record New Image is not entitled to (i) damages equal to the
diminution in the value of the Company's common stock price between the
scheduled and actual disbursement dates or (ii) any attorney's fees.  As a
consequence of the Ninth Circuit's decision, the judgment granting New
Image all 125,000 shares of the Company's common stock being held in escrow
has been reversed and the case has been remanded back to the United States
District Court for further proceedings.  On May 28, 2002, New Image filed a
Motion for Rehearing with the Ninth Circuit Court of Appeals and on June
26, 2002, the Court denied the petition for rehearing.  A pretrial hearing
scheduled in connection with the remaining claims of the parties has been
postponed and settlement negotiations continue.  The recorded value of
trademarks assumes the return to the Company of the shares held in escrow.

     On November 1, 2001, a private label customer filed a lawsuit against
the Company alleging causes of action for breach of contract, declaratory
judgment, and trademark infringement.  The Company denied the allegations
and counter claimed against the customer. In January 2004, the parties
reached an amicable resolution of the litigation which will have no
material effect on the financial statements.

     In November 2001, the Company filed a claim with the U.S. Department
of Transportation ("DOT") in the 13th Judicial Circuit Court of
Hillsborough County, Florida, in connection with the DOT's widening of
Interstate Highway 4, which the Company alleged would result in the loss of
an adjacent rental facility utilized by one of the Company's subsidiaries.
In the third quarter of 2003, the case was settled and the Company received
a net award of $187,000, reflected in "Royalty and other income".

     In November 2002, a stockholder filed a lawsuit in the Circuit Court
for the 17th Circuit of Florida in and for Broward County, styled Joan
Rosoff ("Plaintiff") v. Frank F. Ferola, Shouky Shaheen, Leonard A.
Genovese, Curtis Carlson, John DePinto, Thomas M. D'Ambrosio and The
Stephan Co., Case Number 0222253, against the Company alleging certain
breaches of fiduciary duties and responsibilities.  The Company defended
the claim and on July 15, 2003, the Plaintiff filed a notice of voluntary
dismissal without prejudice.

     In September 2003, in accordance with the Amended and Restated Sorbie
Products Agreement, a Demand for Arbitration was submitted by Sorbie

                                     F-22

NOTE 10. COMMITMENTS AND CONTINGENCIES (Continued)

Acquisition Co. (Trevor Sorbie of America, Inc. "TSA") against Trevor
Sorbie International, PLC ("PLC"). PLC also filed a Demand for Arbitration
and both claims have been consolidated and will be heard together in
Pittsburgh, Pennsylvania.  TSA has denied the allegations raised by PLC and
it has claimed that PLC's assertion of a right to royalty payments is
premised upon an incorrect reading of the underlying agreement, and that
damages should be awarded in favor of TSA based upon PLC's diversion of
Sorbie product and failure to support the brand in violation of the
agreement.  The Company intends to defend itself against the allegations
and does not believe this action will have any material adverse effect on
our financial position or results of operations. However, it is early in
the process and the Company is unable to predict the outcome of this
matter.

     As previously reported, on April 16, 2002, the Company announced that
the previously-formed Special Committee (consisting of two outside
directors) had accepted a bid by a management-led group to purchase all of
the shares of common stock of the Company not already owned by such group.
The acquisition group's initial bid was to purchase all of the Company's
common stock at $4 per share in cash, which offer was later revised to
$4.50 per share with $3.25 to be paid in cash, and $1.25 to be paid by a
42-month, unsecured debt instrument providing for interest at an annual
rate of 4 1/2%.  On March 22, 2004, the Company announced that the bid was
further revised to an all cash price of $4.60 per share, to more
appropriately reflect the updated fairness opinion received from SunTrust
Robinson Humphrey.  On September 19, 2003, at no cost to shareholders, the
Company entered into a Working Capital Management Account ("WCMA")
agreement with Merrill Lynch Business Financial Services Inc. providing for
the creation of a WCMA line of credit not to exceed $5,000,000. Borrowings
against the line of credit will be collateralized by the Company's accounts
receivable and inventories and the debt will bear a variable interest rate
using a 1-month LIBOR rate plus 2.25%.  The provisions of the credit line
include periodic accounting and reporting requirements, maintenance of
certain business and financial ratios as well as restrictions on additional
borrowings.

