What changed in this filing

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Item 9A. Controls and Procedures

2024-03-22 compared with 2023-03-23 · 321 added, 486 removed, 372 unchanged (68% of the section changed)

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our 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, 2022.

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our 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, 2023.

On the basis of that evaluation, management concluded that our 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 our Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

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).

(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).

Our internal control system is designed to provide reasonable assurance to management and to our Board of Directors regarding the preparation and fair presentation of published financial statements.

Under the supervision and with the participation of management, including our Principal Executive Officer and Principal Financial Officer, management conducted an evaluation of the effectiveness of our 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 our internal control over financial reporting was effective as of December 31, 2022.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

Since we are a non-accelerated filer, management’s report is not subject to attestation by our 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.

UNITED-GUARDIAN, INC.

Changes in Internal Control over Financial Reporting

Since we are a non-accelerated filer, management’s report is not subject to attestation by our 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.

There were no changes in our internal control over financial reporting in the fourth quarter of 2023 that materially affected, or would be reasonably likely to materially affect, our internal control over financial reporting.

Limitations of the Effectiveness of Internal Controls

(d) Limitations of the Effectiveness of Internal Controls

The effectiveness of our 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.

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However, our control systems have been designed to provide reasonable assurance of achieving their objectives, and our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures and internal control over financial reporting are effective at the reasonable assurance level.

UNITED-GUARDIAN, INC.

Other Information.

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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 2023 Proxy Statement.

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 2024 Proxy Statement.

CODE OF ETHICS

We have adopted a Code of Business Conduct and Ethics that applies to all of our officers, directors, and employees serving in any capacity, including the Chief Executive Officer and/or President, Chief Financial Officer, and Principal Accounting Officer.

A copy of our Code of Business Conduct and Ethics is available on our website at http://www.u-g.com/corporate.

If applicable, we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of our Code of Business Conduct and Ethics applicable to the Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer by posting this information on our website.

UNITED-GUARDIAN, INC.

A copy of our Code of Business Conduct and Ethics is available on our website at www.u-g.com/esg.

AUDIT COMMITTEE

We have an Audit Committee (“Committee”) that is currently composed of three independent members of our Board of 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.

We have an Audit Committee that is currently composed of three independent members of our Board of 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.

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and (d) assessing the effectiveness of our 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.

The Committee currently meets at least four 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 by reference to the section entitled “Directors and Executive Officers”

to be contained in the Company’s 2023 Proxy Statement.

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 2024 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 “Directors and Executive Officers”

to be contained in the Company’s 2023 Proxy Statement.

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 2024 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 2023 Proxy Statement.

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 2024 Proxy Statement.

UNITED-GUARDIAN, INC.

Principal Accounting Fees and Services.

The aggregate fees that have been billed by Baker Tilly US, LLP (“Baker Tilly”), our principal accountants, for the quarterly reviews of our financial statements for the first, second and third quarters of 2021 and the audit of our financial statements for the 2021 fiscal year were $90,500.

The aggregate fees that have been, or are expected to be, billed by Baker Tilly for the quarterly reviews of our financial statements for the first, second and third quarters of 2022 and the audit of our financial statements for the 2022 fiscal year are $97,000.

Change in Registered Public Accounting Firm

On August 29, 2023, as directed and approved by the Audit Committee of our Board of Directors, we formally dismissed Baker Tilly as our independent registered public accounting firm.

On August 29, 2023, as directed and approved by the Audit Committee, we formally retained Grassi as our independent registered public accounting firm, effective immediately.

The aggregate fees that have been or are expected to be billed by Grassi & Co., CPAs P.C.

(“Grassi”), our principal accountants, for the quarterly review of our financial statements for the third quarter of 2023 and the audit of our financial statements for the 2023 fiscal year were approximately $82,000.

There were no fees billed by Grassi in 2022.

The aggregate fees that were billed by Baker Tilly US, LLP (“Baker Tilly”), our former accountants, for the quarterly reviews of our financial statements for the first and second quarters of 2023 were approximately $23,000.

The aggregate fees that have been billed by Baker Tilly, our former accountants, for the quarterly reviews of our financial statements for the first, second and third quarters of 2022 and the audit of our financial statements for the 2022 fiscal year were approximately $97,000.

Audit-Related Fees

During 2023, there were no fees paid to Grassi in connection with our compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

No other fees were billed by Grassi for the last two fiscal years that were reasonably related to the performance of the audit or review of our financial statements and not reported under "Audit Fees" above.

During 2022, there were no fees paid to Baker Tilly in connection with our 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 our financial statements and not reported under "Audit Fees" above.

UNITED-GUARDIAN, INC.

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 planning.

There were no fees billed by Baker Tilly or Grassi during the last two fiscal years for professional services rendered for tax compliance, tax advice, or tax planning.

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 by Baker Tilly in 2022 or 2021.

Item 15. 

Exhibits, Financial Statement Schedules.

There were no other non-audit-related fees billed by Grassi or Baker Tilly in 2023 or 2022.

UNITED-GUARDIAN, INC.

Exhibits and Financial Statement Schedules.

Documents filed as part of this report.

Financial Statements - see Item 8.

Financial Statements - see Item 8.

Financial Statements and Supplementary Data.

Financial Statement Schedules – None.

Financial Statement Schedules – None.

(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.

March 16, 2023  

/s/ Beatriz Blanco

Beatriz Blanco   

President and Director

/s/ Donna Vigilante

Donna Vigilante

March 19, 2024

UNITED-GUARDIAN, INC.

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/ Beatriz Blanco

President (Principal Executive Officer);

/s/ Donna Vigilante

March 19, 2024

Beatriz Blanco

/s/ Andrea J.

Chief Financial Officer (Controller, Principal Financial Officer,

Donna Vigilante

(Principal Executive Officer)

/s/ Andrea Young

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

March 19, 2024

and Principal Accounting Officer);

/s/ Lawrence F.

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March 19, 2024

Committee member

/s/ Arthur M.

