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Item 1. Business

2021-03-22 compared with 2020-03-26 · 647 added, 578 removed, 43 unchanged (97% of the section changed)

1 unchanged sentence

United-Guardian, Inc.

("United", "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.

It also conducts research and product

development, primarily related to the development of new and unique cosmetic ingredients.

The Company’s research and development

department also modifies, refines, and expands the uses for existing products, with the goal of further developing the market for

the Company's products.

United's predecessor, United International Research,

("UIR"), was founded and incorporated in New York in 1942 by Dr.

Globus, United'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 Corp.

("GCC"), an affiliate of UIR, whereby GCC was merged into UIR and the name was changed to United-Guardian, Inc., a New

York corporation.

("United", "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.

It also conducts research and product development, primarily related to the development of new and unique cosmetic ingredients.

The Company’s research and development department also modifies, refines, and expands the uses for existing products, with

the goal of further developing the market for the Company's products.

United's predecessor,

United International Research, Inc.

("UIR"), was founded and incorporated in New York in 1942 by Dr.

United'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.

On September 14, 1987, United-Guardian, Inc.

(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 of the Company to Delaware.

The Company has a broad range of products,

some of which are currently marketed and some of which are still in the research and development stage.

Of the products being actively

marketed, the two largest product lines are the Lubrajel ® line of cosmetic ingredients and medical lubricants, which

accounted for 67% of the Company's sales in 2019, and Renacidin ® Irrigation Solution (“Renacidin"), a

pharmaceutical product that accounted for 26% of the Company's sales in 2019.

(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 of the Company to Delaware.

The Company has

a broad range of products, some of which are currently marketed and some of which are still in the research and development stage.

Of the products being actively marketed, the two largest product lines are the Lubrajel ®

line of cosmetic ingredients

and medical lubricants, which accounted for 57% of the Company's sales in 2020, and Renacidin ®

Irrigation Solution

(“Renacidin"), a pharmaceutical product that accounted for 36% of the Company's sales in 2020.

UNITED-GUARDIAN, INC.

Unless indicated otherwise, all references in

this Annual Report to “sales” or “Sales” shall mean net sales.

When changes are shown as percentages, the

number is approximate and has been rounded from one decimal place to the nearest whole number.

Unless indicated otherwise,

all references in this Annual Report to “sales”

or “Sales”

shall mean net sales.

When changes are shown

as percentages, the number is approximate and has been rounded from one decimal place to the nearest whole number.

(b) Description of Business

The Company manufactures and markets cosmetic

ingredients, pharmaceuticals, medical lubricants, and specialty industrial products.

It also conducts research and development,

primarily related to the development of new and unique cosmetic ingredients.

The Company focuses on the development of products

that fill unmet market needs, have unique properties, and use proprietary technology that it sometimes protects with patents.

of the Company's products are marketed through collaborative agreements with larger companies.

The cosmetic ingredients manufactured

by the Company are marketed to end users through the Company's worldwide network of marketing partners and distributors, and are

currently used by many of the major manufacturers of cosmetic products.

The Company sells products outright to its marketing partners,

Ex Works (EXW) the Company’s plant in Hauppauge, New York.

Those marketing partners in turn resell those products to their

customers, who are typically the manufacturers and marketers of cosmetic and personal care products, and who in turn utilize the

Company’s products in their finished products.

The products 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 Company operates in one business segment.

The Company’s products are separated into four distinct product categories:

cosmetic ingredients, pharmaceuticals, medical

products, and industrial products.

The Company manufactures

and markets cosmetic ingredients, pharmaceuticals, medical lubricants, and specialty industrial products.

It also conducts research

and development, primarily related to the development of new and unique cosmetic ingredients.

The Company focuses on the development

of products that fill unmet market needs, have unique properties, and use proprietary technology that it sometimes protects with

Many of the Company's products are marketed through collaborative agreements with larger companies.

The cosmetic ingredients

manufactured by the Company are marketed to end users through the Company's worldwide network of marketing partners and distributors,

and are currently used by many of the major manufacturers of cosmetic products.

The Company sells products outright to its marketing

partners, Ex Works (EXW) the Company’s plant in Hauppauge, New York.

Those marketing partners in turn resell those products

to their customers, who are typically the manufacturers and marketers of cosmetic and personal care products, and who in turn utilize

the Company’s products in their finished products.

The products 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 Company operates

in one business segment.

The Company’s products are separated into four distinct product categories:

cosmetic ingredients,

pharmaceuticals, medical products, and industrial products.

Each product category is marketed differently.

The Company’s cosmetic ingredients are

currently marketed globally by five marketing partners, of which Ashland Specialty Ingredients (“ASI”), a business

segment of Ashland, Inc., is the largest.

During most of 2019 the Company also had a separate marketing partner for Korea, but

at the end of 2019 that territory was transferred to ASI.

ASI manufactures and markets globally an extensive line of personal care

and pharmaceutical additives and various other specialty products.

The Company’s cosmetic ingredients are sold directly to

those marketing partners, 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.

The Company’s non-pharmaceutical medical products (referred to hereinafter

as “medical products”) and its specialty industrial products are sold directly by the Company to marketers of finished

The Company’s

cosmetic ingredients are currently marketed globally by five marketing partners, 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.

The Company’s cosmetic ingredients are sold directly to those

marketing partners, 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.

The Company’s non-pharmaceutical medical products (referred to hereinafter as the Company’s

“medical products”) and its specialty industrial products are sold directly by the Company to marketers of finished

products or to the contract manufacturers utilized by those marketers.

The Company’s pharmaceutical products are marketed

primarily through its dedicated Renacidin web site and by online promotion and are sold to hospitals and pharmacies primarily through

full-line drug wholesalers, which purchase the Company’s products outright for resale to their customers.

The Company also

sells a small quantity of pharmaceutical products directly to hospitals and pharmacies.

The Company's 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.

The Company has a corporate web site at www.u-g.com, and a specific

web site for one of its pharmaceutical products at www.renacidin.com.

As stated above, the Company operates in one

business segment, and its product lines are separated into four distinct product categories:

The Company’s pharmaceutical products are marketed

primarily through its dedicated Renacidin website and by internet advertising, and are sold to hospitals and pharmacies primarily

through full-line drug wholesalers, which purchase the Company’s products outright for resale to their customers.

also sells a small quantity of pharmaceutical products directly to hospitals and pharmacies.

The Company's 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.

The Company has a corporate website at www.u-g.com, and

a specific website for Renacidin at www.renacidin.com.

IMPACT OF THE CORONAVIRUS PANDEMIC

In March 2020, the

spread of the coronavirus (COVID-19) began to cause disruptions among businesses and markets worldwide.

On March 20, 2020, the

Governor of New York issued an executive order which closed non-essential businesses.

The Company, as a manufacturer of pharmaceutical

and medical products, was considered an essential business, and continued to operate throughout the pandemic.

When the spread of

the coronavirus was at its worst in New York the Company modified its staffing schedule in order to decrease employee density as

much as possible, with employees working 7 days a week on altered hours, and later on an every-other-week work schedule with limited

Despite the reduced schedule the Company was able to maintain adequate production and shipping schedules, and was able to

fill all orders on a timely basis.

As things improved, the Company gradually increased its working hours and employee density until

it resumed its regular working schedule in June 2020.

Throughout the pandemic the Company was able to maintain its full payroll,

all employees received their full pay, and no employees were furloughed or dismissed.

UNITED-GUARDIAN, INC.

While the Company’s

pharmaceutical sales have not been impacted by the coronavirus pandemic, sales of the Company’s cosmetic ingredients and

medical products have been significantly impacted, particularly in the second half of 2020.

Sales of the Company’s cosmetic

ingredients in 2020 decreased by 33% compared with 2019.

The decrease was primarily the result of lower sales to ASI, the Company’s

marketing partner in China, and was caused primarily by factors related to the coronavirus, including (a) lower consumer demand

in China for many of the products in which the Company’s products are used;

(b) manufacturing disruptions in China resulting

from the impact of the coronavirus on manufacturing facilities;

and (c) excess inventory levels due to overstocking on the part

of both the Company’s marketing partner for China as well as its sub-distributors in China.

The overstocking was due to the

uncertainty on the part of the marketing partner about being able to continue to get product from the Company during the pandemic.

Because the Company’s

cosmetic ingredients are marketed in many different countries, it is difficult to project the future impact of the coronavirus

pandemic on the Company’s global cosmetic ingredient sales, since the virus continues to impact different countries at different

times and to very different extents.

