UNITED GUARDIAN INC 10-K

Item 1. Business OVERVIEW United-Guardian, Inc. (“Registrant” or “Company”) is a Delaware corporation that, through its Guardian Laboratories division, manufactures and markets cosmetic ingredients, pharmaceutical products, medical lubricants and sexual wellness ingredients. 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. In October 2023, the Company entered into a distribution agreement with Brenntag Specialties, a global market leader in chemicals and ingredients distribution, for the distribution of the Company’s new Natrajel™ line of sexual wellness ingredients in the United States, Canada, Mexico, Central America and South America. Although there were no sales of these products during 2023, the Company anticipates that it will begin manufacturing and reporting sales of this new line of products in 2024. The Company conducts various research and development activities. The Company’s research and development department primarily develops new and unique cosmetic ingredients. The Company develops new products using natural and environmentally friendly raw materials, which is a priority to many of the Company’s cosmetic customers. The Company’s research and development department also modifies, refines, and expands the uses for existing products, with the goal of further developing the markets that its products are used in. All the products that the Company markets, except for Renacidin®, are produced at its facility in Hauppauge, New York. Renacidin, a urological product, is manufactured for the Company by an outside contract manufacturer. Our predecessor entity, United International Research, Inc. ("UIR"), was founded and incorporated in New York in 1942 by Dr. Alfred R. Globus, the Company's Chairman and Director of Research until his death on April 9, 2009. On February 10, 1982, a merger took place between UIR and Guardian Chemical Corporation ("Guardian"), an affiliate of UIR, whereby Guardian was merged into UIR and the name was changed to United-Guardian, Inc., a New York corporation. On September 14, 1987, United-Guardian, Inc., a New York corporation, was merged with and into a newly formed Delaware corporation by the same name, United-Guardian, Inc., for the purpose of changing the domicile to the State of Delaware. The cornerstone of our business is our product innovation. We use our product development and formulation expertise to maintain our market position and to propel future growth. We also focus on the development of new products that fill unmet market needs and have unique properties. Our products are sold into stable and growing markets such as personal care, medical devices and pharmaceuticals. Our current product offerings include cosmetic ingredients, medical lubricants, pharmaceuticals and sexual wellness ingredients. Our current product offerings are segregated into the following categories: ● Cosmetic Ingredients : Cosmetic ingredients include an extensive line of multifunctional hydrogel formulations designed to offer sensory enhancement, lubrication, texture and moisturization to personal care products. ● Medical Lubricants : Medical lubricants include a line of hydrogel formulations designed to offer sensory enhancement and lubrication to medical products. ● Pharmaceutical Products : Pharmaceutical products include an FDA approved prescription drug that is used primarily to prevent and to dissolve calcifications in urethral catheters, as well as a chlorine-based topical antimicrobial. 5 UNITED-GUARDIAN, INC. ● Sexual Wellness Ingredients : Sexual wellness ingredients include a line of hydrogel formulations designed to offer sensory enhancement, lubrication and moisturization to sexual wellness applications. Our website, www.u-g.com, which is made available free of charge, contains our annual reports on Form 10-K, quarterly reports on Form 10-Q, and any amendments to those reports. All such reports are available as soon as reasonably practicable after they are electronically filed with, or electronically furnished to, the U.S. Securities and Exchange Commission (“SEC”). These documents are also available in print to any stockholder who requests them. Information contained on our website is not part of this Annual Report on Form 10-K and is not incorporated by reference in this document. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. DESCRIPTION OF THE BUSINESS The Company manufactures and markets 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 product line was discontinued after the second quarter of 2023 due to low sales volume with no growth prospects. In October 2023, the Company entered into a distribution agreement with Brenntag Specialties, a global market leader in chemicals and ingredients distribution, for distribution of the Company’s new Natrajel line of sexual wellness ingredients in the United States, Canada, Mexico, Central America and South America. Although there were no sales of these products during 2023, the Company anticipates that it will begin manufacturing and reporting sales of this new line of products in 2024. We also conduct research and development, primarily related to the development of new and unique cosmetic ingredients and medical lubricants. We focus on the development of products that fill unmet market needs, have unique properties, and use proprietary technology that we typically protect as trade secrets rather than with patents. Many of our products are marketed