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March 19, 2024

/s/ Catherine Kolinski

March 19, 2024

Catherine Kolinski

Ari Papoulias

Audit Committee member;

Investment Committee member

March 19, 2024

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Chairman of the Board of Directors;

Investment Committee member

March 19, 2024

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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)

By-laws of the Company (Incorporated by reference to Exhibit 4.2 of the Registrant's Current Report on Form 8-K, dated September 21, 1987)

Specimen Certificate for shares of Common Stock of the Company (Incorporated by reference to Exhibit 4(a) of the Registrant's Annual Report on Form 10-K for the fiscal year ended February 29, 1988)

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)

Exclusive Distributor Agreement between the Company and ISP Technologies Inc.

dated July 5, 2000 (Incorporated by reference to Exhibit 10(d) of the Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000)

Letter Amendment between the Company and ISP Technologies Inc.

dated December 16, 2002 amending the Exclusive Distributor Agreement between the Registrant and ISP Technologies Inc.

dated July 5, 2000 (Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002)

Letter Amendment between the Company and ISP Technologies Inc.

dated December 20, 2005 amending the Exclusive Distributor Agreement between the Registrant and ISP Technologies Inc.

dated July 5, 2000 and amended on December 31, 2002 (Incorporated by reference to Exhibit 10(d) of the Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005)

Letter Amendment between the Company and ISP Technologies Inc.

dated May 5, 2010 amending the Exclusive Distributor Agreement between the Company and ISP Technologies Inc.

dated July 5, 2000 and amended on December 16, 2002 and December 20, 2005 (Incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2010)

Manufacturing and Supply Agreement between the Company and Smiths Medical ASD, Inc.

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)

Employment agreement between Beatriz Blanco and the Company dated October 10, 2022 (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 10-Q for the fiscal quarter ended September 30, 2022)

UNITED-GUARDIAN, INC.

Memorandum of Understanding (separation agreement) between Ken Globus and the Company effective November 1, 2022 (Incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 10-Q for the fiscal quarter ended September 30, 2022)

By-laws of the Company, as amended and adopted by the Board of Directors on March 18, 2020 (Incorporated by reference to Exhibit 3.2 of the Registrant's Current Report on Form 8-K, dated April 10, 2020)

Memorandum of Understanding (separation agreement) between Ken Globus and the Company effective November 1, 2022 (Incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 10-Q for the fiscal quarter ended September 30, 2022)

Manufacturing and supply agreement between the Company and Amsino Healthcare USA, Inc.

signed March 30, 2023 and effective as of January 1, 2023 (Incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K dated and filed March 1, 2024)

Code 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)

Subsidiaries of the Company:

Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002

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Joint certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002

Inline XBRL Instance Document –

The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.

Policy Relating to Recovery of Erroneously Awarded Compensation

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

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INDEX TO FINANCIAL STATEMENTS

(For the years ended December 31, 2022 and 2021)

(For the years ended

December 31, 2023 and 2022)

Report of Grassi & Co.

CPAs P.C, Independent Registered Public Accounting Firm (PCAOB ID 606 )

Report of Baker Tilly U.S.

LLP, Independent Registered Public Accounting Firm (PCAOB ID 23)

Financial Statements  

Statements of Income

Balance Sheets

Statements of Stockholders' Equity

Statements of Cash Flows

Notes to Financial Statements   

UNITED-GUARDIAN, INC.

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee and Stockholders 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, 2023, and the related statements of income, stockholders’ equity, and cash flows for the year ended, 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, 2023, and the results of its operations and its cash flows for the year then ended, 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.

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 were no critical audit matters.

/s/ GRASSI & CO., CPAs, P.C.

We have served as the Company’s auditors since 2023.

Jericho, New York

March 19, 2024

UNITED-GUARDIAN, INC.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on the Financial Statements

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

(the "Company") as of December 31, 2022 and 2021, 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").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, 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.

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

(the "Company") as of December 31, 2022, the related statements of income, stockholders' equity, and cash flows, for the year then ended, 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, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

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.

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 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.

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 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 risks.

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.

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 provides 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:

Critical audit matters are matters arising from the 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.

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/s/ Baker Tilly US, LLP

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

We served as the Company's auditor from 2019 to 2022.

Uniondale, NY

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Income from operations

Other (loss) income:

Other income (expense):

Investment income

Net loss on marketable securities

Total other (loss) income

Net gain (loss) on marketable securities

Total other income (expense)

Income before provision for income taxes

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Cash and cash equivalents

$ 830,452  

$ 531,213  

Marketable securities

5,653,516  

7,635,463  

Accounts receivable, net of allowance for doubtful accounts of $ 20,063 in 2022 and $ 20,252 in 2021

1,427,576  

1,813,346  

Accounts receivable, net of allowance for credit losses of $ 16,672 in 2023 and $ 20,063 in 2022

Inventories, net

1,672,012  

1,410,789  

Prepaid expenses and other current assets

201,846  

192,579  

Prepaid income taxes

185,228  

Total current assets

9,970,630  

11,583,390  

Deferred income taxes, net

110,544  

Property, plant, and equipment:

69,000  

Factory equipment and fixtures

4,585,055  

4,605,742  

Building and improvements

2,895,742  

2,853,718  

Total property, plant and equipment

7,549,797  

7,528,460  

Less accumulated depreciation

6,990,636  

6,869,598  

Total property, plant, and equipment, net

559,161  

658,862  

$ 10,640,335  

$ 12,242,252  

See Notes to Financial Statements

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Accounts payable

$ 30,415  

$ 410,894  

Accrued expenses

1,322,056  

1,627,390  

Deferred revenue

190,164  

Income taxes payable

88,738  

Dividends payable

21,220  

20,575  

Total current liabilities

1,373,691  

2,337,761  

Deferred income taxes (net)

83,222  

Commitments and contingencies

Stockholders’

Stockholders’ equity:

Common stock, $ .10 par value;

10,000,000 shares authorized;

4,594,319 shares issued and outstanding at December 31, 2022 and 2021, respectively