The Company is hopeful that as vaccinations increase, the global economic situation will gradually

However, based on the current situation, as well as future projections by different analysts, the Company anticipates

that the pandemic will continue to negatively impact sales of the Company’s cosmetic ingredients throughout most or all of

The Company also believes

that the coronavirus impacted sales to two of the Company’s four major medical product customers whose orders decreased in

2020, and may have been a factor in the loss of a third (although the Company has not yet been able to confirm that as the reason

for that lost business).

Overall sales of the Company’s medical products decreased by 31% compared with the corresponding

periods in 2019.

With the continuing

uncertainty as to what the duration and future impact of the pandemic will be, the Company is unable to provide an accurate estimate

or projection as to what the continuing impact of the coronavirus will be on the Company’s operations or its financial results

in the future.

However, as of the date of this report, the Company does not anticipate that the coronavirus pandemic will affect

the ability of the Company to obtain raw materials and maintain production.

The Company has price protection on some but not all

of its most important raw materials, has multiple sources for many of its raw materials, and has been able to maintain sufficient

inventory and production levels to enable it to fulfill sales orders on a timely basis.

The Company does not expect the carrying

value of its assets or its liquidity to be impaired by the coronavirus pandemic.

As stated above, the

Company operates in one business segment, and its product lines are separated into four distinct product categories:

COSMETIC INGREDIENTS

LUBRAJEL ® is an extensive line of

water-based moisturizing and lubricating gel formulations that are used as ingredients in personal care (primarily cosmetic/skincare)

In the personal care industry, they are used primarily as moisturizers and as bases for other personal care products,

and can be found as an ingredient in skin creams, moisturizers, makeup, and body lotions.

The largest product by sales in the Lubrajel

cosmetic ingredient line in 2019 was Lubrajel Oil, followed by Lubrajel PF (also sold under the trade name “Norgel”).

Some other formulations of Lubrajel that are sold for cosmetic use (all using the Lubrajel name), in descending order of sales,

are MS, CG ,DV and NP.

In addition, many of these products are available in equivalent formulations that do not contain parabens

as the preservative, and instead use a different preservative system that is preferred by some customers.

Those equivalent products

are differentiated by adding the word “Free” after the name (for example, Lubrajel MS Free and DV Free), indicating

that those formulations are free of parabens.

LUBRAJEL PF and NORGEL are different from

the other products in the Lubrajel line in that they are completely preservative-free forms of Lubrajel.

Tests have shown that

these products self-preserve, and aid in the preservation of other personal care products with which they are formulated.

are marketed under the Lubrajel PF tradename in all geographic markets other than France, where they are marketed under the tradename

“Norgel” by Societe D'Etudes Dermatologiques ("Sederma"), a subsidiary of Croda International Plc (“Croda”).

Sederma is the Company's exclusive marketing partner and distributor of the Company’s cosmetic ingredients in France and,

along with its parent company, Croda, is a major supplier of specialty cosmetic ingredients to the personal care products industry.

Sales of these two products decreased by 5% in 2019 compared with 2018.

LUBRAJEL NATURAL was the first product in a line

of Lubrajel products for cosmetic use that are produced using only ingredients that are considered “natural”.

product, as well as the additional “natural” products under development (see “Development Activities” below)

are based on natural polysaccharides, which contribute moisturization, emulsion stabilization, and emolliency to personal care

products, particularly creams and lotions.

Ecocert, one of the global organizations authorized to certify natural and organic products,

has certified that Lubrajel Natural complies with the Cosmetic Organic and Natural Standard (“COSMOS”), indicating

that the product is suitable for use in natural and organic cosmetic products.

This product is now being actively marketed, but

sales in 2019 decreased by 33% from 2018.

LUBRAJEL MARINE™ is the second product that

the Company developed for its new line of products that use only “natural” ingredients.

It was formulated using naturally-derived

polysaccharides, with some of the ingredients sourced from marine vegetation.

This product was developed jointly with ASI, and

for that reason is being marketed globally on an exclusive basis by ASI.

Like the original Lubrajel Natural, this product has received

COSMOS certification for use in natural and organic cosmetic products This product is being actively marketed by ASI, and while

sales have not attained the levels that the Company had originally hoped for, there has been a recent increase in orders, and the

Company is still hopeful that sales of this product will increase in the next year or two as the interest in natural products in

the marketplace continues to grow.

Total sales of the Company's cosmetic ingredients

decreased by $1,152,164 (15%) for the year ended December 31, 2019 when compared with 2018, and accounted for approximately 47%

of total Company sales in 2019 compared with 56% in 2018.

The Company’s Lubrajel line of cosmetic ingredients represented

46% of total Company sales in 2019, compared with 55% in 2018.The decrease was primarily due to a decrease in sales of Lubrajel

products to ASI for distribution in China, and a decrease in sales to ASI of a different Lubrajel product for distribution in North

LUBRAJEL ®

is an extensive line of water-based moisturizing and lubricating gel formulations that are used as ingredients in personal care

(primarily cosmetic/skincare) products.

In the personal care industry, they are used primarily as moisturizers and as bases for

other personal care products, and can be found as an ingredient in skin creams, moisturizers, makeup, and body lotions.

in the many different formulations of Lubrajel are variations that use different types of preservatives, as well as some, like

Lubrajel PF , Lubrajel Oil PF , and Lubrajel II XD PF , which are all preservative-free.

UNITED-GUARDIAN, INC.

Each of the following cosmetic ingredients accounted

for less than 2% of the Company’s sales in 2019, listed in descending order of sales.

LUBRASIL ™ is a special formulation of Lubrajel

in which silicone oil is incorporated into a Lubrajel base using proprietary technology, thereby maintaining much of the clarity

of regular Lubrajel.

The product has a silky feel, and is water resistant while at the same time providing moisturization.

current Lubrasil formulation is known as Lubrasil II SB, which contains substantially higher levels of silicone than the original

Lubrasil formulation.

Sales of this product decreased by 7% from 2019.

LUBRAJEL II XD is a version of Lubrajel that was

developed to be a direct replacement for one of the competitive products to Lubrajel.

There is also a paraben-free version of this

product known as Lubrajel II XD Free.

Sales of Lubrajel II XD and Lubrajel II XD Free decreased by 5% in 2019.

LUBRASLIDE ™ and a related product, B-122 ™,

are powdered lubricants used in the manufacture of cosmetics such as pressed powders, eyeliners, and rouges.

The products act as

binders, increasing water-repellency and drop strength and lowering the coefficient of friction in the products in which they are

There are also some industrial applications for these products.

KLENSOFT ™ is a surfactant (a surface-active

agent, such as a soap or detergent) that can be used in shampoos, shower gels, makeup removers, and other cosmetic formulations.

LUBRAJEL NATURAL was the

first product in a line of Lubrajel products for cosmetic use that are produced using only ingredients that are considered “natural”.

This product, as well as the additional “natural”

products under development (see “Development Activities”

below) are based on natural polysaccharides, which contribute moisturization, emulsion stabilization, and emolliency to personal

care products, particularly creams and lotions.

Ecocert, one of the global organizations authorized to certify natural and organic

products, has certified that Lubrajel Natural complies with the Cosmetic Organic and Natural Standard (“COSMOS”), indicating

that the product is suitable for use in natural and organic cosmetic products.

LUBRAJEL MARINE™

was the second product that the Company developed for its new line of “natural”

cosmetic ingredients.

It was formulated

using naturally-derived polysaccharides, with some of the ingredients sourced from marine vegetation.

This product was developed

jointly with ASI, and for that reason is being marketed globally on an exclusive basis by ASI.

Like the original Lubrajel Natural,

this product has received COSMOS certification for use in natural and organic cosmetic products.

It is being actively marketed

by ASI, and while sales have not attained the levels that the Company had originally hoped for, the Company is still optimistic

that sales will increase as the interest in natural products in the marketplace continues.

Total sales of the

Company's cosmetic ingredients decreased by $2,102,737 (33%) for the year ended December 31, 2020 when compared with 2019, and

accounted for approximately 39% of total Company sales in 2020 compared with 47% in 2019.

The decrease was due primarily to a decrease

in sales of Lubrajel cosmetic ingredients to ASI for distribution in China, which the Company believes was due mainly to issues

related to the coronavirus pandemic.

Each of the following

cosmetic ingredients accounted for less than 2% of the Company’s sales in 2020, listed in descending order of sales.

LUBRAJEL II XD is a version

of Lubrajel that was developed to be a direct replacement for one of the competitive products to Lubrajel.

There is a paraben-free

version of this product known as Lubrajel II XD Free, and the Company is currently developing a preservative-free version of the

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

The product acts as a binder, increases water-repellency and drop strength, and lowers the coefficient of friction in

the products in which they are used.