through collaborative distribution agreements with larger companies. The cosmetic ingredients manufactured by the Company are marketed to end users through our worldwide network of distributors and are currently used by many of the major manufacturers of cosmetic products. One of the Company’s most important product lines is its Lubrajel® line of multifunctional hydrogel formulations, which are designed to provide sensory enhancement, lubrication, hydration, and texture to both personal care and medical products. In the last few years, to meet the growing demand for “green” and sustainable products, the Company has focused on developing and launching new products which only contain ingredients that are considered “natural.” The Company’s Lubrajel products in the new natural line have been certified by the Cosmetic Organic and Natural Standard (“COSMOS”). This standard is recognized globally by the cosmetic industry. We ship our cosmetic ingredients to our distributors Ex Works (“EXW”) from our facility in Hauppauge, New York. Those distributors in turn resell those products to their customers, who are typically the manufacturers and marketers of cosmetic and personal care products. The cosmetic ingredients are not sold on a consignment basis, so unless a product is determined to be defective, it is not returnable, except at the discretion of the Company. Our pharmaceutical products are sold primarily to several full-line drug wholesalers which in turn supply those products to pharmacies, physicians, and hospitals. We arrange for, and cover the cost of, shipping our pharmaceutical products, and sales of those products are final when shipped. They are returnable only under specific circumstances in accordance with pharmaceutical industry standards, such as if the products are (a) damaged when received; (b) defective; (c) too close to their expiration dates to sell; or (d) within a year after their expiration dates. We operate in one business segment. Our current products are separated into four distinct product categories: cosmetic ingredients, pharmaceuticals, medical lubricants and sexual wellness. Each product category is marketed differently. Effective July 1, 2023, the Company discontinued its industrial product line of products. Beginning in 2024, the Company added sexual wellness ingredients to its portfolio of product categories. Our cosmetic ingredients are currently marketed globally by five distributors, of which Ashland Specialty Ingredients (“ASI”), a business segment of Ashland, Inc., is the largest. ASI manufactures and markets globally an extensive line of personal care and pharmaceutical additives and various other specialty products. We sell our cosmetic ingredients directly to those distributors, which in turn resell our products to their customers for use in the formulation of one or more of the customers’ personal care and cosmetic products. Our non-pharmaceutical medical lubricants are sold directly to marketers of finished medical products or to the contract manufacturers utilized by those marketers. We market our pharmaceutical products primarily through our dedicated Renacidin website. The pharmaceutical products are sold to hospitals and pharmacies primarily through full-line drug wholesalers, which purchase our products outright for resale to their customers. We also sell a small quantity of pharmaceutical products directly to hospitals and pharmacies. Our products are sold under trademarks or trade names that we own, some of which are registered with the United States Patent and Trademark Office as well as with comparable regulatory agencies in some foreign countries. We maintain a corporate website at www.u-g.com , and a specific website for Renacidin at www.renacidin.com. Information contained on either website is not part of this Annual Report on Form 10-K and is not incorporated by reference in this document. 6 UNITED-GUARDIAN, INC. All references in this Annual Report to “sales” or “Sales” shall mean “net sales” unless specifically identified as “gross sales.” PRODUCTS As stated above, we operate in one business segment, and our current product lines are separated into four distinct categories: COSMETIC INGREDIENTS The cosmetic ingredients we manufacture are marketed and sold to end users through our worldwide network of distributors. Our cosmetic ingredients are currently sold globally by five distributors, of which Ashland Specialty Ingredients (“ASI”), a business segment of Ashland, Inc., is the largest. ASI. is the exclusive distributor of our products in the United States, Canada, Asia, South & Central America, Mexico, Europe (all regions other than France, the United Kingdom, Italy & Switzerland), Scandinavia, Africa, Australia, the Middle East and Korea. Our other cosmetic ingredient distributors are Azelis UK Ltd in the United Kingdom, Sederma SAS, a subsidiary of Croda International Plc., in France, Safic-Alcan S.p.A. in Italy, and Azelis Cosmetics GmbH in Switzerland. The Company is currently in the process of renegotiating some of its distribution agreements. We ship our cosmetic ingredients to our distributors EXW from our facility in Hauppauge, New York. The distributors resell the products to their customers, which are typically major manufacturers and marketers of cosmetic and personal care products. They utilize our products in their finished products. The cosmetic ingredients are not sold on a consignment basis, so unless a