What changed in UNITED GUARDIAN INC's 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of UNITED GUARDIAN INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+165 added−149 removedSource: 10-K (2024-03-22) vs 10-K (2023-03-23)
Top changes in UNITED GUARDIAN INC's 2023 10-K
165 paragraphs added · 149 removed · 108 edited across 4 sections
- Item 1. Business+96 / −90 · 69 edited
- Item 7. Management's Discussion & Analysis+62 / −53 · 33 edited
- Item 5. Market for Registrant's Common Equity+6 / −5 · 5 edited
- Item 3. Legal Proceedings+1 / −1 · 1 edited
Item 1. Business
Business — how the company describes what it does
69 edited+27 added−21 removed24 unchanged
Item 1. Business
Business — how the company describes what it does
69 edited+27 added−21 removed24 unchanged
2022 filing
2023 filing
Biggest changeAs part of the assessment, it was determined that we were strong in the following four areas: 1) Environmental a) Company-specific emergency preparedness and response procedure regarding customer health and safety b) Measures to detect and/or eliminate accidental water contamination c) Formalized procedure related to materials/chemicals management d) Provision of Safety Data Sheets e) Employee awareness/training program on transportation of hazardous materials f) Measures to avoid emissions of dust or particles 12 UNITED-GUARDIAN, INC. 2) Labor & Human Rights a) Labor and human rights policy b) Formalized procedure related to employee health and safety c) Compensation for extra or atypical working hours d) Additional leave beyond standard vacation days e) Bonus scheme related to Company performance f) Heath care coverage of employees in place g) Whistleblower procedure on discrimination and harassment h) Awareness training regarding diversity, discrimination and/or harassment i) Regular assessment (yearly) of individual performance j) Active preventative measures for stress and noise k) Training of relevant employees on health and safety risks and best working practices 3) Ethics a) Disciplinary sanctions to deal with policy violations b) Policy on information security c) Polices on corruption d) Whistleblower procedure to report ethics issues 4) Sustainable Procurement a) RSPO Supply Chain Certification b) Formal assessment of supplier’s progress with regards to REACH requirements c) No use of tin, tantalum, tungsten, gold, and/or their derivatives Areas that required continual improvements were reviewed, and programs and policies were implemented as follows: 1) Environmental impact from product end of life: we joined a prescription take-back program for our pharmaceutical products in the state of California. 2) Measures on energy consumption and GHG’s: we created a carbon footprint procedure that will roll out later in 2023 to assess our current energy consumption, with the goal of reducing that consumption in subsequent years. 3) Established formal CSR Policy: we created a CSR policy to establish a framework for our commitment to sustainable performance.
Biggest changeSustainable Procurement: ● RSPO Supply Chain Certification ● Formal assessment of supplier’s progress with regards to REACH requirements ● No use of tin, tantalum, tungsten, gold, and/or their derivatives Areas that required continual improvements were reviewed, and programs and policies were implemented as follows: 1) Environmental impact from product end of life: we joined a prescription take-back program for our pharmaceutical products in the state of California. 2) Measures on energy consumption and GHG’s: we created a carbon footprint procedure that we continue to update and plan to roll out in 2024.
MEDICAL LUBRICANTS Our medical lubricants are sold directly to manufacturers and marketers of finished products or to the contract manufacturers utilized by those companies. Sales of our medical lubricants are shipped EXW from our facility in Hauppauge, New York.
MEDICAL LUBRICANTS Our medical lubricants are sold directly to manufacturers and marketers of finished medical products or to the contract manufacturers utilized by those companies. Sales of our medical lubricants are shipped EXW from our facility in Hauppauge, New York.
Many key competitors are significantly larger than us and have greater financial resources, leading to greater operating and financial flexibility. To improve our competitive position, we are strengthening our core capabilities and investing in product development, especially in naturally derived products. We will also continue providing high-quality products, excellent technical service and continue to be a reliable supplier.
Many key competitors are significantly larger than us and have greater financial resources, leading to greater operating and financial flexibility. To improve our competitive position, we are strengthening our core capabilities and investing in product development, especially in naturally-derived products. We will also continue providing high-quality products, excellent technical service and we will continue to be a reliable supplier.
Since sales of our products are denominated in U.S. Dollars, our selling prices are generally not affected by fluctuations in foreign currency exchange rates, except to the extent that a stronger dollar compared with foreign currencies can make our products less competitive in foreign markets, sometimes requiring adjustments to our prices in order to be more competitive.
Since sales of our products are in U.S. Dollars, our selling prices are generally not affected by fluctuations in foreign currency exchange rates, except to the extent that a stronger dollar compared with foreign currencies can make our products less competitive in foreign markets, sometimes requiring adjustments to our prices in order to be more competitive.
We focus on the development of products that fill unmet market needs, have unique properties, and use proprietary technology that we typically protect as trade secrets rather than with patents. Many of our products are marketed through collaborative agreements with larger companies.
We focus on the development of products that fill unmet market needs, have unique properties, and use proprietary technology that we typically protect as trade secrets rather than with patents. Many of our products are marketed through collaborative distribution agreements with larger companies.
COMPETITIVE PAY AND BENEFITS We are committed to paying our employees in a fair and equitable manner, regardless of race, gender or country of origin. We believe employees should be compensated equitably based on performance, skills, and experience. We offers a competitive benefits program to support employees through all life stages.
COMPETITIVE PAY AND BENEFITS We are committed to paying our employees in a fair and equitable manner, regardless of race, gender or country of origin. We believe employees should be compensated equitably based on performance, skills, and experience. We offer a competitive benefits program to support employees through all life stages.
Our medical and specialty industrial products are sold directly by us to the end users of those products or, in some cases, to contract manufacturers used by some of those end users. RESEARCH AND DEVELOPMENT Our research and development (“R&D”) team’s main focus is to develop new products and product-line extensions.
Our medical products are sold directly by us to the end users of those products or, in some cases, to contract manufacturers used by some of those end users. RESEARCH AND DEVELOPMENT Our research and development (“R&D”) team’s main focus is to develop new products and product-line extensions.
If necessary, we would also be able to sell directly to the end users of our products until such time as a new distributor is put in place. 10 UNITED-GUARDIAN, INC. Our pharmaceutical products are sold to, and distributed by, full-line drug wholesalers throughout the United States.
If necessary, we would also be able to sell directly to the end users of our products until such time as a new distributor is put in place. Our pharmaceutical products are sold to, and distributed by, full-line drug wholesalers throughout the United States.
TALENT MANAGEMENT The talent management process includes a well-established performance management process that seeks to provide employees ongoing feedback to enhance their performance in support of business objectives.
TALENT MANAGEMENT The talent management process includes a well-established performance assessment process that seeks to provide employees with ongoing feedback to enhance their performance in support of business objectives.
We are committed to using green chemistry principles to produce biodegradable, natural, and safe products with renewable feedstocks. SOLID WASTE We do not produce hazardous waste. We comply with U.S. Environmental Protection Agency (“EPA”) and Department of Transportation’s (“DOT”) regulations for the disposal of the solid waste.
We are committed to using green chemistry principles to produce biodegradable, natural, and safe products with renewable feedstocks. 13 UNITED-GUARDIAN, INC. SOLID WASTE We do not produce hazardous waste. We comply with U.S. Environmental Protection Agency (“EPA”) and Department of Transportation’s (“DOT”) regulations for the disposal of the solid waste.
PRODUCTS - PHARMACEUTICALS RENACIDIN is a prescription drug approved by the FDA that is used primarily to prevent and to dissolve calcifications in urethral catheters. We maintain a specific website dedicated to this product at www.renacidin.com. 7 UNITED-GUARDIAN, INC. CLORPACTIN ® WCS- 90 is a chlorine-based drug that is marketed as a topical antimicrobial and is also used in urology.
PRODUCTS - PHARMACEUTICALS RENACIDIN is a prescription drug approved by the FDA that is used primarily to prevent and to dissolve calcifications in urethral catheters. We maintain a specific website dedicated to this product at www.renacidin.com. CLORPACTIN ® WCS- 90 (“Clorpactin”) is a chlorine-based drug that is marketed as a topical antimicrobial and is also used in urology.
Our products are sold under trademarks or trade names owned by the Company, some of which are registered with the United States Patent and Trademark Office as well as with comparable regulatory agencies in some foreign countries. We maintain a corporate website at www.u-g.com , and a specific website for Renacidin at www.renacidin.com .
Our products are sold under trademarks or trade names that we own, some of which are registered with the United States Patent and Trademark Office as well as with comparable regulatory agencies in some foreign countries. We maintain a corporate website at www.u-g.com , and a specific website for Renacidin at www.renacidin.com.
The pharmaceutical products are sold to hospitals and pharmacies primarily through full-line drug wholesalers, which purchase our products outright for resale to their customers. We also sell a small quantity of pharmaceutical products directly to hospitals and pharmacies.