459,432  

4,594,319 shares issued and outstanding at December 31, 2023 and 2022

Retained earnings

8,807,212  

9,361,837  

Total stockholders ’

9,266,644  

9,821,269  

TOTAL LIABILITIES AND STOCKHOLDERS ’

$ 10,640,335  

$ 12,242,252  

Total stockholders ’ equity

TOTAL LIABILITIES AND STOCKHOLDERS ’ EQUITY

See Notes to Financial Statements

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Years ended December 31, 2023 and 2022

Common stock  

Amount  

Retained earnings

Balance, January 1, 2022

4,594,319  

$ 459,432  

$ 9,894,875  

$ 10,354,307  

4,658,542  

Dividends declared, not paid ($ 0.68 per share)

Dividends declared and paid ($ 0.68 per share)

( 5,190,033 )

Balance, December 31, 2022

4,594,319  

$ 459,432  

$ 9,361,837  

$ 9,821,269  

2,569,512  

Dividends declared, not paid ($ 0.10 per share)

Dividends declared and paid ($ 0.10 per share)

( 3,123,492 )

Balance, December 31, 2023

4,594,319  

$ 459,432  

$ 8,807,212  

$ 9,266,644  

See Notes to Financial Statements

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Depreciation and amortization

Loss (gain) on sale of asset

Net loss on marketable securities

Allowance for doubtful accounts

Reserve for inventory obsolescence

(Gain) loss on sale of asset

Net (gain) loss on marketable securities

Allowance for credit losses

Allowance for obsolete inventory

Deferred income taxes

Decrease (increase) in operating assets:

(Increase) decrease in operating assets:

Accounts receivable

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Prepaid income taxes

(Decrease) increase in operating liabilities:

Increase (decrease) in operating liabilities:

Accounts payable

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Proceeds from sales of marketable securities

Net cash provided by (used in) investing activities

Net cash 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 increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

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Dividends payable

Trade-in received from sale of asset

See Notes to Financial Statements

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NOTES TO FINANCIAL STATEMENTS

NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT 

ACCOUNTING POLICIES

NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

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 92 % and 93 % of the Company’s sales for the years ended December 31, 2022 and December 31, 2021, respectively.

Lubrajel accounted for approximately 59 % and 64 % of the Company’s sales for the years ended December 31, 2022 and December 31, 2021, respectively, and Renacidin accounted for approximately 33 % and 29 % of the Company’s sales for the years ended December 31, 2022 and December 31, 2021, respectively.

Impact of the Coronavirus Pandemic, Global Supply Chain Instability and Inflation

While the coronavirus pandemic continues to impact certain areas of the Company’s operations, the current impact on the Company’s financial performance is coming primarily from 1 ) higher raw material costs and increased shipping costs, which had an impact on the Company’s gross profit margins during 2022 and 2 ) a decrease in cosmetic ingredient sales in China due to China’s zero -COVID mandate that was in effect for a substantial part of 2022.

The pandemic did not affect the Company’s ability to obtain raw materials but due to supply chain instability, the Company experienced longer lead times and higher prices for many of its raw materials.

The increased raw material prices had an impact on the Company’s gross profit margins in 2022 and may continue to have an impact on gross profit margins in upcoming quarters.

In response to the rising raw material prices the Company has instituted price increases on many of its products, which will help to reduce the impact on the Company’s gross margins in the future.

As a result of the lingering effects of the coronavirus pandemic as described above, combined with global supply chain instability, there continues to be uncertainty in regard to its future potential impact on the Company’s operations or financial results.

The Company believes that it is still unable to provide an accurate estimate or projection as to what the future impact of the pandemic will be on its future operations or financial results.

While it is unknown whether inflation will continue to increase or will begin to decrease during 2023, continued inflation is likely to result in further increases in raw material costs, shipping costs, and internal labor costs, which could impact the Company’s results of operations.

(“Registrant” or “Company”) is a Delaware corporation that, through its Guardian Laboratories division, manufactures and markets cosmetic ingredients, pharmaceutical products, medical lubricants and sexual wellness ingredients.

Prior to July 1, 2023, the Company manufactured and reported sales of a line of specialty industrial products;

however, this product line was discontinued after the second quarter of 2023 due to low sales volume with no growth prospects.

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

The Company’s research and development department also modifies, refines, and expands the uses for existing products, with the goal of further developing the market for the Company's products.

Two major product lines, Lubrajel and Renacidin Irrigation Solution (“Renacidin”) together accounted for approximately 94 % and 92 % of the Company’s sales for the years ended December 31, 2023 and December 31, 2022, respectively.

Lubrajel accounted for approximately 55 % and 59 % of the Company’s sales for the years ended December 31, 2023 and December 31, 2022, respectively, and Renacidin accounted for approximately 38 % and 33 % of the Company’s sales for the years ended December 31, 2023 and December 31, 2022, respectively.

Impact of Global Supply Chain Instability and Inflation

The increased raw material prices that the Company experienced during 2022 and the beginning of 2023 stabilized during the latter part of 2023.

The continued supply chain instability, primarily caused by military tensions in the Middle East, has impacted vessels’ access to the Red Sea and Suez Canal.

The Company is working closely with its suppliers regarding lead times and continues to closely monitor this situation.

Although we have not yet experienced any delays in receiving raw materials or an increase in shipping costs, we are aware that the situation is fluid and could impact us at any time.

If that occurs, we may experience longer lead times and increased shipping costs for some of our raw materials, which may impact our future gross margins.

As a result of this global supply chain instability, there continues to be uncertainty regarding the potential impact on our operations or financial results and we are unable to provide an accurate estimate or projection as to what the future impact will be.

Use of Estimates

In preparing financial statements in conformity with a Generally Accepted Accounting Principles in the United States of America (“US GAAP”), management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period.

Actual results could differ from those estimates.

Such estimated items include the allowance for bad debts, reserve for inventory obsolescence, accrued distribution fees, outdated material returns, possible impairment of marketable securities and the allocation of overhead.

UNITED-GUARDIAN, INC.