product is determined to be defective, it is not returnable, except at our discretion. Since our Lubrajel hydrogels are well-known and established specialties, we believe that in the event ASI or any of our other cosmetic product distributors were to cease marketing and selling our products, alternative distribution agreements could be signed with other distributors of cosmetic ingredients in the affected territory or territories. These new distributors would continue supplying products to customers currently using our products, without any significant interruption of sales. If necessary, we would also be able to sell directly to the end users of our products until a new distribution arrangement was put in place. PRODUCTS - COSMETIC INGREDIENTS: LUBRAJEL is an extensive line of multifunctional hydrogel formulations designed to mainly provide sensory enhancement, lubrication, and texture to personal care products. Some of the Lubrajel products also offer skin moisturization benefits. The Lubrajel products are primarily used in skin care products such as moisturizers, anti-aging creams, body lotions, face serums, spa products and sunscreens. The Lubrajel products are also used in makeup products such as primers and foundations. Each Lubrajel product offers unique benefits for the formulation of skin care and color cosmetic products. The basic product line includes Lubrajel CG, Lubrajel DV, Lubrajel IIXD, Lubrajel MS, Lubrajel NP and Lubrajel Oil. 7 UNITED-GUARDIAN, INC. To address customer demand for preservative-free products, we developed and launched Lubrajel DV PF, Lubrajel IIXD PF, Lubrajel MS PF, Lubrajel Oil PF and Lubrajel PF. To address customer demand for paraben-free products, we developed and launched Lubrajel DV free, Lubrajel IIXD free, Lubrajel MS free, Lubrajel NP Free and Lubrajel Oil free. In the last few years, to meet the growing consumer demand for “green” and sustainable products, we have focused on developing and launching new products which only contain ingredients that are considered “natural.” The Lubrajel products in the new natural line have been certified by the Cosmetic Organic and Natural Standard (“COSMOS”). This standard is recognized globally by the cosmetic industry. The new natural line of products includes Lubrajel Natural, Lubrajel Marine, Lubrajel Oil Natural and Lubrajel Terra. All of the natural products are designed using green technology and contain natural raw materials. These products are multifunctional, Roundtable on Sustainable Palm Oil (“RSPO”) certified, Vegan, biodegradable and COSMOS approved. Each one offers a unique skin feel and improves the sensory characteristics of personal care formulations. In addition to the Lubrajel line of products, we also manufacture the following additional cosmetic ingredients, which accounted for less than 10% of total sales in 2023: B-122 ™ is a powdered lubricant used in the manufacture of certain cosmetics, such as pressed powders, eyeliners, and rouges, as well as some industrial products. The product acts as a binder, increases water-repellency and drop strength, and lowers the coefficient of friction in the products in which it is used. ORCHID COMPLEX ™ is an oil-based extract of fresh orchids. It is characterized by its excellent lubricity, spreadability, light feel, and emolliency. Because of its alcohol solubility it may also be used in fragrance products, such as perfumes and toiletries. Its emolliency makes it an excellent additive to shampoos, bath products and facial cleansers. LUBRASIL ™ II SB is a special formulation of Lubrajel in which silicone oil is incorporated into a Lubrajel base using proprietary technology that enables the product to maintain much of the clarity of regular Lubrajel. The product has a silky feel and is water resistant while at the same time providing moisturization. Sales of our cosmetic ingredients represented approximately 38% and 41% of our total sales for the years ended December 31, 2023 and 2022, respectively. We believe that there is potential to continue growing the sales of our cosmetic ingredients through new product development, development of new product applications, development of additional claim substantiations, and geographic expansion. Although we have experienced significant pricing pressure from low-cost competitors, we believe that we can compete with these low-cost competitors because our customers value our innovation capabilities, the quality of our products, the reliability of supply and the outstanding technical support. MEDICAL LUBRICANTS Our medical lubricants are sold directly to manufacturers and marketers of finished medical products or to the contract manufacturers utilized by those companies. Sales of our medical lubricants are shipped EXW from our facility in Hauppauge, New York. Sales are deemed final upon shipment, and we have no obligation to repurchase or allow the return of these goods unless they are defective. 