Until 2021 the Company also had small sales of another powdered lubricant, Lubraslide ,

but that product has now been discontinued due to the negative environmental impact of the PTFE that was one of its ingredients.

KLENSOFT ™

is a surfactant

(a surface-active agent, such as a soap or detergent) that can be used in shampoos, shower gels, makeup removers, and other cosmetic

formulations.

Klensoft sales have been highly variable due to the ordering patterns of the primary customers for the product.

ORCHID COMPLEX ™ is an oil-soluble base for

skin creams, lotions, cleansers, and other cosmetics.

It is an extract of fresh orchids modified by stabilizers and preservatives,

and is characterized by its excellent lubricity, spreadability, light feel, and emolliency.

Because of its alcohol solubility it

may also be used in fragrance products, such as perfumes and toiletries.

Its emolliency makes it an excellent additive to shampoos,

bath products and facial cleansers.

It is also a superior emollient for sunscreens, vitamin creams, toners and skin serums.

The Company believes that its ability to maintain

and/or increase sales of its cosmetic ingredients will depend on (a) the ability and determination of its marketing partners, especially

its largest marketing partner, ASI, to continue to aggressively promote the Company’s products, particularly to new customers,

and to find new marketing opportunities;

(b) the Company's success in developing additional new products, including new varieties

of Lubrajel, as well as new applications for existing products;

and (c) the ability of the Company to find ways to compete with

manufacturers of some lower-cost competitors to Lubrajel that have negatively impacted the sales of the Company’s cosmetic

In particular, the Company has experienced significant pricing pressure from competitive products being marketed in

China by some Asian manufacturers.

These lower-cost competitive products are likely to continue to negatively impact the Company’s

profit margins on some of its products in certain geographic areas.

The Company believes that there is still potential

to expand the sales of its Lubrajel line of products through new product development, modifications to make some of its current

products more competitive, additional claim substantiation, and geographic expansion.

The Company believes that its strong brand

identity and reputation for supplying quality products will be advantageous in its efforts to compete with the growing number of

lower-cost copies of its products, but that it will still be necessary to be more competitive with its product pricing in certain

geographic areas in order to maintain and grow its market share.

LUBRASIL™

is a special formulation of Lubrajel in which silicone oil is incorporated into a Lubrajel base using proprietary technology that

enables the product to maintain much of the clarity of regular Lubrajel.

The product has a silky feel and is water resistant while

at the same time providing moisturization.

UNITED-GUARDIAN, INC.

ORCHID COMPLEX ™

is an oil-soluble base for skin creams, lotions, cleansers, and other cosmetics.

It is an extract of fresh orchids modified by

stabilizers, and is characterized by its excellent lubricity, spreadability, light feel, and emolliency.

Because of its alcohol

solubility it may also be used in fragrance products, such as perfumes and toiletries.

Its emolliency makes it an excellent additive

to shampoos, bath products and facial cleansers.

It is also a superior emollient for sunscreens, vitamin creams, toners and skin

The Company believes

that its ability to maintain and/or increase sales of its cosmetic ingredients will depend on (a) the ability and determination

of its marketing partners, especially its largest marketing partner, ASI, to continue to aggressively promote the Company’s

products, particularly to new customers, and to find new marketing opportunities for those products;

(b) the Company's success

in developing new and innovative cosmetic ingredients, including new types of water-based moisturizers and lubricants;

new applications for existing products;

and (c) the ability of the Company to compete with manufacturers of lower-cost competitors

to Lubrajel that have negatively impacted the sales of the Company’s cosmetic ingredients over the past few years.

In particular,

the Company has experienced significant pricing pressure from competitive products being marketed by some Asian manufacturers.

These lower-cost competitive products are likely to continue to negatively impact the Company’s sales and profit margins

on some of its products in certain geographic areas.

The Company believes

that there is still potential to expand the sales of its cosmetic ingredients through new product development, modifications to

make some of its current products more competitive, additional claim substantiation, and geographic expansion.

The Company believes

that its strong brand identity, reliability, and reputation for supplying quality products will be advantageous in its efforts

to compete with the growing number of lower-cost competitors, but that it will still be necessary to be more competitive with its

product pricing in certain geographic areas in order to maintain and grow its market share.

MEDICAL LUBRICANTS

LUBRAJEL RR and RC are both water-based

gels used primarily as lubricants for urinary catheters.

They are special grades of Lubrajel that can withstand sterilization by

gamma radiation, which is one of the methods of terminally sterilizing medical and hospital products.

Lubrajel RR was the original

radiation-resistant Lubrajel product.

Lubrajel RC was developed as a lower-cost alternative to the Lubrajel RR for those customers

who are in more cost-sensitive markets.

Sales of Lubrajel RR increased by 4% in 2019 compared with 2018, and sales of Lubrajel

RC increased by 18%.

The Company believes that both increases were primarily the result of normal fluctuations in the buying patterns

of the customers for this product.

The combined sales of both products accounted for 10% of the Company’s sales in 2019.

LUBRAJEL RR and RC

are both water-based gels used primarily as lubricants for urinary catheters.

They are special grades of Lubrajel that can withstand

sterilization by gamma radiation, which is one of the methods of terminally sterilizing medical and hospital products.

RR was the original radiation resistant Lubrajel product.

Lubrajel RC was developed as a lower-cost alternative to Lubrajel RR

for those customers who are in more cost-sensitive markets.

Sales of Lubrajel RR increased in 2020 compared with 2019, and sales

of Lubrajel RC.

The Company believes that the decrease in sales of Lubrajel RC was primarily the result of a decrease in orders

from one of the Company’s customers that has been impacted by the coronavirus pandemic.

The combined sales of both products

accounted for 10% of the Company’s sales in 2020.

LUBRAJEL MG is the original

form of Lubrajel, developed as a medical lubricant in the 1970s.

It is used by many medical device manufacturers for lubricating

urinary catheters, pre-lubricated enema tips, and other medical devices.

Sales for this product decreased in 2020 compared with

2019 due to a decrease in sales to two of the Company’s larger customers for this product that are located in areas, such

as China, that were significantly impacted by the coronavirus.

LUBRAJEL LC and LUBRAJEL FA

are Lubrajel formulations that were developed for use in oral care applications.

Sales of these products decreased in 2020 compared

with 2019 primarily as the result of a decrease in orders from the Company’s primary customer, which the Company believes

was related to the coronavirus pandemic.

LUBRAJEL FLUID is a very

low viscosity form of Lubrajel that was developed to provide superior lubrication in water-soluble products.

It was specifically

developed, and is currently in limited use, as a replacement for silicone oils in pre-lubricated condoms.

The Company has only

one customer for this product, and sales of this product did not contribute significantly to the Company’s overall sales.

UNITED-GUARDIAN, INC.

LUBRAJEL MG is the original form of Lubrajel, developed

as a medical lubricant in the 1970s.

It is used by many medical device manufacturers for lubricating urinary catheters, pre-lubricated

enema tips, and other medical devices.

Sales increased by 58% in 2019 compared with 2018.

Most of this increase was due to increased

sales to several of the customers for this product.

Two of those customers are contract manufacturers that manufacture and package

products for other companies, and both acquired new customers for this product in 2019.

LUBRAJEL LC and LUBRAJEL FA are Lubrajel formulations

that were developed for use in oral care applications.

Combined sales for these products decreased by 1% compared with 2018, due

primarily to fluctuations in the buying patterns of its customers for those products.

LUBRAJEL FLUID is a very low viscosity form of

Lubrajel that was developed to provide superior lubrication in water-soluble products.

It was specifically developed, and is currently

in limited use, as a replacement for silicone oils in pre-lubricated condoms.

The Company has only one customer for this product,

and sales of this product did not contribute significantly to the Company’s overall sales.

Sales of all of the medical grades of Lubrajel

increased by 38% in 2019 compared with 2018 and accounted for approximately 22% of the Company’s sales in 2019 compared with

approximately 15% in 2018.

PHARMACEUTICAL

RENACIDIN ® is a prescription drug

product that is used primarily to prevent and to dissolve calcifications in urethral catheters and in the urinary bladder.

currently marketed in a plastic 30 mL single-dose bottle.

Sales of Renacidin increased by approximately 19% in 2019 compared with

2018, and represented approximately 26% of total Company sales.

The Company believes that the increase was due to increased marketing

efforts for this product, including a new dedicated web site, as well as an increase in the Company’s internet advertising.

CLORPACTIN ® WCS-90 is an

antimicrobial product used primarily in urology to treat infections in the urinary bladder.

It is also used in surgery for treating

a wide range of localized infections in the peritoneum (the lining of the abdominal cavity), as well as the eye, ear, nose and

throat, and sinuses.