We market our pharmaceutical products primarily through our dedicated Renacidin website. The pharmaceutical products are sold to hospitals and pharmacies primarily through full-line drug wholesalers, which purchase our products outright for resale to their customers. We also sell a small quantity of pharmaceutical products directly to hospitals and pharmacies.
Sales of those products accounted for approximately 39% of sales in 2022, compared with approximately 34% in 2021. During 2022 and 2021, we participated in various government drug rebate programs related to the sale of Renacidin®, our most important pharmaceutical product.
Sales of those products accounted for approximately 45% of sales in 2023, compared with approximately 39% in 2022. During 2023 and 2022, we participated in various government drug rebate programs related to the sale of Renacidin, our most important pharmaceutical product.
We have been in continuous compliance with ISO standards since November 1998. Between November 1998 and December 2003, we were registered under the ISO 9002 standard. From December 2003 to December 2009, we were registered under the ISO 9001:2000 standard. From December 2009 to July 2018, we were registered under the ISO 9001:2008 standard. 9 UNITED-GUARDIAN, INC.
We have been in continuous compliance with ISO standards since November 1998. Between November 1998 and December 2003, we were registered under the ISO 9002 standard. From December 2003 to December 2009, we were registered under the ISO 9001:2000 standard. From December 2009 to July 2018, we were registered under the ISO 9001:2008 standard.
Sales of our cosmetic ingredients represented approximately 41% of total our total sales for the year ended December 31, 2022. We believe that there is potential to continue growing the sales of our cosmetic ingredients through new product development, development of new product applications, development of additional claim substantiations, and geographic expansion.
Sales of our cosmetic ingredients represented approximately 38% and 41% of our total sales for the years ended December 31, 2023 and 2022, respectively. We believe that there is potential to continue growing the sales of our cosmetic ingredients through new product development, development of new product applications, development of additional claim substantiations, and geographic expansion.
INCLUSION AND DIVERSITY We focus significant resources on developing and retaining diverse talent and are committed to actively creating a collaborative environment of innovation that leverages the talents of a diverse workforce to drive sustainable growth and create value for our shareholders, customers, employees, and the community in which we operate. 13 UNITED-GUARDIAN, INC.
INCLUSION AND DIVERSITY We focus significant resources on developing and retaining diverse talent and are committed to actively creating a collaborative environment of innovation that leverages the talents of a diverse workforce to drive sustainable growth and create value for our stockholders, customers, employees, and the community in which we operate.
Domestic sales of medical lubricants accounted for approximately 3% of our total sales in 2022, compared with 4% in 2021. Although all shipments of medical lubricants to U.S. locations are considered domestic sales, a percentage of those shipments are subsequently shipped by some customers to foreign manufacturing facilities, which then produce finished products that could be marketed globally.
Domestic sales of medical lubricants accounted for approximately 3% of our total sales in both 2023 and 2022. Although all shipments of medical lubricants to U.S. locations are considered domestic sales, a percentage of those shipments are subsequently shipped by some customers to foreign manufacturing facilities, which then produce finished products that could be marketed globally.
INTELLECTUAL PROPERTY In recent years. we have elected to rely on trade secret protection to protect our intellectual property for proprietary product formulations and manufacturing methods. We will file for patent protection in situations where we believe that relying on trade secret protection alone would not provide sufficient protection. We own the Lubrajel®, Renacidin®, and Clorpactin® trademarks.
INTELLECTUAL PROPERTY In recent years, we have elected to rely on trade secret protection to protect our intellectual property for proprietary product formulations and manufacturing methods. We will file for patent protection in situations where we believe that relying on trade secret protection alone would not provide sufficient protection.
We expect our research and development expenses in 2023 to be higher than those of 2022 in order to support innovation and growth. Any additional increase in R&D expenses will also depend on whether capital investments are required in order to continue development work on, or to manufacture, any of the new products under development.
We expect our research and development expenses in 2024 to be higher than those in 2023 in order to support innovation and growth initiatives. Any additional increase in R&D expenses will also depend on whether capital investments are required in order to continue development work on, or to manufacture, any of the new products under development. 12 UNITED-GUARDIAN, INC.
HUMAN CAPITAL MANAGEMENT We currently have 24 employees, 4 of whom serve in an executive capacity, 15 in research, quality control and manufacturing, 3 in maintenance and construction, and 2 in office and administrative support services. Of the total number of employees, 23 are full time.
HUMAN CAPITAL MANAGEMENT We currently have 25 employees, 3 of whom serve in an executive capacity, 18 in research, quality control and manufacturing, 2 in maintenance and construction, and 2 in office and administrative support services. Of the total number of employees, 23 are employed full-time.
FOREIGN SALES For the years ended December 31, 2022 and 2021, approximately 25% and 20%, respectively, of our sales revenue was from foreign sources, and was derived from (a) sales of our cosmetic ingredients to foreign distributors, which accounted for approximately 9% of sales in both 2022 and 2021, and (b) sales of medical lubricants directly to certain customers in foreign countries, which accounted for approximately 16% and 11% of our sales revenue for the years ended December 31, 2022 and 2021, respectively.
FOREIGN SALES For the years ended December 31, 2023 and 2022, approximately 21% and 25%, respectively, of our sales revenue was from foreign sources, and was derived from (a) sales of our cosmetic ingredients to foreign distributors, which accounted for approximately 7% and 9% of sales, for the years ended December 31, 2023 and 2022, respectively, and (b) sales of medical lubricants directly to certain customers in foreign countries, which accounted for approximately 14% and 16% of our sales revenue for the years ended December 31, 2023 and 2022, respectively.
Sales are deemed final upon shipment, and we have no obligation to repurchase or allow the return of these goods unless they are defective. PRODUCTS – MEDICAL LUBRICANTS Our medical lubricants are also sold under the Lubrajel brand since they are water-based gel formulations designed to mainly provide sensory enhancement and lubrication to medical products.
Sales are deemed final upon shipment, and we have no obligation to repurchase or allow the return of these goods unless they are defective. 8 UNITED-GUARDIAN, INC. PRODUCTS – MEDICAL LUBRICANTS Our medical lubricants are also sold under the Lubrajel brand since they are hydrogel formulations designed to provide sensory enhancement and lubrication to medical products.
In addition, the R&D team provides ongoing technical assistance and know-how to quality assurance and manufacturing personnel to ensure consistent standards for our products and to deliver environmentally responsible products that exceed customer expectations. Our research and development expenses in 2022 were $490,770 compared with $478,642 in 2021.
In addition, the R&D team provides ongoing technical assistance and knowhow to quality assurance and manufacturing personnel to ensure consistent standards for our products and to deliver environmentally responsible products that exceed customer expectations. Our research and development expenses in 2023 were $463,992 compared with $490,770 in 2022.
Based on sales information provided by ASI, 66% of ASI’s sales of our products in 2022 were to customers in foreign countries, compared with 74% in 2021. ASI’s largest foreign market in both 2022 and 2021 was China, which accounted for approximately 38% of ASI’s sales of our products in 2022 and 42% in 2021.
Based on sales information provided by ASI, 69% of ASI’s sales of our products in 2023 were to customers in foreign countries, compared with 65% in 2022. ASI’s largest foreign market in both 2023 and 2022 was China, which accounted for approximately 29% of ASI’s sales of our products in 2023 and 38% in 2022.
In addition to the Lubrajel line of products, we also manufacture other cosmetic ingredients noted below: which accounted fortless than 10% of total sales in 2022: B-122 ™ is a powdered lubricant used in the manufacture of certain cosmetics, such as pressed powders, eyeliners, and rouges, as well as some industrial products.
In addition to the Lubrajel line of products, we also manufacture the following additional cosmetic ingredients, which accounted for less than 10% of total sales in 2023: B-122 ™ is a powdered lubricant used in the manufacture of certain cosmetics, such as pressed powders, eyeliners, and rouges, as well as some industrial products.
It is also a powerful disinfectant, fungicide, and deodorizer. Our pharmaceutical products represented 39% of our total sales for the year ended December 31, 2022. We believe that there is potential to grow the sales of our pharmaceutical products through geographic expansion.
It is also a powerful disinfectant, fungicide, and deodorizer. Our pharmaceutical products represented 45% and 39% of our total sales for the years ended December 31, 2023 and 2022 respectively. We believe that there is potential to grow the sales of our pharmaceutical products through geographic expansion. 9 UNITED-GUARDIAN, INC.
Our research and development department also modifies, refines, and expands the uses for existing products, with the goal of further developing the market for our products. The Company also develops new products using natural and environmentally friendly raw materials, which is a priority to many of the Company’s cosmetic customers. Our predecessor entity, United International Research, Inc.
The Company develops new products using natural and environmentally friendly raw materials, which is a priority to many of the Company’s cosmetic customers. The Company’s research and development department also modifies, refines, and expands the uses for existing products, with the goal of further developing the markets that its products are used in.