Such estimated items include the allowance for credit losses, reserve for inventory obsolescence, accrued distribution fees, outdated material returns, possible impairment of marketable securities and the allocation of overhead.

Accounts Receivable and Reserves

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. 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, 2022 and 2021, the allowance for doubtful accounts receivable amounted to $ 20,063 and $ 20,252 , respectively.

From time to time, the Company adjusts its assumptions for anticipated changes in any of these or other factors expected to affect collectability.

As of January 1, 2023, the Company adopted FASB Accounting Standards Update (“ASU”) No.

2016-13 , Measurement of Credit Losses on Financial Instruments , and all subsequently issued related amendments, which changed the methodology used to recognize impairment of the Company’s contract receivables.

Under this ASU, financial assets are presented at the net amount expected to be collected, requiring immediate recognition of estimated credit losses expected to occur over the asset’s remaining life.

This is in contrast to previous U.S.

GAAP, under which credit losses were not recognized until it was probable that a loss had been incurred.

The Company performed its expected credit loss calculation based on historical accounts receivable write-offs, including consideration of then-existing economic conditions and expected future conditions.

The adoption of this ASU did not have a significant impact on the financial statements.

Prior to the implementation of ASU No.

2016-13, the Company calculated its reserve for accounts receivable by considering many factors including historical data, experience, customer types, credit worthiness and economic trends.

UNITED-GUARDIAN, INC.

The carrying amount of accounts receivable is reduced by an allowance for credit losses that reflects the Company’s best estimate of the amounts that will not be collected as of the balance sheet date.

This allowance is based on the credit losses expected to arise over the life of the asset and is based on the Current Expected Credit Losses (“CECL”).

At December 31, 2023 and 2022, the allowance for credit losses related to accounts receivable amounted to $ 16,672 and $ 20,063 , respectively.

Revenue Recognition

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.

The Company’s sales, as reported, are subject to a variety of deductions, some of which are estimated.

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.

The Company’s sales, as reported, are subject to a variety of deductions, some of which are estimated.

These deductions are recorded in the same period in which the revenue is recognized.

Such deductions, primarily related to the sale of the Company’s pharmaceutical products, include chargebacks from the United States Department of Veterans Affairs (“VA”), rebates in connection with the Company’s current participation in Medicare 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 2022 and 2021, the Company participated in various government drug rebate programs related to the sale of Renacidin®, its most important pharmaceutical product.

These programs include the Veterans Affairs Federal Supply Schedule (“FSS”), and the Medicare Part D Coverage Gap Discount Program (“CGDP”).

During 2023 and 2022, the Company participated in various government drug rebate programs related to the sale of Renacidin, its most important pharmaceutical product.

These programs include the Veterans Affairs Federal Supply Schedule (“FSS”), and the Medicare Part D Coverage Gap Discount Program (“CGDP”).

These programs require the Company to sell its product at a discounted price.

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 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 cosmetic 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;

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.

In August of 2022, the Inflation Reduction Act (“IRA”) was signed into law.

The IRA made significant changes to the current Medicare Part D benefit design as it relates to discounts available to enrollees from pharmaceutical manufacturers of brand name drugs.

Beginning on January 1, 2025, the Centers for Medicare & Medicaid Services (“CMS”) will implement a new Medicare Part D Manufacturer Discount Program (“Discount Program”), which will replace the current CGDP.

The new Discount Program eliminates the coverage gap benefit phase, introduces pharmaceutical manufacturer discounts in the initial and catastrophic coverage phases and lowers the cap on enrollee out-of-pocket costs.

Under the new Discount Program, additional rebates are expected to be owed by pharmaceutical manufacturers due to the restructuring of the benefit periods.

The overall financial impact of this new program will vary depending on the products being reimbursed but does have the potential to increase Medicare Part D rebates for drug manufacturers.

At this time, the Company is unable to predict what future impact this new program will have on its financial condition;

however, it has submitted information to CMS requesting to be classified as a “specified small manufacturer”.

If designated as such, the Company would be entitled to a multi-year phase-in period during which it would pay a lower percentage discount on drugs dispensed to beneficiaries.

On January 31, 2024, the Company was notified by CMS that it qualified as a specified small manufacturer and will receive the discount phase-in discussed above.

UNITED-GUARDIAN, INC.

The Company’s cosmetic 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 pharmaceutical products are final upon shipment unless (a) they are found to be defective;

(b) the product is damaged in shipping;

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This return policy conforms to standard pharmaceutical industry practice.

The Company 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.

UNITED-GUARDIAN, INC.

The Company estimates an allowance for outdated material returns based on previous years’ historical returns of its pharmaceutical products.

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

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At December 31, 2023 and 2022, the Company had an allowance of $ 247,847 and $ 369,154 , respectively, for possible outdated material returns, which is included in accrued expenses.

There is no asset value associated with these outdated material returns, as these products are destroyed.

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.

The Company’s standard credit terms, which vary depending on the customer, range between 30 and 60 days.

The Company recognizes an allowance for credit losses on its accounts receivable in accordance with ASU 2016-13, which is based on the credit losses expected to arise over the life of the asset and is based on Current Expected Credit Loss (“CECL”).

Prompt-pay discounts are offered to some customers;

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

At December 31, 2021, the Company recorded an advance payment from one of its customers in the amount of $ 190,164 , which was recorded as deferred revenue on the balance sheet.

The related performance obligation associated with this payment was satisfied in the first quarter of 2022.

No such advanced payment exists at December 31, 2022.

The Company has distribution agreements with certain distributors of its pharmaceutical products that entitles those distributors to distribution and services-related fees.

At December 31, 2023, the Company recorded advance payments from two of its customers in the amount of $ 15,498 , which was recorded as deferred revenue on the balance sheet.

The related performance obligations associated with these payments were satisfied in the first quarter of 2024.

No such advanced payments existed at December 31, 2022.

The Company has distribution agreements with certain distributors of its pharmaceutical products that entitle those distributors to distribution and services-related fees.