Sales of all of the

medical grades of Lubrajel decreased by 31% in 2020 compared with 2019 and accounted for approximately 19% of the Company’s

sales in 2020 compared with approximately 22% in 2019.

PHARMACEUTICALS

RENACIDIN ®

is a prescription drug product that is used primarily to prevent and to dissolve calcifications in urethral catheters and in the

urinary bladder.

It is currently marketed in a plastic 30 mL single-dose bottle.

Sales of Renacidin increased by approximately

12% in 2020 compared with 2019, and represented approximately 36% of total Company sales.

The Company believes that the increase

was due to the Company’s increased marketing efforts for this product, including a dedicated website and expanded internet

CLORPACTIN ®

WCS-90 is an antimicrobial product used primarily in urology to treat infections in the urinary bladder.

It is also used

in surgery for treating a wide range of localized infections in the peritoneum (the lining of the abdominal cavity), as well as

the eye, ear, nose and throat, and sinuses.

The product is a powder that is mixed with water by the end user and used as a solution.

It is also a powerful

disinfectant, fungicide, and deodorizer.

It is also a powerful disinfectant, fungicide, and deodorizer.

Sales of Clorpactin have been very consistent from year-to-year,

In 2019, sales increased

by approximately 4% and represented approximately 4% of the Company’s sales.

The Company believes that the increase was due

to normal year-to-year fluctuations rather than any significant trend in sales.

The Company’s pharmaceutical products

are returnable only at the discretion of the Company unless (a) they are found to be defective;

(b) the product is damaged in shipping;

or (c) they are outdated (but not more than one year after their expiration date, which is a return policy that conforms to standard

pharmaceutical industry practice).

UNITED-GUARDIAN, INC.

DESELEX ™ is a sequestering and chelating

agent that is used primarily as a replacement for phosphates in the manufacture of detergents.

It also has some use in personal

care products as a chelating agent in shampoos and body washes.

Sales of this product decreased by 8% but represent less than 1%

of Company sales.

THOROCLENS is a chlorine-based cleanser manufactured

and packaged by the Company for a small company in New England that resells the product to its customers.

Sales of this product

increased by 7% in 2019, but, as with Deselex, represent less than 1% of Company sales.

and in 2020 sales of Clorpactin represented approximately 6% of the Company’s sales.

The Company’s

pharmaceutical products are returnable only at the discretion of the Company unless (a) they are found to be defective;

product is damaged in shipping;

or (c) they are outdated (but not more than one year after their expiration date, which is a return

policy that conforms to standard pharmaceutical industry practice).

INDUSTRIAL PRODUCTS

DESELEX ™

is a sequestering

and chelating agent that is used primarily as a replacement for phosphates in the manufacture of detergents.

It also has some use

in personal care products as a chelating agent in shampoos and body washes.

Sales of this product decreased slightly in 2020 and

represented less than 1% of Company sales.

The decrease in sales was primarily due to a decrease in orders from the Company’s

primary customer for this product, which the Company believes was due to the impact of the coronavirus pandemic.

THOROCLENS is a chlorine-based

industrial cleanser manufactured and packaged by the Company for a small company in New England.

Sales of this product increased

in 2020, but, as with Deselex, represented less than 1% of Company sales.

DEVELOPMENT ACTIVITIES

In coordination with, and with input from, its

marketing partners, the Company's research and development department has developed products that can be used in many different

industries, including the personal care (including cosmetic), pharmaceutical, medical, health care, and specialty chemical industries.

These products are in various stages of development, some currently marketable and some in the very early stages of development

requiring a substantial amount of development work to bring them to market.

Research is also being done on new uses for currently

marketed products.

Prior to initiating research and development

work on a product, market research is done to determine the marketability of the product, including the potential market size and

the most effective method of marketing the product.

After that, the research and development department will determine whether

the product can be successfully developed, including (a) laboratory refinements and adjustments to suit the intended uses of the

(b) stability studies to determine the effective shelf life of the product and suitable storage and transportation conditions;

and (c) laboratory efficacy tests to determine the effectiveness of the product under different conditions.

If development proves

feasible, the Company will then determine whether production and sales costs make it feasible to bring the product to market.

If the initial development work is successful,

and the estimated costs of further development are acceptable to the Company, further development work to bring the product to

market will continue, including scaling up from laboratory production batches to pilot batches to full-scale production batches.

In the case of drug products or medical devices, significant additional work would have to be done, including studies to determine

safety and effectiveness, preparation of an Investigational New Drug (IND) Application, and finally the filing of an NDA.

of the high cost of bringing new drugs or medical devices to market, and the Company’s limited resources, the Company does

not currently have plans to develop any new drugs or medical devices, and intends to focus its research and development efforts

on the development of new and innovative products for the personal care and medical (non-drug) markets.

While there can be no assurance that any particular

project will result in a new marketable product or a commercially successful product, the Company believes that a number of its

development projects, including those discussed below, may have commercial potential if the Company's development efforts are successful.

The Company's major research focus is on the

development of new and unique cosmetic ingredients.

The following are some of the projects on which the Company is currently working:

LUBRAJEL OIL PF:

This product was developed

as a result of the high demand for the Company’s very popular Lubrajel Oil.

Unlike that product, this formulation will be

preservative-free, which enables formulators to use their own preservative systems without having to account for preservatives

already incorporated into the product.

This approach has been very successful with the Company’s regular Lubrajel PF, and

the Company is hopeful that a preservative-free formulation of Lubrajel Oil will also be successful.

The Company has completed

the testing on this product, and plans to launch it at the In-Cosmetics conference in Barcelona in April 2020.

In coordination with,

and with input from, its marketing partners, the Company's research and development department develops products that are used

in many different industries, including the personal care (including cosmetic), pharmaceutical, medical, health care, and specialty

chemical industries.

These products are in various stages of development, some currently marketable and some in the very early

stages of development requiring a substantial amount of development work to bring them to market.

Research is also being done on

new uses for currently marketed products.

UNITED-GUARDIAN, INC.

Prior to initiating

research and development work on a product the Company consults with its global marketing partners to determine the marketability

of the product, including the potential market size and the most effective method of marketing the product.

After that, the research

and development department will determine whether the product can be successfully developed, including (a) laboratory refinements

and adjustments to suit the intended uses of the product;

(b) stability studies to determine the effective shelf life of the product

and suitable storage and transportation conditions;

and (c) laboratory efficacy tests to determine the effectiveness of the product

under different conditions.

If development proves feasible, the Company will then determine whether production and sales costs

make it feasible to bring the product to market.

If the initial development

work is successful, and the estimated costs of further development are acceptable to the Company, further development work to bring

the product to market will continue, including scaling up from laboratory production batches to pilot batches to full-scale production

In the case of drug products or medical devices, significant additional work would have to be done, including studies

to determine safety and effectiveness, preparation of an Investigational New Drug (IND) Application, and finally the filing of

Because of the high cost of bringing new drugs or medical devices to market, as well as the Company’s limited resources,

the Company does not currently have plans to develop any new drugs or medical devices, and intends to focus its research and development

efforts on the development of new and innovative products for the personal care and medical (non-drug) markets.

While there can be

no assurance that any particular project will result in a new marketable product or a commercially successful product, the Company

believes that a number of its development projects, including those discussed below, may have commercial potential if the Company's

development efforts are successful.

The Company's major

research focus is on the development of new and unique cosmetic ingredients.

The following are some of the projects on which the

Company is currently working:

LUBRAJEL OIL PF:

This product was developed as a result of the high demand for the Company’s very popular Lubrajel Oil.

Unlike that product,

this formulation is preservative-free, which enables formulators to use their own preservative systems without having to account

for preservatives already incorporated into the product.

This approach has been very successful with the Company’s Lubrajel

PF, its first preservative-free product, and the Company is hopeful that a preservative-free formulation of Lubrajel Oil will also

be successful.

The Company has launched this product exclusively with Ashland.

Ashland initially launched the product in Asia

in June 2020, and followed with a global launch in November.

Based on the amount of customer interest, as well as the qualification

of the product for use by existing and new customers, Ashland has indicated that it considers this launch to be a success.

LUBRAJEL II XD PF:

Like the Lubrajel

Oil PF, this product was developed to meet the continuing market demand for preservative-free products.

Current formulators are

moving from conventional preservative systems to more natural methods of preservation.

Eliminating the preservatives enables a

formulator to choose the preservative system that is best for their final application.

Prototypes of this product have been developed

and are currently undergoing sensory testing.

Like Lubrajel Oil PF, this product was developed to meet the continuing market demand for preservative-free products.

formulators are moving from conventional preservative systems to more natural methods of preservation.