Domestic sales of cosmetic ingredients accounted for approximately 32% of total sales in 2022, compared with 41% in 2021. Sales to our largest distributor, ASI, accounted for approximately 32% of total sales in 2022 and 42% of sales in 2021. PHARMACEUTICALS : Our pharmaceutical products are marketed only in the United States and are sold primarily through full-line drug wholesalers.
Sales to our largest distributor, ASI, accounted for approximately 30% of total sales in 2023 and 32% of sales in 2022. 10 UNITED-GUARDIAN, INC. PHARMACEUTICALS : Our pharmaceutical products are marketed only in the United States and are sold primarily through full-line drug wholesalers.
COSMETIC INGREDIENTS The cosmetic ingredients we manufacture are marketed and sold to the end users through our worldwide network of distributors. Our cosmetic ingredients are currently sold globally by five distributors, of which Ashland Specialty Ingredients (“ASI”), a business segment of Ashland, Inc., is the largest.
Our cosmetic ingredients are currently sold globally by five distributors, of which Ashland Specialty Ingredients (“ASI”), a business segment of Ashland, Inc., is the largest.
(New York) was merged with and into a newly formed Delaware corporation by the same name, United-Guardian, Inc., for the purpose of changing the domicile to the State of Delaware. The cornerstone of our business is our product innovation. We use our product development and formulation expertise to maintain our market position and to propel future growth.
On September 14, 1987, United-Guardian, Inc., a New York corporation, was merged with and into a newly formed Delaware corporation by the same name, United-Guardian, Inc., for the purpose of changing the domicile to the State of Delaware. The cornerstone of our business is our product innovation.
All references in this Annual Report to “sales” or “Sales” shall mean “net sales” unless specifically identified as “gross sales.” PRODUCTS As stated above, we operate in one business segment, and our product lines are separated into four distinct categories: 4 UNITED-GUARDIAN, INC.
All references in this Annual Report to “sales” or “Sales” shall mean “net sales” unless specifically identified as “gross sales.” PRODUCTS As stated above, we operate in one business segment, and our current product lines are separated into four distinct categories: COSMETIC INGREDIENTS The cosmetic ingredients we manufacture are marketed and sold to end users through our worldwide network of distributors.
On February 10, 1982, a merger took place between UIR and Guardian Chemical Corporation ("Guardian"), an affiliate of UIR, whereby Guardian was merged into UIR and the name was changed to United-Guardian, Inc., a New York corporation. On September 14, 1987, United-Guardian, Inc.
Globus, the Company's Chairman and Director of Research until his death on April 9, 2009. On February 10, 1982, a merger took place between UIR and Guardian Chemical Corporation ("Guardian"), an affiliate of UIR, whereby Guardian was merged into UIR and the name was changed to United-Guardian, Inc., a New York corporation.
The EcoVadis assessment measured 21 key issues centered around the environment, labor & human rights, ethics, and sustainable procurement. In its latest evaluation we scored in the top 15% of companies evaluated.
The EcoVadis assessment measured 21 key issues centered on the environment, labor & human rights, ethics, and sustainable procurement. In its latest evaluation we scored in the top 15% of companies evaluated. As part of the assessment, it was determined that we were strong in the following four areas: 1.
ENVIRONMENTAL AND CORPORATE SOCIAL RESPONSIBILITY We have a proactive mindset for sustainability. We are committed to sustainable growth and minimizing our impact on the local community and the environment. We are committed to measuring and monitoring our impact on the environment and, where appropriate, making improvements. We comply in all material respects with all federal, state and local environmental regulations.
We are committed to measuring and monitoring our impact on the environment and, where appropriate, making improvements. We comply in all material respects with all federal, state and local environmental regulations. We have recently established a carbon footprint monitoring program.
The cosmetic ingredients manufactured by us are marketed to end users through our worldwide network of distributors and are currently used by many of the major manufacturers of cosmetic products. We ship our cosmetic ingredients to our distributors Ex Works (“EXW”) from our facility in Hauppauge, New York.
The cosmetic ingredients manufactured by the Company are marketed to end users through our worldwide network of distributors and are currently used by many of the major manufacturers of cosmetic products.
We also focus on the development of new products that fill unmet market needs and have unique properties. Our products are sold into stable and growing markets such as personal care, medical lubricants and pharmaceutical products. Our current product offerings include cosmetic ingredients, medical lubricants, pharmaceuticals and specialty industrial products.
We use our product development and formulation expertise to maintain our market position and to propel future growth. We also focus on the development of new products that fill unmet market needs and have unique properties. Our products are sold into stable and growing markets such as personal care, medical devices and pharmaceuticals.
Our other distributors are: Azelis UK Ltd in the United Kingdom, Sederma SAS, a subsidiary of Croda International Plc. in France, Safic-Alcan S.p.A. in Italy, and Azelis Cosmetics GmbH in Switzerland. We ship our cosmetic ingredients to our distributors EXW from our facility in Hauppauge, New York.
Our other cosmetic ingredient distributors are Azelis UK Ltd in the United Kingdom, Sederma SAS, a subsidiary of Croda International Plc., in France, Safic-Alcan S.p.A. in Italy, and Azelis Cosmetics GmbH in Switzerland. The Company is currently in the process of renegotiating some of its distribution agreements.
We have recently established a carbon footprint monitoring program. In 2023, we will be setting goals in order to minimize our impact on the environment. We have also joined initiatives for core raw materials, such as the Roundtable on Sustainable Palm Oil (“RSPO”), to ensure that we support suppliers in protecting the environment and the people in it.
Our plan is to review our current program to ensure it covers all pertinent environmental monitoring and establish goals in 2024. We have also joined initiatives for core raw materials, such as the Roundtable on Sustainable Palm Oil (“RSPO”), to ensure that we support suppliers in protecting the environment and the people in it.
Portions of our operating expenses are directly attributable to complying with federal, state, and local environmental statutes and regulations. In 2022 and 2021, we incurred approximately $39,000 and $32,000, respectively, in federal, state, and local environmental law compliance expenses.
Portions of our operating expenses are directly attributable to complying with federal, state, and local environmental statutes and regulations. In 2023 and 2022, we incurred approximately $41,000 and $39,000, respectively, in federal, state, and local environmental law compliance expenses. There was no material financial or other impact on our results of operations as a result of compliance with environmental laws.
The decision to discontinue this product line was made based on the fact that these products represented less than 2% of our gross sales over the past several years, and the small production scale Our product offerings are segregated into the following categories: ● Cosmetic Ingredients : Cosmetic ingredients is an extensive line of multifactional water-based gel formulations designed to mainly offer sensory enhancement, lubrication, texture and moisturization to personal care products. ● Medical Lubricants : Medical lubricants include a line of water-based gel formulations designed to mainly offer sensory enhancement and lubrication to medical products. ● Pharmaceutical Products : Pharmaceutical products include an FDA approved prescription drug that is used primarily to prevent and to dissolve calcifications in urethral catheters, as well as a chlorine-based topical antimicrobial. ● Industrial Products : Industrial products include cleaning solutions used in various industrial applications.
Our current product offerings are segregated into the following categories: ● Cosmetic Ingredients : Cosmetic ingredients include an extensive line of multifunctional hydrogel formulations designed to offer sensory enhancement, lubrication, texture and moisturization to personal care products. ● Medical Lubricants : Medical lubricants include a line of hydrogel formulations designed to offer sensory enhancement and lubrication to medical products. ● Pharmaceutical Products : Pharmaceutical products include an FDA approved prescription drug that is used primarily to prevent and to dissolve calcifications in urethral catheters, as well as a chlorine-based topical antimicrobial. 5 UNITED-GUARDIAN, INC. ● Sexual Wellness Ingredients : Sexual wellness ingredients include a line of hydrogel formulations designed to offer sensory enhancement, lubrication and moisturization to sexual wellness applications.
The distributors resell the products to their customers, who are typically major manufacturers and marketers of cosmetic and personal care products. They utilize our products in their finished products. The cosmetic ingredients are not sold on a consignment basis, so unless a product is determined to be defective, it is not returnable, except at our discretion.
The cosmetic ingredients are not sold on a consignment basis, so unless a product is determined to be defective, it is not returnable, except at our discretion.
ASI manufactures and markets globally an extensive line of personal care and pharmaceutical additives and various other specialty products. We sell our cosmetic ingredients directly to those distributors, which in turn resell those products to their customers for use in the formulation of one or more of the customers’ personal care and cosmetic products.
We sell our cosmetic ingredients directly to those distributors, which in turn resell our products to their customers for use in the formulation of one or more of the customers’ personal care and cosmetic products. Our non-pharmaceutical medical lubricants are sold directly to marketers of finished medical products or to the contract manufacturers utilized by those marketers.
CUSTOMERS Our cosmetic ingredients are currently marketed and sold globally by five distributors. Those distributors, in turn, market and distribute those products to their customers.