8 UNITED-GUARDIAN, INC. PRODUCTS – MEDICAL LUBRICANTS Our medical lubricants are also sold under the Lubrajel brand since they are hydrogel formulations designed to provide sensory enhancement and lubrication to medical products. The Lubrajel medical lubricant products are primarily used in catheters, condoms, personal lubricants and in oral care applications such as mouthwashes. Currently, we offer medical lubricant products for catheter lubrication, medical devices, condom lubrication and oral care. In addition, we develop and sell customized exclusive products for all these applications. Our medical lubricants include Lubrajel MG, Lubrajel MGL, Lubrajel RRCG, Lubrajel RR, Lubrajel RC, Lubrajel RA, Lubrajel Fluid, Lubrajel LC, Lubrajel BA, and Lubrajel FACO. Lubrajel MG and Lubrajel MGL are our standard medical lubricants and can be applied to catheters, thermometers and other instruments to ensure ease of use and patient comfort. Our R-line of products, Lubrajel RRCG, Lubrajel RR, Lubrajel RC and Lubrajel RA can withstand sterilization by gamma radiation, which is one of the methods of terminally sterilizing medical and hospital products. Lubrajel Fluid is designed as an alternative to traditional silicone-based lubricants. The water-based formula offers easy clean up and is non-staining. It is compatible with traditional condom release powders which are used during the manufacture of latex condoms. Lubrajel LC, Lubrajel BA and Lubrajel FACO are hydrogel formulations developed for use in oral care applications. Sales of medical lubricants represented approximately 16% and 19% of our total sales for the years ended December 31, 2023 and 2022, respectively. We believe that there is potential to continue growing the sales of our medical lubricants through new product development, development of new product applications and markets, and geographic expansion. PHARMACEUTICALS We sell our pharmaceutical products primarily to full-line drug wholesalers, which in turn supply those products to pharmacies, physicians, hospitals, long-term care facilities, the U.S. Department of Veterans Affairs, and other government agencies. We also sell a small quantity of pharmaceutical products directly to hospitals and pharmacies. We arrange for, and cover the cost of, shipping our pharmaceutical products, and sales of those products are final when shipped. The pharmaceutical products are returnable only under specific circumstances in accordance with pharmaceutical industry standards, such as if the products are (a) damaged when received; (b) defective; (c) too close to their expiration dates to sell; or (d) within a year after their expiration dates. These return policies are in conformance with standard pharmaceutical industry practice. PRODUCTS - PHARMACEUTICALS RENACIDIN is a prescription drug approved by the FDA that is used primarily to prevent and to dissolve calcifications in urethral catheters. We maintain a specific website dedicated to this product at www.renacidin.com. CLORPACTIN ® WCS- 90 (“Clorpactin”) is a chlorine-based drug that is marketed as a topical antimicrobial and is also used in urology. It is also a powerful disinfectant, fungicide, and deodorizer. Our pharmaceutical products represented 45% and 39% of our total sales for the years ended December 31, 2023 and 2022 respectively. We believe that there is potential to grow the sales of our pharmaceutical products through geographic expansion. 9 UNITED-GUARDIAN, INC. SEXUAL WELLNESS INGREDIENTS Sexual wellness ingredients is a line of hydrogel formulations designed to offer sensory enhancement, lubrication, and moisturization to sexual wellness applications. The new Natrajel™ line of products comprises Natrajel NT, Natrajel MA, Natrajel ON and Natrajel TE. This line was designed using green technology and contains natural raw materials. All the products are RSPO certified, Vegan, biodegradable and COSMOS approved. FOREIGN SALES For the years ended December 31, 2023 and 2022, approximately 21% and 25%, respectively, of our sales revenue was from foreign sources, and was derived from (a) sales of our cosmetic ingredients to foreign distributors, which accounted for approximately 7% and 9% of sales, for the years ended December 31, 2023 and 2022, respectively, and (b) sales of medical lubricants directly to certain customers in foreign countries, which accounted for approximately 14% and 16% of our sales revenue for the years ended December 31, 2023 and 2022, respectively. Because all shipments to our largest distributor, ASI, are delivered to ASI’s warehouses in the U.S., all sales to ASI are considered domestic sales, even though a significant percentage of ASI’s sales of our products are to customers in foreign countries. Based on sales information provided by ASI, 69% of ASI’s sales of our products in 2023 were to customers in foreign countries, compared with 65% in 2022. ASI’s largest foreign market in both 2023 and 2022 was China, which accounted for approximately 29% of ASI’s sales of our products in 2023 and 38% in 2022. Since sales of our products are in U.S. Dollars, our selling prices are generally not affected by fluctuations in foreign currency exchange rates, except to the extent that a stronger dollar compared with foreign currencies can make our products less competitive in foreign markets, sometimes requiring adjustments to our prices in order to be more competitive. We continue to work closely with our network of distributors to price our products as competitively as possible and, when appropriate, to offer additional volume discounts and more aggressive pricing to maintain and increase sales and expand our customer base. DOMESTIC SALES For the years ended December 31, 2023 and 2022, approximately 79% and 75%, respectively, of our sales were from domestic sources, which represents sales within the United States only. COSMETIC INGREDIENTS : In the United States, our cosmetic ingredient products have been marketed