Eliminating the preservatives

enables a formulator to choose the preservative system that is best for their final application.

This product is ready for marketing,

and it is anticipated that Ashland will have formally launched this product in early February 2021.

The product has already been

qualified by some customers in the EMEA market.

LOWER-COST LUBRAJEL:

Based on feedback

from its marketing partners, the Company believes that there could be significant market potential for a version of Lubrajel that

can be produced and marketed at a lower cost than the current line of Lubrajel products.

There are certain global markets that

are not suitable for the current price points for Lubrajel, and the Company believes that the development of a lower-priced Lubrajel

could open these new markets for the Company.

The idea for a lower-cost Lubrajel has been reviewed and evaluated by the Company

for a number of years, but until now the Company did not have a clear path for the development of this product.

It now believes

that the time is right to focus on these development efforts.

The Company’s goal is to understand the competitive market

and develop a lower-cost product with comparable benefits to some of the Company’s other Lubrajel products but which will

not take away sales from those other products.

Prototypes are being developed and will undergo a series of tests to determine which

formulation would be the most competitive.

Once a prototype has been selected, samples will be sent to the Company’s marketing

partners for evaluation.

Based on feedback from its marketing partners, the Company believes that there could be significant market potential for a

version of Lubrajel for cosmetic use that can be produced and marketed at a lower cost than the current line of Lubrajel products.

There are certain global markets that are not suitable for the current price points for Lubrajel, and the Company believes that

the development of a lower-priced Lubrajel could open these new markets for the Company.

The idea for a lower-cost Lubrajel has

been discussed and considered by the Company for a number of years, and the Company believes that the time is right to focus on

these development efforts.

The goal is to develop a lower-cost product with similar benefits to some of the Company’s other

Lubrajel cosmetic products, but which would not take away sales from those other products.

The Company’s current development

efforts for this product have focused on evaluating competitive products and comparing their attributes to those of the product

we are developing.

This initial research will enable the Company to determine the best path forward in developing a product that

will be competitive in price sensitive markets.

The Company anticipates that this initial research will be completed in early 2021,

and that product development will begin shortly thereafter.

UNITED-GUARDIAN, INC.

OIL/WAX HYDRATION:

for this product is an anhydrous textured gel that can be added to the oil phase of a cosmetic formula.

Like many of the Company’s

other “natural” products, this product has a high natural origin content based on ISO 16128, and, like the Company’s

other natural products, is intended to be certified as a “natural” ingredient.

Prototypes have been created and will

undergo further testing and evaluation.

of this project is to develop a product with 24-hour hydration.

While the Company’s current water-based moisturizing products

provide excellent hydration, the goal is to build upon that to produce a product with superior hydration that will last a full

Prototypes have been developed and testing will be conducted to determine hydration benefits.

The concept for this product is an anhydrous textured gel that can be added to the oil phase of a cosmetic formula.

of the Company’s other “natural”

products, this product has a high natural origin content based on ISO 16128,

and, like the Company’s other natural products, is intended to be certified as a “natural”

formula has been tested for sensory benefits.

Before additional development work is conducted on this prototype we will be discussing

the marketability of the product with our distributors to determine appropriate product pricing and anticipated customer interest.

A clear understanding of what pricing the market will support is necessary before determining the next steps in this project.

The purpose of this project is to develop a product with 24-hour hydration.

While the Company’s current water-based moisturizing

products provide excellent hydration, the goal is to build upon that to produce a product with superior hydration that will last

a full 24 hours.

Prototypes have been developed, and hydration testing is scheduled for March 2021.

The results of this testing

will determine the next steps in this project.

LUBRAJEL OIL NATURAL:

was developed to be an addition to the Company’s “natural” line of products.

It uses vegetable feedstock, and

is based on polysaccharide chemistry.

Modifications have been made over the past year to increase hydration and stabilize the emulsion.

Like the Company’s other “natural” products, this product has been certified by Ecocert to comply with the COSMOS

standards for use in natural and organic cosmetic products.

The newest prototype has been sent to our marketing partners for their

LUBRAJEL TERRA™:

The Company’s

goal with this product was to further extend the Company’s line of products based on natural ingredients.

In this case, the

product uses plant-based materials.

As with the Lubrajel Oil Natural, this product is based on polysaccharide chemistry.

is confident that the product will be certified by Ecocert to comply with the COSOMOS standard, and the necessary documentation

for that certification will be submitted once the Company arrives at a final formulation.

It should be emphasized that some of the projects

listed above are in the very early stages of research and development, and there can be no guarantee that any particular development

project will result in a marketable product or in significant sales if it is marketed.

UNITED-GUARDIAN, INC.

The Company’s research and development

expenses in 2019 were $397,391 compared with $399,517 in 2018.

The Company expects its research and development expenses in 2020

to be comparable to those of 2019.

Any additional increase in development and/or production costs will depend on whether capital

investments are required in order to continue development work on, or to manufacture, any of the new products under development.

The Company requires all employees and consultants

who may receive confidential and proprietary information to agree in writing to keep such information confidential.

product was developed to be an addition to the Company’s “natural”

line of products.

It uses vegetable feedstock,

and is based on polysaccharide chemistry.

Modifications have been made over the past year to increase hydration and stabilize the

Like the Company’s other “natural”

products, this product has been certified by Ecocert to comply with

the COSMOS standards for use in natural and organic cosmetic products.

The Company has initially launched this product with its

UK marketing partner due to a specific interest they had in this product.

The product has already been qualified for use by some

customers in the UK, and the first commercial order was placed in January 2021.

We will continue to work with our marketing partners

to gain feedback on this product, and pursue additional markets where we believe that this product could be successful.

It should be emphasized

that some of the projects listed above are in the very early stages of research and development, and there can be no guarantee

that any particular development project will result in a marketable product or in significant sales if it is marketed.

The Company’s

research and development expenses in 2020 were $451,208 compared with $397,391 in 2019.

The Company expects its research and development

expenses in 2021 to be comparable to those of 2020.

Any additional increase in development and/or production costs will depend

on whether capital investments are required in order to continue development work on, or to manufacture, any of the new products

under development.

The Company requires

all employees and consultants who may receive confidential and proprietary information to agree in writing to keep such information

confidential.

TRADEMARKS AND PATENTS

The Company strongly believes in protecting

its intellectual property and intends, whenever reasonably possible and economically practical, to obtain patents in connection

with its product development program.

The Company strongly

believes in protecting its intellectual property and intends, whenever reasonably possible and economically practical, to obtain

patents in connection with its product development program.

The Company currently holds several trademarks relating to its products.

In recent years

the Company has relied more on trade secrets and proprietary formulations and manufacturing methods to protect its intellectual

property rather than patents, since under current patent law the filing of a patent now provides detailed proprietary information

that can be copied by companies in other countries where enforcement would be difficult and expensive, such as in China.

believes that in many cases it is better to protect its intellectual property in other ways that do not require the disclosure

of proprietary information.

In recent years the Company has relied more on trade secrets and proprietary formulations and manufacturing methods to protect

its intellectual property rather than patents, since under current patent law the filing of a patent now provides detailed proprietary

information that can be copied by companies in other countries where enforcement would be difficult and expensive, such as in China.

The Company believes that in many cases it is better to protect its intellectual property in other ways that do not require the

disclosure of proprietary information.

All of the patents that had previously been issued to the Company have expired.

The Company will continue

to file patent applications in situations where it believes that relying on trade secrets would be insufficient protection.

The various trademarks and trade names owned

or used by the Company in its business are of varying importance to the Company.

The most significant trademarks are Lubrajel ® ,

Renacidin ® , and Clorpactin ® .

will continue to file patent applications in situations where it believes that relying on trade secrets would be insufficient protection.

UNITED-GUARDIAN, INC.

The various trademarks

and trade names owned or used by the Company in its business are of varying importance to the Company.

The most significant trademarks

are Lubrajel ®

, Renacidin ®

, and Clorpactin ®

DOMESTIC SALES

In the United States the Company's 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”), for the marketing of the Company’s cosmetic

ingredients in North, Central, and South America.

Since that time this initial agreement has been modified and expanded multiple

times (see “Marketing Agreements” below).

ASI also has a non-exclusive right to sell certain of the Company's other

industrial and medical products.

It was also granted the exclusive right to market globally an oral care product, Lubrajel BA,

which was specifically developed for ASI in 2012 but which, to date, has not had significant sales, and Lubrajel Marine, the second

product in the Company’s Lubrajel Natural line of products.

