UNITED-GUARDIAN, INC. Annual Report 2023
Excellence
Through
Innovation®
Cosmetic Ingredients | Medical Lubricants | Pharmaceutical Products | Sexual Wellness Ingredients
OFFICERS AND DIRECTORS
DONNA VIGILANTE
President
PETER A. HILTUNEN
Senior Vice President
Production and Procurement
ANDREA YOUNG
Chief Financial Officer & Controller
Treasurer
Secretary
CORPORATE PROFILE
KEN GLOBUS
Chairman of the Board of Directors
ARTHUR M. DRESNER
Director; Counsel to the law firm of
Duane Morris LLP
New York, NY
LAWRENCE F. MAIETTA
Director; Partner in the accounting firm of PKF O'Connor Davies, LLP
New York, NY
ANDREW A. BOCCONE
Director; Independent Business Consultant, Former President of Kline & Company, Inc. (business consulting firm), Little Falls, NJ
S. ARI PAPOULIAS
Director; Principal of ChemRise LLC
(a business advisory firm providing advice to companies in the chemicals industry), Tarrytown, NY
CATHERINE KOLINSKI
Director; Independent Business Consultant,
Former Vice President of Ashland Specialty Ingredients (manufacturer and distributor of specialty chemicals), Bridgewater, NJ
United-Guardian, Inc. is a publicly-traded (NASDAQ:UG), fully integrated research, development, and manufacturing company that has been supplying unique and innovative products to the personal care, health care, pharmaceutical, and industrial sectors since 1942. The company's products are developed and manufactured by the company's Guardian Laboratories Division at its 50,000 square foot facility in Hauppauge, New York. The cosmetic ingredients are marketed through a worldwide network of distributors and are used by many of the major multinational cosmetic companies. The pharmaceutical products are sold primarily to full-line drug wholesalers, which distribute them to pharmacies, hospitals, physicians, long-term care facilities, and other health care providers. The health care products are primarily medical lubricants marketed directly to manufacturers of medical devices
and other medical products, which incorporate them into their finished products and distribute them to hospitals, pharmacies, and other health care facilities. The specialty industrial line of products was discontinued after the second quarter of 2023. The LUBRAJEL® line of hydrogels is the company's most important product line and are used in both personal care and medical products. Innovation is a central theme of United-Guardian's strategy. The focus, at this time, is to continue expanding the pipeline of classic and naturally derived hydrogel products to address unmet market and customer needs. Over the years, the company has been issued over 32 patents. The company currently relies primarily on proprietary manufacturing methods and product formulations, which are protected as trade secrets, rather than patent protection. United-Guardian has received ISO 9001:2015 registration from DQS Inc., indicating that the company's documented procedures and overall operations have attained the very high level of quality needed for this global certification level.
LETTER TO STOCKHOLDERS
Dear Stockholder:
This past year was a challenging one for us, with economic issues still negatively impacting our sales in China, and the temporary production suspension of Renacidin® irrigating solution. Late last year, our contract manufacturer of Renacidin temporarily suspended production resulting in our inability to bring in new inventory and requiring us to allocate our existing inventory to try to ensure that our product was available throughout as much of the country as possible.
I am pleased to report that production of Renacidin has now resumed, and we began shipping some initial batches we received from our contract manufacturer at the end of March. Since then, we have received additional production batches, and we have increased the amounts that we ship to each of our distributors. We are making every effort to make the product available to as many patients as possible, especially those that depend on the product. We expect to fulfill orders in their entirety and be back to normal inventory levels by the end of April.
As a result of the Renacidin production issue, as well as the continuing economic issues that have impacted our sales in China, net income for FY 2023 remained relatively flat compared with FY 2022. Net sales for the year decreased by 14% from $12,698,503 in 2022 to $10,885,154 in 2023, and net income increased from $2,569,512 ($0.56 per share) in 2022 to $2,581,370 ($0.56 per share) in 2023. The decrease in overall sales was due primarily to a decrease in sales of our cosmetic ingredients, which decreased by 20%
from $5,167,909 in 2022 to $4,132,334 in 2023. A decline in sales to our largest distributor, Ashland Specialty Ingredients ("ASI"), was responsible for 19% of the total decrease. According to ASI, the primary reasons for the decrease in sales were customers maintaining lower inventory levels and changing to just-in-time order patterns. Reduced sales in China were responsible for the most significant sales decrease when comparing the regions for which ASI is responsible. We are working with ASI to better understand the market in China and our share of that market, how we can remain competitive there, and what strategies are needed to be successful in this ever-evolving landscape. We are currently in negotiations with ASI on a new marketing agreement, which includes discussions on current marketing territories, competition, market penetration and ways to stimulate sales. While these discussions are going on, we will continue to work with ASI as we have in the past, fulfilling customer orders and discussing marketing strategies to promote our products more effectively.