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

2 unchanged sentences

Cosmetic ingredients

$ 5,167,909  

$ 6,872,714  

Pharmaceuticals

4,943,605  

4,735,324  

Medical lubricants

2,470,163  

2,171,204  

Industrial and other

116,826  

150,387  

Total Net Sales

$ 12,698,503  

$ 13,929,629  

The Company’s cosmetic ingredients are currently marketed worldwide by five distributors, of which the United States (“U.S.”)-based ASI purchases the largest volume.

For the years ended December 31, 2022 and 2021, approximately 25 % and 20 %, respectively, of the Company’s sales were to (a) its foreign-based distributors (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 lubricants sold directly by the Company.

The Company’s cosmetic ingredients are currently marketed worldwide by five distributors, of which the United States (“U.S.”)-based ASI purchases the largest volume.

For the years ended December 31, 2023 and 2022, approximately 21 % and 25 %, respectively, of the Company’s sales were to (a) its foreign-based distributors (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 lubricants, which were sold directly to those customers by the Company.

UNITED-GUARDIAN, INC.

Disaggregated sales by geographic region are as follows:

Years ended December 31,  

United States*

$ 9,537,124  

$ 11,159,341  

Other countries

3,161,379  

2,770,288  

$ 12,698,503  

$ 13,929,629  

* 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.

* 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 certain percentage of those products are subsequently shipped by ASI to its foreign customers.

Based on sales information provided to the Company by ASI, 66 % of ASI’s sales in 2022 were to customers in foreign countries, compared with 74 % in 2021.

ASI’s largest foreign market in both 2022 and 2021 was China, which accounted for approximately 38 % of ASI’s sales in 2022 and 42 % of sales in 2021.

UNITED-GUARDIAN, INC.

Based on sales information provided to the Company by ASI, 69 % of ASI’s sales in 2023 were to customers in foreign countries, compared with 65 % in 2022.

ASI’s largest foreign market in both 2023 and 2022 was China, which accounted for approximately 29 % of ASI’s sales in 2023 and 38 % of sales in 2022.

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, 2022, approximately $ 105,000 exceeded the FDIC limit.

On May 10, 2022, the Company’s Board of Directors declared a semi-annual cash dividend of $ 0.37 per share, which was paid on June 1, 2022 to all stockholders of record as of May 23, 2022.

On November 15, 2022, the Company’s Board of Directors declared a semi-annual cash dividend of $ 0.31 per share, which was paid on December 7, 2022, to all stockholders of record as of November 28, 2022.

In 2022, the Company declared a total of $ 3,124,137 in dividends, of which $ 3,123,492 was paid.

The Company deposits cash and cash equivalents with financially strong, FDIC-insured financial institutions, and it believes that any amounts above FDIC insurance limitations are at minimal risk.

The amounts held in excess of FDIC limits at any point in time are considered temporary and are primarily due to the timing of maturities of United States Treasury Bills.

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, 2023 and 2022, $ 315,000 and $ 105,000 , respectively, exceeded the FDIC limit.

On July 12, 2023, the Company’s Board of Directors declared a cash dividend of $ 0.10 per share, which was paid on August 2, 2023, to all stockholders of record as of July 26, 2023.

The Company did not declare any other dividends in 2023.

During 2023, the Company declared total dividends of $ 459,432 , of which $ 459,387 was paid.

The balance of $ 45 is payable to stockholders whose old Guardian Chemical shares have not yet been exchanged to United-Guardian, Inc.

shares and are pending escheatment.

On May 18, 2021, the Company’s Board of Directors declared a semi-annual cash dividend of $ 0.48 per share, which was paid on June 7, 2021 to all stockholders of record as of May 31, 2021.

On November 16, 2021, the Company’s Board of Directors declared a semi-annual cash dividend of $ 0.65 per share which was paid on December 7, 2021 to all stockholders of record as of November 29, 2021.

In June of 2023, the Company’s Board of Directors changed the Company’s dividend declaration practice and expects to consider a semi-annual dividend declaration in January and July of each year.

On January 30, 2024, our Board of Directors declared a cash dividend of $.0.25 per share, which was paid on February 20, 2024 to all stockholders of record as of February 12, 2024.

On May 10, 2022, the Company’s Board of Directors declared a semi-annual cash dividend of $ 0.37 per share, which was paid on June 1, 2022, to all stockholders of record as of May 23, 2022.

In 2022, the Company declared a total of $ 3,124,137 in dividends, of which $ 3,123,492 was paid.

1 unchanged sentence

shares and are pending escheatment.

UNITED-GUARDIAN, INC.

Marketable Securities

The Company’s marketable securities include investments in equity and fixed income mutual funds.

The Company’s marketable equity securities are reported at fair value with the related unrealized and realized gains and losses included in net income.

The Company’s marketable securities include investments in equity and fixed income mutual funds and certificates of deposit with maturities longer than 3 months.

The Company’s marketable equity securities are reported at fair value with the related unrealized and realized gains and losses included in net income.

Certificates of Deposit are recorded at amortized cost.

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 2022 and 2021, 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.

During 2023 and 2022, 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.

Net realizable value is equal to the selling price less the estimated costs of selling and/or disposing of the product.

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.

UNITED-GUARDIAN, INC.

Property, Plant and Equipment

5 unchanged sentences

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

Estimated useful lives are as follows: 

Factory equipment and fixtures  

5 - 7 years  

           Building

40 years  

Building improvements  

Estimated useful lives are as follows:

Factory equipment and fixtures

Building improvements

Lesser of useful life or 20 years

1 unchanged sentence

Long-lived assets 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.

The 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.

1 unchanged sentence

No impairments were necessary at December 31, 2023 and 2022.

UNITED-GUARDIAN, INC.

Fair Value of Financial Instruments

1 unchanged sentence

Concentration of Credit Risk

Accounts receivable potentially exposes the Company to concentrations of credit risk.

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.

Accounts receivable potentially expose the Company to concentrations of credit risk.

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 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.

As a result 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, 2022, four of the Company’s pharmaceutical wholesalers and cosmetic ingredient distributors accounted for approximately 72 % of the Company’s gross sales during the year and approximately 81 % of its outstanding accounts receivable at December 31, 2022.

