What changed in this filing

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Item 9A. Controls and Procedures

2021-03-22 compared with 2020-03-26 · 748 added, 723 removed, 302 unchanged (83% of the section changed)

Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation

of the Company’s Principal Executive Officer and Principal Financial Officer, has evaluated the design, operation, and effectiveness

of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange

Act as of December 31, 2019.

On the basis of that evaluation, management concluded that the Company’s disclosure controls

and procedures are designed to be, and are, effective at providing reasonable assurance that the information required to be disclosed

in reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods

specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including

its Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

UNITED-GUARDIAN, INC.

(b) Management’s Report on Internal

Control over Financial Reporting

Management is responsible for establishing and

maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).

Company’s internal control system is designed to provide reasonable assurance to management and to the Company’s Board

of Directors regarding the preparation and fair presentation of published financial statements.

Under the supervision and with

the participation of management, including the Company’s Principal Executive Officer and Principal Financial Officer, management

conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework

in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO

Based on management’s evaluation under the framework in Internal Control—Integrated Framework, management concluded

that the Company’s internal control over financial reporting was effective as of December 31, 2019.

This Annual Report does not include an attestation

report of the Company’s registered public accounting firm regarding internal control over financial reporting.

Company is a non-accelerated filer, management’s report is not subject to attestation by the Company's registered public

accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002.

As a result, this Annual Report contains

only management’s report on internal controls.

(a) Evaluation of Disclosure Controls

and Procedures

The Company’s

management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, has evaluated

the design, operation, and effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e)

and 15d-15(e) of the Exchange Act as of December 31, 2020.

On the basis of that evaluation, management concluded that

the Company’s disclosure controls and procedures are designed to be, and are, effective at providing reasonable assurance

that the information required to be disclosed in reports filed or submitted pursuant to the Exchange Act is recorded, processed,

summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated

and communicated to management, including its Principal Executive Officer and Principal Financial Officer as appropriate, to allow

timely decisions regarding required disclosure.

(b) Management’s

Report on Internal Control over Financial Reporting

Management is responsible

for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).

The Company’s internal control system is designed to provide reasonable assurance to management and to the Company’s

Board of Directors regarding the preparation and fair presentation of published financial statements.

Under the supervision and

with the participation of management, including the Company’s Principal Executive Officer and Principal Financial Officer,

management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based

on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway

Commission (COSO 2013).

Based on management’s evaluation under the framework in Internal Control—Integrated Framework,

management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2020.

This Annual Report

does not include an attestation report of the Company’s registered public accounting firm regarding internal control over

financial reporting.

There were no changes in the Company’s

internal control over financial reporting in the fourth quarter of 2019 that materially affected, or would be reasonably likely

to materially affect, the Company’s internal control over financial reporting.

(d) Limitations of the Effectiveness

of Internal Controls

The effectiveness of the Company’s system

of disclosure controls and procedures and internal control over financial reporting is subject to certain limitations, including

the exercise of judgment in designing, implementing and evaluating the control system, the assumptions used in identifying the

likelihood of future events, and the inability to eliminate fraud and misconduct completely.

As a result, there can be no assurance

that the Company’s disclosure controls and procedures and internal control over financial reporting will detect all errors

However, the Company’s control systems have been designed to provide reasonable assurance of achieving their objectives,

and the Company’s Principal Executive Officer and Principal Financial Officer have concluded that the Company’s disclosure

controls and procedures and internal control over financial reporting are effective at the reasonable assurance level.

Other Information.

Since the Company is a non-accelerated filer, management’s report is not subject to attestation by the

Company's registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002.

this Annual Report contains only management’s report on internal controls.

in Internal Control over Financial Reporting

There were no changes

in the Company’s internal control over financial reporting in the fourth quarter of 2020 that materially affected, or would

be reasonably likely to materially affect, the Company’s internal control over financial reporting.

(d) Limitations

of the Effectiveness of Internal Controls

The effectiveness of

the Company’s system of disclosure controls and procedures and internal control over financial reporting is subject to certain

limitations, including the exercise of judgment in designing, implementing and evaluating the control system, the assumptions used

in identifying the likelihood of future events, and the inability to eliminate fraud and misconduct completely.

As a result, there

can be no assurance that the Company’s disclosure controls and procedures and internal control over financial reporting will

detect all errors or fraud.

However, the Company’s control systems have been designed to provide reasonable assurance of

achieving their objectives, and the Company’s Principal Executive Officer and Principal Financial Officer have concluded

that the Company’s disclosure controls and procedures and internal control over financial reporting are effective at the

reasonable assurance level.

UNITED-GUARDIAN, INC.

Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated

by reference to the section entitled “Directors and Executive Officers” to be contained in the Company’s 2020

Proxy Statement.

Other Information.

Directors, Executive Officers

and Corporate Governance.

The information required

by this item is incorporated by reference to the section entitled “Directors and Executive Officers”

to be contained

in the Company’s 2021 Proxy Statement.

Code of Ethics

The Company has adopted a Code of Business Conduct

and Ethics that applies to all officers, directors, and employees serving in any capacity to the Company, including the Chief Executive

Officer and/or President, Chief Financial Officer, and Principal Accounting Officer.

A copy of the Company's Code of Business Conduct

and Ethics is available on the Company's web site at http://www.u-g.com/corporate.

The Company intends to satisfy the disclosure

requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of its Code of Business Conduct

and Ethics applicable to the Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer by posting this

information on the Company's web site.

The Company has adopted

a Code of Business Conduct and Ethics that applies to all officers, directors, and employees serving in any capacity to the Company,

including the Chief Executive Officer and/or President, Chief Financial Officer, and Principal Accounting Officer.

A copy of the

Company's Code of Business Conduct and Ethics is available on the Company's website at http://www.u-g.com/corporate.

The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from

any provision of its Code of Business Conduct and Ethics applicable to the Chief Executive Officer, Chief Financial Officer, and

Principal Accounting Officer by posting this information on the Company's website.

Audit Committee

The Company has an Audit Committee (“Committee”)

that is currently composed of three of the Company’s independent directors, as well as an additional outside director that

has expertise in both accounting and financial reporting, who acts as an advisor to the Committee.

The members of the Committee

are elected annually by the Board of Directors.

The Committee was established for the purpose of assisting the Board of Directors

in fulfilling its oversight responsibilities, including (a) overseeing the Company’s accounting and financial reporting processes,

including preparation of financial statements and audits;

(b) assuring the Company’s compliance with all legal, regulatory,

and ethical responsibilities;

and (d) assessing the effectiveness of the Company’s internal controls and risk management procedures.

The Committee currently

meets four times a year, and is governed by a charter that was adopted in 2006 and updated in 2020.

The Company has an

Audit Committee (“Committee”) that is currently composed of three of the Company’s independent directors, as

well as an additional outside director that has expertise in both accounting and financial reporting, who acts as an advisor to

the Committee.

The members of the Committee are elected annually by the Board of Directors.

The Committee was established for the

purpose of assisting the Board of Directors in fulfilling its oversight responsibilities, including (a) overseeing the Company’s

accounting and financial reporting processes, including preparation of financial statements and audits;

(b) assuring the Company’s

compliance with all legal, regulatory, and ethical responsibilities;

Company’s independent accountants;

and (d) assessing the effectiveness of the Company’s internal controls and risk

management procedures.

The Committee currently meets five times a year, and is governed by a charter that was adopted in 2006 and

updated in 2020.

Executive Compensation.

The information required by this item is incorporated

herein by reference to the section entitled "Compensation of Directors and Executive Officers" to be contained in the

The information required

by this item is incorporated herein by reference to the section entitled "Compensation of Directors and Executive Officers"

in the Company's 2021 Proxy Statement.

UNITED-GUARDIAN, INC.

Security Ownership of Certain

Beneficial Owners and Management and Related Stockholder Matters.

The information required

by this item is incorporated by reference to the section entitled "Voting Securities and Principal Stockholders"

Company's 2021 Proxy Statement.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated

by reference to the section entitled "Voting Securities and Principal Stockholders" to be contained in the Company's

Certain Relationships

and Related Transactions, and Director Independence.

The information required

by this item is incorporated by reference to the section entitled “Directors and Executive Officers"

in the Company's

2021 Proxy Statement.

Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated

by reference to the section entitled “Directors and Executive Officers" to be contained in the Company's 2020 Proxy

UNITED-GUARDIAN, INC.

Principal Accounting Fees and Services.

The aggregate fees that have been, or are expected

to be, billed by Baker, Tilly, Virchow & Krause, LLP, (“Baker Tilly “) ,the Company’s principal accountants

since March 25, 2019, for the quarterly reviews of the Company’s financial statements for the first, second and third quarters

of 2019 and the audit of the Company’s financial statements for the 2019 fiscal year were $90,000.