SEASONALITY Due to the nature of our business and the types of products that we market, we are not subject to any significant seasonal fluctuations in sales. CUSTOMERS Our cosmetic ingredients are currently marketed and sold globally by five distributors. Those distributors, in turn, market and distribute those products to their customers.
Those distributors in turn resell those products to their customers, who are typically the manufacturers and marketers of cosmetic and personal care products. The cosmetic ingredients are not sold on a consignment basis, so unless a product is determined to be defective, it is not returnable, except at the discretion of the Company.
The cosmetic ingredients are not sold on a consignment basis, so unless a product is determined to be defective, it is not returnable, except at the discretion of the Company. Our pharmaceutical products are sold primarily to several full-line drug wholesalers which in turn supply those products to pharmacies, physicians, and hospitals.
To address customer demand for phenoxyethanol-free products, we developed and launched Lubrajel DV free, Lubrajel IIXD free, Lubrajel MS free, Lubrajel NP Free and Lubrajel Oil free. In the last few years, to meet the growing consumer demand for “green” and sustainable products, we have focused on developing and launching new products which only contain ingredients that are considered “natural”.
In the last few years, to meet the growing consumer demand for “green” and sustainable products, we have focused on developing and launching new products which only contain ingredients that are considered “natural.” The Lubrajel products in the new natural line have been certified by the Cosmetic Organic and Natural Standard (“COSMOS”).
The Lubrajel medical lubricant products are primarily used in catheters, condoms, personal lubricants and in oral care applications such as mouth washes. 6 UNITED-GUARDIAN, INC. Currently, we offer six medical lubricant products for catheter lubrication, one product for the lubrication of condoms and one product for oral care.
The Lubrajel medical lubricant products are primarily used in catheters, condoms, personal lubricants and in oral care applications such as mouthwashes. Currently, we offer medical lubricant products for catheter lubrication, medical devices, condom lubrication and oral care. In addition, we develop and sell customized exclusive products for all these applications.
Item 1. Business. (a) Introduction United-Guardian, Inc. (“Registrant” or “Company”) is a Delaware corporation that, through its Guardian Laboratories division, manufactures and markets cosmetic ingredients, pharmaceuticals, medical lubricants, and specialty industrial products. We also conduct research and product development, primarily related to the development of new and unique cosmetic ingredients.
Item 1. Business OVERVIEW 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.
Some of the Lubrajel products also offer skin moisturization benefits. Many of the Lubrajel products are biodegradable. The Lubrajel products are primarily used in skin care products such as moisturizers, anti-aging creams, body lotions, face serums, spa products and sunscreens. The Lubrajel products are also used in makeup products such as primers and foundations.
PRODUCTS - COSMETIC INGREDIENTS: LUBRAJEL is an extensive line of multifunctional hydrogel formulations designed to mainly provide sensory enhancement, lubrication, and texture to personal care products. Some of the Lubrajel products also offer skin moisturization benefits. The Lubrajel products are primarily used in skin care products such as moisturizers, anti-aging creams, body lotions, face serums, spa products and sunscreens.
DOMESTIC SALES For the years ended December 31, 2022 and 2021, approximately 75% and 80%, respectively, of our sales were from domestic sources. COSMETIC INGREDIENTS : In the United States, our cosmetic ingredient products are marketed and distributed exclusively by ASI in accordance with a marketing agreement entered into in 1996 with its predecessor company, International Specialty Products (“ISP”).
COSMETIC INGREDIENTS : In the United States, our cosmetic ingredient products have been marketed and distributed exclusively by ASI in accordance with a marketing agreement entered into in 1996 with its predecessor company, International Specialty Products (“ISP”) and last automatically renewed on January 1, 2022.
We are committed to protecting the safety, health and security of our employees and that of the environment in which we operate. We are further committed and have implemented strict policies against anti-discrimination, anti-harassment and anti-bulling, and will not compromise employee health and safety or the environment for profit.
We are further committed and have implemented strict policies against anti-discrimination, anti-harassment and anti-bulling, and will not compromise employee health and safety or the environment for profit. ENVIRONMENTAL AND CORPORATE SOCIAL RESPONSIBILITY We have a proactive mindset for sustainability. We are committed to sustainable growth and minimizing our impact on the local community and the environment.
Each Lubrajel product offers unique benefits for the formulation of skin care and color cosmetic products. The basic product line includes Lubrajel CG, Lubrajel DV, Lubrajel IIXD, Lubrajel MS, Lubrajel NP and Lubrajel Oil. To address customer demand for preservative-free products, we developed and launched Lubrajel DV PF, Lubrajel IIXD PF, Lubrajel MS PF, Lubrajel Oil PF and Lubrajel PF.
To address customer demand for preservative-free products, we developed and launched Lubrajel DV PF, Lubrajel IIXD PF, Lubrajel MS PF, Lubrajel Oil PF and Lubrajel PF. To address customer demand for paraben-free products, we developed and launched Lubrajel DV free, Lubrajel IIXD free, Lubrajel MS free, Lubrajel NP Free and Lubrajel Oil free.
We have six major raw material vendors that together accounted for approximately 90% of our raw material purchases in 2022 and 94% in 2021. INVENTORIES, RETURNS, and ALLOWANCES We believe it is important to maintain moderate inventory levels of certain of our finished goods in order to fulfill purchase orders in a timely manner.
INVENTORIES, RETURNS, AND ALLOWANCES We believe it is important to maintain moderate inventory levels of certain of our finished goods in order to fulfill purchase orders in a timely manner. Historically, sufficient inventory levels, returns, and allowances have not been a significant factor in our business. BACKLOG We do not currently have any significant backlog of orders.
We believe that in the event ASI were to cease marketing and selling our products, alternative distribution agreements could be signed with other global distributors of cosmetic ingredients. These new appointed distributors would continue supplying products to customers currently using our products, without any significant interruption of sales.
Since our Lubrajel hydrogels are well-known and established specialties, we believe that in the event ASI or any of our other cosmetic product distributors were to cease marketing and selling our products, alternative distribution agreements could be signed with other distributors of cosmetic ingredients in the affected territory or territories.
PHARMACEUTICALS We sell our pharmaceutical products primarily to full-line drug wholesalers, which in turn supply those products to pharmacies, physicians, hospitals, long-term care facilities, the U.S. Department of Veterans Affairs, and other government agencies. We also sell a small quantity of pharmaceutical products directly to hospitals and pharmacies.
We believe that there is potential to continue growing the sales of our medical lubricants through new product development, development of new product applications and markets, and geographic expansion. PHARMACEUTICALS We sell our pharmaceutical products primarily to full-line drug wholesalers, which in turn supply those products to pharmacies, physicians, hospitals, long-term care facilities, the U.S.
Our products are separated into four distinct product categories: cosmetic ingredients, pharmaceuticals, medical lubricants, and industrial products. Each product category is marketed differently. Our cosmetic ingredients are currently marketed globally by five distributors, of which Ashland Specialty Ingredients (“ASI”), a business segment of Ashland, Inc., is the largest.
Our cosmetic ingredients are currently marketed globally by five distributors, of which Ashland Specialty Ingredients (“ASI”), a business segment of Ashland, Inc., is the largest. ASI manufactures and markets globally an extensive line of personal care and pharmaceutical additives and various other specialty products.
Information contained on our website is not part of this annual report on Form 10-K and is not incorporated by reference in this document. The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. 3 UNITED-GUARDIAN, INC.
Information contained on either website is not part of this Annual Report on Form 10-K and is not incorporated by reference in this document. 6 UNITED-GUARDIAN, INC.
The lubrication system employed in Lubrajel Fluid is specifically designed to be compatible with traditional condom release powders, which are used during the manufacture of latex condoms. LUBRAJEL LC, LUBRAJEL BA and LUBRAJEL FA are Lubrajel formulations that were developed for use in oral care applications.
It is compatible with traditional condom release powders which are used during the manufacture of latex condoms. Lubrajel LC, Lubrajel BA and Lubrajel FACO are hydrogel formulations developed for use in oral care applications. Sales of medical lubricants represented approximately 16% and 19% of our total sales for the years ended December 31, 2023 and 2022, respectively.
ASI also has the exclusive right to market four of the Company’s products globally: Lubrajel Marine , which was the second product in our Lubrajel Natural line of products; Lubrajel BA , an oral care product which was specifically developed for ASI in 2012; and two of our preservative-free products, Lubrajel Oil PF and Lubrajel II XD PF .
That agreement was for the marketing of the Company’s cosmetic ingredients in North America, Central America, South America, Asia Pacific, and EMEA. ASI also has the exclusive right to market four of the Company’s products globally: Lubrajel Marine, Lubrajel BA, Lubrajel Oil PF and Lubrajel II XD PF.
RAW MATERIALS We purchase raw materials from multiple sources in the United States and believe that raw material supplies will be available in quantities sufficient to meet demand in 2023. Although some of those raw materials may be manufactured overseas, all of our suppliers are located within the United States.