     In late 2001 and during 2002 the Special Committee received from
Curtis Rudolph, a shareholder of the Company, an indication of his interest
in acquiring the  common stock of the Company; however, no offer was
forthcoming.  In November 2002, Mr. Rudolph initiated an action in Florida
state court (Broward County, Florida) seeking to obtain a review of certain
"books and records" of the Company to which he claimed he was entitled as a
shareholder of the Company.  The Company had previously denied him access
to those books and records due  to his unwillingness to sign a non-
disclosure agreement relating to the Company's non-public information in
the standard form required of other potential bidders for the Company.  In
January 2003, pursuant to a settlement agreement with the Company, Mr.
Rudolph agreed to execute the non-disclosure agreement.  By letter dated
January 13, 2003, Mr. Rudolph reiterated his interest in making a proposal
to acquire the Company.  On or about February 14, 2003, Mr. Rudolph
submitted an unexecuted proposal to acquire substantially all of the assets

                                     F-23

NOTE 10. COMMITMENTS AND CONTINGENCIES (Continued)

and assume certain liabilities of the Company.  The Special Committee
rejected this proposal as it was unexecuted, contained certain unacceptable
terms, was subject to unacceptable conditions, and was structured as an
asset purchase rather than a stock purchase.  In particular, the asset
purchase structure presented substantial negative tax consequences to the
Company and its shareholders and was deemed impractical.  Under the
circumstances, the Special Committee determined Mr. Rudolph's proposal to
not be in the best interests of the Company's shareholders.  The Board of
Directors, through its Special Committee, attempted to negotiate with Mr.
Rudolph, but no further offer has been forthcoming.

     On April 30, 2003, the Board of Directors approved a definitive merger
agreement (the "Merger Agreement") pursuant to which the Company will be
acquired by Gunhill Enterprises, Inc., a wholly-owned subsidiary of
Eastchester Enterprises, Inc.  Eastchester Enterprises, Inc. is owned by
Frank F. Ferola, Thomas M. D'Ambrosio, John DePinto and Shouky A. Shaheen
(all of whom are current Board members) together with their affiliates (the
"Acquisition Group").  The Company entered into the Agreement following
approval by its Board of Directors based in part upon the unanimous
recommendation of the Special Committee comprised of non-management and
disinterested directors of the Company's Board of Directors. The Special
Committee has received an opinion from SunTrust Robinson Humphrey that the
merger consideration to be paid pursuant to the Merger Agreement is fair
from a financial point of view to the stockholders other than the
Acquisition Group.  On October 24, 2003, the Company executed an Amended
and Restated Merger Agreement extending certain dates and making minor
changes to the original Merger Agreement and on November 4, 2003, in
connection with the "going-private" transaction, the Company filed a
Preliminary Proxy with the Securities and Exchange Commission.  In March
2004, the Company executed a further amendment to the merger agreement
which, among other things, incorporated the new consideration offered by
the acquisition group of $4.60 per share in cash.

     If prior to the closing of the transactions contemplated by the Merger
Agreement, as amended, the Special Committee concludes that its failure to
provide information to, or engage in discussions with, third parties who
are interested in acquiring the Company, would be inconsistent with its
fiduciary duties to Stephan's stockholders, then the Special Committee may
thereafter continue to provide information to, and engage in discussions
and negotiations with, such interested parties. Under specified circum-
stances, the Company has the right to terminate the Agreement and to enter
into an agreement with a party proposing a competing transaction which is
deemed superior to the transaction proposed by the Acquisition Group.

     Completion of the merger is subject to customary closing conditions,
including stockholder approval.  The Special Committee has agreed to extend
the closing date of the transaction to no later than June 15, 2004.  As
discussed above, the Company has secured a $5,000,000 line of credit with
Merrill Lynch, a portion of which may be used in the "going-private"
transaction.  Company stockholder approval will be solicited by means of a
proxy statement, which will be mailed by the Company to stockholders upon
completion of the required Securities and Exchange Commission filing and
review process.
                                     F-24

NOTE 10. COMMITMENTS AND CONTINGENCIES (Continued)

     Independent legal counsel and investment banking advisors have been
retained to advise the Special Committee in connection with the
transaction.  After incurring approximately $530,000 of expenses through
December 31, 2003, it is estimated that the remaining costs associated with
this process will be approximately $175,000.

     As previously reported, due to the length of time for the "going
private" transaction to be consummated, the Company has not submitted any
matters to a vote of its security holders since the Company's September 1,
2000 Annual Meeting.  In accordance with the rules and regulations of the
American Stock Exchange (AMEX), the Company was required to promptly notify
its stockholders and AMEX, in writing, indicating the reasons for the
failure to have a meeting and to use good faith efforts to ensure that an
annual meeting is held as soon as reasonably practicable.  The Company
expects to do this in its proxy materials to be filed in connection the
proposed "going private" transaction.  In addition, the Company will
include annual meeting materials in its revised proxy statement.  The
Company believed it was in violation of certain AMEX rules with respect to
the composition of the Board of Directors and the Audit Committee which
could subject the Company to civil penalties and/or the delisting of the
Company's stock.  The Company, based upon on-going discussions with AMEX
and the Company's legal counsel, now believes that none of the
aforementioned issues are of a material nature and any penalties, if
levied, would not be material to the Company's financial position or
results of operations.

NOTE 11. CAPITAL STOCK AND STOCK OPTIONS

     1,000,000 shares of preferred stock, $0.01 par value are authorized;
however, no shares have been issued.