During 2019, the Company paid Raich Ende Malter

& Co (“Raich”) $38,000 in connection with the audit of the Company’s financial statements for the 2018 fiscal

Audit-Related Fees

During 2019, there were no fees paid to Raich

or Baker Tilly in connection with the Company's compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

No other fees were billed by Raich or Baker

Tilly for the last two fiscal years that were reasonably related to the performance of the audit or review of the Company's financial

statements and not reported under "Audit Fees" above.

There were no fees billed by Raich or Baker

Tilly during the last two fiscal years for professional services rendered for tax compliance, tax advice, or tax planning.

none of such services were approved pursuant to pre-approval procedures or permitted waivers thereof.

Principal Accounting

Fees and Services.

The aggregate fees

that have been billed by Baker Tilly US, LLP (“Baker Tilly“), the Company’s principal accountants since March

25, 2019, for the quarterly reviews of the Company’s financial statements for the first, second and third quarters of 2019

and the audit of the Company’s financial statements for the 2019 fiscal year were $89,000.

The aggregate fees

that have been, or are expected to be, billed by Baker Tilly for the quarterly reviews of the Company’s financial statements

for the first, second and third quarters of 2020 and the audit of the Company’s financial statements for the 2020 fiscal

year are $89,500.

During 2020, the

Company paid Raich Ende Malter & Co (“Raich”) $5,000 in connection with the audit of the Company’s

financial statements for the 2019 fiscal year.

Audit-Related

During 2020, there

were no fees paid to Baker Tilly in connection with the Company's compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

No other fees

were billed by Baker Tilly for the last two fiscal years that were reasonably related to the performance of the audit or review

of the Company's financial statements and not reported under "Audit Fees"

There were no fees

billed by Baker Tilly during the last two fiscal years for professional services rendered for tax compliance, tax advice, or tax

Accordingly, none of such services were approved pursuant to pre-approval procedures or permitted waivers thereof.

All Other Fees

There were no other non-audit-related fees billed

to the Company by Raich or Baker Tilly in 2019 or 2018.

Pre-Approval Policies and Procedures

Engagement of accounting services by the Company

is not made pursuant to any pre-approval policies and procedures.

Rather, the Company believes that its accounting firm is independent

because all of its engagements by the Company are approved by the Company's Audit Committee prior to any such engagement.

The Audit Committee meets periodically to review

and approve the scope of the services to be provided to the Company by its Independent Registered Public Accounting Firm, as well

as to review and discuss any issues that may arise during an engagement.

The Committee is responsible for the prior approval of

every engagement of the Company's Independent Registered Public Accounting Firm to perform audit and permissible non-audit services

for the Company, such as quarterly financial reviews, tax matters, and consultation on new accounting and disclosure standards.

Before the auditors are engaged to provide those

services, the President and the Controller will make a recommendation to the Committee regarding each of the services to be performed,

including the fees to be charged for such services.

At the request of the Committee, the Independent Registered Public Accounting

Firm and/or management shall periodically report to the Committee regarding the extent of services being provided by the Independent

Registered Public Accounting Firm, and the fees for the services performed to date.

There were no other

non-audit-related fees billed to the Company by Baker Tilly in 2020 or 2019.

UNITED-GUARDIAN, INC.

Policies and Procedures

Engagement of accounting

services by the Company is not made pursuant to any pre-approval policies and procedures.

Rather, the Company believes that its

accounting firm is independent because all of its engagements by the Company are approved by the Company's Audit Committee prior

to any such engagement.

The Audit Committee

meets periodically to review and approve the scope of the services to be provided to the Company by its Independent Registered

Public Accounting Firm, as well as to review and discuss any issues that may arise during an engagement.

The Committee is responsible

for the prior approval of every engagement of the Company's Independent Registered Public Accounting Firm to perform audit and

permissible non-audit services for the Company, such as quarterly financial reviews, tax matters, and consultation on new accounting

and disclosure standards.

Before the auditors

are engaged to provide those services, the President and the Controller will make a recommendation to the Committee regarding each

of the services to be performed, including the fees to be charged for such services.

At the request of the Committee, the Independent

Registered Public Accounting Firm and/or management shall periodically report to the Committee regarding the extent of services

being provided by the Independent Registered Public Accounting Firm, and the fees for the services performed to date.

Exhibits, Financial Statement Schedules.

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Financial Statements and Supplementary Data.

Financial Statement Schedules – None.

Financial Statement Schedules –

(Financial statement schedules have been omitted either because they are not applicable, not required, or the information required to be set forth therein is included in the financial statements or notes thereto.)

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UNITED-GUARDIAN, INC.

/s/ Kenneth H.

/s/ Ken Globus

March 18, 2021

President and Director

Pursuant to the requirements of the Securities Exchange Act of 1934,

this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Kenneth H.

President, General Counsel, Chairman

March 18, 2020

of the Board of Directors (Principal Executive

/s/ Robert S.

Executive Vice President, Secretary, Director

Pursuant to the requirements of the Securities

Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities

and on the dates indicated.

President (Principal Executive Officer);

General Counsel;

Chairman of the Board of Directors

March 18, 2021

/s/ Andrea J.

Controller, Treasurer (Principal Financial

Chief Financial Officer (Controller, Principal Financial Officer, and Principal Accounting Officer);

March 18, 2021

Officer and Principal Accounting Officer)

/s/ Lawrence F.

Advisor to the Audit Committee

March 18, 2021

/s/ Arthur M.

Audit Committee member

Chairman of the Audit Committee

March 18, 2021

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Exhibit # Description

Certificate of Merger of United-Guardian, Inc.

of Merger of United-Guardian, Inc.

(New York) with and into United-Guardian, Inc.

(Delaware) as filed with the Secretary of State of the State of Delaware on September 10, 1987.

Incorporated by reference to Exhibit 3(b) of the Registrant's Annual Report on Form 10-K for the fiscal year ended February 29, 1988 (the "1988 10-K").

Certificate of Incorporation of the Company as filed April 22, 1987.

Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K, dated September 21, 1987 (the "1987 8-K").

By-laws of the Company.

(Delaware) as filed with the

Secretary of State of the State of Delaware on September 10, 1987.

Incorporated by reference to Exhibit 3(b) of the Registrant's

Annual Report on Form 10-K for the fiscal year ended February 29, 1988 (the "1988 10-K").

Certificate of Incorporation

of the Company as filed April 22, 1987.

Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form

8-K, dated September 21, 1987 (the "1987 8-K").

of the Company.

Incorporated by reference to Exhibit 4.2 to the 1987 8-K.

Specimen Certificate for shares of Common Stock of the Company.

Certificate for shares of Common Stock of the Company.

Incorporated by reference to Exhibit 4(a) to the 1988 10-K.

Qualified Retirement Income Plan for Employees of the Company, as restated April 1, 1976.

Incorporated by reference to Exhibit 11(c) of the Registrant's Registration Statement on Form S-1 (Registration No.

Qualified Retirement Income Plan for Employees

of the Company, as restated April 1, 1976.

Incorporated by reference to Exhibit 11(c) of the Registrant's Registration

Statement on Form S-1 (Registration No.

2-63114) declared effective February 9, 1979.

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signed November 12, 2013 and effective as of November 1, 2013.

Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K dated and filed November 18, 2013 .

Code of Ethics and amendments thereto:

filed herewith

Subsidiaries of the Company:

Jurisdiction of

Incorporation

Name Under Which

it does Business

Dieselite Corporation (Inactive)

Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K dated and filed November 18, 2013.

of Ethics and amendments thereto.

Incorporated by reference to Exhibit 14 of the Registrant's Annual Report on Form 10-K for

the fiscal year ended December 31, 2019.

of the Company:

UNITED-GUARDIAN, INC.

Certification of Kenneth H.

Globus, President and Principal Executive Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Andrea J.

Certification of Ken Globus, President and Principal Executive Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification

Young, Principal Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certifications of Kenneth H.

Globus, President and Principal Executive Officer of the Company, and Andrea J.

Certifications of Ken Globus, President and Principal Executive Officer of the Company, and Andrea J.

Young, Principal Financial Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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December 31, 2020 and 2019)

Reports of Independent Registered Public Accounting Firms

Reports of Independent Registered Public Accounting Firm

Financial Statements

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PUBLIC ACCOUNTING FIRM

Baker, Tilly, Virchow & Krause, LLP:

To the shareholders and the board of directors of United-Guardian, Inc.:

Opinion on the Financial Statements

We have audited the accompanying balance sheet of United-Guardian, Inc.

(the "Company")

as of December 31, 2019, the related statement of income, stockholders' equity, and cash flows, for the period ended December 31,

2019, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its

operations and its cash flows for the period ended December 31, 2019, in conformity with accounting principles generally accepted

in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility

is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with

the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect

to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and

Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its

internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control

over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control

over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement

of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also

included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall

presentation of the financial statements.

We believe that our audit provide a reasonable basis for our opinion.

We have served as the Company's auditor since 2019.

/s/ Baker, Tilly, Virchow & Krause, LLP

March 18, 2020

UNITED-GUARDIAN, INC.

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

RAICH ENDE MALTER & CO.