We own the Lubrajel®, Renacidin®, Clorpactin®, Excellence Through Innovation ®, and Natrajel™ trademarks. 11 UNITED-GUARDIAN, INC. RAW MATERIALS We purchase raw materials from multiple sources in the United States and believe that raw material supplies will be available in quantities sufficient to meet demand in 2024.
Our pharmaceutical products are sold primarily to several full-line drug wholesalers which in turn supply those products to pharmacies, physicians, and hospitals. We arrange for, and cover the cost of, shipping our pharmaceutical products, and sales of those products are final when shipped.
Department of Veterans Affairs, and other government agencies. We also sell a small quantity of pharmaceutical products directly to hospitals and pharmacies. We arrange for, and cover the cost of, shipping our pharmaceutical products, and sales of those products are final when shipped.
All such reports are available as soon as reasonably practicable after they are electronically filed with, or electronically furnished to, the U. S. Securities and Exchange Commission (“SEC”). These documents are also available in print to any stockholder who requests them.
Our website, www.u-g.com, which is made available free of charge, contains our annual reports on Form 10-K, quarterly reports on Form 10-Q, and any amendments to those reports. All such reports are available as soon as reasonably practicable after they are electronically filed with, or electronically furnished to, the U.S. Securities and Exchange Commission (“SEC”).
LUBRAJEL RR and RC are both water-based gels used primarily as lubricants for urinary catheters. Lubrajel RR and Lubrajel RC can withstand sterilization by gamma radiation, which is one of the methods of terminally sterilizing medical and hospital products. Lubrajel RR was the first radiation resistant Lubrajel product.
Our R-line of products, Lubrajel RRCG, Lubrajel RR, Lubrajel RC and Lubrajel RA can withstand sterilization by gamma radiation, which is one of the methods of terminally sterilizing medical and hospital products. Lubrajel Fluid is designed as an alternative to traditional silicone-based lubricants. The water-based formula offers easy clean up and is non-staining.
LUBRAJEL MGL is a medical lubricant with a lower viscosity than our standard medical lubricant, Lubrajel MG. It can be used as a general and instrument lubricant for use during physical exams. It can be applied to catheters, thermometers and other instruments to ensure ease of use and patient comfort.
Our medical lubricants include Lubrajel MG, Lubrajel MGL, Lubrajel RRCG, Lubrajel RR, Lubrajel RC, Lubrajel RA, Lubrajel Fluid, Lubrajel LC, Lubrajel BA, and Lubrajel FACO. Lubrajel MG and Lubrajel MGL are our standard medical lubricants and can be applied to catheters, thermometers and other instruments to ensure ease of use and patient comfort.
There was no material financial or other impact on our results of operations as a result of compliance with environmental laws. 11 UNITED-GUARDIAN, INC. EMPLOYEES HEALTH AND SAFETY We value all of our employees, suppliers, customers and distributors as well as the broader environment in which we all live and work.
EMPLOYEES HEALTH AND SAFETY We value all of our employees, suppliers, customers and distributors as well as the broader environment in which we all live and work. We are committed to protecting the safety, health and security of our employees and that of the environment in which we operate.
If necessary, we would also be able to sell directly to the end users of our products until a new distribution arrangement was put in place. PRODUCTS - COSMETIC INGREDIENTS: LUBRAJEL ® is an extensive line of multifunctional water-based gel formulations designed to mainly provide sensory enhancement, lubrication, and texture to personal care products.
These new distributors would continue supplying products to customers currently using our products, without any significant interruption of sales. If necessary, we would also be able to sell directly to the end users of our products until a new distribution arrangement was put in place.
All of our products were impacted, to varying degrees, by the volatility of raw material costs during 2022, and these conditions are likely to continue in 2023. The principal raw materials we use consist of common industrial organic and inorganic chemicals.
The principal raw materials we use consist of common industrial organic and inorganic chemicals. We have three major raw material vendors that together accounted for approximately 83% of our raw material purchases in 2023 and 80% in 2022.
(b) Description of Business We manufacture and market cosmetic ingredients, pharmaceuticals, medical lubricants, and specialty industrial products. We also conduct research and development, primarily related to the development of new and unique cosmetic ingredients.
Although there were no sales of these products during 2023, the Company anticipates that it will begin manufacturing and reporting sales of this new line of products in 2024. We also conduct research and development, primarily related to the development of new and unique cosmetic ingredients and medical lubricants.
The Lubrajel products in the new natural line have been certified by the Cosmetic Organic and Natural Standard (“COSMOS”). This standard is recognized globally by the cosmetic industry. LUBRAJEL NATURAL was the first product that was launched using only ingredients that are considered natural. This is a unique formulation of natural polymers and glycerin.
In the last few years, to meet the growing demand for “green” and sustainable products, the Company has focused on developing and launching new products which only contain ingredients that are considered “natural.” The Company’s Lubrajel products in the new natural line have been certified by the Cosmetic Organic and Natural Standard (“COSMOS”).
Removed
("UIR"), was founded and incorporated in New York in 1942 by Dr. Alfred R. Globus, the Company's Chairman and Director of Research until his death on April 9, 2009.
Added
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.
Removed
In the second quarter of 2023, we plan to discontinue the manufacturing and sale of our specialty industrial products.
Added
In October 2023, the Company entered into a distribution agreement with Brenntag Specialties, a global market leader in chemicals and ingredients distribution, for the distribution of the Company’s new Natrajel™ line of sexual wellness ingredients in the United States, Canada, Mexico, Central America and South America.
Removed
As discussed above, we plan to discontinue the manufacturing and sale of these products beginning in the second quarter of 2023. Our internet address is http://www.u-g.com. On this website, we make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and any amendments to those reports.
Added
Although there were no sales of these products during 2023, the Company anticipates that it will begin manufacturing and reporting sales of this new line of products in 2024. The Company conducts various research and development activities. The Company’s research and development department primarily develops new and unique cosmetic ingredients.
Removed
Our non-pharmaceutical medical lubricants (referred to hereinafter as the Company’s “medical lubricants”) and our specialty industrial products are sold directly to marketers of finished products or to the contract manufacturers utilized by those marketers. We market our pharmaceutical products primarily through our dedicated Renacidin® website.
Added
All the products that the Company markets, except for Renacidin®, are produced at its facility in Hauppauge, New York. Renacidin, a urological product, is manufactured for the Company by an outside contract manufacturer. Our predecessor entity, United International Research, Inc. ("UIR"), was founded and incorporated in New York in 1942 by Dr. Alfred R.
Removed
We also believe that if we choose to replace one or more of our current distributors, we would be able to put in place new distribution agreements to service our customers in all the geographic areas affected.
Added
Our current product offerings include cosmetic ingredients, medical lubricants, pharmaceuticals and sexual wellness ingredients.
Removed
Lubrajel Natural imparts a light and velvety skin feel, improving the sensory characteristics of personal care formulations, while providing a powerful skin moisturizing effect. LUBRAJEL MARINE ™ was the second product that we developed for our new line of natural products. It was formulated using naturally derived polymers, with some of the ingredients sourced from marine vegetation.
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Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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2022 filing
2023 filing
Biggest changeItem 3. Legal Proceedings From time to time, we are subject to ordinary routine litigation and claims incidental to our business. We are not currently involved in any legal proceedings that we believe are material. Item 4. Mine Safety Disclosures Not applicable. PART II
Biggest changeItem 3. Legal Proceedings From time to time, we are subject to ordinary routine litigation and claims incidental to our business. We are not currently involved in any legal proceedings that we believe are material. Item 4. Mine Safety Disclosures Not applicable. 16 UNITED-GUARDIAN, INC. PART II
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
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Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+1 added−0 removed0 unchanged
2022 filing
2023 filing
Biggest changeOn November 16, 2021, our Board of Directors declared a semi-annual cash dividend of $0.65 per share, which was paid on December 7, 2021 to all stockholders of record as of November 29, 2021. 14 UNITED-GUARDIAN, INC. Item 6. [RESERVED]
Biggest changeCash Dividends On July 12, 2023, our Board of Directors declared a cash dividend of $0.10 per share, which was paid on August 2, 2023, to all stockholders of record as of July 26, 2023. The Company did not declare any other dividends in 2023.
Cash Dividends On May 10, 2022, our Board of Directors declared a semi-annual cash dividend of $0.37 per share, which was paid on June 1, 2022 to all stockholders of record as of May 23, 2022.
On May 10, 2022, our Board of Directors declared a semi-annual cash dividend of $0.37 per share, which was paid on June 1, 2022 to all stockholders of record as of May 23, 2022.
On November 15, 2022, our Board of Directors declared a semi-annual cash dividend of $0.31 per share, which was paid on December 7, 2022 to all stockholders of record as of November 28, 2022.