     In 1990, the shareholders of the Company approved the 1990 Key
Employee Stock Incentive Plan, as amended, and the 1990 Non-Employee
(Outside Directors) Plan, as amended, and in 2000, the shareholders
approved a ten-year extension of both plans. The aggregate number of shares
currently authorized pursuant to the Key Employee Plan, as adjusted for
stock splits and shareholder-approved increases in 1994 and 1997, is
870,000 shares.  The number of shares and terms of each grant is determined
by the Compensation Committee of the Board of Directors, in accordance with
the 1990 Key Employee Plan, as amended.

     The Outside Directors Plan provides for annual grants, as adjusted for
stock splits, of 5,062 shares to non-employee directors.  Such grants are
granted on the earlier of June 30 or the date of the Company's Annual
Meeting of Shareholders, at the fair market value at the date of grant. The
aggregate number of shares reserved for granting under this plan, as
adjusted for stock splits, is 202,500.

     Stock options are granted at the discretion of the Compensation
Committee of the Board of Directors.  The options become exercisable one
year from the grant date and are exercisable within a maximum of 10 years
from the date of grant. Stock option activity for 2003, 2002, and 2001 is
set forth below:

                                    F-25
NOTE 11. CAPITAL STOCK AND STOCK OPTIONS (Continued)

                                  Key Employee           Outside
                                   Incentive     Avg.   Directors    Avg.
                                      Plan      Price      Plan     Price
__________________________________________________________________________
Outstanding at December 31, 2000..   653,470   $ 9.69     86,054   $ 8.98
Granted...........................    70,000     3.00     20,248     3.05
Canceled..........................   (76,000)   14.78    (10,124)   15.75
Exercised.........................      -                   -
                                   __________          __________

Outstanding at December 31, 2001..   647,470     8.36     96,178     7.02

Granted...........................    70,000     3.00     20,248     3.67
Canceled..........................  (146,590)    8.47    (15,186)   11.23
Exercised.........................      -                   -
                                   __________          __________

Outstanding at December 31, 2002..   570,880     7.68    101,240     5.72

Granted...........................    60,000     3.44     20,248     3.71
Canceled..........................  (184,550)    9.38    (20,248)   13.21
Exercised.........................      -                   -
                                   __________          __________
Outstanding at December 31, 2003..   446,330   $ 6.41    101,240   $ 3.82
                                   ==========          ==========

     The number of shares and average exercise price of options exercisable
at December 31, 2003, 2002 and 2001 were 396,330 shares at $6.79, 510,880
shares at $8.23, and 568,275 shares at $8.36, respectively, for the 1990
Key Employee Stock Incentive Plan and 80,992 at $3.85, 80,992 at $6.23, and
75,930 at $7.02, respectively, for the Outside Directors Plan.  At December
31, 2003 and 2002, 423,670 and 299,120 respectively, were available for
future grants under the terms of the 1990 Key Employee Stock Incentive Plan
and 101,260 shares and 101,260 shares, respectively, were available for
future grants under the terms of the Outside Directors Plan.

       The exercise price range of options outstanding and exercisable as
of December 31, 2003 for both the Key Employee Stock Incentive and Outside
Directors plans, the weighted average contractual lives remaining (in
years) and the weighted average exercise price are as follows:

                           Outstanding                 Exercisable
                   ____________________________   ___________________

    Exercise        Number     Average  Average     Number    Average
   Price Range     of shares    Life     Price    of shares    Price
  _______________  __________ _______  ________   ___________________

  $ 3.00 - $ 4.50    397,570    4.83    $ 3.59     327,322     $ 3.60
  $10.00 - $13.50    150,000    4.00    $12.15     150,000     $12.15
                   _________                     _________
                     547,570                       477,322
                   =========                     =========

                                     F-26


                               SIGNATURES


Pursuant to the requirements of Section 13 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.

By: /s/ Frank F. Ferola
   ___________________________________
   Frank F. Ferola
   President and Chairman of the Board
   April 13, 2004


By: /s/ David A. Spiegel
   ___________________________________
   David A. Spiegel
   Principal Financial Officer
   Principal Accounting Officer
   April 13, 2004




     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:


By: /s/ Frank F. Ferola              By:   /s/ Thomas M. D'Ambrosio
   ______________________________         ____________________________
   Frank F. Ferola, Principal             Thomas M. D'Ambrosio
   Executive Officer and Director         Vice President and Director
   Date: April 13, 2004                    Date: April 13, 2004


By: /s/ John DePinto                 By:   /s/ Curtis Carlson
   ______________________________         ____________________________
   John DePinto, Director                 Curtis Carlson, Director
   Date: April 13, 2004                    Date: April 13, 2004



By: /s/ Leonard Genovese             By:   /s/ Shouky Shaheen
   ______________________________         ____________________________
   Leonard Genovese, Director             Shouky Shaheen, Director
   Date: April 13, 2004                    Date: April 13, 2004


                                     30