To the Board of Directors and Stockholders of United-Guardian, Inc.

Hauppauge, New York

To the shareholders and the board of directors of United-Guardian,

Opinion on the Financial Statements

We have audited the accompanying balance sheets of United-Guardian,

(the Company) as of December 31, 2018 and 2017, and the related statements of income, comprehensive income, stockholders’

equity, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively

referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each

of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the

United States of America.

(the "Company") as of December 31, 2020 and 2019, the related statements of income, stockholders' equity, and cash

flows, for the years then ended, and the related notes (collectively referred to as the "financial statements").

opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting

principles generally accepted in the United States of America.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required

We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required

to be independent with respect to the Company in accordance with the U.S.

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regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of

internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

We conducted our audits in accordance with the standards of

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of

material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ RAICH ENDE MALTER & CO.

We have served as the Company’s auditor since 2016.

Melville, New York

March 20, 2019

Our audits included performing procedures to assess the risks

of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as

well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis

for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current

period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined that there are no critical audit matters.

Baker Tilly US, LLP (formerly known as Baker Tilly Virchow Krause,

UNITED-GUARDIAN, INC.

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Research and development

Total costs and expenses

costs and expenses

Income from operations

Other income (expense):

Other income:

Investment income

Net gain (loss) on marketable securities

Loss on trade-in of equipment

Total other income (expense)

Net gain on marketable securities

Total other income

Income before provision for income taxes

Provision for income taxes

Earnings per common share (basicand diluted)

Earnings per common share (basic and diluted)

Weighted average shares (basic and diluted)

See Notes to Financial Statements

See Notes to Financial

UNITED-GUARDIAN, INC.

BALANCE SHEETS

Current assets:

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UNITED-GUARDIAN, INC.

BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

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Commitments and contingencies

Stockholders’ equity:

Stockholders’

Common stock, $.10 par value;

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Retained earnings

Total stockholders’ equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

Total stockholders’

TOTAL LIABILITIES AND STOCKHOLDERS’

See Notes to Financial Statements

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Years ended December 31, 2020 and 2019

comprehensive

Balance, January 1, 2019

Reclassification of accumulated unrealized gains on marketable securities in

accordance with ASU 2016-01(See Note B)

Dividends declared, not paid ($1.10 per share)

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Cash flows from operating activities:

Adjustments to reconcile net income to net cashprovided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Net (gain) loss on marketable securities

Loss on trade-in of equipment

Bad debt expense (recovery)

Net gain on marketable securities

Allowance for doubtful accounts

Reserve for inventories

Deferred income taxes

(Increase) decrease in operating assets:

Decrease (increase) in operating assets:

Accounts receivable

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Accrued expenses

Income taxes payable

Dividends payable

Net cash provided by operating activities

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Proceeds from sales of marketable securities

Net cash provided by (used in) investing

Net cash (used in) provided by investing activities

Cash flows from financing activities:

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Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Non-cash investing activities:

Cost of equipment traded-in (net)

Supplemental disclosure of cash flow information

Supplemental disclosure of non-cash dividend on unexchanged shares

Supplemental disclosure of non-cash dividends on unexchanged shares

See Notes to Financial Statements

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United-Guardian, Inc.

(the "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.

Two major product lines, Lubrajel ® and Renacidin ® Irrigation Solution (“Renacidin”) together

accounted for approximately 93% and 94% of the Company’s sales for the years ended December 31, 2019 and December 31, 2018,

(the "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.

Two major product lines, Lubrajel ®

and Renacidin ®

Irrigation Solution (“Renacidin”)

together accounted for approximately 92% and 93% of the Company’s sales for the years ended December 31, 2020 and December

31, 2019, respectively.

Lubrajel accounted for approximately 67% and 72% of the Company’s sales for the years ended December 31, 2019

and December 31, 2018, respectively, and Renacidin accounted for approximately 26% and 22% of the Company’s sales for the

years ended December 31, 2019 and December 31, 2018, respectively.

Lubrajel accounted for approximately 57% and 67% of the Company’s sales for the years ended December

31, 2020 and December 31, 2019, respectively, and Renacidin accounted for approximately 36% and 26% of the Company’s sales

for the years ended December 31, 2020 and December 31, 2019, respectively.

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.

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 Ashland Specialty

Ingredients (“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

(b) manufacturing disruptions in China resulting from the impact of the coronavirus on manufacturing facilities;

excess inventory levels due to overstocking on the part of both the Company’s marketing partner for China as well its sub-distributors

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.

Since 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

UNITED-GUARDIAN, INC.

The Company also believes

that the coronavirus impacted sales to two of the Company’s four 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

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 protection from large price fluctuations

on its most important raw material, and has multiple sources for many of its other raw materials.

Even with the impact of the coronavirus

pandemic it has been able to maintain sufficient inventory and production levels to enable it to fulfill sales orders on a timely

The Company does not expect the carrying value of its assets or its liquidity to be impaired by the coronavirus pandemic.

Use of Estimates

In preparing financial statements in conformity

with a Generally Accepted Accounting Principles in the United States of America (“US GAAP”), management is required

to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets

and liabilities at the date of the financial statements and revenue and expenses during the reporting period.

Actual results could

differ from those estimates.

Such estimated items include the allowance for bad debts, reserve for inventory obsolescence, accrued

distribution fees, outdated material returns, possible impairment of marketable securities and the allocation of overhead.

Reclassifications

Certain amounts in the prior-period financial

statements have been reclassified to conform to the presentation of the current-period financial statements.

These reclassifications

had no effect on the previously reported net income.

In accordance with ASC Topic 606 “Revenue

from Contracts with Customers”, for the year ended December 31, 2018, the Company reclassified certain sales rebates from

Cost of Sales to Net Sales, in the amount of $323,836.

The reclassification had no effect on gross profit, net income, the provision

for income taxes or earnings per share for the year ended December 31, 2018.

See “Revenue Recognition” below for further

discussion regarding ASU Topic 606.

In preparing financial

statements in conformity with a Generally Accepted Accounting Principles in the United States of America (“US GAAP”),

management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure

of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period.

Actual results could differ from those estimates.

Such estimated items include the allowance for bad debts, reserve for inventory

obsolescence, accrued distribution fees, outdated material returns, possible impairment of marketable securities and the allocation

Accounts Receivable and Reserves

The carrying amount of accounts receivable is

reduced by a valuation allowance that reflects the Company’s best estimate of the amounts that will not be collected.

reserve for accounts receivable comprises the allowance for doubtful accounts and sales returns.

In addition to reviewing

delinquent accounts receivable, the Company considers many factors in estimating this reserve, including historical data, experience,

customer types and credit worthiness, and economic trends.

At December 31, 2019 and 2018, the allowance for doubtful accounts receivable

amounted to $21,178 and $16,895, respectively.

From time to time, the Company adjusts its assumptions for anticipated changes

in any of these or other factors expected to affect collectability.

UNITED-GUARDIAN, INC.

The carrying amount

of accounts receivable is reduced by a valuation allowance that reflects the Company’s best estimate of the amounts that

will not be collected.

The reserve for accounts receivable comprises the allowance for doubtful accounts and sales returns.

addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating this reserve, including

historical data, experience, customer types and credit worthiness, and economic trends.

At December 31, 2020 and 2019, the allowance

for doubtful accounts receivable amounted to $14,017 and $21,178, respectively.

From time to time, the Company adjusts its

assumptions for anticipated changes in any of these or other factors expected to affect collectability.

Revenue Recognition

Effective January 1, 2018, the Company adopted

ASC Topic 606, “Revenue from Contracts with Customers”, using the modified retrospective method.

Under the new guidance,

revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration

expected to be received in exchange for those goods and services.

The Company’s principal source of revenue is product sales.

The Company’s sales, as reported, are

net of a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized.

Such variable consideration, primarily related to the sale of the Company’s pharmaceutical products, includes chargebacks

from the United States Department of Veterans Affairs (“VA”), rebates in connection with participation in Medicare

and Medicaid programs, distribution fees, discounts, and outdated product returns.

These deductions represent estimates of the

related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on

sales for a reporting period.

The Company recognizes revenue from sales of

its cosmetic ingredients, medical products, and industrial products when those products are shipped, as long as a valid purchase

order has been received and future collection of the sale amount is reasonably assured.

These products are shipped “Ex Works”

from the Company’s facility in Hauppauge, NY, and it is at this time that risk of loss and responsibility for the shipment

passes to the customer.

Sales of these products are deemed final, and there is no obligation on the part of the Company to repurchase

or allow the return of those goods unless they are defective.

The Company’s pharmaceutical products

are shipped via common carrier upon receipt of a valid purchase order, with, in most cases, the Company paying the shipping costs.

Sales of pharmaceutical products are final, and revenue is recognized at the time of shipment, which is the satisfaction of the

performance obligation.

Pharmaceutical products are returnable only at the discretion of the Company unless (a) they are found

to be defective;

The Company records

revenue in accordance with ASC Topic 606 “Revenue from Contracts with Customers.”