and distributed exclusively by ASI in accordance with a marketing agreement entered into in 1996 with its predecessor company, International Specialty Products (“ISP”) and last automatically renewed on January 1, 2022. That agreement was for the marketing of the Company’s cosmetic ingredients in North America, Central America, South America, Asia Pacific, and EMEA. ASI also has the exclusive right to market four of the Company’s products globally: Lubrajel Marine, Lubrajel BA, Lubrajel Oil PF and Lubrajel II XD PF. The current agreement with ASI terminated on December 31, 2023, pursuant of a letter provided by the Company to ASI on October 10, 2023. The purpose of the termination was to renegotiate the terms and conditions of the distribution agreement between the two companies. At this time the Company and ASI have not finalized a new agreement, but we believe that a new agreement will be executed by the end of the second quarter of 2024, although there can be no assurance that a new agreement will be executed. The Company anticipates that during the time that contract negotiations are taking place, ASI will continue to market and distribute the Company’s cosmetic ingredients in a manner consistent with past practice. Domestic sales of cosmetic ingredients accounted for approximately 31% of total sales in 2023, compared with 32% in 2022. Sales to our largest distributor, ASI, accounted for approximately 30% of total sales in 2023 and 32% of sales in 2022. 10 UNITED-GUARDIAN, INC. PHARMACEUTICALS : Our pharmaceutical products are marketed only in the United States and are sold primarily through full-line drug wholesalers. Sales of those products accounted for approximately 45% of sales in 2023, compared with approximately 39% in 2022. During 2023 and 2022, we participated in various government drug rebate programs related to the sale of Renacidin, our most important pharmaceutical product. These programs include the Veterans Affairs Federal Supply Schedule (“FSS”), and the Medicare Part D Coverage Gap Discount Program (“CGDP”). These programs require us to sell our product at a discounted price, typically given in the form of a rebate. Our sales, as reported, are net of these rebates, some of which are estimated and are recorded in the same period that the revenue is recognized. MEDICAL LUBRICANTS : We sell our medical lubricants directly to end users or to contract manufacturers utilized by the end users. Domestic sales of medical lubricants accounted for approximately 3% of our total sales in both 2023 and 2022. Although all shipments of medical lubricants to U.S. locations are considered domestic sales, a percentage of those shipments are subsequently shipped by some customers to foreign manufacturing facilities, which then produce finished products that could be marketed globally. ISO 9001:2015 CERTIFICATION On July 23, 2018, we were certified by DQS Inc. to be in compliance with the latest ISO standard, ISO 9001:2015, indicating that our documented procedures and overall operations had attained the high level of quality needed to comply with this current ISO certification level. Our current ISO 9001:2015 certification is valid through July 22, 2024. We have been in continuous compliance with ISO standards since November 1998. Between November 1998 and December 2003, we were registered under the ISO 9002 standard. From December 2003 to December 2009, we were registered under the ISO 9001:2000 standard. From December 2009 to July 2018, we were registered under the ISO 9001:2008 standard. COMPETITION We primarily compete in the specialty ingredients/products space. The participants in this space offer a broad range of product lines designed to meet specific customer needs. Competition is largely based on product performance, price, quality, service, product availability, security of supply, and responsiveness of product development in cooperation with customers. Many key competitors are significantly larger than us and have greater financial resources, leading to greater operating and financial flexibility. To improve our competitive position, we are strengthening our core capabilities and investing in product development, especially in naturally-derived products. We will also continue providing high-quality products, excellent technical service and we will continue to be a reliable supplier. INTELLECTUAL PROPERTY In recent years, we have elected to rely on trade secret protection to protect our intellectual property for proprietary product formulations and manufacturing methods. We will file for patent protection in situations where we believe that relying on trade secret protection alone would not provide sufficient protection. We own the Lubrajel®, Renacidin®, Clorpactin®, Excellence Through Innovation ®, and Natrajel™ trademarks. 