On November 15, 2022, our Board of Directors declared a semi-annual cash dividend of $0.31 per share, which was paid on December 7, 2022 to all stockholders of record as of November 28, 2022. Item 6. [RESERVED]
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Common Stock is currently traded on the NASDAQ Global Market, under the symbol “UG” Holders of Record As of March 1, 2023, there were 371 holders of record of Common Stock.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Common Stock is currently traded on the NASDAQ Global Market, under the symbol “UG” Holders of Record As of March 1, 2024, there were 355 holders of record of Common Stock.
On May 18, 2021, our Board of Directors declared a semi-annual cash dividend of $0.48 per share, which was paid on June 7, 2021 to all stockholders of record as of May 31, 2021.
On January 30, 2024, our Board of Directors declared a cash dividend of $.0.25 per share, which was paid on February 20, 2024 to all stockholders of record as of February 12, 2024.
Added
In June of 2023, the Company’s Board of Directors changed the Company’s dividend declaration practice and expects to consider a semi-annual dividend declaration in January and July of each year.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
33 edited+29 added−20 removed17 unchanged
2022 filing
2023 filing
Biggest changeNet sales of our pharmaceutical products increased by approximately 4% in 2022 compared with the same period in 2021. The increase in net sales was due to the combination of 1) an increase in gross sales of both of our pharmaceutical products, and 2) a decrease in certain pharmaceutical-related rebates and allowances.
Biggest changeAccording to the supplier, it anticipates filling the Company’s outstanding orders in early March of 2024. 20 UNITED-GUARDIAN, INC. Net sales of our pharmaceutical products decreased by less than 1% in 2023 compared with the same period in 2022. The decrease in net sales was due to a decrease in certain pharmaceutical-related rebates and allowances.
(b) Pharmaceuticals Because there are fees, rebates, and allowances associated with sales of our two pharmaceutical products, Renacidin and Clorpactin, discussion of our pharmaceutical sales includes references to both gross sales (before fees, rebates and allowances) and net sales (after fees, rebates and allowances).
Pharmaceuticals Because there are fees, rebates, and allowances associated with sales of our two pharmaceutical products, Renacidin and Clorpactin, discussion of our pharmaceutical sales includes references to both gross sales (before fees, rebates and allowances) and net sales (after fees, rebates and allowances).
These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on sales for a reporting period. During 2022 and 2021, we participated in various government drug rebate programs related to the sale of Renacidin®, our most important pharmaceutical product.
These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on sales for a reporting period. During 2023 and 2022, we participated in various government drug rebate programs related to the sale of Renacidin, our most important pharmaceutical product.
We expect that this competitive environment will continue in 2023 and we plan to enhance our competitive position by strengthening our core capabilities and investing in new products, especially in the area of naturally-derived products. We will also continue providing high-quality products, excellent technical support, and the reliability our customers have come to expect from us. .
We expect that this competitive environment will continue in 2024 and we plan to enhance our competitive position by strengthening our core capabilities and investing in new products, especially in the area of naturally-derived products. We will also continue providing high-quality products, excellent technical support, and the reliability our customers have come to expect from us.
Our long-term liquidity position will be dependent upon our ability to generate sufficient cash flow from profitable , and we expect to continue to use our cash to make dividend payments, purchase marketable securities, and to take advantage of other opportunities that may arise that are in the best interest of our Company and our shareholders.
Our long-term liquidity position will be dependent upon our ability to generate sufficient cash flow from profitable operations, and we expect to continue to use our cash to make dividend payments, purchase marketable securities, and to take advantage of growth opportunities that may arise that are in the best interest of our Company and our stockholders.
We continue to work closely with our network of distributors to price our products as competitively as possible and, when appropriate, to offer additional volume discounts and more aggressive pricing to maintain and increase sales and expand our customer base. 17 UNITED-GUARDIAN, INC.
We work closely with our network of distributors to price our products as competitively as possible and, when appropriate, to offer additional volume discounts and more aggressive pricing to maintain and increase sales and expand our customer base.
During 2022 and 2021, we did not record an impairment charge regarding our investment in marketable securities because our management believes, based on an evaluation of the circumstances, that the decline in fair value below the cost of certain of our marketable securities is temporary. 15 UNITED-GUARDIAN, INC.
During 2023 and 2022, we did not record an impairment charge regarding our investment in marketable securities because management believes, based on an evaluation of the circumstances, that any decline in fair value below the cost of certain of our marketable securities is temporary.
Sales to our other four distributors decreased by a net of approximately 11%, and sales to four of our small direct cosmetic ingredient customers decreased by approximately 54%. We continue to experience global competition from Asian and European companies that manufacture and sell products that are competitive with our products.
In addition, sales to our other four distributors decreased by a net of approximately 26%, while sales to four of our small direct cosmetic ingredient customers increased by approximately 71%. We continue to experience global competition from Asian and European companies that manufacture and sell products that are competitive with our products.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk. The information to be reported under this item is not required of smaller reporting companies. Item 8. Financial Statements and Supplementary Data. Annexed hereto starting on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk. The information to be reported under this item is not required of smaller reporting companies. Item 8. Financial Statements and Supplementary Data. Annexed hereto starting on page F-1.
Net cash used in financing activities was $3,123,492 and $5,190,033 for the years ended December 31, 2022 and 2021, respectively. The decrease was due to the payment of lower dividends in 2022 compared with 2021. During 2022, we paid dividends of $0.68 per share compared with $1.13 per share in 2021.
Net cash used in financing activities was $459,387 and $3,123,492 for the years ended December 31, 2023 and 2022, respectively. The decrease was due to the payment of lower dividends in 2023 compared with 2022. During 2023, we paid dividends of $0.10 per share compared with $0.68 per share in 2022.
The following accounting policies are those that we consider critical to an understanding of the financial statements because their application places the most significant demands on management’s judgment. Our financial results might have been different if other assumptions had been used or other conditions had prevailed. Marketable Securities Our marketable securities include investments in equity and fixed income mutual funds.
The following accounting policies are those that we consider critical to an understanding of the financial statements because their application places the most significant demands on management’s judgment. Our financial results might have been different if other assumptions had been used or other conditions had prevailed. 17 UNITED-GUARDIAN, INC.
Our sales, as reported, are net of these rebates, some of which are estimated and are recorded in the same period that the revenue is recognized.
Our sales, as reported, are net of these rebates, some of which are estimated and are recorded in the same period that the revenue is recognized. In August of 2022, the Inflation Reduction Act (“IRA”) was signed into law.
Therefore, a significant change in the liquidity, financial position, or willingness to pay timely, or at all, of any one of our significant customers would have a significant impact on our results of operations and cash flows. Inventory Valuation Allowance In conjunction with our ongoing analysis of inventory valuation, management constantly monitors projected demand on a product-by-product basis.
Therefore, a significant change in the liquidity, financial position, or willingness to pay timely, or at all, of any one of our significant customers would have a significant impact on our results of operations and cash flows.
We continuously monitor collection and payments from customers and maintain an allowance for doubtful accounts based upon historical experience, anticipation of uncollectible accounts receivable and any specific customer collection issues that have been identified.
The Company performs ongoing credit evaluations of our customers and adjusts credit limits, as determined by a review of current credit information. We continuously monitor collection and payments from customers and maintain an allowance for credit losses based upon historical experience, anticipation of uncollectible accounts receivable and any specific customer collection issues that have been identified.
The decrease in gross profit was due to 1) a decrease in sales of our cosmetic ingredients in 2022 compared to 2021. These products carry a higher profit margin than our pharmaceutical products.
The first was a decrease in sales of our cosmetic ingredients in 2023 compared to 2022 which carry a higher profit margin than our pharmaceutical products, and in 2023 the percentage of pharmaceutical sales was 45% compared with 39% in 2022.
The decrease in pharmaceutical-related rebates and allowances in 2022 was primarily due to a decrease in rebates on sales of our products to the VA and a reduction in sales returns. (c) Medical Lubricants Sales of our medical lubricants increased by approximately 14% in 2022, from $2,171,204 in 2021 to $2,470,163 in 2022.
The decrease in pharmaceutical-related rebates and allowances in 2023 was primarily due to a decrease in allowances for outdated material returns. Medical Lubricants Sales of our medical lubricants decreased by approximately 29% in 2023, from $2,470,163 in 2022 to $1,750,632 in 2023.
We believe that we are still unable to provide an accurate estimate or projection as to what the future impact of the pandemic will be on our future operations or financial results.
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.
Gross sales of our two pharmaceutical products, Renacidin and Clorpactin, together increased by 3%, from $5,748,244 in 2021 to $5,929,216 in 2022. Gross sales of Renacidin increased by 3%, from $5,041,460 in 2021 to $5,181,190 in 2022, and gross sales of Clorpactin increased by 6% from $706,784 in 2021 to $748,026 in 2022.
Gross sales of our two pharmaceutical products, Renacidin and Clorpactin, together decreased by less than 1%, from $5,929,216 in 2022 to $5,894,220 in 2023. Gross sales of Renacidin decreased by approximately 1%, from $5,181,190 in 2022 to $5,127,069 in 2023, and gross sales of Clorpactin increased by 3% from $748,026 in 2022 to $767,151 in 2023.