Under this guidance, revenue is recognized

when a customer obtains control of promised goods or services, in an amount that reflects the consideration expected to be received

in exchange for those goods or services.

The Company’s principal source of revenue is product sales.

UNITED-GUARDIAN, INC.

The Company’s

sales, as reported, are subject to a variety of deductions, which are estimated and recorded in the same period that the revenues

are recognized.

Such variable consideration, primarily related to the sale of the Company’s pharmaceutical products, includes

chargebacks from the United States Department of Veterans Affairs (“VA”), rebates in connection with participation

in Medicare and Medicaid programs, distribution fees, discounts, and outdated product returns.

These deductions represent estimates

of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions

on sales for a reporting period.

During 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 is 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, the Company concluded 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 as of

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).

As long as a valid

purchase order has been received and future collection of the sale amount is reasonably assured, the Company recognizes revenue

from sales of its products when those products are shipped, which is when the Company’s performance obligation is satisfied.

The Company’s products are shipped “Ex-Works”

from the Company’s facility in Hauppauge, NY, and the risk

of loss and responsibility for the shipment passes to the customer upon shipment.

Sales of the Company’s non-pharmaceutical

medical products are deemed final upon shipment, and there is no obligation on the part of the Company to repurchase or allow the

return of these goods unless they are defective.

Sales of the Company’s pharmaceutical products are final upon shipment unless

(a) they are found to be defective;

(b) the product is damaged in shipping;

or (c) the product is outdated (but not more than one year after their

expiration date, which is a return policy which conforms to standard pharmaceutical industry practice).

The Company estimates an

allowance for outdated material returns based on prior year historical returns of their pharmaceutical products.

The Company does not make sales on consignment,

and the collection of the proceeds of the sale of any of the Company’s products is not contingent upon the customer being

able to sell the goods to a third party.

Any allowances for returns are taken as a reduction

of sales within the same period the revenue is recognized.

Such allowances are determined based on historical experience under

ASC Topic 606-10-32-8.

The Company has not experienced significant fluctuations between estimated allowances and actual activity.

The timing between recognition of revenue for

product sales and the receipt of payment is not significant.

The Company’s standard credit terms, which vary depending on

the customer, range between 30 and 60 days.

The Company uses its judgment on a case-by-case basis to determine its ability to collect

outstanding receivables and provides allowances for any receivables for which collection has become doubtful.

Prompt-pay discounts

are offered to some customers however, due to the uncertainty of the customers actually taking the discounts, the discounts are

recorded when they are taken.

or (c) the product is outdated (but not more than one

year after their expiration date, which is a return policy which conforms to standard pharmaceutical industry practice).

estimates an allowance for outdated material returns based on previous years’

historical returns of its pharmaceutical products.

The Company does not

make sales on consignment, and the collection of the proceeds of the sale of any of the Company’s products is not contingent

upon the customer being able to sell the goods to a third party.

Any allowances for

returns are taken as a reduction of sales within the same period the revenue is recognized.

Such allowances are determined based

on historical experience under ASC Topic 606-10-32-8.

The Company has not experienced significant fluctuations between estimated

allowances and actual activity.

The timing between

recognition of revenue for product sales and the receipt of payment is not significant.

Due to the Covid-19 pandemic the Company

experienced minor delays in receiving payments from certain customers that were impacted by the pandemic, but the negative impact

of those delayed payments was not significant.

The Company’s standard credit terms, which vary depending on the customer,

range between 30 and 60 days.

The Company uses its judgment on a case-by-case basis to determine its ability to collect outstanding

receivables and provides allowances for any receivables for which collection has become doubtful.

As of December 31, 2020 and December

31, 2019, the allowance for doubtful accounts receivable was $14,017 and $21,178, respectively.

Prompt-pay discounts are offered

to some customers;

however, due to the uncertainty of the customers taking the discounts, the discounts are recorded when they

UNITED-GUARDIAN, INC.

The Company has distribution fee contracts with

certain distributors of its pharmaceutical products that entitles them to receive distribution and services-related fees.

records distribution fees and estimates of distribution fees as offsets to revenue.

Disaggregated net sales by product

class is as follows:

The Company has distribution

agreements with certain distributors of its pharmaceutical products that entitles those distributors to distribution and services-related

The Company records distribution fees, and estimates of distribution fees, as offsets to revenue.

Disaggregated net sales

by product class is as follows:

Years ended December 31,

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Total Net Sales

The Company’s cosmetic ingredients are

currently marketed worldwide by five marketing partners, of which United States (“U.S.”)-based Ashland Specialty Ingredients

The Company’s

cosmetic ingredients are currently marketed worldwide by five marketing partners, of which United States (“U.S.”)-based

ASI purchases the largest volume.

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.

For the years ended December 31, 2019 and 2018, approximately 18%

and 19%, respectively, of the Company’s sales were to (a) its foreign-based marketing partners (which does not include ASI),

which marketed and distributed the Company’s cosmetic ingredients to customers outside the U.S, and (b) a few foreign customers

for the Company’s medical products.

Disaggregated sales by geographic region is

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.

For the years ended December 31, 2020 and 2019, approximately 20% and 18%, respectively,

of the Company’s sales were to (a) its foreign-based marketing partners (which does not include ASI), which marketed and

distributed the Company’s cosmetic ingredients to customers outside the U.S, and (b) a few foreign customers for the Company’s

medical products.

Disaggregated sales

by geographic region are as follows:

Years ended December 31,

United States*

Other countries

* Although a significant percentage of

ASI’s purchases from the Company are sold to foreign customers, all sales to ASI are considered U.S.

sales for financial

reporting purposes, since all shipments to ASI are shipped to ASI’s warehouses in the U.S.

A significant percentage of the

products are subsequently shipped by ASI to foreign customers.

Based on sales information provided to the Company by ASI, for the

years ended December 31, 2019 and 2018, 75% of ASI’s sales of the Company’s products were to foreign customers, with

China representing 49% of the sales in 2019 and 55% in 2018.

Cash and Cash Equivalents

For financial statement purposes, the Company

considers as cash equivalents all highly liquid investments with an original maturity of three months or less at the time of purchase.

The Company deposits cash and cash equivalents with high credit quality financial institutions and believes that any amounts in

excess of insurance limitations to be at minimal risk.

Cash and cash equivalents held in these accounts are currently insured by

the Federal Deposit Insurance Corporation (“FDIC”) up to a maximum of $250,000.

At December 31, 2019, approximately

$1,174,000 exceeded the FDIC limit.

* Although a significant

percentage of ASI’s purchases from the Company are sold to foreign customers, all sales to ASI are considered U.S.

for financial reporting purposes, since all shipments to ASI are shipped to ASI’s warehouses in the U.S.

A certain percentage

of those products are subsequently shipped by ASI to its 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 to 75% in 2019.

ASI’s largest foreign

market in both 2020 and 2019 was China, which accounted for approximately 33% of ASI’s sales in 2020 and 49% of sales in

UNITED-GUARDIAN, INC.

On May 15, 2019, the Company’s Board of

Directors declared a semi-annual cash dividend of $0.55 per share, which was paid on June 14, 2019 to all stockholders of record

as of May 31, 2019.

On November 20, 2019, the Company’s Board of Directors declared a semi-annual cash dividend of $0.55

per share which was paid on December 10, 2019, to all stockholders of record as of December 3, 2019.

In 2019, the Company declared

a total of $5,053,751 in dividends, of which $5,049,922 was paid.

The balance of $3,829 is payable to stockholders who could not

be located at the time the dividend was paid and is being held by the Company for future payment.

On May 16, 2018, the Company’s Board of

Directors declared a semi-annual cash dividend of $0.50 per share, which was paid on June 13, 2018 to all stockholders of record

as of May 30, 2018.

On November 28, 2018, the Company’s Board of Directors declared a semi-annual cash dividend of $0.55

per share which was paid on December 17, 2018, to all stockholders of record as of December 10, 2018.

In 2018 the Company declared

a total of $4,824,035 in dividends, of which $4,816,239 was paid.

The balance of $7,796 is payable to stockholders who could not

be located at the time the dividend was paid and is being held by the Company for future payment.

Cash and Cash Equivalents

For financial statement

purposes, the Company considers as cash equivalents all highly liquid investments with an original maturity of three months or

less at the time of purchase.

The Company deposits cash and cash equivalents with high credit quality financial institutions and

believes that any amounts in excess of insurance limitations to be at minimal risk.

Cash and cash equivalents held in these accounts

are currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to a maximum of $250,000.

31, 2020, approximately $653,000 exceeded the FDIC limit.

On May 20, 2020, the

Company’s Board of Directors declared a semi-annual cash dividend of $0.42 per share, which was paid on June 17, 2020 to

all stockholders of record as of June 3, 2020.