The current agreement with ASI automatically renewed on January

1, 2020 and will automatically renew again on January 1, 2022 unless either party chooses to terminate, which can be done by giving

60 days’ notice prior to the then expiration date.

Revenue from domestic sales of all Company products

accounted for approximately 82% of the Company’s total sales in 2019, compared with 81% in 2018.

Domestic sales of cosmetic

ingredients accounted for approximately 40% of total Company sales in 2019, compared with 45% in 2018.

Sales to the Company’s

largest marketing partner, ASI, accounted for approximately 36% of total Company gross sales in 2019 and 42% of gross sales in

Although a significant percentage of ASI’s purchases from the Company are ultimately sold to foreign customers, all

sales to ASI are included in domestic sales revenue because all shipments to ASI are delivered to ASI’s warehouses in the

The Company’s pharmaceutical products

are marketed only in the United States and are sold primarily through full-line drug wholesalers and accounted for approximately

30% of Company sales in 2019, and approximately 26% in 2018.

Domestic sales of the Company's medical (non-pharmaceutical) products

accounted for approximately 11% of Company sales in 2019 and 8% in 2018.

COSMETIC INGREDIENTS :

In the United States

the Company's 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”).

That agreement was for

the marketing of the Company’s cosmetic ingredients in North, Central, and South America.

Since that time, this initial agreement

has been modified and expanded multiple times (see “Marketing Agreements”

below), most recently in 2019 when Korea

was added to ASI’s marketing territory.

ASI also has the exclusive right to market two of the Company’s products:

Marine , which was the second product in the Company’s Lubrajel Natural line of products;

and Lubrajel BA , an oral

care product which was specifically developed for ASI in 2012 but which, to date, has not had significant sales.

ASI also has a

non-exclusive right to sell certain of the Company's other industrial and medical products.

The current agreement with ASI automatically

renewed on January 1, 2020 and will automatically renew again on January 1, 2022 unless either party chooses to terminate, which

can be done by giving 60 days’

notice prior to the then expiration date.

Revenue from domestic

sales of all Company products accounted for approximately 80% of the Company’s total sales in 2020, compared with 82% in

Domestic sales of cosmetic ingredients accounted for approximately 30% of total Company sales in 2020, compared with 40%

Sales to the Company’s largest marketing partner, ASI, accounted for approximately 29% of total Company sales in

2020 and 39% of sales in 2019.

It should be noted, however, that while all sales to ASI are considered domestic sales because all

shipments to ASI are delivered to ASI in the U.S., a significant percentage of ASI’s purchases from the Company are ultimately

sold to foreign customers.

Based on sales information provided to the Company by ASI, 68% of ASI’s sales in 2020 were to

customers in foreign countries, compared with 75% in 2019.

PHARMACEUTICALS :

The Company’s

pharmaceutical products are marketed only in the United States, and are sold primarily through full-line drug wholesalers.

of those products accounted for approximately 41% of Company sales in 2020, compared with approximately 30% in 2019.

During 2020 and 2019,

the Company participated in various government drug rebate programs related to the sale of Renacidin, its most important pharmaceutical

These programs include the Medicaid Drug Rebate Program (MDRP), Section 340B Drug Pricing Program (340B), Veterans Affairs

Federal Supply Schedule (FSS), and the Medicare Part D Coverage Gap Discount Program (CGDP).

These programs required the Company

to either sell its product at a discounted price, or, in the case of Medicaid, to pay a significant rebate to the various states

where Renacidin was being provided to Medicaid patients.

The Company’s 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.

As a result of

the overly burdensome nature of the Medicaid rebates it became clear to the Company in October 2020 that it was no longer

profitable for the Company to continue participating in the Medicaid or the 340B programs.

As a result, on October 30, 2020,

the Company informed the Centers for Medicare & Medicaid Services (CMS) and the Health Resources and Services

Administration (HRSA) of its intention to terminate its Medicaid Drug Rebate Agreement and its 340B Drug Pricing Agreement,

effective December 31, 2020.

The Company will, however, continue to participate in the other government discount and rebate

programs, specifically the Veterans Affairs FSS Program and the Medicare Part D Coverage Gap Program (CGDP).

UNITED-GUARDIAN, INC.

MEDICAL PRODUCTS :

The Company’s

non-pharmaceutical medical products, such as its catheter lubricants and oral care products, are sold directly by the Company to

the end users or to contract manufacturers utilized by the end users.

These products are also are available for sale on a non-exclusive

basis by its marketing partners as well.

Domestic sales of the Company’s medical products accounted for approximately 8%

of the Company’s total sales in 2020, compared with 11% in 2019.

Although all shipments of medical products to U.S.

are considered “Domestic Sales”, a certain percentage of those shipments are subsequently shipped by some customers

to foreign manufacturing facilities which then produce finished products that are marketed globally.

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 are marketed globally.

INDUSTRIAL PRODUCTS :

Domestic sales of the

Company’s specialty industrial products accounted for less than 2% of Company sales in both 2020 and 2019.

These products

are sold directly to end-user customers or their contract manufacturers, who incorporate these products into their finished products.

In 2020 and 2019, approximately

20% and 18%, respectively, of the Company’s sales revenue was from foreign sources, and was derived from (a) sales of its

cosmetic ingredients to the Company’s foreign marketing partners, which accounted for approximately 9% of Company sales in

2020 and 7% in 2019, and (b) sales of some of the Company’s medical products directly to certain customers in foreign countries,

which accounted for approximately 11% of Company sales in both 2020 and 2019.

Because all shipments

to the Company’s largest marketing partner, ASI, are delivered to ASI’s warehouses in the U.S., all sales to ASI are

included in “Domestic Sales”, even though a significant percentage of ASI’s sales of the Company’s products

are to customers in foreign countries.

Based on sales information provided to the Company by ASI, 68% of ASI’s sales of the

Company’s products in 2020 were to customers in foreign countries, compared with 75% in 2019.

ASI’s largest foreign

market in both 2020 and 2019 was China, which accounted for approximately 33% of ASI’s sales of Company products in 2020

and 49% in 2019.

Since the Company sells

its products in U.S.

Dollars, the Company’s selling prices are not affected by fluctuations in foreign currency exchange

rates, except to the extent that a stronger dollar compared with foreign currencies can make the Company’s products less

competitive in foreign markets, sometimes requiring the Company to adjust its prices in order to be more competitive.

years, sales have been negatively impacted by the strength of the U.S.

Dollar relative to other currencies, particularly the Euro,

which has resulted in some of the Company’s products being more price sensitive than they had been in the past.

enabled some of the Company’s competitors to take some market share from the Company in those markets.

As a result of the

weakening dollar in 2020, the Company’s products became a little more competitive than they have been over the past few years.

UNITED-GUARDIAN, INC.

Domestic sales of the Company’s specialty

industrial products accounted for approximately 1% of Company sales in both 2019 and 2018.

The medical and industrial products

are sold directly to customers or their contract manufacturers, who incorporate these products into their finished products.

In 2019 and 2018, approximately 18% and 19%,

respectively, of the Company’s sales revenue was from foreign sources and was derived from (a) sales of its cosmetic ingredients

to the Company’s foreign marketing partners, which accounted for approximately 7% of Company sales in 2019 and 11% in 2018,

and (b) sales of some of the Company’s medical products directly to certain customers in foreign countries, which accounted

for approximately 11% of Company sales in 2019 and 8% in 2018.

Because all shipments to the Company’s

largest marketing partner, ASI, are delivered to ASI’s warehouses in the U.S., all sales to ASI are included in “Domestic

Sales”, even though a significant percentage of ASI’s sales of the Company’s products are to customers in foreign

Based on sales information provided to the Company by ASI, in both 2019 and 2018, 75% of ASI’s sales were to customers

in foreign countries.

ASI’s largest foreign market in both 2019 and 2018 was China, which accounted for approximately 49%

of ASI’s sales of Company products in 2019 and 55% in 2018.

Since the Company sells its products in U.S.

Dollars, the Company’s selling prices are not affected by fluctuations in foreign currency exchange rates, except to the

extent that a stronger dollar compared with foreign currencies can make the Company’s products less competitive in foreign

markets, sometimes requiring the Company to adjust its prices in order to be more competitive.

In recent years sales have been

negatively impacted by the strength of the U.S.

Dollar relative to other currencies, particularly the Euro, which has resulted

in some of the Company’s products being more price sensitive than they had been in the past.

It has also enabled some of

the Company’s competitors to take some market share from the Company in those markets.

SALES AND MARKETING

The Company markets its products through marketing

partners and distributors, promotion on the Company’s web sites, and by internet advertising, and has some direct sales to

customers as well.