11 UNITED-GUARDIAN, INC. RAW MATERIALS We purchase raw materials from multiple sources in the United States and believe that raw material supplies will be available in quantities sufficient to meet demand in 2024. Although some of those raw materials may be manufactured overseas, all of our suppliers are located within the United States. The Company is continuing to monitor the situation in the Middle East and is working closely with its suppliers in order to manage lead times, if necessary, of its raw materials due to supply chain instability. The principal raw materials we use consist of common industrial organic and inorganic chemicals. We have three major raw material vendors that together accounted for approximately 83% of our raw material purchases in 2023 and 80% in 2022. INVENTORIES, RETURNS, AND ALLOWANCES We believe it is important to maintain moderate inventory levels of certain of our finished goods in order to fulfill purchase orders in a timely manner. Historically, sufficient inventory levels, returns, and allowances have not been a significant factor in our business. BACKLOG We do not currently have any significant backlog of orders. SEASONALITY Due to the nature of our business and the types of products that we market, we are not subject to any significant seasonal fluctuations in sales. CUSTOMERS Our cosmetic ingredients are currently marketed and sold globally by five distributors. Those distributors, in turn, market and distribute those products to their customers. Although we depend on these distributors for the marketing and distribution of our cosmetic ingredients, we believe that if any of our distributors were to decide not to sell our products, or if we chose to replace one or more of those distributors, we would be able to put new marketing agreements in place to service our customers in all the geographic areas affected. If necessary, we would also be able to sell directly to the end users of our products until such time as a new distributor is put in place. Our pharmaceutical products are sold to, and distributed by, full-line drug wholesalers throughout the United States. Our medical products are sold directly by us to the end users of those products or, in some cases, to contract manufacturers used by some of those end users. RESEARCH AND DEVELOPMENT Our research and development (“R&D”) team’s main focus is to develop new products and product-line extensions. The product development activities are focused on developing products for identified customers and market needs. We frequently collaborate with customers to develop the desired product to meet their specific needs. The R&D team also provides technical support services to assist our customers with application development and co-development. In addition, the R&D team provides ongoing technical assistance and knowhow to quality assurance and manufacturing personnel to ensure consistent standards for our products and to deliver environmentally responsible products that exceed customer expectations. Our research and development expenses in 2023 were $463,992 compared with $490,770 in 2022. We expect our research and development expenses in 2024 to be higher than those in 2023 in order to support innovation and growth initiatives. Any additional increase in R&D expenses will also depend on whether capital investments are required in order to continue development work on, or to manufacture, any of the new products under development. 12 UNITED-GUARDIAN, INC. We require all employees and consultants who may receive confidential and proprietary information to agree in writing to keep such information confidential. GOVERNMENT REGULATION Regulation by governmental authorities in the United States and other countries is a significant factor in the manufacturing and marketing of many of our products. Some of the products we develop and sell in the United States may require approval from federal regulatory agencies, such as the U.S. Food & Drug Administration (“FDA”), as well as state regulatory agencies. Some products sold outside the United States may require approval from foreign regulatory agencies. Our operations and many of our products are subject to chemical control laws. These laws include regulation of chemical substances and inventories under and the Registration, Evaluation and Authorization of Chemicals (“REACH”) regulation in Europe, Right to Know laws under the Global Harmonized System (“GHS”) for hazard communication, and the regulation of chemicals used in the manufacture of pharmaceuticals and personal care products and contact food under the Food, Drug and Cosmetics Act in the United States. We are an FDA Drug Establishment registered site. We are required to comply with all pertinent current Good Manufacturing Practices of the FDA for medical devices and drugs our products may be subject to. Accordingly, the regulations to which we and certain of our products may be subject, and any changes with respect thereto, may materially affect our ability to produce and market new products. Our present and future activities are, and will likely continue to be, subject to varying degrees of additional regulation under the Occupational Safety and Health Act, Environmental Protection Act, import, export and customs regulations, and other present and possible future foreign, federal, state and local regulations. Portions of our operating expenses are directly attributable to complying with federal, state, and local environmental statutes and regulations. In 2023 and 2022, we incurred approximately $41,000 and $39,000, respectively, in federal, state, and local environmental law compliance expenses. There was no material financial or other impact on our results of operations as a result of compliance with environmental laws. EMPLOYEES HEALTH AND SAFETY We value all of our employees, suppliers, customers and distributors as well as the broader environment in which we all live and work. We are committed to protecting the safety, health and security of our employees and that of the environment in which we operate. We are further committed