On November 18, 2020, the Company’s Board of Directors declared a semi-annual

cash dividend of $0.36 per share which was paid on December 8, 2020, to all stockholders of record as of December 1, 2020.

the Company declared a total of $3,583,569 in dividends, of which $3,582,431 was paid.

The balance of $1,138 is payable to stockholders

whose old Guardian shares have not yet been exchanged to United-Guardian, Inc.

shares and are pending escheatment.

See Note H for

further discussion.

During the third quarter

of 2020, the Company paid approximately $124,041 to its transfer agent, which represented accrued dividends on unconverted Guardian

This payment was made to facilitate the conversion of those shares to United-Guardian, Inc.

shares, and the subsequent

escheatment of those shares to the appropriate state jurisdictions.

The Company is continuing to accrue dividends on the remaining

unconverted shares that are currently pending escheatment.

On May 15, 2019, the

Company’s Board of Directors declared a semi-annual cash dividend of $0.55 per share, which was paid on June 14, 2019 to

all stockholders of record as of May 31, 2019.

On November 20, 2019, the Company’s Board of Directors declared a semi-annual

cash dividend of $0.55 per share which was paid on December 10, 2019, to all stockholders of record as of December 3, 2019.

2019, the Company declared a total of $5,053,751 in dividends, of which $5,049,922 was paid.

The balance of $3,829 was payable

to stockholders whose Guardian shares have not been exchanged to United-Guardian, Inc.

shares and are pending escheatment.

Note H for further discussion.

Marketable Securities

The Company’s marketable securities include

investments in equity and fixed income mutual funds and U.S.

The Company’s

marketable securities include investments in equity and fixed income mutual funds and U.S.

Government securities.

The Company’s marketable equity securities

are reported at fair value with the related unrealized and realized gains and losses included in net income.

U.S Treasury Bills

are considered debt securities and any realized gains or losses are reported in other comprehensive income.

Realized gains or losses

on mutual funds are determined on a specific identification basis.

The Company evaluates its investments periodically for possible

other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value had been below cost

basis, the financial condition of the issuer and the Company’s ability and intent to hold the investment for a period of

time which may be sufficient for anticipated recovery of market value.

The Company would record an impairment charge to the extent

that the cost of the available-for-sale securities exceeds the estimated fair value of the securities and the decline in value

is determined to be other-than-temporary.

During 2019 and 2018, the Company did not record an impairment charge regarding its investment

in marketable securities because management believes, based on its evaluation of the circumstances, that the decline in fair value

below the cost of certain of the Company’s marketable securities is temporary.

Inventories are valued at the lower of cost

and net realizable value.

Cost is determined using the average cost method, which approximates cost determined by the first-in,

first-out (“FIFO”) method.

The Company’s

marketable equity securities are reported at fair value with the related unrealized and realized gains and losses included in net

U.S Treasury Bills are considered debt securities and realized gains or losses, if any, are reported in other comprehensive

Realized gains or losses on mutual funds are determined on a specific identification basis.

The Company evaluates its investments

periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair

value had been below cost basis, the financial condition of the issuer and the Company’s ability and intent to hold the investment

for a period of time which may be sufficient for anticipated recovery of market value.

The Company would record an impairment charge

to the extent that the cost of the available-for-sale securities exceeds the estimated fair value of the securities and the decline

in value is determined to be other-than-temporary.

During 2020 and 2019, the Company did not record an impairment charge regarding

its investment in marketable securities because management believes, based on its evaluation of the circumstances, that the decline

in fair value below the cost of certain of the Company’s marketable securities is temporary.

UNITED-GUARDIAN, INC.

Inventories are valued

at the lower of cost and net realizable value.

Cost is determined using the average cost method, which approximates cost determined

by the first-in, first-out (“FIFO”) method.

Inventory costs include material, labor and factory overhead.

Property, Plant and Equipment

Property, plant and equipment are carried at

cost, less accumulated depreciation.

Major replacements and betterments are capitalized, while routine maintenance and repairs

are expensed as incurred.

Property, plant and

equipment are carried at cost, less accumulated depreciation.

Major replacements and betterments are capitalized, while routine

maintenance and repairs are expensed as incurred.

Assets are depreciated under both accelerated and straight-line methods.

Depreciation charged as a result

of using accelerated methods was not materially different than that which would result from using the straight-line method for

all periods presented.

Certain factory equipment and fixtures are constructed by the Company using purchased materials and in-house

charged as a result of using accelerated methods was not materially different than that which would result from using the straight-line

method for all periods presented.

Certain factory equipment and fixtures are constructed by the Company using purchased materials

and in-house labor.

Such assets are capitalized and depreciated on a basis consistent with the Company's purchased fixed assets.

UNITED-GUARDIAN, INC.

Estimated useful lives are as follows:

Estimated useful lives

are as follows:

Factory equipment and fixtures (years)

3 unchanged sentences

Impairment of Long-Lived Assets

Long-lived assets and certain identifiable intangibles

are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future

net cash flows expected to be generated by the asset.

If such assets are considered to be impaired, the impairment to be recognized

is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Assets to be disposed

of are reported at the lower of the carrying amount or fair value less costs to sell.

No impairments were necessary at December

31, 2019 and 2018.

Long-lived assets and

certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying

amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying

amount of an asset to future net cash flows expected to be generated by the asset.

If such assets are considered to be impaired,

the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of

Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

No impairments

were necessary at December 31, 2020 and 2019.

Other Assets (net)

Other assets at December 31, 2019 and 2018 represents

an amount expended in connection with the development of the new single-dose form of Renacidin.

The Company began amortizing these

costs in the first quarter of 2016.

At December 31, 2019 and 2018, accumulated amortization for such assets amounted to $59,296

and $44,472, respectively.

The final amortization expense of $14,824 will be taken in FY2020.

Other assets at December

31, 2020 and 2019 represents an amount expended in connection with the development of the current single-dose form of Renacidin.

The Company began amortizing these costs in the first quarter of 2016.

At December 31, 2020 and 2019, accumulated amortization

for such assets amounted to $74,120 and $59,296, respectively.

Fair Value of Financial Instruments

Management of the Company believes that the

fair value of financial instruments, consisting of cash and cash equivalents, accounts receivable, accounts payable, and accrued

expenses approximates their carrying value due to their short payment terms and liquid nature.

Management of the Company

believes that the fair value of financial instruments, consisting of cash and cash equivalents, accounts receivable, accounts payable,

and accrued expenses, approximates their carrying value due to their short payment terms and liquid nature.

Concentration of Credit Risk

1 unchanged sentence

The Company monitors the amount of credit it allows

each of its customers, using the customer’s prior payment history to determine how much credit to allow or whether any credit

should be given at all.

It is the Company’s policy to discontinue shipments to any customer that is substantially past due

on its payments.

The Company sometimes requires payment in advance from customers whose payment record is questionable.

of its monitoring of the outstanding credit allowed for each customer, as well as the fact that the majority of the Company’s

sales are to customers whose satisfactory credit and payment record has been established over a long period of time, the Company

believes that its accounts receivable credit risk has been reduced.

For the year ended December 31, 2019, two of

the Company’s distributors and marketing partners accounted for approximately 52% of the Company’s gross sales during

the year, and approximately 50% of its outstanding accounts receivable at December 31, 2019.

For the year ended December 31, 2018,

the same two distributors and marketing partners accounted for a total of approximately 56% of the Company’s gross sales

during the year, and 47% of its outstanding accounts receivable at December 31, 2018.

UNITED-GUARDIAN, INC.

For the year ended

December 31, 2020, four of the Company’s distributors and marketing partners accounted for approximately 72% of the Company’s

gross sales during the year and approximately 67% of its outstanding accounts receivable at December 31, 2020.

For the year ended

December 31, 2019, the same four distributors and marketing partners accounted for a total of approximately 70% of the Company’s

gross sales during the year and 70% of its outstanding accounts receivable at December 31, 2019.

Vendor Concentration

Most of the principal raw materials used by

the Company consist of common industrial organic and inorganic chemicals and are available in ample supply from numerous sources.

However, there are some raw materials used by the Company that are not readily available or require long lead times.

has six major raw material vendors that collectively accounted for approximately 86% and 80% of the raw material purchases by the

Company in 2019 and 2018, respectively.

Income taxes are accounted for under the asset

and liability method.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to the temporary

differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating

loss and tax credit carry forwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply

in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and

liabilities of a change in tax rates is recognized in the period that includes the enactment date.

Deferred tax assets are reduced

by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax

assets will not be realized.

Uncertain tax positions are accounted for utilizing

a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or

expected to be taken in a tax return.

As of December 31, 2019 and 2018, the Company did not have any unrecognized income tax benefits.

It is the Company’s policy to recognize interest and penalties related to taxes as interest expense as incurred.

years ended December 31, 2019 and 2018, the Company did not record any tax-related interest or penalties.

The Company’s tax

returns for 2016 and all subsequent years are subject to examination by the United States Internal Revenue Service and by the State

On August 3, 2018, the IRS issued IRS Rev.