In regard to Renacidin, over the past few months we have had in-depth conversations with patients and healthcare professionals who have provided valuable insight into the use and need for Renacidin. We have learned more about our core patient group and what additional steps we need to take to expand brand awareness. We will be working with a marketing firm to aid us in conducting a market research study. The study will be conducted over a two-month period with insight from healthcare professionals who currently prescribe our product. This information will enable us to create a marketing campaign aimed at providing healthcare professionals with clinical information on Renacidin. We are also exploring the possibility of expanding sales of Renacidin into Europe and are in discussions with a company that is very interested in pursuing this with us
United-Guardian, Inc. Annual Report 2023 1
and is in the process of investigating the costs and market potential. While these discussions are in the early stages, we are excited about the possibility of bringing Renacidin to patients outside the U.S.
Brenntag Specialties ("Brenntag"), the new marketer and distributor for our Natrajel™ line of sexual wellness ingredients in the U.S. and Canada, began its marketing efforts for the new product line late last year, and we are continuing to explore the potential in this market, both in North America and around the world. Brenntag will be presenting formulations, which include our Natrajel products, at In-Cosmetics Global Trade Show this spring. We are looking forward to gaining customer insight and feedback from the event. We understand that marketing a new product line takes time, but we have been very encouraged by the number of sample requests that we have received so far.
We are also in the process of negotiating a new marketing agreement that will expand our reach in the medical lubricant market. The agreement will initially include two countries in Europe, with the possibility of expanding that to other European countries as well as countries in the Middle East and Africa. Our distribution partner has identified areas within the healthcare space for which our medical lubricants would be an ideal fit. They will also explore other healthcare markets, including nutraceuticals, diagnostics, and veterinary medicine, where they see potential for our products. This agreement will enable us to explore new markets and provide additional opportunities to develop new products.
Finally, our research team continues to develop ingredients to meet the needs of our cosmetic customers. Companies that produce skin care and hair care products continue to need ingredients that are natural and multifunctional. Our hydrogels meet this market need by adding hydration, lubrication, sensory enhancements, and texture, while also maintaining our commitment to using sustainable sources, green chemistry, and limiting our impact on the environment during the manufacturing processes. In addition, we continue to see the need for new textures and sensory products, and currently have a few concepts
in various stages of development. Along with expanding our product portfolio, we are re-evaluating the marketing strategy for our cosmetic ingredients. We are in the process of hiring a Director of Marketing to spearhead our marketing strategy by increasing brand awareness, understanding our market presence, and evaluating our commercialization channels.
In 2023, we identified ways to expand each of our product categories and began finding partners to bring those ideas to tangible goals. In 2024, we began formalizing those relationships, and with the efforts from our new marketing director, we will begin to implement those strategies. We are hopeful that our sales for 2024 will reflect the efforts we have made so far in positioning ourselves for future growth.
Sincerely,
UNITED-GUARDIAN, INC.
Donna Vigilante
President
2 United-Guardian, Inc. Annual Report 2023
STATEMENTS OF INCOME
Years ended December 31, | |||||||||
2023 | 2022 | ||||||||
Net sales | $10,885,154 | $12,698,503 | |||||||
Costs and expenses: | |||||||||
Cost of sales | 5,479,566 | 5,996,376 | |||||||
Operating expenses | 2,078,564 | 2,174,127 | |||||||
Research and development | 463,992 | 490,770 | |||||||
Total costs and expenses | 8,022,122 | 8,661,273 | |||||||
Income from operations | 2,863,032 | 4,037,230 | |||||||
Other income (expense): | |||||||||
Investment income | 306,651 | 236,695 | |||||||
Net gain (loss) on marketable securities | 81,095 | (1,046,245) | |||||||
Total other income (expense) | 387,746 | (809,550) | |||||||
Income before provision for income taxes | 3,250,778 | 3,227,680 | |||||||
Provision for income taxes | 669,408 | 658,168 | |||||||
Net income | $ | 2,581,370 | $ | 2,569,512 | |||||