Based on these projections, management evaluates the levels of write-downs required for inventory on hand and inventory on order from contract manufacturers.
Inventory Valuation Allowance In conjunction with our ongoing analysis of inventory valuation, management constantly monitors projected demand on a product-by-product basis. Based on these projections, management evaluates the levels of write-downs required for inventory on hand and inventory on order from contract manufacturers.
These competitive products are usually sold at a lower price than our products; however they may not compare favorably to the level of performance and quality of our products. The strengthening of the U.S. dollar in 2022, which reached its highest level in 20 years, made our products less competitive, as they became more expensive in other countries.
These competitive products are usually sold at a lower price than our products; however, they may not compare favorably to the level of performance and quality of our products.
RESULTS OF OPERATIONS Sales Sales decreased by approximately 9%, from $13,929,629 in 2021 to $12,698,503 in 2022. The decrease in sales was primarily due to a decrease in sales of our cosmetic ingredient products, specifically a decrease of 28% in sales to our largest distributor, ASI, in 2022 compared with 2021.
The decrease in sales was primarily due to a decrease in sales of our cosmetic ingredient products, specifically a decrease of 19% in sales to our largest distributor, ASI, in 2023 compared with 2022.
The decrease in working capital was mainly due to a decrease in marketable securities and accounts receivable. Accounts receivable (net of allowance for doubtful accounts) as of December 31, 2022 decreased from $1,813,346 in 2021 to $1,427,576 in 2022. The decrease in accounts receivable was due to a decrease in sales during the third and fourth quarter of 2022.
Accounts receivable (net of allowance for credit losses) as of December 31, 2023 increased from $1,427,576 in 2022 to $1,566,839 in 2023. The increase in accounts receivable was due to an increase in sales during the third and latter part of the fourth quarter of 2023.
The allowance for doubtful accounts receivable decreased from $20,252 in 2021 to $20,063 in 2022, and we believe that the net balance of our accounts receivable as of December 31, 2022 was, and continues to be, fully collectible. We generated cash from operations of $2,525,169 in 2022 compared with $5,313,277 in 2021.
The receivables turnover, or “Days Sales Outstanding,” for 2023, was 50 days, compared with 47 days in 2022. The allowance for credit losses on accounts receivable decreased from $20,063 in 2022 to $16,672 in 2023, and we believe that the net balance of our accounts receivable as of December 31, 2022 was, and continues to be, fully collectible.
Our marketable equity securities are reported at fair value with the related unrealized and realized gains and losses included in net income. Realized gains or losses on mutual funds are determined on a specific identification basis.
Marketable Securities Our marketable securities include investments in equity and fixed income mutual funds and Certificates of deposit. Our marketable equity securities are reported at fair value with the related unrealized and realized gains and losses included in net income. Certificates of Deposit with original maturities of more than 3 months are recorded at amortized cost.
Our effective income tax rate was 20.4% in 2022 and 20.7% in 2021. Liquidity and Capital Resources Working capital decreased from $9,245,629 at December 31, 2021 to $8,596,939 at December 31, 2022. The current ratio increased from 5.0 to 1 at December 31, 2021 to 7.3 to 1 at December 31, 2022.
Liquidity and Capital Resources Working capital increased from $8,596,939 at December 31, 2022 to $10,718,457 at December 31, 2023. The current ratio increased from 7.3 to 1 at December 31, 2022 to 8.0 to 1 at December 31, 2023. The increase in working capital was mainly due to an increase in cash and cash equivalents.
The decrease in 2022 was primarily due to a decrease in net income in 2022 compared with 2021, combined with decreases in accounts payable, accrued expenses and deferred revenue. Net cash provided by investing activities was $897,562 for the year ended December 31, 2022. Net cash used in investing activities was $183,475 for the year ended December 31, 2021.
We generated cash from operations of $3,144,480 in 2023 compared with $2,525,169 in 2022. The increase in 2023 was primarily due to a decrease in inventories and an increase in accounts payable. Net cash provided by investing activities was $4,727,577 for the year ended December 31, 2023 compared with $897,562 for the year ended December 31, 2022.
The increase in sales was driven by higher demand from one of our larger contract manufacturer customers located in China, whose sales doubled in 2022 compared to 2021. (d) Industrial Products Sales of our industrial products decreased by 22% in 2022 compared with 2021.
The decrease in sales was driven by decreased demand from one of our larger contract manufacturer customers located in China, who had built up inventory levels during 2022 to accommodate their customers’ delivery concerns.
The increase in net cash provided by investing activities was mainly due an increase in net proceeds from the sale of marketable securities combined with a decrease in acquisitions of property, plant and equipment in 2022 compared with 2021. 19 UNITED-GUARDIAN, INC.
The increase in net cash provided by investing activities was mainly due an increase in the sales of the Company’s marketable securities in the first half of 2023 compared with 2022. The proceeds from these sales were primarily reinvested in short-term U.S. Treasury Bills, which are included in cash and cash equivalents. 22 UNITED-GUARDIAN, INC.
We have performed an evaluation of our inventory on hand as of December 31, 2022, and believe the reserve is adequate to cover any slow-moving or obsolete inventory. We do not believe the value of our finished products, work in process or raw material inventories have been adversely affected by the current inflationary environment.
We have performed an evaluation of our inventory on hand as of December 31, 2023 and December 31, 2022, and believe the reserves are adequate to cover any slow-moving or obsolete inventory. RESULTS OF OPERATIONS Sales Sales decreased by approximately 14%, from $12,698,503 in 2022 to $10,885,154 in 2023.
Such allowances are determined based on historical experience under ASC Topic 606-10-32-8. We have not experienced significant fluctuations between estimated allowances and actual activity. The timing between recognition of revenue for product sales and the receipt of payment is not significant. Our standard credit terms, which vary depending on the customer, range between 30 and 60 days.
Such allowances are determined based on historical experience under ASC Topic 606-10-32-8. We have not experienced significant fluctuations between estimated allowances and actual activity. We have distribution agreements with certain distributors of our pharmaceutical products that entitle those distributors to distribution and services-related fees. We record distribution fees, and estimates of distribution fees, as offsets to revenue.
(a) Cosmetic Ingredients Sales of our cosmetic ingredients decreased by approximately 25%, from $6,872,714 in 2021, to $5,167,909 in 2022.
In addition, sales of the Company’s medical lubricants decreased by 29%, primarily due to a decrease in demand in 2023 due to foreign customers’ overstocking during 2022. Cosmetic Ingredients Sales of our cosmetic ingredients decreased by approximately 20%, from $5,167,909 in 2022, to $4,132,334 in 2023.
We expect to incur costs of approximately $100,000 in the first six months of 2023 in connection with an upgrade to our building sprinkler system.
In connection with an upgrade to our building sprinkler system, costs of approximately $99,000 have been incurred to date. The project is expected to be completed during the first half of 2024 with additional planned expenditures of $69,000.
We anticipate that operating expenses will remain relatively consistent for 2023. 18 UNITED-GUARDIAN, INC. Research and Development Expenses Research and development expenses increased by approximately 3%, from $478,642 in 2021 to $490,770 in 2022.
In connection with the Company’s 2024 growth initiative, we anticipate that operating expenses will increase modestly in 2024. Research and Development Expenses Research and development expenses decreased by approximately 5%, from $490,770 in 2022 to $463,992 in 2023. The decrease was primarily related to a decrease in payroll and payroll-related expenses.
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Management's Discussion and Analysis of Financial Condition and Results of Operations Impact of the Coronavirus Pandemic, Global Supply Chain Instability and Inflation While the coronavirus pandemic continues to impact certain areas of our operations, the current impact on our financial performance is coming primarily from 1) higher raw material costs and increased shipping costs, which had an impact on our gross profit margins during 2022, and 2) a decrease in cosmetic ingredient sales in China due to China’s zero-COVID mandate that was in effect for a substantial part of 2022.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 as inflation started to decline.
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The pandemic did not significantly affect our ability to obtain raw materials, but due to supply chain instability, we have experienced longer lead times and higher prices for many of our raw materials.
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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.
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The increased raw material prices had an impact on our gross profit margins in 2022 and may continue to have an impact on gross profit margins in upcoming quarters. In response to rising raw material prices, we have instituted price increases on many of our products, which will help to reduce the impact on our gross margins in the future.
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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.
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As a result of the lingering effects of the coronavirus pandemic as described above, combined with global supply chain instability, there continues to be uncertainty regarding the potential impact on our operations or financial results.
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Realized gains or losses on mutual funds are determined on a specific identification basis.
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While it is unknown whether inflation will continue to increase or will begin to mitigate during 2023, continued inflation is likely to result in further increases in raw material costs, shipping costs, and internal labor costs, which could impact our future results of operations.