2018-40, which permits small business taxpayers to obtain automatic IRS consent to implement the small taxpayer provisions under

the Tax Cuts and Jobs Act of 2017 (“TCJA”) effective for tax years beginning after December 31, 2017.

ended December 31, 2018, the Company changed its method of tax accounting from an accrual method to the cash method.

On December 18, 2019, the FASB issued ASU 2019-12,

“Simplifying the Accounting for Income Taxes”, which modifies ASC 740 to simplify the accounting for income taxes.

The amendments in ASU 2109-12 are effective for fiscal years beginning after December 15, 2020.

The Company is currently evaluating

whether any of the modifications included in this pronouncement will impact its financial statements.

Most of the principal

raw materials used by the Company consist of common industrial organic and inorganic chemicals and are available in ample supply

from numerous sources.

However, there are some raw materials used by the Company that are not readily available or require long

The Company did not experience any issues obtaining raw materials from its main suppliers during the COVID-19 pandemic.

The Company has six major raw material vendors that collectively accounted for approximately 88% and 84% of the raw material purchases

by the Company in 2020 and 2019, respectively.

Income taxes are accounted

for under the asset and liability method.

Deferred tax assets and liabilities are recognized for future tax consequences attributable

to the temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax

bases and operating loss and tax credit carry forwards.

Deferred tax assets and liabilities are measured using enacted tax rates

expected to apply in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred

tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or

all the deferred tax assets will not be realized.

Uncertain tax positions

are accounted for utilizing a recognition threshold and measurement attribute for financial statement recognition and measurement

of a tax position taken or expected to be taken in a tax return.

As of December 31, 2020 and 2019, the Company did not have any

unrecognized income tax benefits.

It is the Company’s policy to recognize interest and penalties related to taxes as interest

expense as incurred.

During the years ended December 31, 2020 and 2019, the Company did not record any tax-related interest or

The Company’s tax returns for 2017 and all subsequent years are subject to examination by the United States Internal

Revenue Service and by the State of New York.

On December 18, 2019,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Simplifying

the Accounting for Income Taxes”, which modifies ASC 740 to simplify the accounting for income taxes.

The amendments in ASU

2019-12 are effective for fiscal years beginning after December 15, 2020.

The Company is currently evaluating whether any of the

modifications included in this pronouncement will impact its financial statements.

UNITED-GUARDIAN, INC.

Research and Development

Research and development expenses are expenditures

incurred in connection with in-house research on new and existing products.

It includes payroll and payroll related expenses, outside

laboratory expenditures, lab supplies, and equipment depreciation.

Research and development

expenses are expenditures incurred in connection with in-house research on new and existing products.

It includes payroll and payroll

related expenses, outside laboratory expenditures, lab supplies, and equipment depreciation.

Shipping and Handling Expenses

Shipping and handling costs are classified in

operating expenses in the accompanying statements of income.

Shipping and handling costs were approximately $76,000 and $81,000

for the years ended December 31, 2019 and 2018, respectively.

UNITED-GUARDIAN, INC.

Shipping and handling

costs are classified in operating expenses in the accompanying statements of income.

Shipping and handling costs were approximately

$81,000 and $76,000 for the years ended December 31, 2020 and 2019, respectively.

Advertising Expenses

Advertising costs

are expensed as incurred.

costs are expensed as incurred.

For the years ended December 31, 2020 and 2019, the Company incurred approximately $27,000 and

respectively, in advertising expense .

$28,000, respectively, in advertising expense , which primarily relates to the internet marketing

of Renacidin, one of the Company’s pharmaceutical products.

Earnings Per Share Information

Basic earnings per share are computed by dividing

net income by the weighted average number of common shares outstanding during the year.

Diluted earnings per share would include

the dilutive effect of outstanding stock options, if any.

Basic earnings per

share are computed by dividing net income by the weighted average number of common shares outstanding during the year.

earnings per share would include the dilutive effect of outstanding stock options, if any.

New Accounting Standards

In January 2019, the Company adopted ASU 2016-02,

“Leases”, which was intended to improve financial reporting for lease transactions.

This ASU requires organizations

that lease assets, such as real estate and manufacturing equipment, to recognize both assets and liabilities on their balance sheet

for the rights to use those assets for the lease term and obligations to make the lease payments created by those leases that have

terms of greater than 12 months.

The recognition, measurement, and presentation of expenses and cash flows arising from a lease

by a lessee primarily will depend on its classification as a finance or operating lease.

This ASU requires disclosures to help

investors and other financial statement users better understand the amount and timing of cash flows arising from leases.

disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the

financial statements.

The adoption of this standard did not have a material impact on the Company’s financial statements

On December 18, 2019, the FASB issued ASU 2019-12,

“Simplifying the Accounting for Income Taxes”, which modifies ASU 740 to simplify the accounting for income taxes.

In January 2019, the

Company adopted ASU 2016-02, “Leases”, which was intended to improve financial reporting for lease transactions.

ASU requires organizations that lease assets, such as real estate and manufacturing equipment, to recognize both assets and liabilities

on their balance sheet for the rights to use those assets for the lease term and obligations to make the lease payments created

by those leases that have terms of greater than 12 months.

The recognition, measurement, and presentation of expenses and cash

flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease.

This ASU requires

disclosures to help investors and other financial statement users better understand the amount and timing of cash flows arising

These disclosures include qualitative and quantitative requirements, providing additional information about the amounts

recorded in the financial statements.

The adoption of this standard did not have a material impact on the Company’s financial

On December 18, 2019,

the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”, which modifies ASU 740 to simplify the

accounting for income taxes.

The amendments in ASU 2019-12 are effective for fiscal years beginning after December 15, 2020.

Early adoption is permitted.

Company is currently evaluating if any of these modifications will have an impact on its financial statements.

In August 2018, the FASB issued ASU 2018-13,

“Fair Value Measurement” (Topic 820), Changes to the Disclosure Requirements for Fair Value Measurement”.

amendment’s objective is to improve the effectiveness of disclosures about recurring or nonrecurring fair value measurements.

This amendment is effective for fiscal years beginning after December 15, 2019.

The Company does not expect the implementation

of this standard to have a material impact on its financial statements.

In January 2016, the FASB issued ASU 2016-01

“Recognition and Measurement of Financial Assets and Financial Liabilities”.

This amendment requires companies to measure

equity investments at fair value with changes in fair value recognized in net income.

The Company adopted this standard effective

January 1, 2018.

In accordance with the implementation of the standard, the Company recognized a cumulative effect adjustment related

to unrealized gains on marketable securities, to reduce accumulated other comprehensive income and increase retained earnings on

January 1, 2018 by $466,025.

In June 2016, the FASB issued ASU-2016-13 “Financial

Instruments – Credit Losses”.

This guidance affects organizations that hold financial assets and net investments in

leases that are not accounted for at fair value with changes in fair value reported in net income.

The guidance requires organizations

to measure all expected credit losses for financial instruments at the reporting date based on historical experience, current conditions

and reasonable and supportable forecasts.

It is effective for fiscal years beginning after December 15, 2022.

The Company is currently

evaluating if this pronouncement will have a potential impact on its financial statements.

adoption is permitted.

The Company is currently evaluating if any of these modifications will have an impact on its financial statements.

In June 2016, the FASB

issued ASU-2016-13 “Financial Instruments –

Credit Losses”.

This guidance affects organizations that hold financial

assets and net investments in leases that are not accounted for at fair value with changes in fair value reported in net income.

The guidance requires organizations to measure all expected credit losses for financial instruments at the reporting date based

on historical experience, current conditions and reasonable and supportable forecasts.

It is effective for fiscal years beginning

after December 15, 2022.

The Company is currently evaluating if this pronouncement will have a potential impact on its financial

UNITED-GUARDIAN, INC.

NOTE B - MARKETABLE SECURITIES

Marketable securities include investments in

fixed income and equity mutual funds and U.S.

Government securities with maturities greater than 3 months, which are reported at

their fair values.

Effective January 2018, the Company adopted

Accounting Standards Update (“ASU”) 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”.

This amendment required companies to measure equity investments at fair value with the changes in fair value recognized in net

In accordance with the implementation of the standard, the Company recognized a cumulative-effect adjustment, related to

unrealized gains on marketable equity securities, to reduce accumulated other comprehensive income and increase retained earnings

on January 1, 2018 by $466,025.

The Company’s U.S.

Treasury Bills are

considered debt securities and any unrealized gains and losses are reported in other comprehensive income.

Treasury Bills

are considered held to maturity securities, as they are purchased directly from the U.S.

Government and are unable to be sold before

the maturity date.

The disaggregated net gains and losses on the

marketable securities recognized in the income statement for the years ended December 31, 2019 and 2018 are as follows:

Marketable securities

include investments in fixed income and equity mutual funds and U.S.

Government securities with maturities greater than 3 months,

which are reported at their fair values.