Earnings per common share (basic and diluted) | $ | 0.56 | $ | 0.56 | |||||
Weighted average shares (basic and diluted) | 4,594,319 | 4,594,319 |
See Notes to Financial Statements
United-Guardian, Inc. Annual Report 2023 3
BALANCE SHEETS
ASSETS
December 31, | |||||||
2023 | 2022 | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 8,243,122 | $ | 830,452 | |||
Marketable securities | 851,318 | 5,653,516 | |||||
Accounts receivable, net of allowance for credit losses | |||||||
of $16,672 in 2023 and $20,063 in 2022 | 1,566,839 | 1,427,576 | |||||
Inventories, net | 1,223,506 | 1,672,012 | |||||
Prepaid expenses and other current assets | 191,708 | 201,846 | |||||
Prepaid income taxes | 176,220 | 185,228 | |||||
Total current assets | 12,252,713 | 9,970,630 | |||||
Deferred income taxes, net | 50,930 | 110,544 | |||||
Property, plant, and equipment: | |||||||
Land | 69,000 | 69,000 | |||||
Factory equipment and fixtures | 4,669,936 | 4,585,055 | |||||
Building and improvements | 2,976,577 | 2,895,742 | |||||
Total property, plant, and equipment | 7,715,513 | 7,549,797 | |||||
Less accumulated depreciation | 7,096,318 | 6,990,636 | |||||
Total property, plant, and equipment, net | 619,195 | 559,161 | |||||
TOTAL ASSETS | $ | 12,922,838 | $ | 10,640,335 | |||
See Notes to Financial Statements
4 United-Guardian, Inc. Annual Report 2023
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, | ||||||||
2023 | 2022 | |||||||
Current liabilities: | ||||||||
Accounts payable | $ | 134,449 | $ | 30,415 | ||||
Accrued expenses | 1,363,044 | 1,322,056 | ||||||
Deferred revenue | 15,498 | - | ||||||
Dividends payable | 21,265 | 21,220 | ||||||
Total current liabilities | 1,534,256 | 1,373,691 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity: | ||||||||
Common stock, $.10 par value; 10,000,000 shares | ||||||||
authorized; 4,594,319 shares issued and outstanding at | ||||||||
December 31, 2023 and 2022, respectively | 459,432 | 459,432 | ||||||
Retained earnings | 10,929,150 | 8,807,212 | ||||||
Total stockholders' equity | 11,388,582 | 9,266,644 | ||||||
TOTAL LIABILITIES AND | ||||||||
STOCKHOLDERS' EQUITY | $ | 12,922,838 | $ | 10,640,335 | ||||
See Notes to Financial Statements
United-Guardian, Inc. Annual Report 2023 5
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2023 and 2022 | |||||||||||||||
Common stock | Retained | ||||||||||||||
Shares | Amount | earnings | Total | ||||||||||||
Balance, January 1, 2022 | 4,594,319 | $459,432 | $ | 9,361,837 | $ 9,821,269 | ||||||||||
Net income | - | - | 2,569,512 | 2,569,512 | |||||||||||
Dividends declared, not paid | |||||||||||||||
($0.68 per share) | - | - | (645) | (645) | |||||||||||
Dividends declared and paid | |||||||||||||||
($0.68 per share) | - | - | (3,123,492) | (3,123,492) | |||||||||||
Balance, December 31, 2022 | 4,594,319 | $459,432 | $ | 8,807,212 | $ 9,266,644 | ||||||||||
Net income | - | - | 2,581,370 | 2,581,370 | |||||||||||
Dividends declared, not paid | |||||||||||||||
($0.10 per share) | - | - | (45) | (45) | |||||||||||
Dividends declared and paid | |||||||||||||||
($0.10 per share) | - | - | (459,387) | (459,387) | |||||||||||
Balance, December 31, 2023 | 4,594,319 | $459,432 | $ | 10,929,150 | $11,388,582 | ||||||||||
See Notes to Financial Statements
6 United-Guardian, Inc. Annual Report 2023
STATEMENTS OF CASH FLOWS
Years ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 2,581,370 | $ | 2,569,512 | |||||||
Adjustments to reconcile net income to net cash provided by | |||||||||||
operating activities: | |||||||||||
Depreciation and amortization | 105,682 | 135,396 | |||||||||
(Gain) loss on sale of asset | (10,000) | 2,445 | |||||||||
Net (gain) loss on marketable securities | (81,095) | 1,046,245 | |||||||||
Allowance for credit losses | (3,391) | (189) | |||||||||
Allowance for obsolete inventory | (17,000) | 29,000 | |||||||||
Deferred income taxes | 59,614 | (193,766) | |||||||||
(Increase) decrease in operating assets: | |||||||||||
Accounts receivable | (135,872) | 385,959 | |||||||||
Inventories | 465,506 | (290,223) | |||||||||
Prepaid expenses and other current assets | 10,138 | (9,267) | |||||||||
Prepaid income taxes | 9,008 | (185,228) | |||||||||
Increase (decrease) in operating liabilities: | |||||||||||
Accounts payable | 104,034 | (380,479) | |||||||||
Accrued expenses | 40,988 | (305,334) | |||||||||
Deferred revenue | 15,498 | (190,164) | |||||||||
Income taxes payable | - | (88,738) | |||||||||
Net cash provided by operating activities | 3,144,480 | 2,525,169 | |||||||||
Cash flows from investing activities: | |||||||||||
Acquisitions of property, plant and equipment | (165,716) | (75,179) | |||||||||
Proceeds from sale of asset | 10,000 | 37,039 | |||||||||
Purchases of marketable securities | (621,852) | (1,931,969) | |||||||||