For the year ended December 31, 2021, the same four pharmaceutical wholesalers and cosmetic ingredient distributors accounted for a total of approximately 75 % of the Company’s gross sales during the year and 80 % of its outstanding accounts receivable at December 31, 2021.

UNITED-GUARDIAN, INC.

Vendor Concentration

For the year ended December 31, 2023, four of the Company’s pharmaceutical wholesalers and cosmetic ingredient distributors accounted for approximately 77 % of the Company’s gross sales during the year and approximately 89 % of its outstanding accounts receivable on December 31, 2023.

For the year ended December 31, 2022, the same four pharmaceutical wholesalers and cosmetic ingredient distributors accounted for a total of approximately 72 % of the Company’s gross sales during the year and 81 % of its outstanding accounts receivable on December 31, 2022.

Supplier 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.

During 2022, the Company periodically experienced longer lead times due to shipping delays and supply chain issues related to the pandemic.

The Company has six major raw material vendors that collectively accounted for approximately 90 % and 94 % of the raw material purchases by the Company in 2022 and 2021, respectively.

The Company has three major raw material vendors that collectively accounted for approximately 83 % and 80 % of the raw material purchases by the Company in 2023 and 2022, respectively.

In addition to the Company’s raw materials concentration, the Company utilizes one contract manufacturer for the production of its pharmaceutical product, Renacidin.

Any disruption in this manufacturer’s operations could have a material impact on the Company’s revenue stream.

Income taxes are accounted for under the asset and liability method.

5 unchanged sentences

As of December 31, 2023 and 2022, 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, 2023 and 2022, the Company did not record any tax-related interest or penalties.

The Company’s tax returns for 2019 and all subsequent years are subject to examination by the United States Internal Revenue Service and by the State of New York.

The Company’s tax returns for 2020 and all subsequent years are subject to examination by the United States Internal Revenue Service (“IRS) and by the State of New York.

UNITED-GUARDIAN, INC.

Research and Development

1 unchanged sentence

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 $ 97,000 and $ 82,000 for the years ended December 31, 2022 and 2021, respectively.

Advertising Expenses

Advertising costs are expensed as incurred.

For the years ended December 31, 2022 and 2021, the Company incurred approximately $ 19,000 and $ 31,000 , respectively, in advertising expense, which primarily relates to the internet marketing of Renacidin, one of the Company’s pharmaceutical products.

UNITED-GUARDIAN, INC.

The Company did not incur any advertising costs for the year ended December 31, 2023.

For the year ended December 31, 2022, the Company incurred approximately $ 19,000 in advertising expenses.

These expenses were primarily related to the internet marketing of Renacidin, one of the Company’s pharmaceutical products.

This marketing effort was discontinued during the fourth quarter of 2022.

Earnings Per Share Information

2 unchanged sentences

New Accounting Standards

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 does not expect that the implementation of this standard will have a material effect on its’

financial statements.

NOTE B –

CASH AND CASH EQUIVALENTS

In December 2023, the FASB issued ASU 2023-09 “ Income Taxes- Improvements to Income Tax Disclosures ”.

This guidance enhances the transparency and decision usefulness of income tax disclosures.

More specifically, the amendments relate to the income tax rate reconciliation and income taxes paid disclosures and require 1) consistent categories and greater disaggregation of information in the rate reconciliation and 2) income taxes paid disaggregated by jurisdiction.

This guidance is effective for fiscal years beginning after December 31, 2024.

As of January 1, 2023, the Company adopted FASB Accounting Standards Update (“ASU”) No.

This is in contrast to previous U.S.

GAAP, under which credit losses were not recognized until it was probable that a loss had been incurred.

The adoption of this ASU did not have a significant impact on the financial statements.

NOTE B – CASH AND CASH EQUIVALENTS

Cash and cash equivalents include currency on hand, demand deposits with banks or financial institutions, and short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present minimal risk of changes in value because of changes in interest rates.

The following table summarizes the Company’s cash and cash equivalents:

Years ended December 31,  

The following table summarizes the Company’s cash and cash equivalents:

UNITED-GUARDIAN, INC.

Demand Deposits

$ 333,275  

$ 531,213  

Certificates of Deposit (original 3-month maturity)

Money market funds

Treasury Bills (original 3-month maturity)

497,177  

Total cash and cash equivalents

$ 830,452  

$ 531,213  

NOTE C - MARKETABLE SECURITIES

Marketable securities include investments in fixed income and equity mutual funds with maturities greater than 3 months, which are reported at their fair values.

Marketable securities include investments in fixed income and equity mutual funds, which are reported at their fair values, and certificates of deposit with original maturities greater than 3 months, which are recorded at amortized cost.

The disaggregated net gains and losses on the marketable securities recognized in the income statement for the years ended December 31, 2023 and 2022 are as follows:

Years ended December 31,   

Net losses recognized during the year on marketable securities

$ ( 1,046,245 )

Net losses (gains) realized during the year on marketable securities sold during the period

364,074  

Net unrealized loss recognized during the reporting year on marketable securities still held at the reporting date

$ ( 682,171 )

$ ( 134,935 )

UNITED-GUARDIAN, INC.

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.

Years ended December 31,

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

Net losses realized during the year on marketable securities sold during the period

Net unrealized gain (loss) recognized during the reporting year on marketable securities still held at the reporting 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.

•    Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•    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:

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

• Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

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

UNITED-GUARDIAN, INC.

The following tables summarize the Company’s investments:

December 31, 2023

Unrealized  

Fair Value  

(Loss)Gain  

Unrealized Gain

Equity Securities:

Fixed income mutual funds

$ 5,449,227  

$ 4,924,497  

$ ( 524,730 )

Equity and other mutual funds

717,165  

729,019  

11,854  

Total equity securities

6,166,392  

5,653,516  

Other short-term investments:

Fixed income certificates of deposit (original maturities >3 months)

Total marketable securities

$ 6,166,392  

$ 5,653,516  

$ ( 512,876 )

December 31, 2022

Unrealized  

 Cost  

Fair Value  

Unrealized (Loss) Gain

Equity Securities

Fixed income mutual funds

$ 6,814,420  

$ 6,873,333  

$ 58,913  

Equity and other mutual funds

651,748  

762,130  

110,382  

Total equity securities

7,466,168  

7,635,463  

169,295  

Total marketable securities

$ 7,466,168  

$ 7,635,463  

$ 169,295  

Investment income is recognized when earned and consists principally of dividend income from equity and fixed income mutual funds and interest income on United States Treasury Bills.