The Company’s

Treasury Bills are considered debt securities and unrealized gains and losses, if any, are reported in other comprehensive

Treasury Bills are considered held to maturity securities, as they are purchased directly from the U.S.

and are unable to be sold before the maturity date.

The disaggregated net

gains and losses on the marketable securities recognized in the income statement for the years ended December 31, 2020 and 2019

are as follows:

Years ended December 31,

Net gains (losses) recognized during the year on marketable securities

Net gains recognized during the year on marketable securities

Net gains recognized during the year on marketable securities sold during the period

Unrealized gains (losses) recognized during the reporting year on marketable securities still held at the reporting date

The fair values of the Company’s marketable

securities are determined in accordance with US GAAP, with fair value being defined as the amount that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would

use in pricing an asset or liability.

As a basis for considering such assumptions, the Company utilizes the three-tier value hierarchy,

as prescribed by US GAAP, which prioritizes the inputs used in measuring fair value as follows:

Unrealized (losses) gains recognized during the reporting year on marketable securities still held at the reporting date

The fair values of

the Company’s marketable securities are determined in accordance with US GAAP, with fair value being defined as the amount

that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at

the measurement date.

As such, fair value is a market-based measurement that should be determined based on assumptions that market

participants would use in pricing an asset or liability.

As a basis for considering such assumptions, the Company utilizes the

three-tier value hierarchy, as prescribed by US GAAP, which prioritizes the inputs used in measuring fair value as follows:

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

1 unchanged sentence

that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s marketable equity securities,

which are considered available-for-sale securities, are re-measured to fair value on a recurring basis and are valued using Level

1 inputs using quoted prices (unadjusted) for identical assets in active markets.

The following tables summarize the Company’s

Level 3 –

inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s

marketable equity securities, which are considered available-for-sale securities, are re-measured to fair value on a recurring

basis and are valued using Level 1 inputs using quoted prices (unadjusted) for identical assets in active markets.

The following

tables summarize the Company’s investments:

UNITED-GUARDIAN, INC.

December 31, 2019

Debt Securities

U.S Treasury Bills (maturities of greater than three months up to one year)

Total debt securities

Equity Securities

Unrealized Gain

Fixed income mutual funds

2 unchanged sentences

Total marketable securities

December 31, 2018

Debt Securities

5 unchanged sentences

Total equity securities

Total marketable

Investment income is recognized when earned

and consists principally of interest income from fixed income mutual funds and U.S.

Treasury Bills and dividend income from equity

and other mutual funds.

Realized gains and losses on sales of investments are determined on a specific identification basis.

Proceeds from the sale and redemption of marketable

securities amounted to $15,964,917 for the year ended December 31, 2019, which included realized gains of $262,399.

Proceeds from

the sale and redemption of marketable securities for the year ended December 31, 2018 amounted to $8,022,804, which included realized

gains of $4,204.

NOTE C – INVENTORIES

Total marketable securities

Investment income is

recognized when earned and consists principally of interest income from fixed income mutual funds and U.S.

Treasury Bills and dividend

income from equity and other mutual funds.

Realized gains and losses on sales of investments are determined on a specific identification

Proceeds from the sale

and redemption of marketable securities amounted to $6,371,128 for the year ended December 31, 2020, which included realized gains

Proceeds from the sale and redemption of marketable securities for the year ended December 31, 2019 amounted to $15,964,917,

which included realized gains of $262,399.

NOTE C –

Inventories consist of the following:

3 unchanged sentences

Total Inventories

Inventories are valued

at the lower of cost and net realizable value.

Cost is determined using the average cost method, which approximates cost determined

by the first-in, first-out method.

Finished product inventories at December 31, 2020 and December 31, 2019 are net of a reserve

At December 31, 2020 and 2019, the Company had an allowance of $302,715 and $231,392 respectively, for possible outdated

material returns, which is included in accrued expenses.

As of the date of this report, the COVID-19 pandemic has not adversely

affected the valuation of the Company’s finished products, work in process or raw material inventories.

UNITED-GUARDIAN, INC.

Inventories are valued at the lower of cost

and net realizable value.

Cost is determined using the average cost method, which approximates cost determined by the first-in,

first-out method.

Finished product inventories at December 31, 2019 and December 31, 2018 are net of a reserve of $35,000 and

$20,000 respectively, for slow-moving or obsolete inventory.

At December 31, 2019 and 2018, the Company had an allowance of $231,392

and $160,533 respectively, for possible outdated material returns, which is included in accrued expenses.

NOTE D – INCOME TAXES

The provision for income taxes consists of the following:

NOTE D –

The provision for income taxes consists

of the following:

Years ended December 31,

Total current provision for income taxes

Total deferred provision for income taxes

Total provision for income taxes

The following is a reconciliation of the Company’s

effective income tax rate to the Federal statutory rate (dollar amounts have been rounded to the nearest thousand):

deferred (benefit from) provision for income taxes

provision for income taxes

The following is a

reconciliation of the Company’s effective income tax rate to the Federal statutory rate (dollar amounts have been rounded

to the nearest thousand):

Years ended December 31,

4 unchanged sentences

Provision for income taxes

The TJCA favorably amended certain tax provisions

applicable to eligible small business taxpayers.

On August 3, 2018, the IRS issued Rev.

2018-40 which permits small business

taxpayers to obtain automatic IRS consent to implement the small taxpayer provisions under the act, effective for tax years beginning

after December 31, 2017.

For the year ended December 31, 2018, in accordance with Rev.

2018-40, the Company elected to change

its method of tax accounting from an accrual method to the cash method.

UNITED-GUARDIAN, INC.

The tax effects of temporary differences which

comprise the deferred tax assets and liabilities are as follows:

The tax effects of

temporary differences which comprise the deferred tax assets and liabilities are as follows:

Deferred tax assets

9 unchanged sentences

Total deferred tax liabilities

Net deferred tax liability

deferred tax liability

UNITED-GUARDIAN, INC.

NOTE E - BENEFIT PLANS

Defined Contribution Plan

The Company sponsors a 401(k) defined contribution

plan ("DC Plan") that provides for a dollar-for-dollar employer matching contribution of the first 4% of each employee's

The Company sponsors

a 401(k) defined contribution plan ("DC Plan") that provides for a dollar-for-dollar employer matching contribution of

the first 4% of each employee's pay.

Employees become fully vested in employer matching contributions after one year of employment.

Company 401(k) matching contributions

were approximately $88,000 and $90,000 for the years ended December 31, 2019 and 2018, respectively.

The Company also makes discretionary contributions

to each employee's account based on a "pay-to-pay" safe-harbor formula that qualifies the 401(k) Plan under current IRS

For the years ended December 31, 2019 and 2018, the Company’s Board of Directors authorized discretionary contributions

in the amount of $145,000 per year to be allocated among all eligible employees.

Employees become vested in the discretionary contributions

20% after two years of employment, and 20% for each year of employment thereafter until the employee becomes fully

vested after six years of employment.

Company 401(k) matching contributions were approximately $83,000 and $88,000 for the years ended December 31, 2020 and 2019, respectively.

The Company also makes

discretionary contributions to each employee's account based on a "pay-to-pay"

safe-harbor formula that qualifies the

401(k) Plan under current IRS regulations.

For the years ended December 31, 2020 and 2019, the Company’s Board of Directors

authorized discretionary contributions in the amount of $130,000 and $145,000, respectively, to be allocated among all eligible

Employees become vested in the discretionary contributions as follows:

20% after two years of employment, and 20% for

each year of employment thereafter until the employee becomes fully vested after six years of employment.

NOTE F - GEOGRAPHIC and OTHER INFORMATION

Through its Guardian Laboratories division 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’s

R&D department not only develops new products but also modifies and refines existing products, with the goal of expanding the

potential markets for the Company’s products.

Many of the cosmetic ingredients manufactured by Guardian, particularly its

Lubrajel line of water-based moisturizing and lubricating gels, are currently used by many of the major multinational personal

care products companies.

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.

Through its Guardian

Laboratories division 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

The Company’s R&D department not only develops new products but also modifies and refines existing products,

with the goal of expanding the potential markets for the Company’s products.

Many of the cosmetic ingredients manufactured

by the Company, particularly its Lubrajel line of water-based moisturizing and lubricating gels, are currently used by many of

the major multinational personal care products companies.

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 cosmetic ingredients are marketed through

a global network of marketing partners and distributors.

These marketing partners purchase product outright from the Company and

provide the marketing functions for these products on behalf of the Company.

They in turn receive their compensation for those

efforts by re-selling those products at a markup to their customers.

This enables the Company to aggressively have its products

marketed without the high cost of maintaining its own in-house marketing staff.

The cosmetic ingredients

are marketed through a global network of marketing partners and distributors.

These marketing partners purchase product outright

from the Company and provide the marketing functions for these products on behalf of the Company.

They in turn receive their compensation

for those efforts by re-selling those products at a markup to their customers.

This enables the Company to aggressively have its

products marketed without the high cost of maintaining its own in-house marketing staff.

The Company has written marketing arrangements

3 unchanged sentences

with ASI ends on December 31, 2021.