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The IRA made significant changes to the current Medicare Part D benefit design as it relates to discounts available to enrollees from pharmaceutical manufacturers of brand name drugs. Beginning on January 1, 2025, the Centers for Medicare & Medicaid Services (“CMS”) will implement a new Medicare Part D Manufacturer Discount Program (“Discount Program”), which will replace the current CGDP.
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We use our judgment on a case-by-case basis to determine our ability to collect outstanding receivables and provide allowances for any receivables for which collection has become doubtful. As of December 31, 2022 and December 31, 2021, the allowance for doubtful accounts receivable was $20,063 and $20,252, respectively.
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The new Discount Program eliminates the coverage gap benefit phase, introduces pharmaceutical manufacturer discounts in the initial and catastrophic coverage phases, and lowers the cap on enrollee out-of-pocket costs. Under the new Discount Program, additional rebates are expected to be owed by pharmaceutical manufacturers due to the restructuring of the benefit periods.
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Prompt-pay discounts are offered to some customers; however, due to the uncertainty of the customers taking the discounts, the discounts are recorded when they are taken. We have distribution agreements with certain distributors of our pharmaceutical products that entitle those distributors to distribution and services-related fees.
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The overall financial impact of this new program will vary depending on the products being reimbursed, but does have the potential to increase Medicare Part D rebates for drug manufacturers.
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We record distribution fees, and estimates of distribution fees, as offsets to revenue. 16 UNITED-GUARDIAN, INC. Accounts Receivable Allowance We perform ongoing credit evaluations of our customers and adjust credit limits, as determined by a review of current credit information.
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At this time, the Company is unable to predict what future impact this new program will have on its financial condition; however, it submitted information to CMS requesting to be classified as a “specified small manufacturer.” If designated as such, the Company would be entitled to a multi-year phase-in period during which it would pay a lower percentage discount on drugs dispensed to beneficiaries.
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The decrease in sales of cosmetic ingredients was caused by the following factors: 1) supply chain issues faced by certain contract manufactures caused them to overstock products in 2021 in order to avoid not being able to obtain products in 2022, which resulted in a reduction of purchases of these products by certain contract manufacturers in 2022, and 2) lower demand in Asia, especially in China, due to China’s zero-COVID mandate that was in place for much of 2022.
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On January 31, 2024, the Company was notified by CMS that it qualified as a specified small manufacturer and will receive the discount phase-in discussed above. 18 UNITED-GUARDIAN, INC.
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We plan on discontinuing the manufacturing and sales of specialty industrial products in the second quarter of 2023. These products sales represent less than 2% of total sales. Gross Profit on Sales Gross profit on sales was 53% in 2022 compared with 59% in 2021.
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Accounting for Financial Instruments - Credit Losses On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses. In accordance with this standard, the Company recognizes an allowance for credit losses for its trade receivables to present the net amount expected to be collected as of the balance sheet date.
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In 2022, our pharmaceutical sales as a percentage of gross sales was 43% compared to 38% in 2021; 2) increased raw material and shipping costs in 2022 compared with 2021; 3) the recording of $206,621 in rebates payable to one of our marketing partners during 2022; and 4) the recording of a one-time Employee Retention Credit (“ERC”) in the amount of approximately $105,000 in 2021, which reduced cost of sales during that period.
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This allowance is based on the credit losses expected to arise over the life of the asset and are based on Current Expected Credit Losses (CECL). Implementation of this standard did not have a material effect on the Company’s financial statements.
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Operating Expenses Operating expenses increased by approximately 7%, from $2,035,970 in 2021 to $2,174,127 in 2022.
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When determining the reserve for credit losses, the Company takes into consideration current and future economic conditions and the impact that these changing dynamics may have on potential future losses. The timing between recognition of revenue for product sales and the receipt of payment is not significant.
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The increase was mainly attributable to the following factors: 1) increases in fees paid to the independent members of our Board of Directors during 2022 for special projects; 2) an increase in payroll and payroll related expenses, insurance expense and utilities; and 3) the recording of a one-time ERC in the amount of approximately $31,000 in 2021, which reduced operating expenses for that period.
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Our standard credit terms, which vary depending on the customer, range between 30 and 60 days. The Company provides an allowance for credit losses related to its accounts receivable for which collection is doubtful in accordance with ASU 2016-13.
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The increase was primarily related to an increase in payroll and payroll related expenses combined with the recording of an ERC during 2021 in the amount of $28,000 which reduced R&D expenses for that period. Investment Income Investment income increased by approximately 1%, from $233,857 in 2021 to $236,695 in 2022.
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As of December 31, 2023 and December 31, 2022, the allowance for credit losses on accounts receivable was $16,672 and $20,063, respectively. Prompt-pay discounts are offered to some customers; however, due to the uncertainty of the customers taking the discounts, the discounts are recorded when they are taken. 19 UNITED-GUARDIAN, INC.
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The increase was due to an increase in dividend income from both stock and bond mutual funds. Net loss on Marketable Securities The net loss on marketable securities increased from a net loss of $23,018 in 2021 to a net loss of $1,046,245 in 2022.
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A significant part of the decrease was due to the decrease in sales to ASI.
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The increased loss was primarily due to 1) the recognition of increased unrealized losses during 2022 due primarily to rising interest rates combined with the downward trajectory of the financial markets during 2022. Our portfolio of marketable securities is predominantly invested in fixed income mutual funds.
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Based on information provided to the Company by ASI, the reasons for the decrease during 2023 was due to 1) decreased demand for the Company’s products in China; 2) increased competition from lower-priced local competitors, especially Asian producers; and 3) customers working off excess stock, maintaining lower inventory levels and changing ordering patterns to just in time.
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When interest rates began to rise during the year, the value of these funds declined; and 2) increased realized losses on those same fixed income mutual funds that were sold during the year.
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The primary reason for the decrease in Renacidin sales was due to the Company’s packaging supplier of Renacidin temporarily ceasing manufacturing during the fourth quarter of 2023. According to information provided to the Company from its supplier, this temporary shutdown was done to perform required maintenance and address observations made by the FDA at their facility.
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During 2021, we recognized realized gains of $111,917 from the sale of marketable securities, while in 2022, we recorded $364,074 in realized losses from the sale of marketable securities. Provision for Income Taxes The provision for income taxes decreased from $1,219,383 in 2021 to $658,168 in 2022. This decrease was due to a decrease in income before taxes.
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Sexual Wellness Ingredients There were no sales of our sexual wellness ingredients in 2023, since the Company only began its marketing efforts for those products in mid-2023 and it is not unusual for it to take a year or more for new ingredients to find their way into new products in the marketplace.
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The receivables turnover, or “Days Sales Outstanding”, for 2022, was 47 days, compared with 42 days in 2021. The increase in Days Sales Outstanding was primarily due to an increase in the sales of our medical lubricant products in 2022.
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We are hopeful we will begin to receive orders for these products in 2024. Industrial Products Sales of our industrial products decreased by 56% in 2023 compared with 2022. The decrease in sales was due to this product line being discontinued after the second quarter of 2023 due to low sales volume with minimal growth.
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These products are primarily sold to customers located overseas and the payment terms for these customers is typically 60 days, as compared with 30-45 days for our domestic customers.
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Gross Profit on Sales Gross profit on sales was 50% in 2023 compared with 53% in 2022. The decrease in gross profit was primarily due to two factors.
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The second factor was higher per unit overhead costs due to reduced production, which was caused by lower demand for some of the Company’s products. Operating Expenses Operating expenses decreased by approximately 4%, from $2,174,127 in 2022 to $2,078,564 in 2023. The decrease was mainly attributable to decreases in employee bonuses and depreciation expenses.
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In connection with the Company’s growth initiatives that are expected to be put into place in 2024, the Company expects its research and development expenses to increase modestly during 2024. 21 UNITED-GUARDIAN, INC. Investment Income Investment income increased by approximately 30%, from $236,695 in 2022 to $306,651 in 2023.
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The increase was primarily due to the Company repositioning its marketable securities portfolio and selling most of its equity and fixed income mutual funds. The proceeds from these sales were used to purchase U.S. Treasury Bills and certificates of deposit to take advantage of the increase in interest rates in 2023.
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In addition, in connection with the Company changing its dividend policy during 2023, cash flow increased and the additional monies were used to purchase both U.S. Treasury Bills and certificates of deposit.
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Net gain (loss) on Marketable Securities For the year ended December 31, 2023, the Company recorded net gains on its marketable securities portfolio of $81,095, compared with recording net losses of $1,046,245 in 2022.
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The reason for the fluctuation was due to the following factors: 1) during 2022, the Company’s fixed income mutual funds (which made up approximately 90% of the investment portfolio) lost a significant amount of value due to increases in interest rates, and those unrealized losses were recorded during 2022; and 2) a majority of those mutual funds were sold during the second quarter of 2023, and while most of the losses had already been recorded in 2022, there were some increases in market value at the time of these sales, which created unrealized gains in that period.
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As previously discussed, the Company repositioned its marketable securities portfolio in the first half of 2023 to take advantage of the increase in interest rates.
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