Investment income is recognized when earned and consists principally of dividend income from equity and fixed income mutual funds and interest income on United States Treasury Bills, certificates of deposit and money market 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 $ 5,505,145 for the year ended December 31, 2023, which included realized losses of $ 433,769 .

Proceeds from the sale and redemption of marketable securities for the year ended December 31, 2021 amounted to $ 4,152,660 , which included realized gains of $ 111,917 .

UNITED-GUARDIAN, INC.

NOTE D –

INVENTORIES  

Proceeds from the sale and redemption of marketable securities for the year ended December 31, 2022 amounted to $ 2,867,671 , which included realized losses of $ 364,074 .

NOTE D – INVENTORIES

Inventories consist of the following:

Raw materials

$ 601,125  

$ 494,348  

Work in process

16,520  

119,069  

Finished products

1,054,367  

797,372  

Total Inventories

$ 1,672,012  

$ 1,410,789  

Inventories are valued at the lower of cost and net realizable value.

Net realizable value is equal to the selling price less the estimated costs of selling and/or disposing of the product.

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, 2022 and December 31, 2021 are net of a reserve of $ 64,000 and $ 35,000 , respectively.

NOTE E –

Finished product inventories on December 31, 2023 and December 31, 2022 are net of a reserve of $ 47,000 and $ 64,000 , respectively.

UNITED-GUARDIAN, INC.

NOTE E – INCOME TAXES

The provision for income taxes consists of the following:

Years ended December 31,

$ 850,344  

$ 1,287,749  

Total current provision for income taxes

851,934  

1,287,845  

Total deferred benefit from income taxes

Total deferred expense (benefit) from income taxes

Total provision for income taxes

$ 658,168  

$ 1,219,383  

The following is a reconciliation of the Company’s effective income tax rate to the Federal statutory rate:         

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,

Income taxes at statutory federal income tax rate

$ 677,813  

$ 1,234,364  

State taxes, net of federal benefit

Research & development credits

( 0.3 )  

Non-taxable dividends

( 0.2 )  

( 0.1 )  

Provision for income taxes

$ 658,168  

$ 1,219,383  

UNITED-GUARDIAN, INC.

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

December 31, .

Deferred tax assets

Allowance for doubtful accounts

$ 4,213  

$ 4,253  

13,440  

Allowance for credit losses

Accounts payable

86,288  

92,756  

Unrealized loss on marketable securities

107,704  

Accrued expenses

277,326  

339,884  

Total deferred tax assets

$ 501,806  

$ 437,775  

Deferred tax liabilities

4 unchanged sentences

Total deferred tax liabilities

Net deferred tax asset (liability)

$ 110,544  

Net deferred tax asset

UNITED-GUARDIAN, INC.

NOTE F - BENEFIT PLANS

4 unchanged sentences

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, 2022 and 2021, respectively, the Company’s Board of Directors authorized discretionary contributions in the amount of $ 109,000 to be allocated among all eligible employees.

For the years ended December 31, 2023 and 2022, respectively, the Company’s Board of Directors authorized discretionary contributions in the amount of $ 109,000 to be allocated among all eligible employees.

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.

The discretionary contribution for 2022 will be paid in February 2023.

The amount paid in February 2023 has been reduced by an amount paid to Ken Globus upon his retirement from the Company during 2022.

The remaining contribution payable is included in accrued expenses at December 31, 2022.

The discretionary contribution for 2023 will be paid in March 2024 and is included in accrued expenses.

NOTE G - GEOGRAPHIC AND OTHER INFORMATION

Through its Guardian Laboratories division, the Company conducts research, product development, manufacturing, and marketing of cosmetic ingredients, personal and health care products, pharmaceuticals, non-pharmaceutical medical products, and proprietary specialty industrial products.

All the products that the Company markets, exception for Renacidin, are produced at its facility in Hauppauge, New York.

Through its Guardian Laboratories division, the Company conducts research, product development, manufacturing, and marketing of cosmetic ingredients, pharmaceuticals, medical lubricants and sexual wellness ingredients.

Prior to July 1, 2023, the Company manufactured and reported sales of a line of specialty industrial products, however this produce line was discontinued after the second quarter of 2023 due to low sales volume with no growth.

All the products that the Company markets, with the exception of Renacidin, are produced at its facility in Hauppauge, New York.

Renacidin, a urological product, is manufactured for the Company by an outside contract manufacturer.

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.

UNITED-GUARDIAN, INC.

The Company operates in one business segment.

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

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

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

cosmetic ingredients, pharmaceuticals, medical lubricants, sexual wellness ingredients and industrial products.

The Company discontinued its industrial line of products after the second quarter of 2023 due to a low volume of sales and no growth.

Each product category is marketed differently.

The cosmetic ingredients are marketed through a global network of distributors.

These distributors purchase product outright from the Company and provide the marketing functions for these products on behalf of the Company.

These distributors purchase products 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 with only one of its global distributors, ASI, and that contract renews every two years unless cancelled for any reason by either party at least 60 days prior to the expiration of the two -year marketing period in effect at that time.

The current marketing period with ASI ends on December 31, 2023.

The Company’s other distributors 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.

The Company currently has no written distribution agreements with the companies that market its cosmetic ingredients.

The marketing contract with ASI terminated on December 31, 2023, and the Company is currently in negotiations with ASI to establish a new marketing agreement.

The Company anticipates that it will have a new marketing agreement in place with ASI by the end of the second quarter.