The Company’s other marketing partners are not under any contractual obligation to market

the Company’s cosmetic ingredients, and the Company has the ability to cancel those marketing arrangements at any time upon

The Company’s other marketing partners are not under any contractual obligation to market

the Company’s cosmetic ingredients, and the Company has the ability to cancel those marketing arrangements at any time upon

reasonable notice.

All sales of the Company’s cosmetic ingredients are final other than product later determined to be defective,

and the Company does not make any sales on consignment.

UNITED-GUARDIAN, INC.

No prior regulatory approval is needed by the

Company to sell any products other than its pharmaceutical products.

The end users of its products may or may not need regulatory

approvals, depending on the intended claims and uses of those products.

The pharmaceutical products are two urological

products that are sold to end users primarily through distribution agreements with the major drug wholesalers.

For these products,

the Company does the marketing, and the drug wholesalers supply the product to the end users, such as hospitals and pharmacies.

The Company’s marketing efforts for these products are currently centered around the corporate web site as well as a separate

web site developed specifically for Renacidin, which is its most important drug product.

In 2018 the Company began promoting Renacidin

through internet advertising.

Both of these products are drug products that required the Company to obtain regulatory approval

before marketing.

The medical products are not pharmaceutical

They consist primarily of medical lubricants, which are marketed by the Company directly to manufacturers that incorporate

them into urologic catheters and other medical devices and products that they sell.

These products are distinguished from the pharmaceutical

products in that, unlike the pharmaceutical products, the Company is not required to obtain regulatory approval prior to marketing

these products.

Approvals are the responsibility of the company that markets the products in which the Company’s products

are used, such as medical devices.

However, the Company is responsible for manufacturing these products in accordance with current

Good Manufacturing Practices for medical devices.

The industrial products are also marketed by

the Company directly to manufacturers, and generally do not require that the Company obtain regulatory approval.

However, the manufacturers

of the finished products may have to obtain such regulatory approvals before marketing these products.

The following tables present the significant

concentrations of the Company’s sales.

Although a significant percentage of Customer A’s purchases from the Company

are sold to foreign customers, in table “b” below all sales to Customer A are included in “United States”

No prior regulatory

approval is needed by the Company to sell any products other than its pharmaceutical products.

The end users of its products may

or may not need regulatory approvals, depending on the intended claims and uses of those products.

The pharmaceutical

products are two urological products that are sold to end users primarily through distribution agreements with the major drug wholesalers.

For these products, the Company does the marketing, and the drug wholesalers supply the product to the end users, such as hospitals

and pharmacies.

The Company’s marketing efforts for these products are currently centered around the corporate website, a

separate website developed specifically for Renacidin, its most important drug product, and internet marketing using Google ads.

Both of these products were originally developed in the 1950s.

Clorpactin pre-dated the need for a formal New Drug Application

(“NDA”), and the current sterile liquid form of Renacidin is being marketed under an NDA that was approved by the FDA

The medical products

are not pharmaceutical products.

They consist primarily of medical lubricants, which are marketed by the Company directly to manufacturers

that incorporate them into urologic catheters and other medical devices and products that they sell.

These products are distinguished

from the pharmaceutical products in that, unlike the pharmaceutical products, the Company is not required to obtain regulatory

approval prior to marketing these products.

Approvals are the responsibility of the company that markets the products in which

the Company’s products are used, such as medical devices.

However, the Company is responsible for manufacturing these products

in accordance with current Good Manufacturing Practices for medical devices.

The industrial products

are also marketed by the Company directly to manufacturers, and generally do not require that the Company obtain regulatory approval.

However, the manufacturers of the finished products may have to obtain such regulatory approvals before marketing these products.

The following tables

present the significant concentrations of the Company’s sales.

Although a significant percentage of Customer A’s purchases

from the Company are sold to foreign customers, in table “b”

below all sales to Customer A are included in “United

States”

sales revenue because all shipments to Customer A are delivered to Customer A's warehouses in the U.S.

In addition, there are four customers for the

Company’s medical products that take delivery of their shipments in the U.S.

but potentially ship some of that product to

manufacturing facilities outside the U.S.

In addition, there

are four customers for the Company’s medical products that take delivery of their shipments in the U.S.

but potentially ship

some of that product to manufacturing facilities outside the U.S.

Since the Company makes those shipments to U.S.

locations, sales to those customers are

also included in the “United States” revenue number in the table below.

UNITED-GUARDIAN, INC.

(a) Net Sales

Years ended December 31,

locations, sales

to those customers are also included in the “United States”

revenue number in the table below.

(a) Net Sales Years ended December 31,

Cosmetic Ingredients

3 unchanged sentences

Discounts and allowances

UNITED-GUARDIAN, INC.

(b) Geographic Information

5 unchanged sentences

All other customers

Total Gross Sales

NOTE G - ACCRUED EXPENSES

Accrued expenses at December 31, 2019 and 2018 consist of:

Accrued expenses at December 31, 2020 and

2019 consist of:

Distribution fees

3 unchanged sentences

Sales rebates

Computer services

Total accrued expenses

UNITED-GUARDIAN, INC.

NOTE H - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

AND NON-CASH INVESTING AND FINANCING ACTIVITIES

Cash payments for income taxes were $1,100,000

and $1,150,000 for the years ended December 31, 2019 and 2018, respectively.

As of December 31, 2019, the Company had a number

of unconverted shares of one of its previous corporate entities, Guardian Chemical Corporation (“Guardian”), that would

convert to approximately 2,430 shares of United-Guardian, Inc.

common stock if all of the remaining holders of those Guardian shares

converted their Guardian stock to United-Guardian stock.

The Company’s transfer agent is holding an additional 9,246 (approximately)

shares of United-Guardian stock that is pending escheatment to the appropriate state authorities because the owners of record could

not be located by the Company or its transfer agent.

It is likely that there will be additional stock escheatments on some or all

of the remaining 2,430 shares as the Company’s transfer agent continues to try to locate the holders of those shares.

Company is currently accruing dividends on only the 2,430 shares that have not yet been exchanged or designated for escheatment

as of December 31, 2019, and the Company will continue to do so as dividends are declared.

The Company will continue to pay dividends

on the shares that are pending escheatment, and anticipates paying the dividends that have already accrued on those escheated shares

in the first or second quarter of 2020.

Cash payments for income

taxes were $1,025,000 and $1,100,000 for the years ended December 31, 2020 and 2019, respectively.

As of December 31,

2020, the Company had a number of unconverted Guardian shares that would convert to approximately 1,369 shares of United-Guardian,

common stock if all of the remaining holders of those Guardian shares converted their Guardian stock to United-Guardian stock.

The Company’s transfer agent continues to try to locate the holders of those shares in anticipation of escheating them to

the appropriate state jurisdictions.

The Company is currently accruing dividends on the 1,369 shares that have not yet been exchanged

or designated for escheatment as of December 31, 2020, and the Company will continue to do so as dividends are declared.

During the third quarter

of 2020, the Company paid approximately $124,041 to its transfer agent, which represented accrued dividends on unconverted Guardian

This payment was made to facilitate the conversion of those shares to United-Guardian, Inc.

shares, and the subsequent

escheatment of those shares to the appropriate state jurisdictions.

UNITED-GUARDIAN, INC.

NOTE I - RELATED PARTY TRANSACTIONS

During each of the years ended December 31,

2019 and 2018, the Company paid to Bonamassa, Maietta, and Cartelli, LLP, $17,500 and $15,500, respectively, for accounting and

tax services.

Lawrence Maietta, a partner in Bonamassa, Maietta, and Cartelli, LLP, is a director of the Company.

During each of the

years ended December 31, 2020 and 2019, the Company paid Bonamassa, Maietta, and Cartelli, LLP, $16,250 and $17,500, respectively,

for accounting and tax services.

Lawrence Maietta, a partner in Bonamassa, Maietta, and Cartelli, LLP (newly part of PKF O’

Connor Davies), is a director of the Company.

NOTE J –

SUBSEQUENT EVENTS

On March 27, 2020,

the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

The CARES Act contains

a provision known as the Employee Retention Credit (“ERC”), a refundable payroll tax credit for qualified wages paid

to retained full-time employees between March 13, 2020 and December 31, 2020.

The Consolidations Appropriations Act (CAA), signed

into law on December 27, 2020, significantly modified and expanded the provisions of the ERC to include wages paid in the first

half of 2021.

The Company has determined that it has qualified for this credit in the first quarter of 2021 and anticipates utilizing

benefits under this act to aid its liquidity position.

For 2021, the ERC provides employers a refundable federal tax credit equal

to 70% of the first $10,000 of qualified wages and benefits paid to retained employees between January 1, 2021 and June 30, 2021.

Credits may be claimed immediately by reducing payroll taxes sent to the Internal Revenue Service.

To the extent that the credit

exceeds employment withholdings, the employer may request a refund of prior taxes paid.

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 9A. Controls and Procedures