Proceeds from sales of marketable securities | 5,505,145 | 2,867,671 | |||||||||
Net cash provided by investing activities | 4,727,577 | 897,562 | |||||||||
Cash flows from financing activities: | |||||||||||
Dividends paid | (459,387) | (3,123,492) | |||||||||
Net cash used in financing activities | (459,387 | ) | (3,123,492) | ||||||||
Net increase in cash and cash equivalents | 7,412,670 | 299,239 | |||||||||
Cash and cash equivalents, beginning of year | 830,452 | 531,213 | |||||||||
Cash and cash equivalents, end of year | $ | 8,243,122 | $ | 830,452 | |||||||
Supplemental disclosure of cash flow information: | |||||||||||
Taxes paid | $ | 600,000 | $ | 1,125,000 | |||||||
Supplemental disclosure of non-cash items: | |||||||||||
Dividends payable | $ | 45 | $ | 645 | |||||||
See Notes to Financial Statements
United-Guardian, Inc. Annual Report 2023 7
NOTES TO FINANCIAL STATEMENTS
NOTE A
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
United-Guardian, Inc. ("Registrant" or "Company") is a Delaware corporation that, through its Guardian Laboratories division, manufactures and markets cosmetic ingredients, pharmaceutical products, medical lubricants and sexual wellness ingredients. Prior to July 1, 2023, the Company manufactured and reported sales of a line of specialty industrial products; however, this product line was discontinued after the second quarter of 2023 due to low sales volume with no growth prospects. The Company also conducts research and product development, primarily related to the development of new and unique cosmetic ingredients. The Company's research and development department also modifies, refines, and expands the uses for existing products, with the goal of further developing the market for the Company's products. Two major product lines, Lubrajel and Renacidin Irrigation Solution ("Renacidin") together accounted for approximately 94% and 92% of the Company's sales for the years ended December 31, 2023 and December 31, 2022, respectively. Lubrajel accounted for approximately 55% and 59% of the Company's sales for the years ended December 31, 2023 and December 31, 2022, respectively, and Renacidin accounted for approximately 38% and 33% of the Company's sales for the years ended December 31, 2023 and December 31, 2022, respectively.
Impact of Global Supply Chain Instability
and Inflation
The increased raw material prices that the Company experienced during 2022 and the beginning of 2023 stabilized during the latter part of 2023. The continued supply chain instability, primarily caused by military tensions in the Middle East, has impacted vessels' access to the Red Sea and Suez Canal.
The Company is working closely with its suppliers regarding lead times and continues to closely monitor this situation. Although we have not yet experienced
any delays in receiving raw materials or an increase in shipping costs, we are aware that the situation is fluid and could impact us at any time. If that occurs, we may experience longer lead times and increased shipping costs for some of our raw materials, which may impact our future gross margins. As a result of this global supply chain instability, there continues to be uncertainty regarding the potential impact on our operations or financial results and we are unable to provide an accurate estimate or projection as to what the future impact will be.
Use of Estimates
In preparing financial statements in conformity with a Generally Accepted Accounting Principles in the United States of America ("US GAAP"), management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates. Such estimated items include the allowance for credit losses, reserve for inventory obsolescence, accrued distribution fees, outdated material returns, possible impairment of marketable securities and the allocation of overhead.
Accounts Receivable and Reserves
As of January 1, 2023, the Company adopted FASB Accounting Standards Update ("ASU") No.
2016-13, Measurement of Credit Losses on Financial Instruments, and all subsequently issued related amendments, which changed the methodology used to recognize impairment of the Company's contract receivables. Under this ASU, financial assets are presented at the net amount expected to be collected, requiring immediate recognition of estimated credit losses expected to occur over the asset's remaining life. This is in contrast to previous U.S. GAAP, under which credit losses were not recognized until it was probable that a loss had been incurred. The Company performed its expected credit loss calculation based
8 United-Guardian, Inc. Annual Report 2023
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United-Guardian Inc. published this content on 23 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 April 2024 14:28:05 UTC.