The Company’s relationship with ASI continues to be strong, and during this period of renegotiation the Company is continuing to fill ASI’s orders on a timely basis.

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 include a urological product and a topical bioticide that are sold to end users primarily through distribution agreements with the major drug wholesalers.

The pharmaceutical products include a urological product and a topical biocide 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 effort for Renacidin, its most important drug product, centers around a separate Renacidin website.

There is currently no active marketing effort for Clorpactin.

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 marketed under an NDA that was approved by the FDA in 1990.

The medical lubricants are not pharmaceutical products.

1 unchanged sentence

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 them.

Approvals are the responsibility of the companies that market the products in which the Company’s products are used, which are typically classified as medical devices.

However, the Company is responsible for manufacturing these products in accordance with current Good Manufacturing Practices for medical devices, and its manufacturing facility is subject to regular FDA oversight.

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

Approvals are the responsibility of the companies that market the products in which the Company’s products are used, which are typically classified as medical devices.

However, the Company is responsible for manufacturing these products in accordance with current Good Manufacturing Practices, and its manufacturing facility is subject to regular FDA oversight.

The industrial products were marketed by the Company directly to manufacturers, and generally did 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 Company plans on discontinuing the sales of its industrial products in the second quarter of 2023.

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 “The United States”

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

UNITED-GUARDIAN, INC.

In addition, there are four customers for the Company’s medical lubricants that take delivery of their shipments in the U.S.

The Company discontinued this product line on July 1, 2023.

The sexual wellness ingredients are marketed by Brenntag Specialties, a global market leader in chemicals and ingredient distribution.

The Company entered into a marketing and distribution agreement with Brenntag in October of 2023 in the United States, Canada, Mexico, Central America and South America.

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 the “United States” sales numbers 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 lubricants 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 “The United States”

revenue number in the table below.

Years ended December 31,  

locations, sales to those customers are also included in the “United States” sales number in the table below.

Years ended December 31,

Cosmetic Ingredients

$ 5,388,365  

$ 6,872,714  

Pharmaceuticals

5,929,216  

5,748,244  

Medical Lubricants

2,471,555  

2,175,822  

Industrial and other

116,826  

150,387  

13,905,962  

14,947,167  

Discounts and allowances

( 1,207,459 )

( 1,017,538 )

$ 12,698,503  

$ 13,929,629  

UNITED-GUARDIAN, INC.

Geographic Information

1 unchanged sentence

United States

$ 9,537,124  

$ 11,159,341  

Other countries

3,161,379  

2,770,288  

$ 12,698,503  

$ 13,929,629  

Gross Sales to Major Customers

Years ended December 31,  

$ 4,284,799  

$ 5,641,279  

2,527,743  

2,526,869  

1,613,597  

1,522,882  

1,553,885  

1,488,301  

Years ended December 31,

All other customers

3,925,938  

3,767,836  

Total Gross Sales

$ 13,905,962  

$ 14,947,167  

NOTE H - ACCRUED EXPENSES

Accrued expenses at December 31, 2022 and 2021 consist of:

$ 175,496  

$ 348,000  

Accrued expenses on December 31, 2023 and 2022 consist of:

Distribution fees

395,536  

359,550  

Payroll and related expenses

53,475  

292,560  

Company 401(k) contribution

94,326  

109,000  

Annual report expenses

68,349  

64,038  

66,500  

61,500  

Reserve for outdated material returns

369,154  

313,904  

Sales rebates

80,926  

56,857  

18,294  

21,981  

Total accrued expenses

$ 1,322,056  

$ 1,627,390  

UNITED-GUARDIAN, INC.

NOTE I - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND 

NON-CASH INVESTING AND FINANCING ACTIVITIES

NOTE I - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES

As of December 31, 2023, the Company had a number of unconverted Guardian Chemical shares that would convert to approximately 447 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 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 447 shares that have not yet been exchanged or designated for escheatment as of December 31, 2023, and the Company will continue to do so as dividends are declared.

UNITED-GUARDIAN, INC.

NOTE J - RELATED PARTY TRANSACTIONS

During the years ended December 31, 2022 and 2021, the Company paid PKF O’Connor Davies $ 14,500 and $ 19,500 , respectively, for accounting and tax services.

Lawrence Maietta, a partner at PKF O’Connor Davies, is a director of the Company.

For the year ended December 31, 2022, the Company paid Ken Globus, the Company’s previous President and CEO, $ 20,000 for consulting services subsequent to his departure from the Company.

The Company’s consulting agreement with Ken Globus expires on May 31, 2023.

During the years ended December 31, 2023 and 2022, the Company made payments of $ 100,000 and $ 20,000 , respectively, to Ken Globus, the Company’s former President, for consulting services subsequent to his departure from the Company.

The Company’s consulting agreement with Ken Globus expires on May 31, 2024.

Ken Globus is a director of the Company and currently serves as Chairman of the Board of Directors.

In addition, in November 2022, Ken Globus purchased a used vehicle from the Company for $ 37,039 .

During the years ended December 31, 2023 and 2022, the Company paid PKF O’Connor Davies $ 20,000 and $ 14,500 , respectively, for accounting and tax services.

Lawrence Maietta, a partner at PKF O’Connor Davies, is a director of the Company.

NOTE K – SUBSEQUENT EVENTS

On October 10, 2023 the Company notified Ashland Specialty Ingredients (“ASI”), one of its marketing and distribution partners, that it was not renewing its Exclusive Distributor Agreement.

The Company is currently in negotiations with Ashland on a new contract and believes it will have the new agreement executed before the end of Q2 2024, although there can be no assurance that a new agreement will be executed.

In October 2023 the Company experienced a supply disruption at our contract manufacturer’s facility for Renacidin, one of the Company’s pharmaceutical products.

The Company has been working very closely with its contract manufacturer to coordinate validation activities and ensure a timely restart of production.

As of February 12, 2024, the validation activities have been completed and production has started.

On January 30, 2024, the Company’s Board of Directors declared a cash dividend of $.

0.25 per share, which was paid on February 20, 2024 to all stockholders of record as of February 12, 2024.

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