and have implemented strict policies against anti-discrimination, anti-harassment and anti-bulling, and will not compromise employee health and safety or the environment for profit. ENVIRONMENTAL AND CORPORATE SOCIAL RESPONSIBILITY We have a proactive mindset for sustainability. We are committed to sustainable growth and minimizing our impact on the local community and the environment. We are committed to measuring and monitoring our impact on the environment and, where appropriate, making improvements. We comply in all material respects with all federal, state and local environmental regulations. We have recently established a carbon footprint monitoring program. Our plan is to review our current program to ensure it covers all pertinent environmental monitoring and establish goals in 2024. We have also joined initiatives for core raw materials, such as the Roundtable on Sustainable Palm Oil (“RSPO”), to ensure that we support suppliers in protecting the environment and the people in it. We are committed to using green chemistry principles to produce biodegradable, natural, and safe products with renewable feedstocks. 13 UNITED-GUARDIAN, INC. SOLID WASTE We do not produce hazardous waste. We comply with U.S. Environmental Protection Agency (“EPA”) and Department of Transportation’s (“DOT”) regulations for the disposal of the solid waste. WATER We comply in all material respects with all laws and regulations on water discharge. ECOVADIS We joined EcoVadis as part of our commitment to Corporate Social Responsibility (“CSR”). EcoVadis is a global leader in guiding, measuring, and improving corporate environmental and social responsibility and sustainability performance. The EcoVadis assessment measured 21 key issues centered on the environment, labor & human rights, ethics, and sustainable procurement. In its latest evaluation we scored in the top 15% of companies evaluated. As part of the assessment, it was determined that we were strong in the following four areas: 1. Environmental: ● Company-specific emergency preparedness and response procedure regarding customer health and safety ● Measures to detect and/or eliminate accidental water contamination ● Formalized procedure related to materials/chemicals management ● Provision of Safety Data Sheets ● Employee awareness/training program on transportation of hazardous materials ● Measures to avoid emissions of dust or particles 2. Labor & Human Rights: ● Labor and human rights policy ● Formalized procedure related to employee health and safety ● Compensation for extra or atypical working hours ● Additional leave beyond standard vacation days ● Bonus scheme related to Company performance ● Heath care coverage of employees in place ● Whistleblower procedure on discrimination and harassment ● Awareness training regarding diversity, discrimination and/or harassment ● Regular assessment (yearly) of individual performance ● Active preventative measures for stress and noise ● Training of relevant employees on health and safety risks and best working practices 3. Ethics: ● Disciplinary sanctions to deal with policy violations ● Policy on information security ● Polices on corruption ● Whistleblower procedure to report ethics issues 14 UNITED-GUARDIAN, INC. 4. Sustainable Procurement: ● RSPO Supply Chain Certification ● Formal assessment of supplier’s progress with regards to REACH requirements ● No use of tin, tantalum, tungsten, gold, and/or their derivatives Areas that required continual improvements were reviewed, and programs and policies were implemented as follows: 1) Environmental impact from product end of life: we joined a prescription take-back program for our pharmaceutical products in the state of California. 2) Measures on energy consumption and GHG’s: we created a carbon footprint procedure that we continue to update and plan to roll out in 2024. This procedure will allow us to determine our current energy consumption, with the goal of reducing that consumption in subsequent years. 3) Established formal CSR Policy: we created a CSR policy to establish a framework for our commitment to sustainable performance. HUMAN CAPITAL MANAGEMENT We currently have 25 employees, 3 of whom serve in an executive capacity, 18 in research, quality control and manufacturing, 2 in maintenance and construction, and 2 in office and administrative support services. Of the total number of employees, 23 are employed full-time. COMPETITIVE PAY AND BENEFITS We are committed to paying our employees in a fair and equitable manner, regardless of race, gender or country of origin. We believe employees should be compensated equitably based on performance, skills, and experience. We offer a competitive benefits program to support employees through all life stages. INCLUSION AND DIVERSITY We focus significant resources on developing and retaining diverse talent and are committed to actively creating a collaborative environment of innovation that leverages the talents of a diverse workforce to drive sustainable growth and create value for our stockholders, customers, employees, and the community in which we operate. TALENT MANAGEMENT The talent management process includes a well-established performance assessment process that seeks to provide employees with ongoing feedback to enhance their performance in support of business objectives. Item 1A. Risk Factors. The information to be reported under this item is not required of smaller reporting companies.