The cosmetic ingredients are sold outright (not on consignment) to the Company’s marketing partners, which

in turn market and resell the products to cosmetic and other personal care product manufacturers for use in the formulation of

one or more of their products.

The pharmaceutical products are sold in the United States primarily to drug wholesalers, which in

turn distribute and resell those products to drug stores, hospitals, physicians, long-term care facilities, the U.S.

of Veterans Affairs, and other government agencies.

The medical and specialty industrial products are sold by the Company directly

to the end users.

The industrial products are older products that have limited marketability, but are still being sold to some

long-time customers.

The Company markets

its products through marketing partners and distributors, promotion on the Company’s websites, and by internet advertising,

and has some direct sales to customers as well.

The cosmetic ingredients are sold outright (not on consignment) to the Company’s

marketing partners, which in turn market and resell the products to cosmetic and other personal care product manufacturers for

use in the formulation of one or more of their products.

The pharmaceutical products are sold in the United States primarily to

drug wholesalers, which in turn distribute and resell those products to drug stores, hospitals, physicians, long-term care facilities,

Department of Veterans Affairs, and other government agencies.

The medical and specialty industrial products are sold

by the Company directly to the end users.

The industrial products are older products that have limited marketability but are still

being sold to some long-time customers.

They are not actively marketed but are available for sale to any new customers.

MARKETING AGREEMENTS

The Company has a written marketing agreement

only with ASI.

All other marketing arrangements are subject to cancellation at any time by either the Company or the marketing

The marketing agreement with ASI gives it exclusive foreign marketing rights with the exception of the following territories,

where the Company's other marketing partners have exclusive marketing rights:

the United Kingdom (by The Azelis Group);

(by Sederma SAS, a subsidiary of Croda International Plc.);

The Company has a written

marketing agreement only with ASI.

All other marketing arrangements are subject to cancellation at any time by either the Company

or the marketing partner.

The marketing agreement with ASI gives it exclusive foreign marketing rights with the exception of the

following territories, where the Company's other marketing partners have exclusive marketing rights:

the United Kingdom (by The

Azelis Group);

France (by Sederma SAS, a subsidiary of Croda International Plc.);

Italy (by Safic-Alcan);

and Switzerland (by Azelis Cosmetics GmbH.).

The Company previously had a separate marketing partner in Korea, but at the end of 2019 the marketing rights for Korea were transferred

UNITED-GUARDIAN, INC.

The marketing agreement with ASI was entered

into in 1994 with ISP, the predecessor company of ASI.

That agreement set forth provisions under which ISP/ASI would market and

distribute the Company's cosmetic ingredients, as well as some medical and specialty industrial products, in certain parts of Europe,

Asia, Australia, and Africa.

In 1996, the parties entered into another agreement, extending ASI’s distribution rights to

the United States, Canada, Mexico, and Central and South America, and in December 2019 the marketing rights in Korea were transferred

to ASI from the Company’s previous distributor for Korea.

In July 2000, December 2002, December 2005, May 2010, November

2012, and November 2013 the parties entered into additional agreements that modified, extended, and consolidated the 1994 and 1996

agreements, and provided for automatic two-year renewals of ASI’s marketing rights unless either party terminated the arrangement

upon 60 days’ notice.

The agreement automatically renewed on January 1, 2012, 2014, 2016, 2018, and 2020 for additional two-year

and Switzerland (by Azelis

Cosmetics GmbH.).

That agreement set

forth provisions under which ISP/ASI would market and distribute the Company's cosmetic ingredients, as well as some medical and

specialty industrial products, in certain parts of Europe, Asia, Australia, and Africa.

In 1996, the parties entered into another

agreement, which extended ASI’s distribution rights to the United States, Canada, Mexico, and Central and South America,

and in December 2019 the marketing rights in Korea were transferred to ASI from the Company’s previous distributor for Korea.

In July 2000, December 2002, December 2005, May 2010, November 2012, and November 2013 the parties entered into additional agreements

that modified, extended, and consolidated the 1994 and 1996 agreements, and provided for automatic two-year renewals of ASI’s

marketing rights unless either party terminated the arrangement upon 60 days’

The agreement automatically renewed

on January 1, 2012, 2014, 2016, 2018, and 2020 for additional two-year terms.

The current contract ends on December 31, 2021.

The Company believes that in the event ASI were

to cease marketing the Company's products alternative arrangements could be made with one of the other global marketers of cosmetic

ingredients to continue to supply products to customers currently using the Company's products, without any significant interruption

The Company believes

that in the event ASI were to cease marketing the Company's products alternative arrangements could be made with one of the other

global marketers of cosmetic ingredients to continue to supply products to customers currently using the Company's products, without

any significant interruption of sales.

RAW MATERIALS

The principal raw materials used by the Company

consist of common industrial organic and inorganic chemicals.

Most of these materials are available in ample supply from numerous

The Company has six major raw material vendors that together accounted for approximately 86% of the raw material purchases

by the Company in 2019 and 80% in 2018.

The principal raw materials

used by the Company consist of common industrial organic and inorganic chemicals.

Most of these materials are available in ample

supply from numerous sources.

The Company has six major raw material vendors that together accounted for approximately 88% of the

raw material purchases by the Company in 2020 and 84% in 2019.

INVENTORIES, RETURNS, and ALLOWANCES

It is important for the Company to maintain

moderate inventory levels of certain of its 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 the Company's business.

The Company currently does not have any significant

backlog of orders.

Due to the nature of the Company's business

and the types of products it markets it is not subject to any significant seasonal fluctuations in sales.

The Company’s cosmetic ingredients are

currently marketed and sold globally by five marketing partners.

During most of 2019, the Company also had a separate marketing

partner for Korea, but at the end of 2019 that territory was transferred to ASI.

Those marketing partners in turn market and distribute

those products to their customers.

Although the Company depends on those marketing partners for the marketing and distribution

of its cosmetic ingredients, it is confident that if any of its marketing partners were to decide not to sell the Company’s

products, or if the Company chose to replace one or more of those marketing partners, it would be able to put in place new marketing

agreements to service its customers in all of the geographic areas affected.

If necessary, the Company would also be able to sell

directly to the end users of its products until such time as a new marketing partner is put in place.

It is important for

the Company to maintain moderate inventory levels of certain of its finished goods in order to fulfill purchase orders in a timely

Historically, sufficient inventory levels, returns, and allowances have not been a significant factor in the Company's

UNITED-GUARDIAN, INC.

The Company’s pharmaceutical products

are sold to, and distributed by, full-line drug wholesalers throughout the United States.

Its medical and specialty industrial

products are sold directly by the Company to the end users of those products or, in some cases, to contract manufacturers used

by some of those end users.

The Company has some products or processes that

are either proprietary or have some unique characteristics.

Its Lubrajel line of products is well known globally and has a long-standing

reputation for high quality.

The Company believes that these characteristics will be advantageous to the Company in its continuing

efforts to compete effectively with other companies marketing similar products.

The pharmaceutical, health care, and cosmetic industries

are all highly competitive, and during 2019 the Company experienced a high level of competition for its cosmetic ingredients both

The Company currently

does not have any significant backlog of orders.

Due to the nature of

the Company's business and the types of products it markets, it is not subject to any significant seasonal fluctuations in sales.

The Company’s

cosmetic ingredients are currently marketed and sold globally by five marketing partners.

Those marketing partners in turn market

and distribute those products to their customers.

Although the Company depends on those marketing partners for the marketing and

distribution of its cosmetic ingredients, it is confident that if any of its marketing partners were to decide not to sell the

Company’s products, or if the Company chose to replace one or more of those marketing partners, it would be able to put in

place new marketing agreements to service its customers in all the geographic areas affected.

If necessary, the Company would also

be able to sell directly to the end users of its products until such time as a new marketing partner is put in place.

The Company’s

pharmaceutical products are sold to, and distributed by, full-line drug wholesalers throughout the United States.

Its medical and

specialty industrial products are sold directly by the Company to the end users of those products or, in some cases, to contract

manufacturers used by some of those end users.

The Company has some

products or processes that are either proprietary or have some unique characteristics.

Its Lubrajel line of products is well known

globally and has a long-standing reputation for high quality.

The Company believes that these characteristics will be advantageous

to the Company in its continuing efforts to compete effectively with other companies marketing similar products.

The pharmaceutical,

health care, and cosmetic industries are all highly competitive, and during 2020 the Company experienced a high level of competition

for its cosmetic ingredients both in the U.S.

and in foreign markets.

In 2019 the U.S.

dollar continued to strengthen against many foreign currencies, which made

the Company’s products less competitive in those markets.

The Company believes that there will continue to be increased competition

in coming years, especially from Asian competitors, and is working with ASI, its primary marketing partner, to address the issue

and determine how the Company can make its products more competitive in the marketplace.

The Company is aware that there are other

domestic and foreign companies that are engaged in the same or similar areas of research as those in which the Company is engaged,

some of which have substantially greater financial, research, manpower, marketing and distribution resources than the Company.

In addition, there are many large, integrated and established pharmaceutical, specialty chemical, personal care and health care

companies that have greater capacity than the Company to develop and to commercialize types of products upon which the Company's

research and development programs are based.

The Company intends to focus its research efforts on the development of new and innovative

products for which there is not the same competitive situation as there is for some of the Company’s older products, and

is optimistic that the development of unique products, such as its focus on the development of products made exclusively with natural

ingredients, will enable it to continue to compete in a market in which competition has become more of a factor than it had been

Unlike in 2019, in 2020 the value of the U.S.

dollar declined

relative to some other foreign currencies, in particular the Euro, which made the Company’s products a little more competitive

in those markets than it had been in recent years.

Despite the more favorable currency situation, the Company believes that there

will continue to be significant competition for its products, especially from Asian competitors, and the Company intends to continue

to work closely with its marketing partners to remain as competitive as possible.

The Company is aware that there are other domestic

and foreign companies that are engaged in the same or similar areas of research as those in which the Company is engaged, some

of which have substantially greater financial, research, manpower, marketing and distribution resources than the Company.

there are many large, integrated and established companies that have greater capacity than the Company to develop and to commercialize

the types of products upon which the Company's research and development programs are based.

The Company intends to continue to

focus its research efforts on the development of new and innovative products for which there is not the same competitive situation

as there is for some of the Company’s older products, and it is optimistic that the development of unique products, including

products made exclusively with natural ingredients, will enable it to continue to compete in a market in which competition has

become more of a factor than it had been in the past.

UNITED-GUARDIAN, INC.

ISO 9001:2015 REGISTRATION

On July 23, 2018, the Company was certified

by Underwriters Laboratories, Inc.

to be in compliance with the latest ISO standard, ISO 9001:2015, indicating that the Company's

documented procedures and overall operations had attained the high level of quality needed to comply with this current ISO certification

On July 23, 2018, the

Company was certified by Underwriters Laboratories, Inc.

to be in compliance with the latest ISO standard, ISO 9001:2015, indicating

that the Company's documented procedures and overall operations had attained the high level of quality needed to comply with this

current ISO certification level.

From October 2009 to July 2018, the Company had been registered under the ISO 9001:2008 standard;

from December 2003 to

October 2009, the Company had been registered under the ISO 9001:2000 standard;

and between November 1998 and December 2003 the

Company had been registered under the ISO 9002 standard.

The Company has been in continuous compliance with ISO standards since

November 1998.

from December 2003 to October 2009, the Company had been registered under the ISO 9001:2000 standard;

and between November 1998

and December 2003 the Company had been registered under the ISO 9002 standard.

The Company has been in continuous compliance with

ISO standards since November 1998.

GOVERNMENT REGULATION

Regulation by governmental authorities in the

United States and other countries is a significant factor in the manufacturing and marketing of many of the Company's products.

Regulation by governmental

authorities in the United States and other countries is a significant factor in the manufacturing and marketing of many of the

Company's products.

The Company and many of the Company's products are subject to certain government regulations.

Products that may be developed and

sold by the Company in the United States may require approval from federal regulatory agencies, such as the U.S.

Administration (“FDA”), as well as state regulatory agencies.

Products that may be developed and sold by the Company

outside the United States may require approval from foreign regulatory agencies.

Although the Company does not currently market

any medical devices, if it were to do so a 510(k) pre-market notification to the FDA would be required to demonstrate that the

device is at least as safe and effective as a legally marketed device.

The Company would then need to receive clearance from the

FDA prior to marketing the device.

While the Company does not have any plans to develop new pharmaceutical products, if it decided

to do so any new drug product would require clinical evaluation under an Investigational New Drug Application, and the subsequent

submission to the FDA of a New Drug Application.

UNITED-GUARDIAN, INC.

The Company is required to comply with all pertinent

current Good Manufacturing Practices of the FDA for medical devices and drugs.

Accordingly, the regulations to which the Company

and certain of its products may be subject, and any changes with respect thereto, may materially affect the Company's ability to

produce and market new products developed by the Company.

The Company's present and future activities

are, and will likely continue to be, subject to varying degrees of additional regulation under the Occupational Safety and Health

Act, Environmental Protection Act, import, export and customs regulations, and other present and possible future foreign, federal,

state and local regulations.

Portions of the Company's operating expenses

are directly attributable to complying with federal, state, and local environmental statutes and regulations.

In 2019 and 2018,

the Company incurred approximately $39,000 and $43,000, respectively, in federal, state, and local environmental law compliance

There was no material financial or other impact on the Company as a result of compliance with environmental laws.

The Company presently has 28 employees, 4 of

whom serve in an executive capacity, 16 in research, quality control and manufacturing, 5 in maintenance and construction, and

3 in office and administrative support services.

Some products

developed and sold by the Company in the United States may require approval from federal regulatory agencies, such as the U.S.

Food & Administration (“FDA”), as well as state regulatory agencies.

Some products developed and sold by the

Company outside the United States may require approval from foreign regulatory agencies.

Although the Company does not currently

market any medical devices, if it were to do so a 510(k) pre-market notification to the FDA would be required to demonstrate that

the device is at least as safe and effective as a legally marketed device.

The Company would then need to receive clearance from

the FDA prior to marketing the device.

While the Company does not have any plans to develop new pharmaceutical products, if it

decided to do so any new drug product would require clinical evaluation under an Investigational New Drug Application, and the

subsequent submission to the FDA of a New Drug Application.

The Company is required

to comply with all pertinent current Good Manufacturing Practices of the FDA for medical devices and drugs.

Accordingly, the regulations

to which the Company and certain of its products may be subject, and any changes with respect thereto, may materially affect the

Company's ability to produce and market new products developed by the Company.

The Company's present

and future activities are, and will likely continue to be, subject to varying degrees of additional regulation under the Occupational

Safety and Health Act, Environmental Protection Act, import, export and customs regulations, and other present and possible future

foreign, federal, state and local regulations.

Portions of the Company's

operating expenses are directly attributable to complying with federal, state, and local environmental statutes and regulations.

In 2020 and 2019, the Company incurred approximately $13,000 and $39,000, respectively, in federal, state, and local environmental

law compliance expenses.

There was no material financial or other impact on the Company as a result of compliance with environmental

The Company presently

has 25 employees, 4 of whom serve in an executive capacity, 16 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, 22 are full time.

POTENTIAL IMPACT OF CORONAVIRUS

The Company’s marketing partners sell

the Company’s cosmetic ingredients and medical lubricants to customers in geographic areas that are currently being impacted

by an outbreak of coronavirus, in particular China, Korea, and certain parts of Europe.

It is likely that this outbreak will have

some impact on the Company’s sales in these geographic areas, particularly in Asia.

However, at the time of the Company’s

filing of this Form 10-K it is not possible to determine the extent of that potential impact.

With some businesses in the affected

areas temporarily closing as a result of the spread of this virus, it is possible that payments from some customers may be delayed.

The Company has also been informed by its marketing partners in Asia that there is an expectation on the part of cosmetic manufacturers

doing business there that consumer sales of cosmetic products in some areas may decrease due to the temporary closing of stores

and the reduction in tourism.

As a result, it is believed that some manufacturers may temporarily reduce their purchases of raw

materials used in the production of their cosmetics, including those materials sold by the Company.

The Company is monitoring this

situation closely to determine what impact, if any, this outbreak will have on its sales in the coming year.

Although the Company does source some of its

raw materials from areas being impacted by the coronavirus, it has multiple sources for many, but not all, of its raw materials.

For those it doesn’t it is increasing its inventory in case there is a temporary delay in obtaining some of those materials.

While at the present time the Company’s production of cosmetic ingredients, as well as its other products, has not yet been

impacted by the coronavirus, the situation is changing rapidly, both in the U.S.

and overseas, and there is a possibility that

businesses, including the Company’s business, might have to temporarily shut down, which could have a significant impact

on sales until production can be resumed.

UNITED-GUARDIAN, INC.

Risk Factors.

The information to be reported under this item

is not required of smaller reporting companies.

The information to

be reported under this item is not required of smaller reporting companies.

UNITED-GUARDIAN, INC.

Unresolved Staff Comments.

The information to be reported under this item

is not required of smaller reporting companies.

The information to

be reported under this item is not required of smaller reporting companies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business